-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OwPLzbwrhNr4nEQt+azR3PmlM8kL7fB88H+NG2Be/RFiQ8YO96dh8D5bGKd11UFu YLVM8IXDkOBv8Gbzmn3Ifw== 0001032210-02-000478.txt : 20020415 0001032210-02-000478.hdr.sgml : 20020415 ACCESSION NUMBER: 0001032210-02-000478 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FISHER COMMUNICATIONS INC CENTRAL INDEX KEY: 0001034669 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 910222175 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22439 FILM NUMBER: 02588657 BUSINESS ADDRESS: STREET 1: 1525 ONE UNION SQ STREET 2: 600 UNIVERSITY ST CITY: SEATTLE STATE: WA ZIP: 98101-3185 BUSINESS PHONE: 2064047000 MAIL ADDRESS: STREET 1: 1525 ONE UNION SQU STREET 2: 600 UNIVERSITY ST CITY: SEATTLE STATE: WA ZIP: 98101-3185 FORMER COMPANY: FORMER CONFORMED NAME: FISHER COMPANIES INC DATE OF NAME CHANGE: 19970226 10-K 1 d10k.txt FORM 10-K FOR THE PERIOD ENDED 12/31/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13D OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 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 000-22439 FISHER COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) Washington 91-0222175 (State of Incorporation) (IRS Employer Identification No.) 1525 One Union Square 600 University Street, Seattle, Washington 98101-3185 (Address of principal executive offices) (Zip Code) (206) 404-7000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- ------------------- None Not Applicable Securities registered pursuant to Section 12(g) of the Act: Common Stock, $1.25 par value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ __ ]. The aggregate market value of the voting stock held by nonaffiliates of the registrant as of March 1, 2002, based on the last sale price reported on the Nasdaq National Market, was approximately $243,791,000. The number of shares outstanding of each of the registrant's classes of common stock as of March 1, 2002 was: Title of Class Number of Shares Outstanding -------------- ---------------------------- Common Stock, $1.25 Par Value 8,591,658 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement relating to the Annual Meeting of Shareholders to be held on April 25, 2002, are incorporated by reference under Part III of this Report. PART I ITEM 1. BUSINESS This annual report on Form 10-K contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential," or "continue," the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined in the section entitled "Additional Factors that May Affect Our Business, Financial Condition and Future Results" below and elsewhere in this annual report. These factors may cause our actual results to differ materially from any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this annual report to conform such statements to actual results or to changes in our expectations. COMPANY DESCRIPTION Fisher Communications, Inc. is a communications and media company comprised of three subsidiaries: Fisher Broadcasting Company, Fisher Media Services Company, and Fisher Properties Inc. We are focused primarily on broadcasting and media services, but we also currently maintain a portfolio of commercial real estate assets through our subsidiary, Fisher Properties Inc. In 2001 we changed our name from Fisher Companies Inc. to Fisher Communications, Inc. and listed on the Nasdaq National Market to increase visibility for the company and facilitate trading for shareholders. The broadcasting subsidiary owns and operates eleven network-affiliated television stations (and owns a 50% interest in a company that owns a twelfth television station), and also owns and operates 28 radio stations. The television and radio stations are located in Washington, Oregon, Idaho, and Montana, with the exception of two Fox-affiliated television stations located in Augusta and Columbus, Georgia. Seattle and Portland are our two largest markets for both television and radio (ranked 12th and 23rd; 14th and 24th, respectively, based on Designated Market Area rankings by Nielsen Media Research). Fisher's television stations reach nearly 4,000,000 households (approximately 4% of U.S. television households) according to Nielsen Media Research. Our radio stations represent the 26th largest radio group in the U.S. in terms of revenue. Fisher Media Services Company was formed in 2001 to develop and manage three principle businesses: Fisher Entertainment, a producer and distributor of content for cable and television; Fisher Pathways, offering satellite transmission services; and Fisher Plaza, a digital hub that houses and serves an array of communications and media clients. Fisher Communications, Inc. was founded in 1910, and is incorporated in the state of Washington. As of December 31, 2001, the company had 1,016 full-time employees. As used herein, unless the context requires otherwise, when we say "we," "us" or "our," we are referring to Fisher Communications, Inc. and its consolidated subsidiaries. Note 11 to the consolidated financial statements contains information regarding our industry segments for the years ended December 31, 2001, 2000, and 1999. Beginning in 2002, financial performance of the company will be reported in three operating segments: broadcasting, media services, and real estate. COMPANY STRATEGY Fisher's goal is to be a fully integrated communications and media company. Our strategy includes the following components: Restructure corporate enterprise to support greater functional integration of core competencies and to improve operational efficiencies. In 2001, we restructured our broadcasting subsidiary, Fisher Broadcasting Company, and established a new subsidiary, Fisher Media Services Company. We continue to implement our corporate restructuring that we expect will improve the performance and efficiency of our operations. The purpose of this restructuring is to enable us to focus on our objective of becoming a company that fully integrates broadcast communications and media services operations. 2 To build upon our broadcasting foundation, we created Fisher Media Services Company. It produces and provides programming through its subsidiary, Fisher Entertainment. It offers content distribution and media transmission services through its subsidiary, Fisher Pathways. In addition, it owns and operates Fisher Plaza. Fisher Plaza is a communication hub facility for the creation, aggregation, transmission and distribution of media (audio, video, still images, and text) through multiple channels, including satellite, television, cable, radio and terrestrial wired and wireless telecommunications. Fisher Plaza is also designed to serve as a community for media and communications enterprises, which has made it a convergence point for content creation and distribution that we believe meets the demands of today's businesses and consumers. In addition to serving as the home of Fisher's KOMO TV, the Seattle facility houses several media, communications and high-tech companies, including ABC News, AT&T, Internap Network Services Corporation, Looking Glass Networks, MetroMedia Fiber Networks, Qwest, S/2/ Entertainment, Sonic Telecom, Tech TV, Terabeam Networks, Time Warner Telecom, Verizon, and Worldcom Construction of the second building at Fisher Plaza began in the fourth quarter of 2000, and is expected to be completed in the fall of 2002. Fisher Entertainment and Fisher Pathways benefit from and extend the capabilities of Fisher Plaza. Our commercial real estate subsidiary, Fisher Properties Inc., continues in its present form. Given our emphasis on communications and media, we recently considered a sale of its real estate portfolio through a bid process. Due to buyer response as a result of current market conditions, we presently are not seeking to sell the entire portfolio of real estate assets, but will continue to explore opportunistically the sale of individual properties. As part of our corporate restructuring, we sold the assets and working capital used in our flour milling operations in Seattle, Blackfoot, Modesto, and Portland on April 30, 2001, and we completed the sale of the distribution assets and working capital of Fisher Mills Inc. and its subsidiary Sam Wylde Flour Company, Inc. on June 29, 2001. Consistent with the restructuring was the elimination of the boards of directors and a substantial amount of redundant management and support positions. Beginning in 2002, Fisher Broadcasting Company, Fisher Media Services Company and Fisher Properties Inc. each will be reported as a separate business segment in our financial statements. Improve competitive position and operational efficiencies of our broadcast communications properties. We believe Fisher Plaza will enable us to achieve operational efficiencies by centralizing several key aspects of programming and distribution for our broadcast properties. For example, we plan to combine our Seattle radio and television news gathering and production operations at Fisher Plaza. In addition, we expect that news stories from our broadcast properties will be centrally indexed and stored at Fisher Plaza in a digital format for electronic distribution to our stations. We will consider opportunistic acquisitions and divestitures of broadcast properties that could improve the overall strength of Fisher Broadcasting Company. For example, we will look at potential acquisitions of broadcast properties in order to do one or more of the following: improve efficiencies, establish or expand a strategically located geographic footprint, improve our ability to acquire syndicated programming, leverage relationships with networks, and expand our talent pool. Whether, and to what extent, we acquire additional broadcasting properties will depend on a number of factors, including but not limited to the availability of such properties, the relative costs and benefits of such opportunities as compared with non-broadcast opportunities, the cost of financing, acceptable levels of debt, and the manner in which broadcast acquisition alternatives might complement our other operations. However, we can provide no assurance that we will acquire or sell broadcast properties or, if we do so, when we might make such acquisitions or dispositions or how significant they might be. Expand relationships with customers and audience by distributing content through additional channels. We are developing new opportunities for creating, aggregating and distributing content through non-broadcast media channels. We are co-developing ways to re-purpose and more fully utilize the content generated by our broadcast operations by delivering it through alternative media channels such as cell phones, the Internet and web-enabled personal digital assistants. The goal of these efforts is to enable us to deliver highly localized and personalized information that will deepen the trust and loyalty of our audiences. We also believe that by utilizing both its physical infrastructure and the competencies of its residents, Fisher Plaza can be an important component in support of our efforts to digitize and distribute broadcast content and other media through multiple channels. For example, Fisher is collaborating with Ingeniux, a Seattle software company, to seek to create media management software tools to automate the re-purposing of some broadcast content to web sites and IP (Internet Protocol) addressable devices, such as cell phones, pagers, personal digital assistants, and personal computers. Presently, three Fisher television stations use this software and have experienced dramatically increased web site usage. Additionally, working with AT&T Broadband, KOMO TV is delivering text news stories to cable set top boxes for television viewing in thousands of homes in the Tacoma, Washington area using Fisher developed software. Fisher is also working with Weather Central to deliver highly customized weather forecasts via the Internet, with the objective of enhancing loyalty and trust with its audience and creating further sales opportunities with its advertisers. 3 Develop strategic relationships. We are seeking to develop relationships to help us to achieve our objective of becoming a fully integrated communications and media company, to enable us to focus on our core competencies, and to take advantage of the expertise and financial resources of others. Develop opportunities to cross sell broadcast advertising within our markets and the Northwest region. We are seeking to expand our cross selling of broadcast advertising within markets in which we own one or more television and radio stations and within the Northwest region. The objective of this effort is to better serve our advertising clients and increase the efficiency and effectiveness of our sales efforts. TELEVISION AND RADIO STATIONS Our broadcasting operations are conducted through Fisher Broadcasting Company ("Fisher Broadcasting"), a Washington corporation (formerly Fisher Broadcasting Inc.). Fisher Communications, Inc. owns all the outstanding capital stock of Fisher Broadcasting. Fisher Broadcasting had approximately 951 full-time employees as of December 31, 2001. TELEVISION The following table sets forth certain information regarding our television stations.
Analog Average DMA(1) Network Channel/ Audience Rank in Station Market Area Rank Affiliation Frequency/(2)/ Share/(3)/ Market/(3)/ - ---------------- -------------------- ---------- ------------ --------------- ----------- ------------- KOMO Seattle-Tacoma, WA 12 ABC 4/VHF 11.2% 2 KATU Portland, OR 23 ABC 2/VHF 13.4% 2 WFXG Augusta, GA 114 FOX 54/UHF 8% 3 KVAL/(4)/ Eugene, OR 123 CBS 13/VHF 16% 1 KCBY/(4)/ Coos Bay, OR 123 CBS 11/VHF 16% KPIC/(4)//(5)/ Roseburg, OR 123 CBS 4/VHF 16% KBCI Boise, ID 121 CBS 2/VHF 12% 2 KIMA/(6)/ Yakima, WA 125 CBS 29/UHF 12% 2 KEPR/(6)/ Pasco/Richland/ Kennewick, WA 125 CBS 19/UHF 12% 2 KLEW Lewiston, ID NA/(7)/ CBS 3/VHF NA/(7)/ NA/(7)/ WXTX Columbus, GA 126 FOX 54/UHF 6% 3 KIDK Idaho Falls, ID 166 CBS 3/VHF 12% 2
- ------------------- /(1)/ Designated Market Area ("DMA") represents an exclusive geographic area of counties in which the home market stations are estimated to have the largest quarter-hour audience share (Nielsen Media Research). /(2)/ VHF refers to very high frequency band (channels 2-13) of the spectrum. UHF refers to ultrahigh frequency band (channels above 13) of the spectrum. In addition, each of these stations has been allocated a digital channel television frequency. /(3)/ 6 a.m. - 2 a.m. per Nielsen Media Research average ratings February, May, July, and November 2001. /(4)/ Station ranking is for three-station group designated as KVAL+ by Nielsen Media Research. /(5)/ Fisher Broadcasting owns a 50% interest in South West Oregon Television Broadcasting Corporation, licensee of KPIC. /(6)/ Station ranking is for two-station group designated as KIMA+ by Nielsen Media Research. /(7)/ Although included as part of the Spokane, WA DMA, KLEW primarily serves the Lewiston, ID, Clarkston, WA audience that is only a small portion of the Spokane DMA. GENERAL OVERVIEW 4 Commercial television broadcasting began in the United States on a regular basis in the 1940s. The Federal Communications Commission ("FCC") grants licenses to build and operate broadcast television stations, and currently, a limited number of channels are available for television broadcasting in any one geographic area. Television stations that broadcast over the VHF band generally have some competitive advantage over those that broadcast over the UHF band (channels above 13) because VHF channels usually have better signal coverage and operate at a lower transmission cost. However, the improvement of UHF transmitters and receivers, the complete elimination from the marketplace of VHF-only television receivers and the expansion of cable and satellite television systems have reduced the competitive advantage of stations broadcasting over the VHF band. There are approximately 105 million U.S. television households of which approximately 73 million are wired cable households and approximately 15 million receive television via direct broadcast satellite. Overall household television viewing has risen to slightly more than 53 hours per week. The average home receives 89.2 channels and views 14.1 channels for 10 or more continuous minutes per week. (Nielsen Media Research) Television stations primarily receive revenues from the sale of local, regional and national advertising and, to a much lesser extent, from network compensation, tower rental and commercial production activities. Broadcast television stations' heavy reliance on advertising revenues renders the stations vulnerable to cyclical changes in the economy. The size of advertisers' budgets, which are sensitive to broad economic trends, affects the broadcast industry in general and, specifically, the revenues of individual broadcast television stations. Events outside our control can adversely affect advertising revenues. For example, Fisher Broadcasting has experienced declines in advertising revenue during some periods as a result of strikes in major industries. Political and advocacy advertising can constitute, and in the past has constituted, a significant revenue source in some years, particularly national election years. The amount of such revenue in election years depends on many factors, such as whether Washington and Oregon are contested states in a presidential election. Political and advocacy revenue is very low in years in which there is little election or other ballot activity. NETWORK AFFILIATIONS A television station's affiliation with one of the four major television networks (ABC, CBS, NBC and FOX) has a significant impact on the composition of the station's programming, revenues, expenses and operations. A station affiliated with ABC, CBS or NBC typically receives approximately 9 to 10 hours of each day's programming from the network. This programming, along with cash payments, is generally provided to the affiliate by the network in exchange for a substantial majority of the advertising time sold during the airing of network programs. The network then sells this advertising time for its own account. The affiliate retains the revenues from time sold during designated breaks in and between network programs, and during programs produced by the affiliate or purchased from non-network sources. In acquiring programming to supplement network programming, network affiliates compete primarily with other affiliates and independent stations in their markets. In addition, a television station may acquire programming through bartering arrangements. Under such arrangements, which are becoming increasingly popular with both network affiliates and independents, a national program distributor may receive advertising time in exchange for the programming it supplies, with the station paying no cash or a reduced fee for such programming. Generally, FOX-affiliated stations receive fewer hours of programming from the FOX Television Network than stations affiliated with ABC, CBS or NBC receive from those networks. Two of Fisher Broadcasting's television stations are affiliated with the ABC Television Network, eight (including 50%-owned KPIC TV) are affiliated with the CBS Television Network, and two are affiliated with the FOX Television Network. The stations' affiliation agreements provide each station the right to broadcast all programs transmitted by the network with which they are affiliated. In return, the network has the right to sell most of the advertising time during such broadcasts. Each station, except the FOX affiliates, receives a specified amount of network compensation for broadcasting network programs. 5 The network affiliation agreements for our television stations have the following expiration dates:
Network Station Market Area Affiliation Expiration Date - ------- ------------------- ------------------ ------------------------ KOMO Seattle-Tacoma, WA ABC September 1, 2004 KATU Portland, OR ABC September 1, 2004 KVAL Eugene, OR CBS February 28, 2006 KCBY Coos Bay, OR CBS February 28, 2006 KPIC/(1)/ Roseburg, OR CBS February 28, 2006 KIMA Yakima, WA CBS February 28, 2006 KEPR Pasco/Richland/ CBS February 28, 2006 Kennewick, WA KLEW Lewiston, ID CBS February 28, 2006 KBCI Boise, ID CBS February 28, 2006 KIDK Idaho Falls, ID CBS February 28, 2006 WFXG Augusta, GA FOX May 31, 2004 WXTX Columbus, GA FOX May 31, 2004
- ---------------- /(1)/ Fisher Broadcasting owns a 50% interest in South West Oregon Television Broadcasting Corporation, licensee of KPIC. Although Fisher Broadcasting expects to continue to be able to renew its affiliation agreements with ABC, CBS and FOX, no assurance can be given that such renewals will be obtained. Generally, the networks use a contract renewal with affiliates as an opportunity to modify contract terms. It is uncertain how network-affiliate relations will change in the future. The nonrenewal or modification of a network affiliation agreement could materially harm Fisher Broadcasting's results of operations. ADDITIONAL INFORMATION ABOUT TELEVISION MARKETS AND STATIONS KOMO TV, SEATTLE-TACOMA, WASHINGTON Market Overview. KOMO TV operates in the Seattle-Tacoma market, which has - --------------- approximately 1.6 million television households and a population of approximately 4.1 million. In 2001, approximately 74% of the population in the DMA subscribed to cable, and 9.8% received local stations via alternative delivery systems, like direct satellite. (Nielsen Media Research) Major industries in the market include aerospace, manufacturing, biotechnology, forestry, telecommunications, software, Internet products and services, transportation, retail and international trade. Major employers include Microsoft, Boeing, SAFECO, Paccar, Nintendo, Amazon.com, Inc., the University of Washington and Weyerhaeuser. The 2001 television revenue for the Seattle-Tacoma DMA was estimated to be $290 million, as reported by Miller, Kaplan, Arase & Co., LLP, an accounting firm that provides the television industry with revenue figures. Station Performance. KOMO TV's commitment to be the market leader in local news - ------------------- is manifested on multiple distribution platforms. KOMO TV produces 33 hours of live local television news per week on its analog and digital channels. KOMO TV News is the first local television station in the nation to provide local news to cell phones through a relationship with AT&T Wireless. KOMO TV produces Northwest Afternoon, a daily 60-minute talk program, which typically ranks number one in its time period. The Radio Television and News Directors' Association has recognized KOMO TV nationally in the past year for its investigative reports. The Association of Television Arts and Sciences awarded 13 Emmys to the station for program and individual excellence in 2001. KOMO TV serves actively in its community, participating in numerous civic and charitable events. KATU, PORTLAND, OREGON Market Overview. KATU serves a market of approximately 2.7 million people and - --------------- approximately 1 million television households. Approximately 63% of Portland's population subscribed to cable in 2001. (Nielsen Media Research) The 6 Portland metro area has a broad base of manufacturing, distribution, wholesale and retail trade, regional government and business services. High-tech companies, including Intel, employ more than 60,000 people in the region. International trade is an important aspect of the local economy. Other major employers in the Portland area include Fred Meyer, Oregon Health Sciences University, Providence Health System, Legacy Health System, Nike and Freightliner. Station Performance. KATU currently broadcasts 30.5 hours of live local news - ------------------- weekly. For over 25 years, KATU has been a Portland market leader in local program production. KATU has a long history of public service and involvement in the community. It is the only station in Portland providing real-time closed captioning of its newscasts. KIMA TV, KEPR TV, KLEW TV, YAKIMA AND TRI-CITIES, WASHINGTON AND LEWISTON, IDAHO. Market Overview. KIMA TV serves the Yakima, Washington area and KEPR TV serves - --------------- the Pasco-Richland-Kennewick (the "Tri-Cities"), Washington area. Yakima and the Tri-Cities areas comprise the Yakima DMA, which serves approximately 547,000 people in approximately 209,000 households and has a 60% cable penetration. KLEW TV is the exclusive local station in Lewiston, Idaho and is part of the Spokane, Washington DMA. Lewiston's KLEW TV serves approximately 165,000 people in approximately 63,000 households with a 66% cable penetration. KEPR TV and KLEW TV are KIMA TV's satellite stations, which are defined as full-power terrestrial broadcast stations authorized to retransmit all or part of the programming of a parent station that is ordinarily commonly owned. The area covered by KIMA, KEPR and KLEW has an economic base that consists primarily of agriculture, nuclear technology, government, manufacturing and the wholesale/retail, service and tourism industries. Major employers include food processors such as Tree Top, Snokist, Lamb Weston, Washington Beef and Del Monte, as well as manufacturers such as Boise Cascade, Western RV Manufacturing, Potlatch Corp. and Blount Manufacturing. Other major employers are Fluor Daniel, Bechtel, Pacific N.W. Labs, Lockheed Martin and Siemens Power Corp. Station Performance. KIMA and KEPR each broadcast 9.5 hours per week of - ------------------- scheduled live local news programs and are a leader in the market. According to Nielsen Media Research, the combined households of KIMA and KEPR exceed the combined households of the NBC affiliates and the combined households of the ABC affiliates in the Yakima DMA. KLEW TV broadcasts five hours of scheduled live, local news per week. KIMA/KEPR/KLEW have demonstrated a commitment to public affairs and local interest programming. All three stations have won numerous awards for having superior service in the news arena. KBCI TV, BOISE, IDAHO Market Overview. KBCI serves the Boise, Idaho DMA, which has a total population - --------------- of approximately 566,000 and approximately 220,000 TV households. An estimated 44% of the television households in the Boise DMA subscribe to cable television. (Nielsen Media Research) The Boise area ranked among the top five fastest growing metropolitan areas in the United States from 1990 to 2000. Boise is the state capital and regional center for business, government, education, health care and the arts. Major employers include high-tech companies such as Micron Technology, Inc. and its subsidiaries, Hewlett-Packard Company, micronpc.com, Crucial Technology and ZiLOG, as well as JR Simplot Company, Albertson's, Saint Alphonsus Regional Medical Center, St. Luke's Regional Medical Center, DirecTV, US Bank, Idaho Power Company, Boise Cascade, Sears Boise Regional Credit Card Operations Center, Washington Group International (formerly Morrison Knudson), Mountain Home Air Force Base, the Idaho State government and the United States government. Station Performance. KBCI currently broadcasts 15 hours per week of live local - ------------------- news programs and broadcasts Boise State University men's and women's athletics. The station has won numerous awards for excellence in television broadcasting, including "Best Newscast" in 1999, 2000 and 2001 from the Idaho State Broadcasters Association and the Idaho Press Club. The station has a strong commitment to community affairs with major support provided to a variety of local nonprofit, community-based organizations. KIDK TV, IDAHO FALLS/POCATELLO, IDAHO Market Overview. KIDK serves the Idaho Falls/Pocatello DMA with a total - ---------------- population of approximately 301,000 and approximately 105,000 TV households. An estimated 51% of the television households subscribe to cable. (Nielsen Media Research) The Idaho Falls/Pocatello DMA consists of 15 counties located in Eastern Idaho and Western Wyoming. Idaho Falls and Pocatello, 50 miles apart, are the two largest cities in the DMA. Bechtel, Inc., contractor for operation of the Idaho National 7 Engineering & Environmental Laboratory, is the largest employer in the region. Other major employers include Melaluca, Inc., JR Simplot Company, FMC Corp., Idaho State University and BYU-Idaho. Station Performance. KIDK broadcasts 14 1/2 hours per week of live local news - ------------------- programs. KIDK operates from its main studio in Idaho Falls. In November 2001, Nielsen Media Research reported KIDK as the station with the most growth in local news ratings in the Idaho Falls/Pocatello DMA. KVAL+ (KVAL TV, KCBY TV, KPIC TV), EUGENE, COOS BAY AND ROSEBURG, OREGON Market Overview. The Eugene/Springfield DMA includes Eugene, Springfield, - --------------- Roseburg, Coos Bay and Corvallis, Oregon. It has a population of approximately 530,000 with approximately 216,000 television households. Approximately 64% of the DMA population subscribed to cable in 2001. (Nielsen Media Research) KCBY TV and KPIC TV are satellite stations of KVAL TV. The area's economic base includes forest products, agriculture, high-tech manufacturing, packaging, tourism and fishing. Major employers include the state's two major universities-University of Oregon in Eugene and Oregon State University in Corvallis, Sony Disc Manufacturing, Hyundai Semiconductor, Hewlett Packard, Symantec Software, Sacred Heart Medical Center and Roseburg Forest Products. Station Performance. In the local programming time period from 3 p.m.-8 p.m., - ------------------- KVAL+ has the largest audience share in its DMA. KVAL+ numbers almost exceed the combined audience shares of its competition. In addition, KVAL+ has historically out-performed the CBS national Nielsen ratings. (Nielsen Media Research) KVAL+ broadcasts 17 hours of live local news per week. KVAL TV produces a local news window on CNN Headline News every hour every day. KVAL+ has a long tradition of award-winning news, public affairs programming and information. In addition to broadcasting its signal to the DMA, KVAL+ has the ability to `narrowcast' with relevant individual news, weather and commercialization to the Eugene, Roseburg, Coos Bay, Florence and Corvallis/Albany markets. WFXG TV, AUGUSTA, GEORGIA Market Overview. Augusta, Georgia has a total population of approximately - --------------- 600,000 people. Of the market's approximately 234,000 television households, 72% subscribe to cable. (Nielsen Media Research) Augusta is the state's second largest metropolitan area. Major employers include the United States Military (Ft. Gordon), Textron, Medical College of GA, John Deere, Delta Airlines (Reservation Center) and EZ-Go Golf Carts. WFXG continues to outperform the average FOX network prime-time rating average in terms of audience delivery. WFXG is committed to active involvement in community affairs. WXTX TV, COLUMBUS, GEORGIA Market Overview. Columbus, Georgia has a population of approximately 479,000. Of - --------------- the market's approximately 197,000 television households, 76% subscribe to cable. Columbus ranks as Georgia's third largest metropolitan area. Major employers include Fort Benning, AFLAC, Muscogee County School System, The University System, Dolly Madison Bakeries and Synovus. Station Overview. WXTX remains active in community affairs and produces a broad - ---------------- range of public affairs campaigns. COMPETITION Broadcast television stations compete for advertising revenues primarily with other broadcast television stations and networks, radio stations, cable systems, satellite broadcast systems, syndicated programmers, Internet websites and print media, and, to some extent, with outdoor advertising. Competition within the television industry, including the markets in which Fisher Broadcasting's stations compete, is intense. This competition takes place on several levels: competition for audience, competition for programming (including news), competition for advertisers and competition for local staff and management. Additional factors material to a television station's competitive position include signal coverage and assigned frequency. The television broadcasting industry faces continuing technological change and innovation, the possible rise in popularity of competing entertainment and communications media, changing business practices such as television "duopolies" (owning and operating two stations in the 8 same market), use of local marketing agreements ("LMAs") and joint sales agreements ("JSAs") and governmental restrictions or actions of federal regulatory bodies, including the FCC and the Federal Trade Commission. Any of these factors could materially harm the television broadcasting industry and Fisher Broadcasting's business in particular. Audience. Stations compete for audience on the basis of program popularity, - -------- which has a direct effect on advertising rates. During periods of network programming, the stations are totally dependent on the performance of the network programs in attracting viewers. The competition between the networks is intense, and the success of any network's programming can vary significantly over time. Each station competes in non-network time periods on the basis of the performance during such time periods of its programming and syndicated programming it has purchased using a combination of self-produced news, public affairs and other entertainment programming that each station believes will attract viewers. The competition between stations in non-network time periods is intense, and here, too, success can vary over time. Fisher Broadcasting's stations compete for television viewership share against local network-affiliated and independent stations, as well as against cable programming and alternate methods of television program distribution. These other transmission methods can increase competition for a station by bringing into its market distant broadcasting signals not otherwise available to the station's audience, and also by serving as a distribution system for nonbroadcast programming originated on the cable system. To the extent cable operators and broadcasters increase the amount of local news programming, the heightened competition for local news audiences could have a material adverse effect on Fisher Broadcasting's advertising revenues. Other sources of competition for Fisher Broadcasting's television stations include home entertainment systems (including video cassette recorder and playback systems, DVD players and television game devices), Internet websites, wireless cable and satellite master antenna television systems. Fisher Broadcasting's stations also face competition from direct broadcast satellite services, which transmit programming directly to homes equipped with special receiving antennas or to cable television systems for transmission to their subscribers. Fisher Broadcasting competes with these sources of competition both on the basis of product performance (quality, variety, information and entertainment value of content) and price (the cost to utilize these systems). Programming. Competition for syndicated programming involves negotiating with - ----------- national program distributors, or syndicators. Fisher Broadcasting's stations compete against in-market broadcast stations for exclusive access to syndicated programming. Cable system operators generally do not compete with local stations for programming; however various national cable networks acquire programs that might have otherwise been offered to local television stations. Advertising. Advertising rates are based on the size of the market in which a - ----------- station operates, a program's popularity among the viewers an advertiser wishes to attract in that market, the number of advertisers competing for the available time, the demographic make-up of the market served by the station, the availability of alternative advertising media in the market area, the presence of aggressive and knowledgeable sales forces and the development of projects, features and programs that tie advertiser messages to programming. Fisher Broadcasting's stations compete for advertising revenues with other television stations in their respective markets, as well as with other advertising media, such as newspapers, radio, magazines, Internet websites, outdoor advertising, transit advertising, yellow page directories, direct mail and local cable systems. In addition, another source of revenue is paid political and advocacy advertising, the amount of which fluctuates significantly, particularly being higher in national election years and very low in years in which there is little election or other ballot activity. Competition for advertising dollars in the television broadcasting industry occurs primarily within individual markets on the basis of the above factors as well as on the basis of advertising rates charged by competitors. Generally, a television broadcasting station in one market area does not compete with stations in other market areas. Fisher Broadcasting's television stations are located in highly competitive markets. Staff and Management. The loss of key staff, including management, on-air - -------------------- personalities and sales staff, to competitors can adversely affect revenues and earnings of television stations. DIGITAL/HIGH DEFINITION TELEVISION ("HDTV") The Digital Television ("DTV") standard, developed after years of research, and approved by the FCC in December 1996, was the breakthrough that made possible the transmission of vast amounts of information in the same size channel (6 MHz) as the current analog standard television system. DTV brings with it three major changes to the way viewers experience television. First, DTV sets display pictures using a rectangular, wide-screen format, as opposed to the nearly square screens used by current analog TV sets. (In technical terms, this means DTV screens use a "16 by 9" aspect ratio while current analog TV sets use a "4 by 3" aspect ratio. Aspect ratio is 9 the ratio of screen width to screen height.) Because of this screen shape, watching programs on digital TV sets can be similar to watching a movie at the theater, giving more lifelike images and allowing the viewer to feel more involved in the action on screen. Second, DTV delivers six channels of CD-quality, digital surround sound using the same Dolby Digital technology heard in many movie theaters. Third, DTV can deliver high definition pictures with crisp, photographic quality, and greatly enhanced detail. The following chart sets forth certain information regarding our channel allocation and status for digital/high definition television. Currently Digital Channel Broadcasting in Station Market Area Allocation Digital Format/(1)/ KOMO Seattle-Tacoma, WA 38 Yes (HDTV) KATU Portland, OR 43 Yes (HDTV) WFXG Augusta, GA 51 No KVAL Eugene, OR 25 Yes KCBY Coos Bay, OR 21 No KPIC Roseburg, OR 19 No KBCI Boise, ID 28 No KIMA Yakima, WA 33 No KEPR Pasco/Richland/Kennewick 18 No KLEW Lewiston, ID 32 No WXTX Columbus, GA 49 No KIDK Idaho Falls, ID 36 No ________________ /(1)/ Those stations that do not currently broadcast in HDTV are required to comply with the FCC rules that require them to broadcast a digital signal by May 2, 2002. RADIO The following table sets forth certain information regarding our radio stations located in Seattle and Portland.
Number of Audience Listening Commercial ---------------------- Radio Dial Market Stations in Rank in Station Market Station Position Power Rank the Market Market/(1)/ Share/(1)/ Format - -------------- ----------- ------------ -------- -------- ------------- ----------- ---------- ------------ Seattle, WA 14 51 KOMO AM 1000 kHz 50 kW 13 2.9% News/Talk KVI AM 570 kHz 5 kW 6 4.2% Talk KPLZ FM 101.5 MHz 100 kW 16 2.8% Today's Best Variety Portland, OR 24 43 KOTK AM 1080 kHz 50 kW 18 1.3% Talk KWJJ FM 99.5 MHz 52 kW 5 4.3% Country
- ------------------- /(1)/ Ratings information in the above chart refers to average quarter-hour share of listenership among total persons, 12+, Monday through Sunday, 6 a.m. to midnight, and is subject to the qualifications listed in each report. Source: Arbitron Co. four-book average -- Winter -- Fall 2001. GENERAL OVERVIEW Commercial radio broadcasting began in the United States in the early 1920s. Only a limited number of frequencies are available for broadcasting in any one geographic area. The FCC grants the license to operate a radio station. Currently, two commercial radio broadcast bands provide free, over-the-air radio service, each of which employs different methods of 10 delivering the radio signal to radio receivers. The AM band (amplitude modulation) consists of frequencies from 550 kHz to 1700 kHz. The FM (frequency modulation) band consists of frequencies from 88.1 MHz to 107.9 MHz. Radio station revenues are derived almost exclusively from local, regional and national advertising. Radio stations' heavy reliance on advertising revenues renders the stations vulnerable to cyclical changes in the economy. The size of advertisers' budgets, which are sensitive to broad economic trends, affects the broadcast industry in general and, specifically, the revenues of individual radio stations. Events outside of our control can adversely affect advertising revenues. FISHER RADIO SEATTLE (KOMO AM, KVI AM, KPLZ FM), SEATTLE, WASHINGTON Fisher Radio Seattle stations broadcast to nearly 21,000 square miles of Western Washington with information and entertainment radio services. Fisher Radio Seattle is committed to supporting our community with news and talk programming that addresses local issues that affect the local population and is actively involved in the community by conducting fundraisers for civic and charitable organizations Fisher Radio Seattle stations have won several awards for news coverage from the Radio and Television News Directors' Association and from the Associated Press. In addition, they have received many awards for excellence in commercial production, fundraising and community involvement and community event development. FISHER RADIO PORTLAND (KOTK AM, KWJJ FM), PORTLAND, OREGON Fisher Radio Portland stations broadcast to a six-county metropolitan population of approximately 1,755,000. Fisher Radio Portland is committed to serving its community through the airing of public service announcements, as well as sponsoring and organizing various community events and fundraisers. KOTK broadcasts news and talk programming. KWJJ is a country music station and was honored by the Oregon Association of Broadcasters in 2001 as its Station of the Year. 11 FISHER RADIO REGIONAL GROUP The following table sets forth general information for Fisher Radio Regional Group Inc.'s stations and the markets they serve.
Number of Audience Listening Commercial ---------------------- Radio Dial Stations in Rank in Station Market Station Position Power the Market Market/(1)/ Share Format - ------------- ------------ ------------ ------- ------------- ----------- ---------- ---------- Billings, MT 16 KRZN 96.3 FM 100 kW 4 8.1% Active Rock KRKX 94.1 FM 100 kW T5 6.2% Classic Rock KBLG 910 AM 1 kW/(2)/ 7 5.6% News/Talk KYYA 93.3 FM 100 kW 8 5.0% A.C./(3)/ Missoula, MT 11 KZOQ 100.1 FM 14 kW 1 13.5% Classic Rock KGGL 93.3 FM 43 kW 4 8.5% Country KXDR 98.7 FM 100 kW 6 8.2% A.C. KGRZ 1450 AM 1 kW 6 8.2% Sports/Talk KYLT 1340 AM 1 kW 9 1.9% Oldies Great Falls, MT 12 KAAK 98.9 FM 100 kW 1 18.8% A.C. KQDI 106.1 FM 100 kW 5 9.4% Classic Rock KXGF 1400 AM 1 kW 6 8.2% Pop Standard KQDI 1450 AM 1 kW 7 4.7% News/Talk KIKF 104.9 FM 94 kW /(4)/ /(4)/ Country KINX 107.3 FM 94 kW /(4)/ Active Rock /(4)/ Butte, MT 5 KMBR 95.5 FM 50 kW 1 25.7% Classic Rock KAAR 92.5 FM 4.5 kW 2 20.0% Country KXTL 1370 AM 5 kW /(5)/ /(5)/ Oldies/Talk Wenatchee, WA 10 KWWW 96.7 FM 0.4 kW 3 10.4% Hot A.C. KZPH 106.7 FM 3 kW 4 9.0% Classic Rock KYSN 97.7 FM 3 kW 6 5.8% Country KAAP 99.5 FM 5 kW T8 2.3% Soft A.C. KWWX 1340 AM 1 kW /(5)/ /(5)/ Spanish
- --------------------------- /(1)/ Ratings information in the above chart refers to average quarter-hour share of listenership among total persons, age 12+, Monday through Sunday, 6 a.m. to midnight, and is subject to the qualifications listed in each report. Sources: (a) Billings, Montana: Arbitron Ratings, Spring, 2001 Billings Market Report; (b) Missoula, Montana: Eastlan Resources, Fall, 2001 Missoula/Hamilton Market Report; (c) Great Falls, Montana: Arbitron Ratings, Spring, 2001 Great Falls Market Report; (d) Butte, Montana: Arbitron Ratings 2001 Montana County Coverage Study, Silver Bow County; and (e) Wenatchee, Washington: Eastlan Resources Audience Measurement, Fall, 2001 Wenatchee Market Report. "T" refers to a tie. /(2)/ KBLG, Billings, operates with power of 1,000 watts day and 63 watts night. /(3)/ A.C. stands for the "Adult Contemporary" format. /(4)/ KIKF and KINK are new stations that signed on the air after the ratings were conducted. /(5)/ Listenership is below minimum report standards. Fisher Radio Regional Group operates 18 stations in four Montana markets (Billings, Missoula, Great Falls and Butte), and five stations in Wenatchee, Washington. 12 Billings is the largest city in Montana, with a metropolitan population of approximately 130,000. It serves as a retail hub for portions of three states and home to a regional medical center and two colleges. Primary industries include agriculture and oil refining. Fisher's four Billings radio stations are long-time leaders in community service. Missoula is the second largest city in Montana. The Missoula market area is comprised of two counties, with a combined population of approximately 130,000. One of those counties, Ravalli, was the state's fastest growing during the 1990's. Missoula is home to the University of Montana, with approximately 12,000 students. The region's other primary industry is timber. Fisher's Missoula radio cluster received the Montana Broadcasters' Association award for "Best Public Service" in 2001. The Great Falls market is Montana's third largest, with a population of approximately 80,000. The largest single employer is Malmstrom Air Force Base. Agriculture is the other primary industry. Fisher has operated four stations in Great Falls for a number of years, and recently signed on two additional FM stations. Both of the new FM stations broadcast from a new mountaintop transmitter site, providing signals that cover a larger area than any of the other FM radio stations in Great Falls. Butte, Montana has a population of approximately 35,000. The city's largest employers include Montana Power Company ASiMI, a silicon manufacturer and a regional medical center. Tourism is another primary industry, as Butte is at the junction of the two Interstate highways that serve Montana, and is only about 150 miles from Yellowstone National Park. Fisher operates three of the five radio stations in Butte. Fisher Radio Regional Group operates five radio stations in an area including Wenatchee, Quincy and Moses Lake, Washington. These three cities in central Washington have a regional population of approximately 90,000. Agriculture is the primary industry, and Wenatchee is known as "the apple capital of America." The region has no local television stations, so radio stations play an important role in the lives of these communities. Approximately one-quarter of the region's population is Hispanic, and one of Fisher's stations is the heritage Spanish-language station. COMPETITION A small number of companies control a large number of radio stations within the United States. Some of these companies syndicate radio programs or own networks whose programming is aired by Fisher Broadcasting's stations. Some of these companies also operate radio stations in markets in which Fisher Broadcasting operates, have greater overall financial resources available for their operations and may control large national networks of radio sales representatives. Competition in the radio industry, including each of the markets in which Fisher Broadcasting's radio stations compete, takes place on several levels: competition for audience, competition for advertisers, competition for programming and competition for staff and management. Additional significant factors affecting a radio station's competitive position include assigned frequency and signal strength. The radio broadcasting industry is continually faced with technological change and innovation and the possible rise in popularity of competing entertainment and communications media, as well as governmental restrictions or actions of federal regulatory bodies, including the FCC and the Federal Trade Commission, any of which could have a material adverse effect on the broadcasting business. The FCC has authorized Direct Audio Radio from Satellite ("DARS") to broadcast over a separate frequency spectrum (the "S" band, between 2.31 and 2.36 GHz). One company, XM has begun service, and a second DARS company, SIRIUS, has announced its plan to begin satellite service in the fall of 2002. Each company offers approximately 100 different programming channels on a monthly fee basis. Radios capable of receiving these new digital signals are available as after-market equipment and in selected 2002 model vehicles. While DARS stations are not expected to compete for local advertising revenues, they will compete for listenership, and may dilute the overall radio audience. Audience. Fisher Broadcasting's radio stations compete for audience on the - -------- basis of programming popularity, which has a direct effect on advertising rates. As a program or station grows in audience, the station is capable of charging a higher rate for advertising. Formats, stations and music are often researched through large-scale perceptual studies, auditorium-style music tests and weekly call-outs. All are designed to evaluate the distinctions and unique tastes of formats and listeners. New formats and audience niches have created targeted advertising vehicles and programming that are focused to appeal to a narrow segment of the population. Tactical and strategic plans are utilized to attract larger audiences through marketing campaigns and promotions. Marketing campaigns using television, transit, outdoor, telemarketing or direct mail advertising are designed to improve a station's cume audience (total number of people listening) while promotional tactics such as cash giveaways, trips and prizes are utilized by stations to extend the TSL (time spent listening), which works in correlation to cume as a means of establishing a station's share of audience. In the effort to increase audience, the format of a station may 13 be changed. Format changes can result in increased costs and create other difficulties that can harm the performance of the station. Fisher Broadcasting has experienced this effect. The recent proliferation of radio stations and other companies streaming their programming over the Internet has created additional competition for local radio stations. These Internet channels provide further choice for listeners, in addition to the existing over-the-air radio stations and the DARS stations. The number of entities streaming audio abated somewhat during 2001, as some traditional broadcasters and Internet broadcasters temporarily curtailed their streaming, due to uncertainty relating to royalties. Nevertheless, a fall 2001 survey by the Arbitron Company and Edison Media Research revealed that 52% of people who have access to the Internet have either watched or listened to streaming media. In February 2002, a Copyright Arbitration Royalty Panel (CARP) of the Library of Congress issued its "webcasting" decision which recommended rates for the compulsory copyright license which covers streaming audio transmissions by radio stations and other Internet music providers. The Company cannot predict whether the CARP decision will be adopted by the Register of Copyright, or what effect the rates, if implemented, will have on streaming audio as a competitor to over-the-air radio. Advertising. Advertising rates are based on the number and mix of media - ----------- outlets, the audience size of the market in which a radio station operates, the total number of listeners the station attracts in a particular demographic group that an advertiser may be targeting, the number of advertisers competing for the available time, the demographic make-up of the market served by the station, the availability of alternative advertising media in the market area, the presence of aggressive and knowledgeable sales forces and the development of projects, features and programs that tie advertisers' messages to programming. Fisher Broadcasting's radio stations compete for revenue primarily with other radio stations and, to a lesser degree, with other advertising media such as television, cable, newspaper, yellow pages directories, direct mail, Internet and outdoor and transit advertising. Competition for advertising dollars in the radio broadcasting industry occurs primarily within the individual markets on the basis of the above factors, as well as on the basis of advertising rates charged by competitors. Generally, a radio station in one market area does not compete with stations in other market areas. Staff and Management. The loss of key staff, including management, on-air - -------------------- personalities and sales staff, to competitors can adversely affect revenues and earnings of radio stations. MEDIA SERVICES FISHER PLAZA In 2000, we completed the first of two buildings at Fisher Plaza, our new state-of-the-art communications center located in Seattle. Fisher Plaza is designed to enable the distribution of analog and digital media content through numerous distribution channels, including broadcast, satellite, cable, Internet, broadband (high speed digital transmission of voice, data and/or video), and wired and wireless communication systems. In addition to serving as the home of Seattle's KOMO TV, Fisher Plaza houses several high-tech companies, including Internap Network Services Corporation, a leading provider of Internet connectivity services, and Terabeam Corporation. Construction of the second building commenced in the fourth quarter of 2000 and is expected to be complete in the fall of 2002. FISHER PATHWAYS Fisher Pathways, Inc. (Fisher Pathways) is a media transmission and services provider. It connects media and businesses to the desired target(s) using third-party satellite and fiber distribution networks to and from any point on the globe that has broadcast receive capability. Its objectives are to continue to grow its core business while diversifying and growing complementary lines of business, in part using the capabilities of Fisher Plaza and the community of businesses resident within that facility. Today, Fisher Pathways' core business consists of operating satellite communications teleports in Seattle and Portland, primarily transmitting news, corporate and sporting events originating from these two markets for distant market consumption. The Seattle and Portland teleports are connected to each other via a bi-directional microwave link and to all major NW sports venues via fiber lines. The list of Fisher Pathways' current clients includes ABC, CNN, ESPN, MSNBC, FOX News, China's Skyarc Media, Microsoft and Tech TV. Fisher Pathways also operates a fiber optic terminal with connectivity to the Vyvx national fiber optic network for point-to-point transmission of audio and video signals. In addition, Fisher Pathways offers studio facilities for satellite interviews and distance learning, satellite and fiber booking services and tape playout capability in both Seattle and Portland markets. We believe that our combination of fiber optic and satellite communication capabilities provides Fisher Pathways with a competitive advantage in the efficient transmission of point-to-point and point-to-multipoint video and audio to and from the Pacific Northwest. 14 Current revenues attributable to Fisher Pathways' operations are not material to our results of operations. Fisher Pathways' revenues and earnings remain mainly event-driven. News and sporting events occurring in the Northwest, primarily Portland and Seattle, create the demand, and therefore affect revenues received, for the transmission services that Fisher Pathways provides. OTHER We own 2 million shares of the common stock of Terabeam Corporation, which we acquired for an aggregate of $1 million in December 1998. Terabeam Corporation is a provider of fiberless broadband IP services over the first/last mile link of global communications networks. AN Systems, L.L.C. AN Systems, L.L.C. (AN Systems) was a developer of a new - ------------------ public advertising network which uses a display device known as the Civia Media Terminal that delivers information in public places such as office buildings and other venues. Under terms of various agreements the Company and its subsidiaries agreed, among other things, to lend funds to AN Systems, to defer collection of certain amounts due under the agreements, and to provide AN Systems with certain office space. Loans by the Company were evidenced by convertible promissory notes issued by AN Systems and, at December 31, 2001, totaled $5,424,000. Effective January 1, 2002, AN Systems was merged into Civia, Inc. (Civia) and, immediately prior to the merger, the Company elected to convert $2,000,000 of such loans into a 65.1% equity interest in Civia. PROGRAM CONTENT DEVELOPMENT AND PRODUCTION Fisher Entertainment's mission is to develop original program content, exploit the library of programming created by Fisher Broadcasting and establish alliances with other producers and programming buyers to enhance creative output and merge complementary skills. Fisher Entertainment has taken advantage of Fisher Plaza's digital production facility to create content cost-effectively. Fisher Entertainment focuses on supplying original productions for broadcast syndication and national cable television networks. The Other Half, a daily, one-hour daytime talk show co-developed and co-produced by Fisher Entertainment, is syndicated by NBC Enterprises and is seen in 180 U.S. television markets. Current revenues attributable to Fisher Entertainment's operations are not material to our results of operations. FISHER ENTERTAINMENT MARKETS Fisher Entertainment's primary marketplace is series programming for both cable and the first-run syndication markets. Cable. It is estimated that national cable networks spent $3.1 billion on - ----- original program production in 2001. (Paul Kagan & Associates) Most of these original productions are commissioned from independent (non-studio-affiliated) suppliers with whom the cable networks have long-term relationships. The cable networks often retain all ownership rights under these agreements. There are 40 ad-supported basic cable networks that achieve reported ratings. (Cable Sweeps) Fisher Entertainment is currently targeting eight cable networks for series programming development: MTV, VH1, Comedy Central, ABC Family, USA, The Learning Channel, The Travel Channel and TNN. In 2001, Fisher Entertainment contracted to produce two one-hour specials on volcanoes for The Travel Channel, with delivery scheduled for the second quarter of 2002. These specials are being produced for national telecast utilizing library footage from our broadcast stations. Broadcast Syndication. The market for broadcast syndication is highly - --------------------- competitive. First-run syndication is the production of original programs that are sold on a station-by-station, market-by-market basis. Broadcasters compete for a limited number of available programs. Fisher Entertainment has had success in this regard with The Other Half, as evidenced by its airing in 180 U.S. markets. It intends to pursue additional opportunities in syndicated series development in conjunction with production and distribution partners while carefully managing related costs and risks. Copyright retention and production financing will be addressed on a project-by-project basis. Fisher Station Distribution. Fisher Entertainment produced a four-part Body - --------------------------- Female series of women's health specials in 2001, that aired on all of Fisher's television stations. A new three-part Body Female series is being produced in 2002 to meet 15 the ongoing need of Fisher's television stations for women's health specials with a specific Northwest focus. Fisher Entertainment continues to create value from the Fisher station libraries by licensing footage to outside producers. LICENSING AND REGULATION APPLICABLE TO TELEVISION AND RADIO BROADCASTING The following is a brief discussion of certain provisions of the Communications Act of 1934, as amended (the "Communications Act"), most recently amended by the Telecommunications Act of 1996 (the "Telecommunications Act"), and of FCC regulations and policies that affect the television and radio broadcasting business conducted by Fisher Broadcasting. Reference should be made to the Communications Act, FCC rules and the public notices and rulings of the FCC, on which this discussion is based, for further information concerning the nature and extent of FCC regulation of television and radio broadcasting stations. LICENSE RENEWAL Broadcasting licenses are currently granted for a standard term of eight years. Those licenses are subject to renewal upon application to the FCC. In determining whether to grant or renew a broadcasting license, the FCC considers a number of factors pertaining to the applicant, including compliance with alien ownership limitations; limits on common ownership of broadcasting, cable and newspaper properties; and character, technical and other regulatory standards. Additionally, in the case of television license renewal, the FCC considers the station's compliance with FCC programming and commercialization rules relating to programming for children. During certain limited periods when a renewal application is pending, petitions to deny a license renewal may be filed by interested parties, including members of the public. Such petitions may raise various issues before the FCC. The FCC is required to hold evidentiary, trial-type hearings on renewal applications if a petition to deny renewal raises a "substantial and material question of fact" as to whether the grant of the renewal application would be inconsistent with the public interest, convenience and necessity. The FCC is required to renew a broadcast license if it finds that the station has served the public interest, convenience and necessity; there have been no serious violations by the licensee of either the Communications Act or the FCC's rules; and there have been no other violations by the licensee that taken together would constitute a pattern of abuse. If the incumbent licensee fails to meet the renewal standard, and if it does not show other mitigating factors warranting a lesser sanction, such as a conditional renewal, the FCC has the authority to deny the renewal application and permit the submission of competing applications for that frequency. Failure to observe FCC rules and policies, including, but not limited to, those discussed herein, can result in the imposition of various sanctions, including monetary forfeitures, the grant of short-term (i.e., less than the full eight years) license renewals or, for particularly egregious violations, the denial of a license renewal application or revocation of a license. While the vast majority of such licenses are renewed by the FCC, there can be no assurance that Fisher Broadcasting's licenses will be renewed at their expiration dates, or, if renewed, that the renewal terms will be for eight years. The expiration date for the licenses of our television stations are as follows: Station Market Area Expiration Date - ----------- --------------------------- ------------------ KOMO Seattle-Tacoma, WA February 1, 2007 KATU Portland, OR February 1, 2007 WFXG Augusta, GA April 1, 2005 KVAL Eugene, OR February 1, 2007 KCBY Eugene, OR February 1, 2007 KPIC Roseburg, OR February 1, 2007 KIMA Yakima, WA February 1, 2007 KEPR Pasco/Richland/Kennewick, WA February 1, 2007 KLEW Lewiston, ID October 1, 2006 KBCI Boise, ID October 1, 2006 WXTX Columbus, GA April 1, 2005 KIDK Idaho Falls, ID October 1, 2006 16 The license terms of Fisher Broadcasting's and Fisher Radio Regional Group's radio stations in Washington and Oregon expire February 1, 2006. The license terms for all of Fisher Radio Regional Group Inc.'s Montana radio stations expire on April 1, 2005. The non-renewal or revocation of one or more of Fisher Broadcasting's FCC licenses could materially harm Fisher Broadcasting's television or radio broadcasting operations. ASSIGNMENT AND TRANSFER OF LICENSES The FCC prohibits the assignment of a license or the transfer of control of a television or radio broadcasting license without prior FCC approval. In order to obtain such consent, an application must be filed with the FCC on the appropriate form, and the FCC provided with certain information required by the form and its rules. Assignment and transfer applications are subject to public notice, and interested parties may file a petition to deny such an application. In deciding whether to grant an assignment or transfer application, the FCC considers the qualifications of the assignee or transferee, the compliance of the transaction with its multiple ownership and other rules, and other factors in order to determine whether the public interest would be served by such change in ownership. If the FCC finds unresolved substantial and material questions of fact affecting whether the public interest would be served by grant of an assignment or transfer application, it is required to conduct an evidentiary hearing to resolve such outstanding issues. MULTIPLE OWNERSHIP RULES AND CROSS OWNERSHIP RESTRICTIONS The FCC has adopted complex regulations that limit the attributable ownership interests which may be held by a single individual or entity. The following is a summary of those regulations. Attribution. The FCC generally applies its ownership limits to "attributable" - ----------- interests held by an individual, corporation, partnership or other association. In the case of corporations holding broadcast licenses, the interests of officers, directors and those who, directly or indirectly, have the right to vote 5% or more of the corporation's stock (or 20% or more of such stock in the case of insurance companies, mutual funds, bank trust departments and certain other passive investors that are holding stock for investment purposes only) are generally deemed to be attributable, as are interests held by officers and directors of a corporate parent of a broadcast licensee. In addition, interests of any party that holds a financial interest, whether equity or debt or some combination thereof, in excess of 33% of a licensee's total capital are considered attributable under the "debt/equity plus" rule if such holder is either a significant program supplier to the licensee or if such holder has another media interest in the same market. TELEVISION National Ownership Limits. Under FCC regulations, no individual or entity may - ------------------------- hold an attributable interest in TV stations that have an aggregate national audience reach exceeding 35% of television households. For this purpose, the FCC counts the television households in each Nielsen DMA in which a party has an attributable interest in a television station as a percentage of the total television households in all DMAs. Only 50% of the television households in a DMA are counted toward the 35% national restriction if the owned station is a UHF station (the "UHF discount"), and households are counted only once regardless of how many interests a party may have in a particular DMA. On February 19, 2002, the United States Court of Appeals for the District of Columbia Circuit ruled that, while the 35% national television station ownership limit was not unconstitutional, its adoption was arbitrary, capricious and contrary to law. The case was remanded to the FCC to further consider whether to repeal or modify the rule. The FCC has not announced whether it will appeal that decision. The FCC has announced its intention to implement a phased-in elimination of the UHF discount near the completion of the transition to digital television. Local Television Limits. The FCC's rules allow common ownership of two - ----------------------- television stations, regardless of signal contour overlap, as long as each station is in a different DMA. The FCC also allows common ownership of two television stations in the same DMA if there is no Grade B contour overlap of the two stations. The FCC will also allow an entity holding an attributable interest in one television station in a DMA to acquire a second television station in the same DMA as long as eight separately owned, full-power commercial and noncommercial television stations will remain after the transaction to place the two stations under common ownership is completed, and provided that at least one of the stations in the transaction is not among the top-four rated stations in the market. In addition, the FCC will consider granting rule waivers to permit common ownership of two television stations in the same market in cases in which a same-market licensee is the only reasonably available buyer and the station being acquired is either "failed," "failing" or "unbuilt." Television/Cable Cross Ownership. The FCC's rules have effectively prohibited a - -------------------------------- cable television system (including all parties under common control) from owning an interest in a television station that places a predicted Grade B contour over any portion of the system, and, conversely, prohibit television stations from owning interests in cable systems within their predicted Grade B 17 contour (the "Cable/TV Cross Ownership Rule"). On February 19, 2002, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the Cable/TV Cross Ownership Rule was arbitrary, capricious and contrary to law, vacated the rule, and ordered the FCC to repeal it forthwith. RADIO National Ownership Limits. At present, the FCC imposes no limits on the number - ------------------------- of radio stations that may be directly or indirectly owned nationally by a single entity. Local Ownership Limits. The FCC limits the number of attributable interests in - ---------------------- radio stations that one entity may own locally. These limits are based on radio "markets" that are determined on a case-by-case method by the FCC with reference to a contour overlap standard. FCC rules provide that (i) in a market with 45 or more commercial radio stations, an entity may own up to eight commercial radio stations, not more than five of which are in the same service (AM or FM); (ii) in a market with between 30 and 44 (inclusive) commercial radio stations, an entity may own up to seven commercial radio stations, not more than four of which are in the same service; (iii) in a market with between 15 and 29 (inclusive) commercial radio stations, an entity may own up to six commercial radio stations, not more than four of which are in the same service; and (iv) in a market with 14 or fewer commercial radio stations, an entity may own up to five commercial radio stations, not more than three of which are in the same service, except that an entity may not own more than 50% of the stations in such market. These numerical limits apply regardless of the aggregate audience share of the radio stations sought to be commonly owned. FCC ownership rules continue to permit an entity to own one FM and one AM station in a local market regardless of market size. Irrespective of FCC rules governing radio ownership, however, the Department of Justice and the Federal Trade Commission have the authority under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") to determine, and in certain radio transactions have determined, that a particular transaction presents antitrust concerns. Moreover, in certain recent cases the FCC has signaled a willingness to independently examine issues of market concentration notwithstanding a transaction's compliance with the numerical radio station limits and HSR Act approval by the Department of Justice. The FCC has closely scrutinized and invited public comment on applications involving potential ownership of station combinations with high aggregate estimated advertising revenue percentages within a market. On December 6, 2000, the FCC adopted a Notice of Rulemaking in which it proposed to revise the manner in which it administers the local radio ownership rule, and particularly its method of defining radio markets. Among other things, the FCC indicated it would consider using Arbitron market definitions, rather than overlapping contours, to obtain a more accurate measure of radio markets, or, alternatively, to retain the contour overlap method of defining a geographic radio market, but to revise the standard for determining how many stations are in the market and how many of those stations a particular owner is deemed to own. That rulemaking remains pending. Combined Ownership of Radio and Television. The FCC will allow a party to own a - ------------------------------------------ television station (and a second television station, if otherwise permitted under the FCC's rules) along with any of the following radio station combinations in the same market: (i) up to six radio stations (any combination of AM and FM stations that complies with the local radio ownership rule) if at least 20 independent media voices would exist in the market after the transaction creating the television-radio combination; (ii) up to four radio stations (in compliance with local radio ownership rules) if at least 10 independent media voices would exist in the market after the transaction; or (iii) one radio station regardless of the number of independent media voices remaining in the market after the transaction. In those markets where a party owns only one television station and there would be at least 20 independent media voices in the market after the transaction, the FCC will allow common ownership of the television station and seven radio stations (again, in compliance with local radio ownership rules). The FCC will also allow waivers of the radio/TV cross-ownership rule in certain cases in which one of the stations in the proposed transaction is a failed station. LMAs and JSAs. A number of television and radio stations have entered into - ------------- local marketing agreements ("LMAs"). While these agreements may take varying forms, pursuant to a typical LMA separately owned and licensed broadcast television stations agree to enter into cooperative arrangements of varying sorts, subject to compliance with the requirements of antitrust laws and with the FCC's rules and policies. Under these types of arrangements, separately owned stations agree to function cooperatively in terms of programming, advertising sales, etc., subject to the requirement that the licensee of each station maintain independent control over the programming and operations of its own station and ensure compliance with applicable FCC rules and policies. One typical type of LMA is a programming agreement between two separately owned broadcast stations serving a common service area, whereby the licensee of one station programs substantial portions of the broadcast day on the other licensee's station, subject to ultimate editorial and other controls being exercised by the latter licensee, and sells advertising time during such program segments. At present, FCC rules permit LMAs, but the licensee of a broadcast station brokering more than 15% of the time on another television station in its market is generally considered to have an attributable interest in the brokered station. Pre-existing television LMAs entered into prior to November 5, 1996, have been grandfathered, conditioned on the FCC's 2004 biennial review. During this initial grandfathering period and during the pendency of the 2004 review, these LMAs may continue in full force and effect, and may also be transferred and renewed by the parties, though the renewing parties and/or transferees take the LMAs subject to a status review of the LMA 18 as part of the 2004 biennial review. At that time, the FTC will reevaluate these grandfathered television LMAs, on a case-by-case basis, to examine the competition, diversity, equities and public interest factors they raise and to determine whether these LMAs should continue to be grandfathered. The FCC's rules also prohibit a radio licensee from simulcasting more than 25% of its programming on another station in the same broadcast service (i.e., AM-AM or FM-FM) on a commonly owned station or through a time brokerage or LMA arrangement where the stations serve substantially the same area. Some television and radio stations have entered into cooperative arrangements commonly known as joint sales agreements ("JSAs"). While these agreements may take varying forms, under the typical JSA a station licensee obtains, for a fee, the right to sell substantially all the commercial advertising on a separately owned and licensed station in the same market. The typical JSA also customarily involves the provision by the selling licensee of certain sales, accounting and "back office" services to the station whose advertising is being sold. The typical JSA is distinct from an LMA in that a JSA (unlike an LMA) normally does not involve programming. The FCC has determined that issues of joint advertising sales should be left to enforcement by antitrust authorities, and therefore does not generally regulate joint sales practices between stations. Currently, stations for which a licensee sells time under a JSA are not deemed by the FCC to be attributable interests of that licensee. Newspaper/Broadcast Cross-Ownership. The FCC's rules effectively prohibit a - ----------------------------------- radio or television broadcast station to be licensed to an entity that, directly or indirectly, owns, operates or controls a daily newspaper that is published in a community within certain defined signal strength contours of the broadcast station (the "Newspaper/Broadcast Cross-Ownership Rule"). On September 13, 2001, the FCC issued a Notice of Proposed Rulemaking regarding the Newspaper/Broadcast Cross-Ownership Rule. The FCC asked for comments on a wide variety of options including retention of the rule in its current form, modifying the geographic scope of the rule, modifying the media covered by the rule, applying a market concentration or market voice count test, and eliminating the rule completely. Effect of Noncompliance. If an attributable stockholder of the company has or - ----------------------- acquires an attributable interest in other television or radio stations, or in daily newspapers or cable systems, depending on the size and location of such stations, newspapers or cable systems, or if a proposed acquisition by the Company or Fisher Broadcasting would cause a violation of the FCC's multiple ownership rules or cross-ownership restrictions, Fisher Broadcasting may be unable to obtain from the FCC one or more authorizations needed to conduct its business and may be unable to obtain FCC consents for certain future acquisitions. ALIEN OWNERSHIP Under the Communications Act, broadcast licenses may not be granted to or held by any foreign corporation, or a corporation having more than one-fifth of its capital stock owned of record or voted by non-U.S. citizens (including a non-U.S. corporation), foreign governments or their representatives (collectively, "Aliens"). The Communications Act also prohibits a corporation, without an FCC public interest finding, from holding a broadcast license if that corporation is controlled, directly or indirectly, by a foreign corporation, or a corporation in which more than one-fourth of the capital stock is owned of record or voted by Aliens. The FCC has issued interpretations of existing law under which these restrictions in modified form apply to other forms of business organizations, including general and limited partnerships. As a result of these provisions, and without an FCC public interest finding, the Company, which serves as a holding company for its television station licensee subsidiaries, cannot have more than 25% of its capital stock owned of record or voted by Aliens. While the Company does not track the precise percentage of stock owned by Aliens at any particular time, it does take steps to confirm continued compliance with these alien ownership restrictions when it files FCC applications for new stations or major changes in its stations. PROGRAMMING AND OPERATION The Communications Act requires broadcasters to serve the "public interest." Since the late 1970s, the FCC gradually relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast of certain types of programming responsive to the needs of a station's community of license. Broadcast station licensees continue, however, to be required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. Complaints from viewers and listeners concerning a station's programming may be considered by the FCC when it evaluates license renewal applications, although such complaints may be filed, and generally may be considered by the FCC, at any time. Stations must also follow various FCC rules that regulate, among other things, children's television programming, political advertising, sponsorship identifications, contest and lottery advertising, obscene and indecent broadcasts and technical operations, including limits on radio frequency radiation. Disclosure Requirements. On September 12, 2000, the FCC proposed to standardize - ----------------------- and enhance public interest disclosure requirements for television broadcasters. In a Notice of Proposed Rulemaking approved that date, the FCC tentatively 19 concluded that television broadcasters should place information in their public files on a quarterly basis. The information would be on a standardized form, and would replace the current programs-issues lists maintained by television licensees. Among the information that would be required are the amounts of programming broadcast in certain categories, such as news and public affairs programming, and information as to the licensee's closed-captioning and video description activities. It is contemplated that the information would be retained in a station's public file until final action had been taken on its next renewal application. No decision has been issued by the FCC regarding this rulemaking. Equal Employment Opportunities Outreach. On April 18, 2000, a new FCC equal - --------------------------------------- employment opportunities ("EEO") rule went into effect. The new rule required broadcast licensees to provide equal opportunity in employment to all qualified persons, and prohibited discrimination against any person by broadcast stations because of race, color, religion, national origin or sex. The EEO rule required each station to establish, maintain and carry out a positive continuing program of specific practices designed to ensure equal opportunity and nondiscrimination in every aspect of station employment policy and practice, and to document the station's EEO practices and results. On January 16, 2001, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision invalidating the FCC's EEO rule on constitutional grounds and on January 22, 2002, the U.S. Supreme Court declined to hear an appeal of that decision. On December 31, 2001, the FCC initiated a new rulemaking proceeding looking toward the imposition of an alternative EEO rule that would comply with the Court's decision and meet the FCC's goal of non-discrimination and broad outreach to disadvantaged minorities. Among the proposals to be considered by the FCC is imposition of a rule that would require stations to provide notification of each vacancy to any organization that distributes information about employment opportunities upon request and to engage in a specific number of EEO outreach initiatives. The FCC has also proposed to require stations to maintain extensive records regarding their efforts to comply with the rule, to submit regular reports to the FCC evaluating their EEO programs, and to be the subject of an FCC review of EEO compliance at the mid point of their renewal term as well as part of the renewal process. The FCC has also proposed that stations with few employees would be exempted from certain portions of the FCC's EEO requirements. Political Advertising. Political advertising is subject to pervasive federal - --------------------- regulation. Broadcast stations are required by the doctrine of "reasonable access" to sell some advertising time for use by legally qualified candidates for federal office. While there is no comparable right of reasonable access for state or local candidates, once time is sold for any candidate, his or her opponents have the right to purchase comparable amounts and quality of time for their own use. The advertising rates that can be charged a candidate or his or her official committee for advertising "uses" positive broadcasts that feature the identifiable voice or image of the candidate are also subject to FCC regulation. Legally qualified candidates are always entitled, at a minimum, to purchase time for a "use" at rates comparable to what other, nonpolitical candidates pay. During certain periods prior to elections, broadcast stations may charge candidates purchasing time for a use no more than their "lowest unit charge" for the same class and amount of time for the same period. In essence, the candidate must be sold advertisements at the lowest charge the station is receiving from its most favored advertisers for the same class, length of spot and time period, even though the candidate did not buy the volume of advertising purchased by the favored commercial advertiser. In accepting political advertising, stations are prohibited from considering the content of the advertisement, and may not censor such advertisements in any way except to insure that they contain adequate sponsorship identification. RESTRICTIONS ON BROADCAST ADVERTISING - ------------------------------------- Tobacco and Alcohol Advertising. The advertising of cigarettes on broadcast - ------------------------------- stations has been banned for many years. The broadcast advertising of smokeless tobacco products has more recently been banned by Congress. Certain congressional committees have examined legislative proposals to eliminate or severely restrict the advertising of alcohol, including beer and wine, and such proposals may attract greater support because of the announced decision by one of the major national television network in 2001 to accept "hard liquor" advertising under limited circumstances. We cannot predict whether any or all of such proposals will be enacted into law and, if so, what the final form of such law might be. The elimination of all beer and wine advertising would have an adverse effect on Fisher Broadcasting's stations' revenues and operating income, as well as the revenues and operating incomes of other stations that carry beer and wine advertising. Lottery Advertising. The FCC has promulgated a number of regulations - ------------------- prohibiting, with certain exceptions, broadcast advertising relating to lotteries and casinos. The U.S. Court of Appeals for the Ninth Circuit (which includes Washington, Oregon, Idaho and Montana) has ruled that the advertising limits on casino advertising are unconstitutional and therefore invalid. The U.S. Supreme Court has declined to review that decision. In June 1999, the U.S. Supreme Court held that current federal law cannot be applied under the First Amendment to prohibit advertisements of lawful private casino gambling on broadcast stations located in Louisiana. In September 1999, the FCC released a Public Notice indicating that, in the U.S. government's brief in an appeal before the U.S. Court of Appeals for the Third Circuit, the government has concluded that the statutory prohibition against broadcasting lottery information, as currently written, may not constitutionally be applied to truthful advertisements for lawful casino gambling, regardless of whether the broadcaster who transmits the advertisement is located in a state that permits casino gambling or a state that prohibits it. The FCC does not 20 interpret the decisions of these courts as applying to forms of lotteries other than casino gambling. The FCC has not withdrawn its September 1999 Public Notice or otherwise reconsidered its position as set forth in that Public Notice. None of these court decisions specifically address any state law prohibitions on the broadcast advertising of lottery information, including casino gambling, within their borders. If state law prohibits such advertising, it is the FCC's position that such prohibition will control notwithstanding any freedom granted under federal law. Children's Advertising. The FCC has adopted regulations that place quantitative - ---------------------- limits on the amount of commercialization during, and adjacent to, television programming intended for an audience of children ages 12 and under. In addition, the FCC's regulations prohibit certain advertising practices, including host selling, that could influence viewers who are children. The FCC has issued a number of forfeitures for violation of these regulations, and has issued substantial forfeitures even in cases where it appears that the violation was inadvertent. Closed Captioning. Under FCC regulations, adopted pursuant to the - ----------------- Telecommunications Act, 100% of all new English-language video programming must be closed-captioned by January 2006. Programming first exhibited prior to January 1, 1998 is subject to different compliance schedules. In all cases, the FCC's rules require programming distributors to continue to provide captioning at substantially the same level as the average level of captioning that they provided during the first six months of 1997, even if that amount exceeds the benchmarks applicable under the new rules. Certain station and programming categories are exempt from the closed-captioning rules, including stations or programming for which the captioning requirement has been waived by the FCC after a showing of undue burden has been made. Video Descriptions. Video description involves the insertion into a TV program - ------------------ of narrated descriptions of settings and actions that are not otherwise reflected in the dialogue, such as the movement of a person in the scene, and are intended to assist the visually impaired. On July 21, 2000, the FCC adopted rules that require, effective April 1, 2003, that television broadcast stations affiliated with the ABC, NBC, CBS and Fox networks in the top 25 DMAs provide a minimum of 50 hours per calendar quarter of described prime time and/or children's programming, and to "pass through" any video description it receives from a programming provider if technically capable of doing so. In addition, all stations providing local emergency information as part of a regularly scheduled newscast, or as part of a newscast that interrupts regularly scheduled programming, will be required to make the critical details of this information accessible to persons with visual disabilities in the local area, and all stations providing emergency information through a "crawl" or a "scroll" will be required to accompany that information with an aural tone to alert persons with visual disabilities. The FCC did adopt an exemption for those showing it would be an undue burden to comply. Video description or programming is to be provided on TV through the use of the Secondary Audio Programming ("SAP") channel, which is currently used by some broadcasters to provide simultaneous transmission of dialogue in an alternative language, such as Spanish. Fisher operates two television stations-KOMO-TV, Seattle, and KATU, Portland-in the top 25 DMAs, both of which are affiliated with the ABC network OTHER PROGRAMMING RESTRICTIONS - ------------------------------ Ratings. The television industry has adopted, effective January 1, 1997, and - ------- subsequently revised, on August 1, 1997, a voluntary rating scheme regarding violence and sexual content contained in television programs. FCC rules, adopted to effectuate a Telecommunications Act provision, required that at least one-half of all television receiver models with screen sizes 13 inches or greater produced after July 1, 1999 have technology installed designed to enable viewers to block all programs with a certain violence rating (the "v-chip"), and that all such television receivers produced since January 1, 2000 have v-chips. We cannot predict whether the v-chip and ratings system will have any significant effect on the operations of our business. Children's Programming. The FCC has adopted regulations effectively requiring - ---------------------- television stations to broadcast a minimum of three hours per week of programming designed to meet specifically identifiable educational and informational needs, and interests, of children. Present FCC regulations require that each television station licensee appoint a liaison responsible for children's programming. Information regarding children's programming and commercialization during such programming is required to be compiled quarterly and made available to the public. This programming information is also required to be filed with the FCC annually, and is reviewed as part of each station's renewal application. CABLE AND SATELLITE TELEVISION "Must-Carry" or "Retransmission Consent" Rights. The 1992 Cable Act requires - ----------------------------------------------- television broadcasters to make a periodic election to exercise either "must-carry" or "retransmission consent" rights in connection with the carriage of television stations by cable television systems in the station's local market. If a broadcaster chooses to exercise its must-carry rights, it may demand carriage on a specified channel on cable systems within its market, which, in certain circumstances, may be denied. Must-carry rights are not absolute, and their exercise is dependent on variables such as the number of activated channels on and the location and size of the cable system, the amount of duplicative programming on a broadcast station and 21 the technical quality of the signal delivered by the station to the cable system headend. If a broadcaster chooses to exercise its retransmission consent rights, it may prohibit cable systems from carrying its signal, or permit carriage under a negotiated compensation arrangement. Each Fisher Broadcasting station has elected either to require retransmission consent or to exercise its must-carry rights with regard to each cable system in its respective DMA and each station is currently being carried by all the cable systems deemed material by Fisher Broadcasting to the operation of those stations. The next election will take place on October 1, 2002, to be effective January 1, 2003. It is the cable industry's desire to eliminate the must-carry provision as the broadcast television industry converts to DTV. Elimination of must-carry could adversely affect Fisher Broadcasting's results of operations. Syndicated Exclusivity/NonDuplication Protection. The FCC's syndicated - ------------------------------------------------ exclusivity rules allow local broadcast stations to require that, under certain circumstances, cable television operators black out certain syndicated, non-network programming carried on "distant signals" (i.e., signals of broadcast stations, including so-called superstations, that serve areas substantially removed from the local community). The network nonduplication rule allows local broadcast network affiliates to require, under certain circumstances, that cable television operators black out duplicative network broadcast programming carried on more distant signals. Satellite Home Viewer Act. The Satellite Home Viewer Act (the "SHVA") permits - ------------------------- satellite carriers and direct broadcast satellite carriers to provide to certain satellite dish subscribers a package of network-affiliated stations as part of their service offering. This service is not intended to be offered to subscribers who are capable of receiving their local affiliates off the air through the use of conventional rooftop antennas or who have received network affiliated stations by cable within the past 90 days. Furthermore, the package of affiliate stations is intended to be offered only for private home viewing, and not to commercial establishments. The purpose of the SHVA is to facilitate the ability of viewers in so-called "white areas" to receive broadcast network programming when they are unable to receive such programming from a local affiliate, while protecting local affiliates from having the programming of their network imported into their market by satellite carriers. As a result of litigation, certain satellite carriers were prohibited from offering program packages that include the package of network affiliates to subscribers that were outside of "white areas." In response to the concerns of broadcasters, satellite carriers and viewers, Congress enacted the Satellite Home Viewer Improvement Act of 1999 ("1999 SHVIA"), on November 29, 1999. This act authorizes satellite carriers to add more local and national broadcast programming to their offerings, and to make that programming available to subscribers who previously have been prohibited from receiving broadcast fare via satellite under compulsory licensing provisions of the copyright law. The legislation generally seeks to place satellite carriers on an equal footing with local cable operators when it comes to the availability of broadcast programming, including the reception of local broadcast signals by satellite retransmission ("local into local") and thus give consumers more and better choices in selecting a multichannel video program distributor ("MVPD"). Among other things, the legislation and implementing regulation require broadcasters, until 2006, to negotiate in good faith with satellite carriers and MVPDs with respect to their retransmission of the broadcasters' signals, and prohibit broadcasters from entering into exclusive retransmission agreements. The law also requires that satellite carriers carry upon request all local television stations' signals in local markets in which the satellite carriers carry at least one local television station signal pursuant to the statutory copyright license, subject to the other carriage provisions contained in the 1999 SHVIA. The FCC has concluded several rulemakings to implement the 1999 SHVIA, including a proceeding to determine whether, and to what extent, the FCC's network nonduplication, syndicated exclusivity and sports blackout rules should apply to satellite retransmissions, and to resolve a number of issues relating to retransmission consent issues. In general the FCC imposed standards on satellite carriage similar to those in place for the cable industry. DIGITAL TELEVISION In February 1998, the FCC issued regulations regarding the implementation of advanced television in the United States. These regulations govern a new form of digital telecasting ("DTV") based on technical standards adopted by the FCC in December 1996. DTV is the technology that allows the broadcast and reception of a digital binary code signal, in contrast to the current analog signal, which is transmitted through amplitude and frequency variation of a carrier wave. Digitally transmitted sound and picture data can be compressed, allowing broadcasters to transmit several standard definition pictures within the same amount of spectrum currently required for a single analog channel. DTV also allows broadcasters to transmit enough information to create a high definition television ("HDTV") signal. The FCC's regulations permit, but do not require, broadcasters to provide an HDTV signal, which features over 1,000 lines of resolution, rather than the 525 lines of resolution used in analog television sets. The greater number of lines of resolution will allow HDTV to provide a far more detailed picture than existing television sets can produce. Under the FCC's DTV rules each existing station will receive a second channel on which to initiate DTV broadcasts. The FCC has specified the channel and the maximum power that may be radiated by each station. DTV stations will be limited to 1 million watts Effective Radiated Power, and no station has been assigned less than 50 thousand watts Effective Radiated 22 Power. The FCC has stated that the new channels will be paired with existing analog channels, and broadcasters will not be permitted to sell their DTV channels, while retaining their analog channels, and vice versa. Each station operated by Fisher Broadcasting and its affiliates has been allocated a second DTV channel. Affiliates of the ABC, CBS, FOX and NBC television networks in the top 10 television markets had until May 1, 1999 to construct and commence operation of DTV facilities on their newly allocated DTV channels. Affiliates of those networks in markets 11 through 30 had until November 1, 1999 to do the same. All other commercial television stations will be given until May 1, 2002 to place a DTV signal on the air, and all noncommercial stations will have until May 1, 2003. Stations will have one-half of the specified construction periods in which to apply to the FCC for a construction permit authorizing construction of the new DTV facilities. The FCC has indicated its intention to act expeditiously on such applications. While the FCC has announced its intention to grant extensions of the construction deadlines in appropriate cases, the impact of failing to meet these applications and construction deadlines cannot be predicted at this time. Fisher Broadcasting has already constructed and commenced DTV operation of stations KOMO-DT, Seattle, KATU-DT, Portland, KBCI-DT, Boise and KVAL-DT, Eugene. Construction permits have been obtained authorizing DTV stations to be paired with each of the other Fisher Broadcasting television stations. KVAL-DT is operating pursuant to Special Temporary Authority with lower powered facilities than specified in its construction permit, and it is anticipated that the remaining DTV stations of Fisher Broadcasting will be constructed with lower powered facilities. In a November 15, 2001 order, the FCC indicated that, upon request, it would extend the date for initiation of full powered operation of digital facilities indefinitely so long as low powered operations commenced by May 1, 2002. Fisher Broadcasting anticipates that, barring unforeseen circumstances, it will meet that deadline for each of its stations. Once a Fisher Broadcasting station begins operation of its new DTV facilities it will be required to deliver, at a minimum, a free programming service with picture resolution at least as good as that of the current analog service provided by the station, and will have to be aired during the same time periods as the current service. It may prove possible to provide more than one of such "analog equivalent" signals over a single DTV channel, or to mix an "analog equivalent" signal with other forms of digital material. The FCC will not require a broadcaster to transmit a higher quality HDTV signal over a DTV channel; the choice as to whether to transmit an HDTV signal or one or more "analog equivalent" channels will be left up to the station licensee. It is not believed possible, under the present state of the art, to transmit additional program material over the DTV signal while it is transmitting in the HDTV mode. We cannot predict whether competitors of Fisher Broadcasting's television stations will operate in the HDTV or "analog equivalent" mode or the economic impact of such choices on the stations' operations. Stations operating in the DTV mode will be subject to existing public service requirements. The FCC has initiated rulemakings contemplating the imposition of additional public service requirements, such as free advertising time for federal political candidates, and increased news, public affairs and children's programming requirements, in the future. We cannot predict whether such changes will be adopted, or any impact they might have on station operations. By 2003, DTV stations will have to devote at least one-half of their broadcast time to duplication of the programming on their paired analog stations. This simulcasting requirement will increase to 75% in 2004 and to 100% in 2005. The FCC has indicated that the transition from analog to digital service will end in 2006, at which time one of the two channels being used by broadcasters will have to be relinquished to the government, and DTV transmissions will be "repacked" into channels 2-51. Congress has established certain conditions that, if met, would allow the FCC to delay the termination of analog broadcasting beyond 2006. In addition, the FCC, in November 1998, voted to impose a fee on DTV licensees providing ancillary and supplementary services via their digital spectrum. The fee will equal 5% of gross revenues obtained from the provision of such ancillary and supplementary services, but will not be assessed against revenues generated by the traditional sale of broadcast time for advertising. The FCC said that it was following the stated goals of the Telecommunications Act to recover a portion of the value of the DTV spectrum, avoid unjust enrichment of broadcasters and recover an amount equal to that which would have been obtained if the spectrum had been auctioned for such ancillary services. Implementation of DTV is expected to generally improve the technical quality of television signals received by viewers. Under certain circumstances, however, conversion to DTV may reduce a station's geographic coverage area or result in some increased interference. Also, the FCC's allocations could reduce the competitive advantage presently enjoyed by several of Fisher Broadcasting's television stations, including its stations in Seattle and Portland, which operate on low VHF channels serving broad areas. Implementation of DTV will impose substantial additional costs on television stations because of the need to replace equipment and because some stations will operate at higher utility costs. Fisher Broadcasting estimates that the adoption of DTV would require a broad range of capital expenditures to provide facilities and equipment necessary to 23 produce and broadcast DTV programming. The introduction of this new technology will require that customers purchase new receivers (television sets) for DTV signals or, if available by that time, adapters for their existing receivers. The FCC's authorized DTV system utilizes a form of modulation known as 8-VSB. Several broadcast groups have raised questions concerning the efficacy of the 8-VSB modulation standard, particularly in urban settings, due to multipath problems exhibited in some first-generation DTV receivers. The FCC has affirmed the 8-VSB modulation system as the DTV transmission standard, concluding that there is no reason to revisit its decision denying a request to allow use of an alternative DTV modulation standard. The FCC initially set dates for stations with both analog and digital channel assignments within the DTV core (channels 2-51) to elect which channel they will use for their post-transition digital channel. It also held that broadcasters need not replicate with their digital signal the entire Grade B service area of their analog station. However, the Commission said that commercial stations will lose interference protection to those portions of their existing NTSC service area that they do not replicate with their DTV signal by December 31, 2004. On November 15, 2001, the FCC issued an order which deferred the dates by which stations must elect their post-transition channel and the date by which they must replicate their NTSC service area or lose interference protection. On December 22, 2000, the FCC issued new rules giving digital-only television stations must-carry status. The FCC tentatively decided that a local TV station may not assert a right to carriage for both its analog and digital signals ("dual carriage"). A further rulemaking was initiated to consider that issue, as well as to resolve a number of other issues relating to the DTV marketplace. We cannot predict the outcome of that proceeding. NEW BROADCAST SERVICES Class A LPTV Stations. The low-power television ("LPTV") service was established - --------------------- by the FCC in 1982 as a secondary spectrum priority service. LPTV stations have been prohibited from causing objectionable interference to existing full-service television stations such as operated by Fisher Broadcasting and that must yield to facilities increases of existing full-service stations or to new full service stations. On November 29, 1999, Congress enacted the Community Broadcasters Protection Act of 1999 (the "CPBA"), which required the FCC to prescribe regulations establishing a Class A license available to licensees of qualifying LPTV stations. The CBPA directs that Class A licensees be accorded primary status as a television broadcaster as long as the station continues to meet the requirements set forth in the statute for a qualifying LPTV station. In addition to other matters, the CBPA sets out certain certification and application procedures for LPTV licensees seeking to obtain Class A status, prescribes the criteria LPTV stations must meet to be eligible for a Class A license and outlines the interference protection Class A applicants must provide to analog, DTV, LPTV and TV translator stations. The FCC has issued rules implementing the Class A license class, and has granted a number of Class A authorizations. We cannot predict whether Class A stations will limit the ability of Fisher Broadcasting to make modifications to its existing and currently proposed television facilities. Low Power FM. Low power FM ("LPFM") stations operate with a maximum power of 100 - ------------ and 10 watts, respectively, and eligible licensees are limited to nonprofit entities proposing noncommercial operation. The LPFM stations are required to meet minimum separation requirements to protect the service contours of existing FM, FM translator and FM booster stations, and proposed FM and FM translator stations. The FCC has accepted applications for new LPFM stations on a state-by-state basis pursuant to a timetable set forth in its rules, and the first LPFM construction permits were granted in 2001. PROPOSED LEGISLATION AND REGULATIONS As discussed above, under certain circumstances, broadcast stations currently are required to provide political candidates with discounted airtime in the form of lowest unit rates. A number of changes have been proposed before Congress to mandate public service obligations on broadcast stations such as the provision of free or discounted airtime for political candidates. From time to time, legislation is introduced to change campaign financing or limit political contributions. Fisher Broadcasting is unable to predict the outcome of this debate regarding political advertising and campaign finance reform. Requirements to provide free airtime to candidates or to provide further discounts for airtime, as well as any legislation that results in decreasing political or advocacy spending, could adversely affect the financial performance of Fisher Broadcasting. Other matters that could affect Fisher Broadcasting's stations include technological innovations affecting the mass communications industry such as technical allocation matters, including assignment by the FCC of channels for additional broadcast stations, low-power television stations and wireless cable systems and their relationship to and competition with full-power television broadcasting service. 24 Congress and the FCC also have under consideration, or may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of Fisher Broadcasting's broadcasting business, resulting in the loss of audience share and advertising revenues of the stations, and affecting Fisher Broadcasting's ability to acquire additional, or retain ownership of existing, broadcast stations, or finance such acquisitions. Such matters include, for example, (i) changes to the license renewal process; (ii) imposition of spectrum use or other governmentally imposed fees on a licensee; (iii) proposals to change rules or policies relating to political broadcasting; (iv) technical and frequency allocation matters, including those relative to the implementation of DTV; (v) proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on broadcast stations; (vi) changes to broadcast technical requirements; (vii) proposals to limit the tax deductibility of advertising expenses by advertisers and (viii) changes in ownership rules and caps. Fisher Broadcasting cannot predict what other matters might be considered in the future, nor can it judge in advance what impact, if any, the implementation of any of these proposals or changes might have on its broadcasting business. The foregoing is a summary of the material provisions of the Communications Act, the Telecommunications Act and other congressional acts or related FCC regulations and policies applicable to Fisher Broadcasting. Reference is made to the Communications Act, the Telecommunications Act and other congressional acts, such regulations, and the public notices promulgated by the FCC, on which the foregoing summary is based, for further information. There are many additional FCC regulations and policies, and regulations and policies of other federal agencies, that govern political broadcasts, public affairs programming, equal employment opportunities and other areas affecting Fisher Broadcasting's broadcasting business and operations. REAL ESTATE OPERATIONS INTRODUCTION Fisher Properties Inc. ("FPI"), is a wholly owned subsidiary of the Company. Historically, FPI has been a proprietary real estate company engaged in the acquisition, development, ownership and management of a diversified portfolio of real estate properties, principally located in the greater Seattle, Washington area. Increasingly, FPI is focusing on providing real estate management, communication infrastructure, project management and support services to our broadcasting and media operations. As of December 31, 2001, FPI's portfolio of real estate assets included 23 commercial and industrial buildings containing over 1.3 million square feet of leasable space serving approximately 140 tenants and a 201-slip marina. FPI also owns 40 acres of unimproved residential land and manages the development and operations of the 200,000-square-foot Fisher Plaza. FPI manages, leases and operates the real estate that it owns. FPI does not manage properties for third-party owners. FPI had 44 employees as of December 31, 2001. In November 2001, FPI placed its portfolio of commercial and industrial properties on the market. Due to current market conditions, Fisher Communications presently is not seeking to sell its entire portfolio of real estate assets, but will continue to explore opportunistically the sale of individual properties. BUSINESS FPI's historical business model focused on real estate revenue enhancement, development and acquisition of selected strategic real estate and other property-related activities. Cash flow from real estate operations was used to reduce real estate debt, maintain properties, and finance real estate operations, and for capital investment in real estate development. FPI's operations historically have been cash flow positive. As stated in Note 11 to the consolidated financial statements, income from operations reported for the real estate segment excludes interest expense. When interest expense is taken into account, real estate operations have historically had negative income or nominal profit. FPI also would have incurred a loss in 1999, except for gain from the sale of real property. The majority of FPI's existing operating properties were developed by FPI. Future activities are expected to move toward service-related revenue generation and away from acquisition and development of physical assets. DEVELOPMENT ACTIVITIES During 2001, FPI continued its significant involvement in the development of Fisher Plaza. The first of the two buildings planned for the site and that now houses KOMO TV was completed in 2000. Construction of the second building 25 commenced in the fourth quarter of 2000 and has continued through 2001 and into 2002. A fall 2002 completion of the entire complex is projected. OPERATING PROPERTIES FPI's portfolio of operating properties is classified into three business categories: (i) office; (ii) warehouse and industrial; and (iii) marina properties. The following table includes FPI's significant properties:
Ownership Year Land Area Approx. % Leased Name and Location Interest FPI's Interest Developed (Acres) Rentable Space 12/31/01 - ----------------------------- --------- -------------- --------- --------- -------------- -------- OFFICE West Lake Union Center Fee 100% 1994 1.24 185 SF 100% Seattle, WA Parking for 487 Cars Fisher Business Center Fee 100% 1986 9.75 195,000 SF 93% Lynnwood, WA Parking for 733 Cars Marina Mart Fee 100% Renovated 1993 * 18,950 SF 58% Seattle, WA Rock Salt Steak House Fee 100% Renovated 1987 * 10,160 SF 100% Seattle, WA 1530 Building Fee 100% Renovated 1985 * 10,160 SF 75% Seattle, WA INDUSTRIAL Fisher ITC Fee 100% 2000 14.6 274,000 SF 71% Auburn, WA Pacific North Equipment Co. Fee 100% N/A 5.5 38,000 SF 100% Kent, WA Fisher Commerce Center Fee 100% N/A 10.21 171,400 SF 86% Kent, WA Fisher Industrial Park Fee 100% 1982 & 1992 22.08 398,600 SF 100% Kent, WA MARINA Marina Mart Moorings Fee & Leased 100% 1939 - 1987 5.01 Fee and 201 Slips 98% Seattle, WA 2.78 Leased
- ----------------------------- * Undivided land portion of Marina. In addition to the above-listed properties, FPI owns 40 acres of unimproved residential land near Marysville, Washington; and a small residential property in Seattle. FPI does not currently intend to acquire other properties. West Lake Union Center, Fisher Business Center, Fisher Industrial Park, Fisher Commerce Center and Fisher ITC are encumbered by nonrecourse, long-term debt financing that was obtained by FPI in connection with the development or refinancing of such properties. Each of these properties produces cash flow that exceeds debt service. 26 INVESTMENT IN SAFECO CORPORATION A substantial portion of the Company's assets are represented by an investment in 3,002,376 shares of the common stock of SAFECO Corporation, an insurance and financial services corporation ("SAFECO"). The Company has been a stockholder of SAFECO since 1923. At December 31, 2001, the Company's investment constituted 2.4% of the outstanding common stock of SAFECO. The market value of the Company's investment in SAFECO common stock as of December 31, 2001 was approximately $93,524,000, representing 15% of the Company's total assets as of that date. Dividends received with respect to the Company's SAFECO common stock amounted to $2,777,000 during 2001. In February 2001, SAFECO reduced its quarterly dividend from $0.37 to $0.185 per share. SAFECO's common stock price ranged from $21.50 to $32.95 per share during 2001. A significant decline in the market price of SAFECO common stock or a significant reduction in the amount of SAFECO's periodic dividends could have a material adverse effect on the financial condition or results of operation of the Company. Such securities are classified as investments available for sale under applicable accounting standards (see "Notes to Consolidated Financial Statements; Note 1: Operations and Accounting Policies: Marketable Securities"). Mr. William W. Krippaehne Jr., President, CEO and a Director of the Company, is a Director of SAFECO. SAFECO'S common stock is registered under the Securities Exchange Act of 1934, as amended, and further information concerning SAFECO may be obtained from reports and other information filed by SAFECO with the Securities and Exchange Commission. SAFECO common stock trades on The NASDAQ Stock Market under the symbol "SAFC." As further discussed in Note 14 to the Notes to Consolidated Financial Statements, 3,000,000 shares of the SAFECO common stock owned by the Company are collateral under and subject to the agreement between the Company and a financial institution with respect to a variable forward sale transaction. ADDITIONAL FACTORS THAT MAY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND FUTURE RESULTS The following risk factors and other information included in this Annual Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected. A CONTINUING ECONOMIC DOWNTURN IN THE SEATTLE, WASHINGTON OR PORTLAND, OREGON AREAS COULD ADVERSELY AFFECT OUR OPERATIONS, REVENUE, CASH FLOW AND EARNINGS. Our operations are concentrated primarily in the Pacific Northwest. The Seattle, Washington and Portland, Oregon markets are particularly important for our financial well being. Operating results during 2001 were adversely impacted by a softening economy, and a continuing economic downturn in these markets could have a material adverse effect on our operations and financial condition. Because our costs of products and services are relatively fixed, we may be unable to significantly reduce costs if our revenues continue to decline. If our revenues do not increase or continue to decline, we could continue to suffer net losses or such net losses could increase. IF THE MARKET VALUE OF THE SAFECO COMMON STOCK WE OWN DECLINES, IT MAY MATERIALLY AND ADVERSELY AFFECT OUR FINANCIAL CONDITION. We have obtained proceeds from a loan collateralized by the shares of SAFECO stock we own. We are currently seeking to obtain proceeds pursuant to a variable forward sale transaction, some of which we intend to use to repay the loan. If the market value of our SAFECO stock declines significantly while we are seeking to obtain the proceeds under the variable forward sale transaction, the decline may significantly decrease the amount of proceeds we can obtain under that transaction, and may cause all or part of the loan to become immediately due and payable. If all or part of the loan becomes due and payable, the Company may be required to sell assets, including securities owned by the Company, to repay the loan. If the amount of proceeds we can obtain under the variable forward sale transaction decreases significantly, it may materially and adversely affect our financial condition and the Company may sell assets to satisfy its liquidity needs. OUR DEBT SERVICE CONSUMES A SUBSTANTIAL PORTION OF THE CASH WE GENERATE, BUT OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. We currently use a significant portion of our operating cash flow to service our debt. Our leverage makes us vulnerable to an increase in interest rates or a downturn in the operating performance of our businesses or a decline in general economic conditions. It further limits our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or other purposes, and may limit our ability to pay dividends. Finally, it inhibits our ability to 27 compete with competitors who are less leveraged than we are, and it restrains our ability to react to changing market conditions, changes in our industry and economic downturns. Prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will affect our ability to satisfy our debt obligations. If in the future we cannot generate sufficient cash flow from operations to meet our obligations, we may need to refinance our debt, obtain additional financing, forego or delay acquisitions and capital expenditures or sell assets. Any of these actions could adversely affect the value of our common stock. We cannot assure you that we will generate sufficient cash flow or be able to obtain sufficient funding to satisfy our debt service requirements. COMPETITION IN THE BROADCASTING INDUSTRY AND THE RISE OF ALTERNATIVE ENTERTAINMENT AND COMMUNICATIONS MEDIA MAY RESULT IN LOSSES OF AUDIENCE SHARE AND ADVERTISING REVENUE BY OUR STATIONS. We cannot assure you that any of our stations will continue to maintain or increase its current audience ratings or advertising revenue market share. Fisher Broadcasting's television and radio stations face intense competition from local network affiliates and independent stations, as well as from cable and alternative methods of broadcasting brought about by technological advances and innovations. The stations compete for audiences on the basis of programming popularity, which has a direct effect on advertising rates. Additional significant factors affecting a station's competitive position include assigned frequency and signal strength. The possible rise in popularity of competing entertainment and communications media could also have a materially adverse effect on Fisher Broadcasting's audience share and advertising revenue. We cannot predict either the extent to which such competition will materialize or, if such competition materializes, the extent of its effect on our business. OUR RESTRUCTURING MAY CAUSE DISRUPTION OF OPERATIONS AND DISTRACTION OF MANAGEMENT, AND MAY NOT ACHIEVE THE DESIRED RESULTS. We continue to implement a restructuring of our corporate enterprise with the objective of allowing greater functional integration of core competencies and improving operational efficiencies. This restructuring may disrupt operations and distract management, which could have a material adverse effect on our operating results. We cannot predict whether this restructuring will achieve the desired benefits, or whether our company will be able to fully integrate our broadcast communications, media services and other operations. We cannot assure you that the restructuring will be completed in a timely manner or that any benefits of the restructuring will justify its costs. We may incur costs in connection with the restructuring in the areas of professional fees, marketing expenses, employment expenses, and administrative expenses. In addition, we may incur additional costs which we are unable to predict at this time. THE SEPTEMBER 11, 2001 TERRORIST ATTACKS MAY CONTINUE TO AFFECT OUR RESULTS OF OPERATIONS. We may continue to be affected by the events of September 11, 2001, in New York, Washington, D.C., and Pennsylvania, as well as by the actions taken by the United States in response to such events. At this time, we cannot determine the ultimate extent of the effect of these events and their aftermath on the operating results of our television and radio broadcasting operations. However, as a result of expanded news coverage following the attacks and subsequent military action, we experienced a loss in advertising revenues. The events of September 11 negatively affected economic activity in the United States and globally, including the markets in which we operate. If weak economic conditions continue or worsen, our financial condition and results of operations may be materially and adversely affected. Furthermore, there is no assurance that there will not be further terrorist attacks against the United States or United States businesses, including real or threatened attacks. Although we have received no specific threats of such attacks, any such attacks might directly impact our physical facilities or our personnel, potentially causing substantial losses or disruptions in our operations. Our insurance coverage may not be adequate to cover the losses and interruptions caused by terrorist attacks. Insurance premiums may increase, or adequate coverage may not be available. OUR EFFORTS TO DEVELOP NEW BUSINESS OPPORTUNITIES ARE SUBJECT TO TECHNOLOGICAL RISK AND MAY NOT BE SUCCESSFUL, OR RESULTS MAY TAKE LONGER THAN EXPECTED TO REALIZE. We are developing new opportunities for creating, aggregating and distributing content through non-broadcast media channels, such as the Internet, cell phones, and web-enabled personal digital assistants. The success of our efforts is subject to technological innovations and risks beyond our control, so that the anticipated benefits may take longer than expected to realize. In addition, we have limited experience in non-broadcast media, which may result in errors in the conception, design or implementation of a strategy to take advantage of the opportunities available in that area. We therefore cannot give any assurance that our efforts will result in successful products or services. 28 THE FCC'S EXTENSIVE REGULATION OF THE BROADCASTING INDUSTRY LIMITS OUR ABILITY TO OWN AND OPERATE TELEVISION AND RADIO STATIONS AND OTHER MEDIA OUTLETS. The broadcasting industry is subject to extensive regulation by the Federal Communications Commission ("FCC") under the Communications Act of 1934, as amended. Compliance with and the effects of existing and future regulations could have a material adverse impact on us. Issuance, renewal or transfer of broadcast station operating licenses requires FCC approval, and we cannot operate our stations without FCC licenses. Failure to observe FCC rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of short-term (i.e., less than the full eight years) license renewals or, for particularly egregious violations, the denial of a license renewal application or revocation of a license. While the majority of such licenses are renewed by the FCC, there can be no assurance that Fisher Broadcasting's licenses will be renewed at their expiration dates, or, if renewed, that the renewal terms will be for eight years. If the FCC decides to include conditions or qualifications in any of our licenses, we may be limited in the manner in which we may operate the affected stations. The Communications Act and FCC rules impose specific limits on the number of stations and other media outlets an entity can own in a single market. The FCC attributes interests held by, among others, an entity's officers, directors and stockholders to that entity for purposes of applying these ownership limitations. The existing ownership rules or proposed new rules may prevent us from acquiring additional stations in a particular market. We may also be prevented from engaging in a swap transaction if the swap would cause the other company to violate these rules. DEPENDENCE ON KEY PERSONNEL MAY EXPOSE US TO ADDITIONAL RISKS. Our business is dependent on the performance of certain key employees, including our chief executive officer and other executive officers. We also employ several on-air personalities who have significant loyal audiences in their respective markets. A substantial majority of our executive officers do not have employment contracts with us. We can give no assurance that all such key personnel will remain with us. The loss of any key personnel could adversely affect our operations and financial results. THE NON-RENEWAL OR MODIFICATION OF AFFILIATION AGREEMENTS WITH MAJOR TELEVISION NETWORKS COULD HARM OUR OPERATING RESULTS. Our television stations' affiliation with one of the four major television networks (ABC, CBS, NBC and FOX) has a significant impact on the composition of the stations' programming, revenues, expenses and operations. We cannot give any assurance that we will be able to renew our affiliation agreements with the networks at all, or on satisfactory terms. In recent years, the networks have been attempting to change affiliation arrangements in manners that would disadvantage affiliates. The non-renewal or modification of any of the network affiliation agreements could have a material adverse effect on our operating results. A NETWORK MIGHT ACQUIRE A TELEVISION STATION IN ONE OF OUR MARKETS, WHICH COULD HARM OUR BUSINESS AND OPERATING RESULTS. If a network acquires a television station in a market in which we own a station affiliated with that network, the network will likely decline to renew the affiliation agreement for our station in that market, which could materially and adversely affect our business and results of operations. OUR OPERATIONS MAY BE ADVERSELY AFFECTED BY POWER OUTAGES, INCREASED ENERGY COSTS OR EARTHQUAKES IN THE PACIFIC NORTHWEST. Our corporate headquarters and a significant portion of our operations are located in the Pacific Northwest. The Pacific Northwest has from time-to-time experienced earthquakes and experienced a significant earthquake on February 28, 2001 which caused damage to some of our facilities. We do not know the ultimate impact on our operations of being located near major earthquake faults, but an earthquake could materially adversely affect our operating results. In addition, the Pacific Northwest may experience power shortages or outages and increased energy costs. Power shortages or outages could cause disruptions to our operations, which in turn may result in a material decrease in our revenues and earnings and have a material adverse effect on our operating results. Power shortages or increased energy costs in the Northwest could adversely affect the region's economy and our advertising, which could reduce our advertising revenues. Our insurance coverage may not be adequate to cover the losses and interruptions caused by earthquakes and power outages. 29 OUR DEVELOPMENT, OWNERSHIP AND OPERATION OF REAL PROPERTY IS SUBJECT TO RISKS, INCLUDING THOSE RELATING TO THE ECONOMIC CLIMATE, LOCAL REAL ESTATE CONDITIONS, POTENTIAL INABILITY TO PROVIDE ADEQUATE MANAGEMENT, MAINTENANCE AND INSURANCE, POTENTIAL COLLECTION PROBLEMS, RELIANCE ON SIGNIFICANT TENANTS, AND REGULATORY RISKS. Revenue and operating income from our properties and the value of our properties may be adversely affected by the general economic climate, the local economic climate and local real estate conditions, including prospective tenants' perceptions of attractiveness of the properties and the availability of space in other competing properties. We are developing the second building at Fisher Plaza which entails significant investment by us. The softened economy in the Seattle area could adversely affect our ability to lease the space of our properties on attractive terms or at all, which could have a material adverse effect on our operating results. Other risks relating to our real estate operations include the potential inability to provide adequate management, maintenance and insurance, and the potential inability to collect rent due to bankruptcy or insolvency of tenants or otherwise. Several of our properties are leased to tenants that occupy substantial portions of such properties and the departure of one or more of them or the inability of any of them to pay their rents or other fees could have a significant adverse effect on our real estate revenues. Real estate income and values may also be adversely affected by such factors as applicable laws and regulations, including tax and environmental laws, interest rate levels and the availability of financing. We carry comprehensive liability, fire, extended coverage and rent loss insurance with respect to our properties. There are, however, certain losses that may be either uninsurable, not economically insurable or in excess of our current insurance coverage limits. If an uninsured loss occurs with respect to a property, it could materially and adversely affect our operating results. A REDUCTION ON THE PERIODIC DIVIDEND ON THE COMMON STOCK OF SAFECO MAY ADVERSELY AFFECT OUR REVENUE, CASH FLOW AND EARNINGS. We are a 2.4% stockholder of the common stock of SAFECO. If SAFECO reduces its periodic dividends, it will negatively affect our revenue, cash flow and earnings. In February 2001, SAFECO reduced its quarterly dividend from $0.37 to $0.185 per share. ANTITRUST LAW AND OTHER REGULATORY CONSIDERATIONS COULD PREVENT OR DELAY EXPANSION OF OUR BUSINESS OR ADVERSELY AFFECT OUR REVENUES. The completion of any future transactions we may consider will likely be subject to the notification filing requirements, applicable waiting periods and possible review by the Department of Justice or the Federal Trade Commission under the Hart-Scott-Rodino Act. Any television or radio station acquisitions or dispositions will be subject to the license transfer approval process of the FCC. Review by the Department of Justice or the Federal Trade Commission may cause delays in completing transactions and, in some cases, result in attempts by these agencies to prevent completion of transactions or to negotiate modifications to the proposed terms. Review by the FCC, particularly review of concentration of market revenue share, may also cause delays in completing transactions. Any delay, prohibition or modification could adversely affect the terms of a proposed transaction or could require us to abandon an acquisition or disposition opportunity. In addition, campaign finance reform laws or regulations could result in a reduction in funds being spent on advertising in certain political races, which would adversely affect our revenues and results of operations in election years. OUR INVESTMENTS IN HDTV AND DIGITAL BROADCASTING MAY NOT RESULT IN REVENUE SUFFICIENT TO JUSTIFY THE INVESTMENT. The ultimate success of digital television broadcasting will depend on programming being produced and distributed in a digital format, the effect of current or future laws and regulations relating to digital television, including the FCC's determination with respect to "must-carry" rules for carriage of each station's digital channel and receiver standards for digital reception, and public acceptance and willingness to buy new digital television sets. Unless consumers embrace digital television and purchase enough units to cause home receiver prices to decline, the general public may not switch to the new technology, delaying or preventing its ultimate economic viability. Our investments in HDTV and digital broadcasting may not generate earnings and revenue sufficient to justify the investments. 30 THE RISKS INHERENT IN A NEW BUSINESS VENTURE MAY ADVERSELY AFFECT THE OPERATING RESULTS OF FISHER ENTERTAINMENT. While Fisher Broadcasting has created programming in the past, we do not have significant experience in the creation and distribution of programming on the scale contemplated by Fisher Entertainment. Factors that could materially and adversely affect the results of Fisher Entertainment include competition from existing and new competitors, as well as related performance and price pressures, potential difficulties in relationships with cable and television networks, failure to obtain air time for the programming produced and the changing tastes and personnel of the acquirers of programming. There are many inherent risks in a new business venture such as Fisher Entertainment, including startup costs, performance of certain key personnel, and the unpredictability of audience tastes. ACQUISITIONS COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL CONDITION AND ARE IN ANY EVENT UNCERTAIN. We may opportunistically acquire broadcasting and other assets we believe will improve our competitive position. However, any acquisition may fail to increase our cash flow or yield other anticipated benefits due to a number of other risks, including: . failure or unanticipated delays in completing acquisitions due to difficulties in obtaining regulatory approval, . failure of an acquisition to maintain profitability, generate cash flow, or provide expected benefits, . difficulty in integrating the operations, systems and management of any acquired assets or operations, . diversion of management's attention from other business concerns, and . loss of key employees of acquired assets or operations. Some competitors for acquisition of broadcasting or other assets are likely to have greater financial and other resources than we do. We cannot predict the availability of acquisition opportunities in which we might be interested. ITEM 2. DESCRIPTION OF PROPERTIES. Television stations operate from offices and studios owned by Fisher Broadcasting. Television transmitting facilities and towers are also generally owned by Fisher Broadcasting although some towers are sited on leased land. KATU Television in Portland, Oregon is a participant with three other broadcast companies in a the Sylvan Tower LLC formed to construct and operate a joint use tower and transmitting site for the broadcast of radio and digital television signals. The land on which this facility is sited is leased by the LLC from one of the participants under the terms of a 40-year lease. Radio studios are generally located in leased space. Radio transmitting facilities and towers are owned by Fisher Broadcasting, except KPLZ-FM, KWJJ-FM and some of the stations operated by Fisher Radio Regional Group, where such facilities are situated on leased land. Property operated by our real estate subsidiary, FPI, is described under "Real Estate Operations - Operating Properties." Real estate projects that are subject to non-recourse mortgage loans are West Lake Union Center, Fisher Business Center, Fisher Industrial Park, and Fisher Commerce Center, and Fisher Industrial Technical Center. We believe that the properties owned or leased by our operating subsidiaries are generally in good condition and well maintained, and are adequate for present operations. ITEM 3. LEGAL PROCEEDINGS We are parties to various claims, legal actions and complaints in the ordinary course of our businesses. In our opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on our consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS No matters were submitted to a vote of securities holders in the fourth quarter of 2001. 31 PART II ITEM 5. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS On May 18, 2001 our Common Stock began trading on the Nasdaq National Market under the symbol "FSCI." Prior to that date bid and ask prices were quoted in the Pink Sheets and on the OTC Bulletin Board. The following table sets forth the high and low prices for the Common Stock for the periods indicated. In determining the high and low prices for the period after May 18, 2001, we used the high and low sales prices as reported on the Nasdaq National Market, and for the period prior to May 18, 2001, we used the high and low bid prices as quoted on the Pink Sheets and on the OTC Bulletin Board. CAPTION> Quarterly Common Stock Price Ranges ----------------------------------- 2001 2000 ---- ---- Quarter High Low High Low - ------- ---- --- ---- --- 1st $59.50 $50.00 $63.50 $54.00 2nd 72.89 49.25 80.00 60.00 3rd 70.50 44.50 74.00 70.25 4th 54.02 40.50 72.00 42.00
- --------------- The approximate number of record holders of our Common Stock as of December 31, 2001 was 361. We paid cash dividends on our Common Stock of $1.04 per share for each of the fiscal years 2001 and 2000. Annual cash dividends have been paid on our Common Stock every year since our reorganization in 1971. We currently expect that comparable cash dividends will continue to be paid in the future, although our ability to do so may be affected by the terms of our credit facilities and other factors described in the subsection "Liquidity and Capital Resources" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the section entitled "Additional Factors That May Affect Our Business, Financial Condition and Future Results." ITEM 6. SELECTED FINANCIAL DATA. The following financial data of the Company are derived from the Company's historical audited financial statements and related footnotes. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related footnotes contained elsewhere in this Form 10-K. 32 SELECTED FINANCIAL DATA
Year ended December 31, 2001 2000 1999 1998 1997 --------------------------------------------------------------------- (All amounts in thousands except per share data) Revenue Continuing operations $ 161,641 $ 209,662 $ 163,875 $ 139,902 $ 136,039 Discontinued operations 44,675 112,012 114,942 108.056 129,941 --------------------------------------------------------------------- $ 206,316 $ 321,764 $ 278,817 $ 247,958 $ 260,034 ===================================================================== Income (loss) Continuing operations $ (7,936) $ 31,857 $ 23,061 $ 22,460 $ 23,628 Discontinued operations (327) (17,327) (4,968) (1,403) (1,101) --------------------------------------------------------------------- Net income (loss) $ (8,263) $ 14,530 $ 18,039 $ 21,057 $ 24,729 ===================================================================== Per common share data Income (loss) per share Continuing operations $ (0.92) $ 3.72 $ 2.70 $ 2.63 $ 2.77 Discontinued operations $ (0.04) $ (2.02) $ (0.58) $ (0.16) $ 0.13 --------------------------------------------------------------------- Net income (loss) $ (0.96) $ 1.70 $ 2.12 $ 2.17 $ 2.90 ===================================================================== Income (loss) per share assuming dilution Continuing operations $ (0.92) $ 3.71 $ 2.69 $ 2.62 $ 2.75 Discontinued operations (0.04) $ (2.02) $ (0.58) $ (0.16) $ 0.13 --------------------------------------------------------------------- Net income (loss) $ (0.96) $ 1.69 $ 2.11 $ 2.46 $ 2.88 ===================================================================== Cash divedends declared/(1)/ $ 0.78 $ 1.04 $ 1.04 $ 1.01 $ 0.25 December 31, 2001 2000 1999 1998 1997 --------------------------------------------------------------------- Working capital $ 9.380 $ 10,121 $ 33,959 $ 34,254 $ 36,336 Total assets/(2)/ 623,117 646,804 678,512 439,522 438,753 Total debt 286,949 283,055 338,174 76,736 73,978 Stockholders' equity 237,454 262,710 241,975 266,548 266,851
Certain prior year balances have been reclassified to conform to the 2001 presentation. /(1)/Amounts for 2000, 1999 and 1998 include $.26 per share declared for payment in the subsequent year. 1997 amount was declared for payment in first quarter 1998. /(2)/The Company applies Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" (FAS 115), which requires investments in equity securities, be designated as either trading or available-for-sale. The Company has classified its investments as available-for-sale and those investments are reported at fair market value. Accordingly, total assets include unrealized gain on marketable securities as follows: December 31, 2001 - $95,939; December 31, 2000 - $100,912; December 31, 1999 - $78,274; December 31, 1998 - $131,132; December 31, 1997 - $148,506. Stockholders' equity includes unrealized gain on marketable securities, net of deferred income tax, as follows: December 31, 2001 - $62,360; December 31, 2000 - $65,593; December 31, 1999 - $50,878; December 31, 1998 - $85,236; December 31, 1997 - $96,529. 33 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This annual report on Form 10-K contains forward-looking statements that involve known and unknown risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Words such as "may," "could," "would," "expect," "anticipate," "intend," "plan," "believe," "estimate" and variations of such words and similar expressions are intended to identify such forward-looking statements. You should not place undue reliance on these forward-looking statements, which are based on our current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties, and assumptions (including those described herein) and apply only as of the date of this report. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Additional Factors that May Affect Our Business, Financial Condition and Future Results" as well as those discussed in this sections and elsewhere in this annual report. This discussion is intended to provide an analysis of significant trends and material changes in our financial position and operating results during the period 1999 through 2001. In June 1999, the Company's real estate subsidiary sold, under threat of condemnation, certain improved property in Seattle Washington. Total gain on the sale amounted to $12,825,000, of which $9,827,000 was recognized in June 1999 and $2,998,000 was recognized in December 1999. On July 1, 1999, the Company and its broadcasting subsidiary completed the acquisition of ten network-affiliated television stations and 50% of the outstanding stock of a corporation that owns one television station. The acquired properties were in seven markets located in California, the Pacific Northwest, and Georgia (the "Fisher Television Regional Group" or the "newly acquired stations"). Total consideration was $216.7 million, which included $7.6 million of working capital (primarily accounts receivable and prepaid expenses, less accounts payable and other current liabilities). Funding for the transaction was from a senior credit facility in the amount of $230 million. On July 1, 1999, the Company and the milling subsidiary purchased the remaining 50% interest in the limited liability company (LLC) which owned and operated flour milling facilities in Blackfoot, Idaho. The $19 million purchase price was funded from bank lines of credit. Prior to July 1, our milling subsidiary used the equity method to account for its 50% interest in the LLC. Subsequent to the acquisition the LLC became a wholly-owned subsidiary, and operating results of the Blackfoot facility are fully consolidated in the milling segment. The first clients of the Fisher Plaza project began moving into that facility during May 2000. Financial results for the portion of the project not occupied by KOMO TV are included in the real estate segment. On August 1, 2000, our broadcasting subsidiary completed the sale of its wholly owned membership interest in a limited liability company, which owned and operated KJEO-TV in Fresno, CA, for $60 million, resulting in a gain of $15,722,000. On October 27, 2000, the Board of Directors authorized management to negotiate one or more transactions with third parties with respect to a sale of Fisher Mills, with terms of a specific transaction subject to approval of the Board. Accordingly, the operating results, net current liabilities, and net noncurrent assets of Fisher Mills have been reported as discontinued operations in the accompanying financial statements. On April 30, 2001, the sale of the assets and working capital used in the Seattle, Blackfoot, Modesto, and Portland flour milling operations was completed. On June 29, 2001 the sale of the distribution assets and working capital of Fisher Mills Inc. and its subsidiary Sam Wylde Flour Co. was completed. Proceeds from the transactions totaled $49,910,000 including working capital. On November 6, 2001, the Board of Directors approved management's recommendation to consider selling the real estate portfolio held by the Company's real estate subsidiary. The bid process was completed in February 2002. Due to current market conditions, we are presently not seeking to sell the entire portfolio of real estate assets, but will continue to explore opportunistically the sale of individual properties. Any offers received from potential purchasers are subject to approval of the Board of Directors. We continue to implement a corporate restructuring, begun in 2001, that we expect will lead to improved efficiencies. The purpose of this restructuring is to enable us to focus on our objective of becoming a company that fully integrates broadcast communications and media services operations. 34 Each of these transactions had an effect on the comparative results of operations in terms of revenue, costs and expenses, and operating income referred to in the following analysis. Certain prior year balances have been reclassified to conform to the 2001 presentation. Such reclassifications had no effect on net income or loss. CONSOLIDATED RESULTS OF OPERATIONS Operating results for the year ended December 31, 2001 showed a consolidated net loss of $8,263,000 compared with net income of $14,530,000 reported for the year ended December 31, 2000. Results for 2001 include a loss of $327,000, net of tax effects, from the milling businesses, which is reported as discontinued operations. Broadcasting revenue declined $50,299,000 compared with 2000. Factors occurring during 2001 which contributed to the decline include decreased advertiser demand, particularly by national advertisers, relative weakness of ABC Network programming, competition for viewers and listeners as a result of the popularity of the Seattle Mariners baseball game programming on a competing station, a decline in revenue from political advertising, of approximately $23,700,000, and the absence of revenue from KJEO-TV which contributed approximately $5,200,000 of revenue in 2000 prior to sale on August 1st of that year. The adverse effects of the events of September 11, 2001 also contributed to the decline in broadcast revenue as our television stations aired continuous, commercial-free, network news coverage for several days following the events and a number of advertisers cancelled or delayed previously scheduled advertising. Total expenses relating to broadcasting operations, including interest and depreciation, decreased approximately $15,100,000. Operating income from real estate operations improved in 2001 compared with 2000 due to improved margins and the completion of phase one and operations at Fisher Plaza. Corporate expenses increased primarily due to reassignment of personnel and other costs, including severance and related expenses of approximately $3,200,000, associated with the Company's restructuring. Interest expense declined as a result of a combination of reduced borrowing and lower interest rates. Consolidated net income for the year ended December 31, 2000 amounted to $14,530,000 compared with $18,093,000 reported for the year ended December 31, 1999. The loss from discontinued operations of milling businesses for the year ended December 31, 2000 includes results of operations of the milling businesses through September 30, 2000 amounting to $1,665,000, net of income tax benefit of $962,000, and estimated loss from disposal of the milling businesses amounting to $15,662,000, net of income tax benefit of $8,434,000. Components of the estimated loss include the excess of net book value of assets over projected sales proceeds, estimated costs of sale including employee severance, and estimated operating results during the phase-out period. Excluding loss from discontinued operations of the milling businesses, income from continuing operations for the year ended December 31, 2000 was $31,857,000 compared with $23,061,000 reported for 1999. Our 2000 results include after tax gains from the sale of KJEO-TV, amounting to $9,747,000, and from the sale of two parcels of real estate, amounting to $554,000. Excluding these non-recurring gains and the gain from real estate, sold under threat of condemnation, of $8,337,000, net of tax, recognized in 1999, income from continuing operations for the year ended December 31, 2000 increased 46.4% compared with the year ended December 31, 1999. Milling operation results are included in the caption labeled "Discontinued Operations." REVENUE - -------------------------------------------------------------------------------- 2001 %Change 2000 %Change 1999 Broadcasting $145,513,000 -25.7% $195,812,000 28.7% $152,128,000 Real estate 16,128,000 16.4% 13,850,000 17.9% 11,747,000 In total, revenue declined 22.9% in year ended December 31, 2001 compared with year ended December 31, 2000. Total revenue increased 27.9% in the year ended December 31, 2000 compared with year ended December 31, 1999. Broadcasting and real estate operations are discussed further on pages 38 - 40. 35 COST OF PRODUCTS AND SERVICES SOLD - -------------------------------------------------------------------------------- 2001 %Change 2000 %Change 1999 $71,226,000 -0.6% $71,628,000 14.3% $62,689,000 Percentage of revenue 44.1% 34.2% 38.3% The cost of products and services sold consists primarily of costs to acquire, produce, and promote broadcast programming, including salaries, and costs to operate the properties reported in the real estate segment. These costs are relatively fixed in nature, and do not vary directly with revenue. During the year ended December 31, 2001 operating expenses of the broadcasting operations increased modestly compared with 2000, after adjusting 2000 to exclude expenses of KJEO-TV, which was sold in August of that year. Overall operating costs of the real estate operations decreased approximately $300,000, or 17.1%. Operating expenses of the broadcasting operations increased $8,931,000 during the year ended December 31, 2000 compared with 1999, after adjustment to exclude expenses of KJEO-TV, which was sold in August 2000. Overall operating costs of the real estate operations increased approximately $540,000. Broadcasting and real estate operations are discussed further on pages 38 - 40. SELLING EXPENSES - --------------------------------------------------------------------------------
2001 %Change 2000 %Change 1999 $21,179,000 -7.1% $22,791,000 33.1% $17,118,000 Percentage of revenue 13.1% 10.9% 10.4%
Selling expenses are incurred by the broadcasting operations. The principal cause of the reduction in selling expenses is the overall decrease in revenue, which resulted in decreased sales department compensation, primarily in the form of sales commissions. If the selling expenses incurred by KJEO-TV reflected in operating results for the first seven months of 2000 are excluded, the percentage decrease would be 4.5%. The increase in selling expenses as a percentage of revenue reflects the relatively fixed nature of certain sales department costs, such as management salaries, information systems, and ratings services. The increase for the year ended December 31, 2000 compared with 1999 is a result of costs incurred by the television stations acquired in 1999 and increased commissions and related expenses attributable to increased broadcasting revenue. GENERAL AND ADMINISTRATIVE EXPENSES - -------------------------------------------------------------------------------- 2001 %Change 2000 %Change 1999 $39,713,000 -9.4% $43,822,000 11.4% $39,349,000 Percentage of revenue 24.6% 20.9% 24.0% General and administrative expenses declined at the broadcasting operations largely due to cessation of benefit accruals for the broadcasting subsidiary's defined benefit plan (which was terminated in January 2002), reduction in personnel costs as a result of the retirement of a senior officer in early 2001, and decrease of expenses attributable to KJEO-TV as a result of the sale on August 1, 2000. Expenses declined with respect to the real estate operations primarily as expenses associated with certain officers were transferred to the corporate segment in connection with the Company's restructuring. The corporate segment incurred increased costs in connection with reassignment of personnel and other costs associated with the restructuring, including severance and related expenses of approximately $3,200,000, and a donation of $1,000,000 to fund a civic project in Seattle, Washington. General and administrative expenses increased in all business segments during 2000. The increase at the broadcasting segment is largely attributable to costs incurred by the newly acquired television stations, higher employee benefit costs, and higher legal and consulting expenses. The real estate segment experienced increased salaries and employee benefit costs. The corporate segment incurred increased costs in connection with additional personnel. 36 DEPRECIATION AND AMORTIZATION - ------------------------------------------------------------------------------- 2001 %Change 2000 %Change 1999 $24,809,000 13.4% $21,889,000 48.0% $14,784,000 Percentage of revenue 15.3% 10.4% 9.0% The increases in depreciation expense relate primarily to Fisher Plaza and the Fisher Industrial Technology Center, located in Auburn, Washington, owned by the real estate subsidiary. Depreciation of Fisher Plaza, and new broadcast and related equipment and digital studios acquired by KOMO TV, began in June of 2000. Construction of the Fisher Industrial Technology Center was complete in Fall 2000, and tenants began occupancy in mid-2001. OTHER INCOME, NET - ------------------------------------------------------------------------------- 2001 %Change 2000 %Change 1999 $3,210,000 -84.9% $21,199,000 20.5% $17,586,000 Other income, net in 2001 includes primarily dividends received on marketable securities and also interest and miscellaneous income. The decline in other income, net for the year ended December 31, 2001 compared to 2000 is attributable to a reduction in the dividend paid by SAFECO Corporation and the inclusion in 2000 of gain from the sale of KJEO-TV in the amount of $15,722,000 and gain from sale of two parcels of real estate in the amount of $852,000. After deducting income taxes, the gains were $9,747,000 and $554,000, respectively. For the year ended December 31, 2000, other income, net includes the gains from the sale of KJEO-TV and from sale of real estate described in the preceding paragraph. The 1999 amount includes $12,825,000 gain from sale of real estate. Dividend income was largely unchanged from 1999 to 2000. (LOSS) GAIN IN EQUITY INVESTEES - ------------------------------------------------------------------------------- 2001 % Change 2000 1999 $(4,572,000) 377.4% $(958,000) $94,000 Investments in entities over which we have significant influence, however do not control, (equity investees) are accounted for using the equity method. The loss in equity investees includes our pro rata share of losses incurred by such investees and, for the year ended December 31, 2001, relate principally to loans for development of the Civia Media Terminal. INTEREST EXPENSE - ------------------------------------------------------------------------------- 2001 %Change 2000 %Change 1999 $17,847,000 -16.4% $21,360,000 72.7% $12,367,000 Interest expense includes interest on borrowed funds, loan fees, and net payments under a swap agreement, and is net of interest allocated to discontinued operations based on net borrowing of the discontinued operations. The decrease in interest expense for the year ended December 31, 2001 compared with 2000 is attributable to lower amounts of borrowed funds outstanding and to lower interest rates. Interest incurred in connection with funds borrowed to finance construction of Fisher Plaza and other significant capital projects is capitalized as part of the cost of the related project. The increase in 2000 interest expense compared with 1999 is attributable to funds borrowed in July 1999 to finance the acquisition of television stations and the acquisition of 50% interest in the Blackfoot flour mill. PROVISION FOR FEDERAL AND STATE INCOME TAXES (BENEFIT) - -------------------------------------------------------------------------------- 2001 % Change 2000 % Change 1999 $(6,559,000) -139.6% $16,556,000 35.8% $12,187,000 Effective tax rate 45.3% 34.2% 34.6% The provision for federal and state income taxes varies directly with pre-tax income. The tax benefit in 2001 reflects our ability to utilize a net operating loss carryback. The effective tax rate varies from the statutory rate for all years primarily due to a deduction for dividends received, offset by the impact of state income taxes. 37 OTHER COMPREHENSIVE INCOME (LOSS) - -------------------------------------------------------------------------------- 2001 % Change 2000 % Change 1999 $(5,489,000) -137.3% $14,715,000 142.8% $(34,358,000) Other comprehensive income (loss) includes unrealized gain or loss on our marketable securities and the effective portion of the change in fair value of an interest rate swap agreement, and is net of income taxes. During the year ended December 31, 2001, the value of the marketable securities declined $3,233,000, net of tax. A significant portion of the marketable securities consists of 3,002,376 shares of SAFECO Corporation. The per share market price of SAFECO Corporation common stock was $31.15 at December 31, 2001, $32.88 at December 31, 2000, and $24.88 at December 31, 1999. Unrealized gains and losses, net of tax, are a separate component of stockholders' equity. BROADCASTING OPERATIONS REVENUE - ------------------------------------------------------------------------------- 2001 % Change 2000 %Change 1999 $145,513,000 -25.7% $195,812,000 28.7% $152,128,000 During the year ended December 31, 2001, as compared with 2000, our revenue from local advertisers declined $19,300,000; our national advertising revenue declined $21,400,000; and our political advertising revenue decreased $23,700,000. These declines were partially offset by commissions paid to advertising agencies, with the result that net revenue from broadcasting operations declined $50,299,000 in 2001, compared with 2000. Comparability between the periods is affected by the sale by the Company's broadcasting subsidiary, in August 2000, of all of the membership interest in a limited liability company which owned and operated KJEO-TV. If, for purposes of comparison, revenue from KJEO-TV is excluded from the 2000 revenue, the decrease in revenue from broadcasting operations for the year ended December 31, 2001 compared with 2000 would be 23.1%. Factors occurring during 2001 which have contributed to the decline include decreased advertiser demand, particularly by national advertisers, relative weakness of ABC Network programming, competition for viewers and listeners in the Seattle market as a result of the popularity of the Seattle Mariners baseball game programming on a competing station, a decline in revenue from political advertising of approximately $23,700,000, and the absence of revenue from KJEO-TV, which had contributed approximately $5,200,000 of revenue in 2000. The adverse effects of the events of September 11, 2001 also contributed to the decline in broadcast revenue as our television stations aired continuous, commercial-free, network news coverage for several days following the events and a number of advertisers cancelled or delayed previously scheduled advertising. KOMO TV in Seattle and KATU Television in Portland experienced declines in net revenue of 31.3% and 30.4%, respectively, in 2001 compared to 2000. Revenue in 2001 from the smaller market television stations declined 16.3% (adjusted to exclude KJEO-TV) from the year ago period. Revenue from the Company's Seattle and Portland radio groups declined 16.2% and 17.2%, respectively, from the year ago period. Revenue from the small market radio operations declined 6.5% from the year ago period. Our satellite teleport and Fisher Entertainment divisions generated revenue of approximately $1,400,000 and $1,200,000, respectively in 2001. Revenue from the television stations acquired in July 1999 totaled $21,350,000 in the six months ended June 30, 2000. If, for purposes of comparison, that amount is excluded, revenue of $174,462,000 for the year ended December 31, 2000 would represent a 14.7% increase over 1999. Revenue increased in 2000 at all broadcasting operations, with the largest increases realized by the Seattle, Portland and Regional television stations due to high demand for advertising by political action committees ("PACs") and, to a lesser degree, candidates for political office. KOMO TV revenue increased 27% for the year ended December 31, 2000 compared to 1999. Political advertising revenue accounted for 68% of KOMO TV's overall revenue increase, while national sales declined 2% from 1999. KATU Television revenue for the year ended December 31, 2000 increased 15% compared to 1999. Political advertising revenue accounted for all of the overall revenue increase, as national sales for KATU declined 9% during the period and more than offset the 2% improvement in local sales. Revenue from the Fisher Television Regional Group increased approximately $18,610,000 compared with the year ended December 31, 1999; however, the Company owned the stations only six months during that period. Seattle radio revenue improved 12% for the twelve months ended December 31, 2000 compared to the same period in 1999. Political advertising was not as significant a factor in the Seattle radio market as it was for television stations during 2000; however, about 10% of the overall revenue growth for Fisher's Seattle radio group was derived from political advertising sales. All three of the Seattle stations, KOMO AM, KVI AM and KPLZ FM, reported increased advertising sales during 2000 when compared to the prior year. Portland radio sales improved 11% for the twelve months ended December 31, 2000, 38 compared to 1999. The growth was due to increases in both local and political sales, while national sales declined 8%. Political sales represented approximately one-half of the overall increase. The Fisher Radio Regional Group of small market stations in Montana and Wenatchee, Washington experienced a 10% increase in advertising sales in 2000, with growth occurring in each of the five markets. Our satellite teleport and Fisher Entertainment divisions generated revenue of approximately $1,200,000 and $900,000, respectively in 2000. INCOME FROM OPERATIONS - ------------------------------------------------------------------------------- 2001 %Change 2000 %Change 1999 $8,613,000 -83.4% $51,764,000 49.8% $34,554,000 Percentage of revenue 5.9% 26.4% 22.7% The decline in income from broadcasting operations for the year ended December 31, 2001 compared with 2000 is primarily due to the decline in revenue discussed above. If adjusted to exclude the operating results attributable to KJEO-TV, operating expenses for 2001 would be approximately $2,900,000 lower than those incurred in 2000. Depreciation expense increased approximately $2,800,000 largely due to KOMO TV's new broadcast equipment and studios. Excluding operating income from the Fisher Television Regional Group that was only included in 1999 results for the second half of the year, the increase in income from operations for the year ended December 31, 2000 is 52.2% compared with 1999. Each broadcasting group except the Portland radio group experienced an improvement in 2000 compared with the prior year as increases in revenue exceeded increases in operating expenses. Overall, operating expenses at the broadcasting segment increased 23.2% in 2000, including the effect of the operating costs of the newly acquired stations. Aside from the additional costs of operating the regional television group for the entire year 2000, other significant cost increases included depreciation of KOMO TV's new digital broadcast equipment in Fisher Plaza, local sales commissions and merchandising expenses that accompanied the significant growth in local sales during the year and increased employment costs including benefits. REAL ESTATE OPERATIONS REVENUE - -------------------------------------------------------------------------------- 2001 %Change 2000 % Change 1999 $16,128,000 16.4% $13,850,000 17.9% $11,747,000 The real estate segment includes our real estate subsidiary and the portion of the Fisher Plaza project not occupied by KOMO TV. Rents from the first building at Fisher Plaza, which was 80% occupied at December 31, 2001, approximated $3,896,000 during 2001 compared with $1,589,000 in 2000. During 2001 marketing efforts were underway for the five-building project in Auburn, Washington, known as the Fisher Industrial Technology Center (the Fisher ITC), which was substantially completed by the real estate subsidiary in September 2000. Rental income from Fisher ITC during 2001 totaled $193,000. At year-end the Fisher ITC project was 71% leased. Revenue of the real estate segment increased in 2000 as a result of rent increases, and rental income from Fisher Plaza, which approximated $1,589,000. The first clients began moving into Fisher Plaza in May 2000. Comparison with 1999 results is impacted by the loss of revenue from two properties sold in June 1999. If revenue from those properties were excluded from 1999 revenue, the percentage increase would be 23.1%. INCOME FROM OPERATIONS - ------------------------------------------------------------------------------- 2001 %Change 2000 %Change 1999 $6,946,000 42.5% $4,875,000 52.2% $3,203,000 Percentage of revenue 43.1% 35.2% 27.3% The increase in operating income for the real estate segment for the year ended December 31, 2001, compared with 2000, is primarily attributable to the operations of the portion of Fisher Plaza not occupied by KOMO TV. Exclusive of the Fisher ITC, which was in lease-up phase during 2001, average occupancy of the properties operated by the real estate subsidiary during 2001 was 97% compared with 92% during 2000. 39 The increase in operating income for the real estate segment for the year ended December 31, 2000, compared with 1999, is also primarily attributable to the operations of Fisher Plaza. Results for 1999 include operating income of approximately $270,000 from the two properties that were sold in June of that year. DISCONTINUED OPERATIONS LOSS FROM DISCONTINUED OPERATIONS OF MILLING BUSINESSES - ------------------------------------------------------------------------------- 2001 % Change 2000 %Change 1999 $327,000 -98.1% $17,327,000 248.8% $4,968,000 The loss from discontinued operations of milling businesses for the year ended December 31, 2001 reflects an increase in the estimate of benefits for employees of the milling and distribution operations. Based upon updated information from its actuaries, the Company increased the estimated loss from discontinued operations by $500,000, or $327,000 net of taxes. The loss from discontinued operations of milling businesses for the year ended December 31, 2000 includes results of operations of the milling businesses through September 30, 2000 amounting to $1,665,000, net of income tax benefit of $962,000, and estimated loss from disposal of the milling businesses amounting to $15,662,000, net of income tax benefit of $8,434,000. Components of the estimated loss include the excess of net book value of assets over projected sales proceeds, estimated costs of sale including employee severance, and estimated operating results during the phase-out period. The loss from discontinued operations of milling businesses for the year ended December 31, 1999 represents the results of operations of the milling businesses during that year. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board (FASB) approved FASB Statement No. 141 (FAS 141), "Business Combinations", and FASB Statement No. 142 (FAS 142), "Goodwill and Other Intangible Assets." FAS 141 establishes new standards for accounting and reporting requirements for business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interests method for combinations initiated after June 30, 2001. FAS 142 changes the accounting for goodwill and intangible assets with indefinite lives from an amortization method to an impairment-only approach. Upon adoption of FAS 142, goodwill will be tested at the reporting unit annually and whenever events or circumstances occur indicating that goodwill might be impaired. Amortization of goodwill, including goodwill recorded in past business combinations, will cease. The adoption date for the Company was January 1, 2002. We are still assessing what the impact of FAS 141 and FAS 142 will be on our results of operations and financial position. In June 2001, the FASB issued Statement No. 143 (FAS 143), "Accounting for Asset Retirement Obligations", which establishes requirements for the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. FAS 143 is effective for fiscal years beginning after June 15, 2002, with earlier application encouraged. In August 2001, the FASB issued Statement No. 144 (FAS 144) "Accounting for the Impairment or disposal of Long-Lived Assets", which establishes requirements for the financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. The provisions of FAS 144 shall be effective for financial statements issued for fiscal years beginning after December 31, 2001, and interim periods within those fiscal years. We are currently assessing the impact of FAS 143 and FAS 144 on our financial statements. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2001, we had working capital of $9,380,000 and cash and short-term cash investments totaling $3,568,000. We intend to finance working capital, debt service, capital expenditures, and dividend requirements primarily through operating activities. However, we will consider using available lines of credit to fund acquisition activities and significant real estate development activities. In this regard, we had a five-year unsecured revolving line of credit (revolving line of credit) with two banks for a maximum amount of $100,000,000 to finance construction of Fisher Plaza and for general corporate purposes. The revolving line of credit provided that borrowings under the line would bear interest at variable rates. The revolving line of credit also placed limitations on the disposition or encumbrance of certain assets and required us to maintain certain financial ratios. At December 31, 2001, the revolving line of credit was fully drawn. Approximately $19,700,000 was available under short-term working capital lines of credit. 40 The unsecured revolving line of credit and the senior credit facility required us to comply with several covenants, including covenants with respect to the maintenance of some financial ratios. As of December 31, 2001, we were not in compliance with certain covenants. As a result of such noncompliance, the lenders could have required us to immediately repay all principal and interest outstanding, thus causing the long-term debt to be classified as current. However, subsequent to year-end we requested and received agreement from the lenders to forbear from exercising remedies under the revolving line of credit and the senior credit facility during the period from December 31, 2001 through March 31, 2002. Subsequent to year-end we repaid these obligations through the use of proceeds from new financings (see Note 14 of Notes to Consolidated Financial Statements). As a result, we have continued to present the debt as long-term on the balance sheet. In addition, as a result of such repayment of the unsecured revolving line of credit and the senior credit facility we will record an extraordinary loss of approximately $3,500,000 as a result of its write off of the related deferred loan costs. We will also record a loss of approximately $2,700,000 as a result of termination of a related interest rate swap agreement. On October 27, 2000, the Board of Directors authorized management to negotiate one or more transactions with third parties with respect to a sale of Fisher Mills, with terms of a specific transaction subject to approval of the Board. Accordingly, the operating results, net working capital, and net noncurrent assets of Fisher Mills are reported as discontinued operations in the accompanying financial statements. On April 30, 2001 the sale of the assets and working capital used in the Seattle, Blackfoot, Modesto, and Portland flour milling operations was completed. On June 29, 2001 the sale of the distribution assets and working capital of Fisher Mills Inc. and its subsidiary Sam Wylde Flour Co. was completed. Proceeds from the transactions totaled $49,910,000 including working capital. Net cash provided by operating activities during the year ended December 31, 2001 was $8,533,000. Net cash provided by operating activities consists of our net income, increased by non-cash expenses such as depreciation and amortization, and adjusted by changes in operating assets and liabilities. Net cash provided by investing activities during the year was $5,383,000, including $49,910,000 proceeds from the sales of milling and distribution assets and working capital, reduced by $40,420,000 for purchase of property, plant and equipment (including the Fisher Plaza project) and $4,109,000 for investments in equity investees. Net cash used in financing activities was $10,566,000, comprised of payments of $49,697,000 on borrowing agreements and mortgage loans, $6,675,000 for retirement of preferred stock of our broadcasting subsidiary, cash dividends paid to stockholders totaling $8,919,000 or $1.04 per share, reduced by net borrowings under notes payable and borrowing agreements totaling $54,036,000 and proceeds from exercise of stock options of $1,249,000. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The market risk in our financial instruments represents the potential loss arising from adverse changes in financial and commodity market prices and rates. We are exposed to market risk in the areas of interest rates and securities prices. These exposures are directly related to our normal funding and investing activities. Interest Rate Exposure Our strategy in managing exposure to interest rate changes is to maintain a balance of fixed- and variable-rate instruments. See Note 6 to the consolidated financial statements for information regarding the contractual interest rates of the Company's debt. We will also consider entering into interest rate swap agreements at such times as we deem appropriate. At December 31, 2001, the fair value of our fixed-rate debt is estimated to be approximately $2,000,000 greater than the carrying amount, based on current borrowing rates. Market risk is estimated as the potential change in fair value resulting from a hypothetical 10 percent change in interest rates. With respect to our fixed-rate debt, such market risk amounted to $1,639,000 at December 31, 2001. We also had $229,397,000 in variable-rate debt outstanding at December 31, 2001. A hypothetical 10 percent change in interest rates underlying these borrowings would result in a $1,340,000 annual change in our pre-tax earnings and cash flows. We are a party to an interest rate swap agreement fixing the interest rate at 6.52%, plus a margin based on the ratio of funded debt to operating cash flow, on a portion of the variable-rate debt outstanding under the senior credit facility. The notional amount of the swap reduces as payments are made on principal outstanding under the senior credit facility until termination of the contract on December 30, 2004. At December 31, 2001, the fair value of the swap agreement was ($3,471,000). A hypothetical 10 percent change in interest rates would change the fair value of our swap agreement by approximately $374,000 at December 31, 2001. Marketable Securities Exposure The fair value of our investments in marketable securities at December 31, 2001 was $97,107,000. Marketable securities consist of equity securities traded on a national securities exchange or reported on the Nasdaq stock market. A significant portion of the marketable securities consists of 3,002,376 shares of SAFECO Corporation. As of December 31, 2001, these 41 shares represented 2.4% of the outstanding common stock of SAFECO Corporation. SAFECO's common stock price has been volatile in recent years, and ranged from $21.50 to $32.95 per share during 2001. We have classified our investments as available-for-sale under applicable accounting standards. Mr. William W. Krippaehne Jr., President, CEO, and a Director of Fisher Communications, Inc., is a Director of SAFECO. A hypothetical 10 percent change in market prices underlying these securities would result in a $9,711,000 change in the fair value of the marketable securities portfolio. Although changes in securities prices would affect the fair value of the marketable securities portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless the investments are sold. Subsequent to year-end the Company pledged 3,000,000 shares of SAFECO Corporation stock owned by it as collateral under a margin loan and a variable forward sales transaction (see Note 14 of Notes to Consolidated Financial Statements). ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and related documents listed in the index set forth in Item 14 in this report are filed as part of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 42 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under the headings "Information With Respect to Nominees and Directors Whose Terms Continue", "Security Ownership of Certain Beneficial Owners and Management", and "Compliance With Section 16(a) Filing Requirements" contained in the definitive Proxy Statement for our Annual Meeting of Shareholders to be held on April 25, 2002, is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the heading "Executive Compensation" and "Information With Respect to Nominees and Directors Whose Terms Continue" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on April 25, 2002, is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the heading "Security Ownership of Certain Beneficial Owners and Management" contained in the definitive Proxy Statement for our Annual Meeting of Shareholders to be held on April 25, 2002, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the heading "Transactions With Management" contained in the definitive Proxy Statement for our Annual Meeting of Shareholders to be held on April 25, 2002, is incorporated herein by reference. 43 PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Consolidated Financial Statements: . Reports of Management and Independent Accountants . Consolidated Statement of Income for the years ended December 31, 2001, 2000, and 1999 . Consolidated Balance Sheet at December 31, 2001 and 2000 . Consolidated Statement of Stockholders' Equity for the years ended December 31, 2001, 2000, and 1999 . Consolidated Statement of Cash Flows for the years ended December 31, 2001, 2000, and 1999 . Consolidated Statement of Comprehensive Income for the years ended December 31, 2001, 2000, and 1999 . Notes to Consolidated Financial Statements (2) Financial Statement Schedules: . Report of Independent Accountants . Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2001, 2000, and 1999 . Schedule III - Real Estate and Accumulated Depreciation at December 31, 2001 (3) Exhibits: See "Exhibit Index." (b) Forms 8-K filed during the fourth quarter of 2001: A report on Form 8-K was filed with the Commission on November 15, 2001 announcing the Company's intention to sell the real estate assets held by its subsidiary, Fisher Properties Inc. A report on Form 8-K was filed with the Commission on November 21, 2001 announcing that waiver for the Company's noncompliance with certain covenants contained in certain of the Company's credit facilities was granted by the lenders and that, as of September 30, 2001, $205,284,000 of principal outstanding under the credit facilities was no longer classified as current. 44 REPORT OF MANAGEMENT Management is responsible for the preparation of the Company's consolidated financial statements and related information appearing in this annual report. Management believes that the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements reasonably present the Company's financial position and results of operations in conformity with accounting principles generally accepted in the United States of America. Management also has included in the Company's financial statements amounts that are based on estimates and judgments which it believes are reasonable under the circumstances. The independent accountants audit the Company's consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and provide an objective, independent report on such financial statements. The Board of Directors of the Company has an Audit Committee composed of five non-management Directors. The Committee meets periodically with management and the independent accountants to review accounting, control, auditing and financial reporting matters. /s/ William W. Krippaehne Jr. William W. Krippaehne Jr. President and Chief Executive Officer /s/ Warren J. Spector Warren J. Spector Executive Vice President and Chief Operating Officer /s/ David D. Hillard David D. Hillard Senior Vice President and Chief Financial Officer REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Fisher Communications, Inc: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of stockholders' equity, of comprehensive income and of cash flows present fairly, in all material respects, the financial position of Fisher Communications, Inc. (formerly Fisher Companies Inc.) and its subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Seattle, Washington March 21, 2002 45 FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31 2001 2000 1999 - ---------------------------------------------------------------------------------------- (in thousands, except per share amounts) Revenue Broadcasting $ 145,513 $ 195,812 $ 152,128 Real estate 16,128 13,850 11,747 - ---------------------------------------------------------------------------------------- 161,641 209,662 163,875 - ---------------------------------------------------------------------------------------- Costs and expenses Cost of products and services sold 71,226 71,628 62,689 Selling expenses 21,179 22,791 17,118 General and administrative expenses 39,713 43,822 39,349 Depreciation and amortization 24,809 21,889 14,784 - ---------------------------------------------------------------------------------------- 156,927 160,130 133,940 - ---------------------------------------------------------------------------------------- Income from operations 4,714 49,532 29,935 Other income, net 3,210 21,199 17,586 (Loss) gain in equity investees (4,572) (958) 94 Interest expense (17,847) (21,360) (12,367) - ---------------------------------------------------------------------------------------- Income (loss) from continuing operations before provision for income taxes (14,495) 48,413 35,248 Provision for federal and state income taxes (benefit) (6,559) 16,556 12,187 - ---------------------------------------------------------------------------------------- Income (loss) from continuing operations (7,936) 31,857 23,061 Loss from discontinued operations of milling businesses, net of income tax (327) (17,327) (4,968) - ---------------------------------------------------------------------------------------- Net income (loss) $ (8,263) $ 14,530 $ 18,093 - ---------------------------------------------------------------------------------------- Income (loss) per share: From continuing operations $ (0.92) $ 3.72 $ 2.70 From discontinued operations (0.04) (2.02) (0.58) - ---------------------------------------------------------------------------------------- Net income (loss) per share $ (0.96) $ 1.70 $ 2.12 - ---------------------------------------------------------------------------------------- Income (loss) per share assuming dilution: From continuing operations $ (0.92) $ 3.71 $ 2.69 From discontinued operations (0.04) (2.02) (0.58) - ---------------------------------------------------------------------------------------- Net income (loss) per share assuming dilution $ (0.96) $ 1.69 $ 2.11 - ---------------------------------------------------------------------------------------- Weighted average shares outstanding 8,575 8,556 8,548 Weighted average shares outstanding assuming dilution 8,575 8,593 8,575
See accompanying notes to consolidated financial statements. 46 FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
December 31 2001 2000 - ------------------------------------------------------------------------------------------ (in thousands, except share and per share amounts) ASSETS Current Assets Cash and short-term cash investments $ 3,568 $ 218 Receivables 33,081 40,375 Prepaid income taxes 10,760 563 Prepaid expenses 4,251 3,862 Television and radio broadcast rights 10,318 10,253 Net working capital of discontinued operations 216 10,526 - ------------------------------------------------------------------------------------------ Total current assets 62,194 65,797 - ------------------------------------------------------------------------------------------ Marketable Securities, at market value 97,107 102,080 - ------------------------------------------------------------------------------------------ Other Assets Cash value of life insurance and retirement deposits 12,403 11,725 Television and radio broadcast rights 1,725 927 Intangible assets, net of amortization 189,133 194,316 Investments in equity investees 2,594 3,057 Other 12,232 10,017 Net noncurrent assets of discontinued operations 1,635 39,236 - ------------------------------------------------------------------------------------------ 219,722 259,278 - ------------------------------------------------------------------------------------------ Property, Plant and Equipment, net 244,094 219,649 - ------------------------------------------------------------------------------------------ $ 623,117 $ 646,804 - ------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable $ 25,469 $ 25,642 Trade accounts payable 5,490 4,981 Accrued payroll and related benefits 7,616 10,458 Television and radio broadcast rights payable 8,980 9,002 Dividends payable 2,225 Other current liabilities 5,259 3,368 - ------------------------------------------------------------------------------------------ Total current liabilities 52,814 55,676 - ------------------------------------------------------------------------------------------ Long-term Debt, net of current maturities 261,480 257,413 - ------------------------------------------------------------------------------------------ Other Liabilities Accrued retirement benefits 12,028 13,638 Deferred income taxes 50,994 53,648 Television and radio broadcast rights payable, long-term portion 1,570 794 Other liabilities 6,777 2,934 - ------------------------------------------------------------------------------------------ 71,369 71,014 - ------------------------------------------------------------------------------------------ Commitments and Contingencies Stockholders' Equity Common stock, shares authorized 12,000,000, $1.25 par value; issued 8,591,658 in 2001 and 8,558,042 in 2000 10,739 10,698 Capital in excess of par 3,486 2,140 Deferred compensation (66) (135) Accumulated other comprehensive income - net of income taxes: Unrealized gain on marketable securities 62,360 65,593 Net loss on interest rate swap (2,256) Retained earnings 163,191 184,405 - ------------------------------------------------------------------------------------------ 237,454 262,701 - ------------------------------------------------------------------------------------------ $ 623,117 $ 646,804 - ------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 47 FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated Capital in Other Common Stock Excess Deferred Comprehensive Retained Total Shares Amount of Par Compensation Income Earnings Equity - ------------------------------------------------------------------------------------------------------------------------------ (in thousands except share amounts) Balance December 31, 1998 8,542,384 $ 10,678 $ 1,792 $ (733) $ 85,236 $ 169,575 $ 266,548 Net income 18,093 18,093 Other comprehensive income (loss) (34,358) (34,358) Issuance of common stock rights 222 (222) Amortization of deferred compensation 421 421 Issuance of common stock under rights and options, and related tax benefit 8,306 10 154 164 Dividends (8,893) (8,893) - ------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 1999 8,550,690 10,688 2,168 (534) 50,878 178,775 241,975 Net income 14,530 14,530 Other comprehensive income 14,715 14,715 Issuance of common stock rights, net of forfeitures (69) 69 Amortization of deferred compensation 330 330 Issuance of common stock under rights and options, and related tax benefit 7,352 10 41 51 Dividends (8,900) (8,900) - ------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 2000 8,558,042 10,698 2,140 (135) 65,593 184,405 262,701 Net loss (8,263) (8,263) Other comprehensive income (loss) (5,489) (5,489) Amortization of deferred compensation 69 69 Issuance of common stock under rights and options, and related tax benefit 33,616 41 1,346 1,387 Redemption of preferred stock of subsidiary (6,257) (6,257) Dividends (6,694) (6,694) - ------------------------------------------------------------------------------------------------------------------------------ Balance December 31, 2001 8,591,658 $ 10,739 $ 3,486 $ (66) $ 60,104 $ 163,191 $ 237,454 - ------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 48 FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities Net income (loss) $ (8,263) $ 14,530 $ 18,093 Adjustments to reconcile net income (loss) to net cash provided by Operating activities Depreciation and amortization 26,362 26,146 17,975 Noncurrent deferred income taxes 2,222 (1,420) 7,461 Net loss in equity investees 4,572 958 689 Amortization of deferred loan costs 778 828 500 Gain on sale of real estate (852) (12,825) Gain on sale of KJEO TV (15,722) Net loss from discontinued operations 17,327 Other 286 (232) 937 Change in operating assets and liabilities Receivables 8,064 7,621 (3,111) Inventories 5,354 38 Prepaid income taxes (10,373) 888 (1,276) Prepaid expenses (1,402) 691 2,199 Cash value of life insurance and retirement deposits (725) (772) (738) Other assets (2,301) (2,454) (6,505) Income taxes payable (457) Trade accounts payable, accrued payroll and related benefits and other current liabilities (10,547) 4,770 3,246 Accrued retirement benefits (1,578) 770 730 Other liabilities 1,548 1,230 1,060 Amortization of television and radio broadcast rights 16,181 15,837 14,606 Payments for television and radio broadcast rights (16,291) (16,689) (14,771) - ----------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 8,533 58,809 27,851 - ----------------------------------------------------------------------------------------------------------- Cash flows from investing activities Proceeds from sale of discontinued milling business assets 49,910 Proceeds from sale of KJEO TV 60,000 Proceeds from sale of real estate and property, plant and equipment 2 2,396 17,120 Investments in equity investees (4,109) (1,011) (1,375) Purchase assets of television and radio stations (221,160) Purchase of 50% interest in Blackfoot flour mill (19,000) Purchase of property, plant and equipment (40,420) (59,587) (56,376) - ----------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 5,383 1,798 (280,791) - ----------------------------------------------------------------------------------------------------------- Cash flows from financing activities Net (payments) borrowings under notes payable (560) (2,706) 596 Borrowings under borrowing agreements 54,036 11,000 262,201 Payments on borrowing agreements and mortgage loans (49,697) (63,413) (1,358) Redemption of preferred stock of subsidiary (6,675) Proceeds from exercise of stock options 1,249 19 33 Cash dividends paid (8,919) (8,898) (8,891) - ----------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (10,566) (63,998) 252,581 - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and short-term cash investments 3,350 (3,391) (359) Cash and short-term cash investments, beginning of period 218 3,609 3,968 - ----------------------------------------------------------------------------------------------------------- Cash and short-term cash investments, end of period $ 3,568 $ 218 $ 3,609 - ----------------------------------------------------------------------------------------------------------- Supplementalcash flow information is include in Notes 5,6,8 and 9. See accompanying notes to consolidate financial statements.
49 FISHER COMMUNICATIONS,INC.ANDSUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year Ended December 31 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------- (in thousands) Net income (loss) $ (8,263) $ 14,530 $ 18,093 Other comprehensive income (loss): Cumulative effect of accounting change, net of income tax benefit of $489 (907) Unrealized gain (loss) on marketable securities (4,974) 22,638 (52,859) Effect of income taxes 1,741 (7,923) 18,501 Net (loss) on interest rate swap (2,076) Effect of income taxes 727 - ----------------------------------------------------------------------------------------------------------- Comprehensive income (loss) $ (13,752) $ 29,245 $ (16,265) - -----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. 50 FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 OPERATIONS AND ACCOUNTING POLICIES The principal operations of Fisher Communications, Inc. and subsidiaries (the Company) are television and radio broadcasting, proprietary real estate development and management, and other media operations including program production as well as satellite and fiber transmission. As explained in Note 2 the Company sold its flour milling and bakery supply distribution businesses during 2001. The Company conducts its business primarily in Washington, Oregon, California, Georgia and Montana. A summary of significant accounting policies is as follows: Principles of consolidation The consolidated financial statements include --------------------------- the accounts of Fisher Communications, Inc. and its wholly-owned subsidiaries. Television and radio broadcasting, and other media operations are conducted through Fisher Broadcasting. Real estate operations are conducted through Fisher Properties Inc. Fisher Media Services Company was formed in 2001 to conduct other media operations, including Fisher Plaza, beginning in 2002. All material intercompany balances and transactions have been eliminated. Estimates The preparation of financial statements in conformity with --------- generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue recognition Television and radio revenue is recognized when the ------------------- advertisement is broadcast. Rentals from real estate leases are recognized on a straight-line basis over the term of the lease. Short-term cash investments Short-term cash investments are comprised of --------------------------- repurchase agreements collateralized by U.S. Government securities held by major banks. The Company considers short-term cash investments which have original maturities at date of purchase of 90 days or less to be cash equivalents. Television and radio broadcast rights Costs of television and radio ------------------------------------- broadcast rights are charged to operations using accelerated or straight-line methods of amortization selected to match expense with anticipated revenue over the contract life. Asset costs and liabilities for television and radio broadcast rights are recorded without discount for any noninterest-bearing liabilities. Those costs and liabilities attributable to programs scheduled for broadcast after one year have been classified as noncurrent assets and liabilities in the accompanying financial statements. Marketable securities Marketable securities consist of equity securities --------------------- traded on a national securities exchange or reported on the Nasdaq stock market. A significant portion of the marketable securities consists of 3,002,376 shares of SAFECO Corporation at December 31, 2001 and 2000. As of December 31, 2001, these shares represented 2.4% of the outstanding common stock of SAFECO Corporation. Mr. William W. Krippaehne Jr., President, CEO and a Director of the Company, is a Director of SAFECO. Market value is based on closing per share sale prices. The Company has classified its investments as available-for-sale under applicable accounting standards and those investments are reported at fair market value. Unrealized gains and losses are a separate component of stockholders' equity, net of any related tax effect. Investments in equity investees Investments in equity investees represent ------------------------------- investments in entities over which the Company does not have control, but has significant influence and owns 50% or less. Such investments are accounted for using the equity method (See note 4). Intangible assets Intangible assets represent the excess of purchase price ----------------- of certain broadcast properties over the fair value of tangible net assets acquired and are amortized based on the straight-line method over the estimated useful life of 40 years. Accumulated amortization at December 31, 2001 and 2000 is $17,512,000 and $12,573,000, respectively (See "Recent Accounting Pronouncements"). Property, plant and equipment Replacements and improvements are ----------------------------- capitalized while maintenance and repairs are charged as expense when incurred. Property, plant and equipment are stated at historical cost. Gains or losses on dispositions of property, plant and equipment are included in income. Real estate taxes, interest expense and certain other costs related to real estate projects constructed for lease to third parties are capitalized as a cost of such projects until the project, including major tenant improvements, is substantially completed. A project is generally considered to be substantially completed when a predetermined occupancy level has been reached or the project has been available for occupancy for a period of one year. Costs, including depreciation, applicable to a project are charged to expense based on the ratio of occupied space to total rentable space until the project is substantially completed, after which costs are expensed as incurred. 51 For financial reporting purposes, depreciation of plant and equipment is determined primarily by the straight-line method over the estimated useful lives of the assets as follows: Buildings and improvements 3-55 years Machinery and equipment 3-25 years Land improvements 10-55 years Impairment of long-lived assets Whenever changes in circumstances indicate ------------------------------- that the carrying amount may not be recoverable the Company assesses the recoverability of intangible and long-lived assets by reviewing the performance of the underlying operations, in particular, the operating cash flows (earnings before interest, income taxes, depreciation and amortization) of the operation. Income taxes Deferred income taxes are provided for all significant ------------ temporary differences in reporting for financial reporting purposes versus income tax reporting purposes. Advertising The Company expenses advertising costs at the time the ----------- advertising first takes place. Advertising expense was $4,409,000, $4,337,000, and $3,343,000 in 2001, 2000, and 1999, respectively. Earnings per share Net income (loss) per share represents net income ------------------ (loss) divided by the weighted average number of shares outstanding during the year. Net income (loss) per share assuming dilution represents net income (loss) divided by the weighted average number of shares outstanding, including the potentially dilutive impact of the stock options and restricted stock rights issued under the Company's incentive plans. Common stock options and restricted stock rights are converted using the treasury stock method. A reconciliation of the number of shares outstanding to the weighted average number of shares outstanding assuming dilution is as follows: Year Ended December 31 2001 2000 1999 ---------- ---------- ---------- Shares outstanding at beginning of period 8,558,042 8,550,690 8,542,384 Weighted average of shares issued 16,535 5,351 6,070 ---------- ---------- ---------- 8,574,577 8,556,041 8,548,454 Dilutive effect of: Restricted stock rights 9,613 13,570 Stock options 27,402 12,731 ---------- ---------- ---------- 8,574,577 8,593,056 8,574,755 ---------- ---------- ---------- The dilutive effect of 3,612 restricted stock rights and options to purchase 413,613 shares are excluded for the year ended December 31, 2001 because such rights and options were anti-dilutive. All restricted stock rights and options were dilutive for the year ended December 31, 2000. The dilutive effect of options to purchase 130,025 shares is excluded for the year ended December 31, 1999 because such options were anti-dilutive. Fair value of financial instruments The carrying amount of cash and ----------------------------------- short-term cash investments, receivables, inventories, marketable securities, trade accounts payable and broadcast rights payable approximate fair value due to their short maturities. The fair value of notes payable and variable-rate long-term debt approximates the recorded amount based on borrowing rates currently available to the Company. At December 31, 2001, the fair value of our fixed-rate debt is estimated to be approximately $2,000,000 greater than the recorded amount, based on current borrowing rates. Accounting change Effective January 1, 2001, the Company adopted Statement ----------------- of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133), as amended. This pronouncement establishes accounting and reporting standards for derivative instruments, and requires that an entity recognize those items as assets or liabilities in the financial statements and measure them at their fair value. If the derivative is designated as a cash flow hedge, the effective portion of the change in fair value of the derivative is recorded in other comprehensive income, and the ineffective portion is recorded in earnings. Changes in the fair value of derivatives not designated as hedges are recognized in earnings. The Company uses an interest rate swap, designated as a cash flow hedge, to manage exposure to interest rate risks. In accordance with FAS 133, the effective portion of the change in fair value of the swap is recorded in other comprehensive income. Adoption of FAS 133 resulted in a reduction to other comprehensive income of $907,000, net of income tax of $489,000, which is reported as the cumulative effect of the accounting change. There was no effect on net income or loss. The effective portion of the change in fair value of the interest rate swap from January 1, 2001 through December 31, 2001 is included in other comprehensive income. The fair value of the interest rate swap is included in other liabilities. Recent accounting pronouncements In June 2001, the Financial Accounting -------------------------------- Standards Board (FASB) approved FASB Statement No. 141 (FAS 141), "Business Combinations", and FASB Statement No. 142 (FAS 142), "Goodwill and Other Intangible Assets." FAS 141 establishes new standards for accounting and reporting requirements for business combinations initiated after June 30, 2001 and prohibits the use of the pooling-of-interests method for combinations initiated after June 30, 2001. FAS 142 changes the accounting for goodwill and intangible assets with indefinite lives from an amortization method to an impairment-only approach. Upon adoption of FAS 142, goodwill will be tested at the reporting unit annually and whenever events or circumstances occur indicating that goodwill might be impaired. 52 Amortization of goodwill, including goodwill recorded in past business combinations, will cease. The adoption date for the Company was January 1, 2002. We are still assessing what the impact of FAS 141 and FAS 142 will be on our results of operations and financial position. In June 2001, the FASB issued Statement No. 143 (FAS 143), "Accounting for Asset Retirement Obligations", which establishes requirements for the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. FAS 143 is effective for fiscal years beginning after June 15, 2002, with earlier application encouraged. In August 2001, the FASB issued Statement No. 144 (FAS 144) "Accounting for the Impairment or disposal of Long-Lived Assets", which establishes requirements for the financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed of. The provisions of FAS 144 shall be effective for financial statements issued for fiscal years beginning after December 31, 2001, and interim periods within those fiscal years. We are currently assessing the impact of FAS 143 and FAS 144 on our financial statements. Reclassifications Certain prior year balances have been reclassified to ----------------- conform to the 2001 presentation. Such reclassifications had no effect on net income or loss. NOTE 2 DISCONTINUED OPERATIONS On October 27, 2000 the Board of Directors authorized management to negotiate one or more transactions with third parties with respect to a sale of Fisher Mills, with terms of a specific transaction subject to approval of the Board. Accordingly, the operating results, net current liabilities, and net noncurrent assets of Fisher Mills have been reported as discontinued operations in the accompanying financial statements. On April 30, 2001, the sale of the assets and working capital used in the Seattle, Blackfoot, Modesto, and Portland flour milling operations was completed. On June 29, 2001, the sale of the distribution assets and working capital of Fisher Mills Inc. and its subsidiary Sam Wylde Flour Co. was completed. Proceeds from the transactions totaled $49,910,000 including working capital. As a result of these sales, and an increase in the estimate of benefits for employees of the milling and distribution operations based upon updated information from its actuaries, the Company increased the estimated loss from discontinued operations by $500,000. This revision in estimate, net of taxes, was recorded as loss from discontinued operations in the quarter ended June 30, 2001. The loss from discontinued operations of the milling businesses is summarized as follows (in thousands): Year Ended December 31 2001 2000 1999 --------- ---------- ---------- Loss from operations: Before income taxes $ 2,627 $ 7,625 Income tax benefit (962) (2,657) --------- ----------- ---------- 1,665 4,968 Estimated loss from disposal of milling businesses: Before income taxes $ 500 24,096 Income tax benefit (173) (8,434) --------- ----------- ---------- 327 15,662 --------- ----------- ---------- $ 327 $ 17,327 $ 4,968 --------- ----------- ---------- Net working capital of discontinued operations includes net current assets relating to the discontinued milling operations. Net noncurrent assets of discontinued operations includes the book value of property, plant and equipment not included in the sales described above and other noncurrent assets less noncurrent liabilities relating to the discontinued milling operations. Revenue of the discontinued milling operations was $44,675,000, $112,102,000, and $114,942,000 for the years ended December 31, 2001, 2000, and 1999, respectively. 53 NOTE 3 RECEIVABLES Receivables are summarized as follows (in thousands): December 31 2001 2000 ----------- ----------- Trade accounts $ 32,241 $ 40,274 Other 1,545 1,113 ----------- ----------- 33,786 41,387 Less-Allowance for doubtful accounts 705 1,012 ----------- ----------- $ 33,081 $ 40,375 ----------- ----------- Net receivables of the discontinued milling operations amounting to $11,520,000 are not included in the December 31, 2000 amounts above. NOTE 4 INVESTMENTS IN EQUITY INVESTEES Investments in entities over which the Company does not have control, but has significant influence and owns 50% or less, are accounted for using the equity method. The Company's investments are reported in the consolidated balance sheet as "Investments in equity investees" and its share of income or losses is reported as "(Loss) gain in equity investees" in the consolidated statement of income. Tulalip Estates The real estate subsidiary maintained a 50% interest in a --------------- joint venture formed to develop residential real estate owned by the joint venture. The joint venture was dissolved during 2000 and the real estate subsidiary received distribution of its interest. South West Oregon Television Broadcasting Corporation In connection with ----------------------------------------------------- the 1999 acquisition of network-affiliated television stations (see Note 12) the broadcasting subsidiary acquired 50% of the outstanding stock of South West Oregon Broadcasting Corporation (South West Oregon Television), licensee of a television station in Roseburg, Oregon. The broadcasting subsidiary serves as manager of the station. AN Systems, L.L.C. AN Systems, L.L.C. (AN Systems) was a developer of a ------------------ new public advertising network which uses a display device known as the Civia Media Terminal that delivers information in public places such as office buildings and other venues. Under terms of various agreements the Company and its subsidiaries agreed, among other things, to lend funds to AN Systems, to defer collection of certain amounts due under the agreements, and to provide AN Systems with certain office space. Loans by the Company were evidenced by convertible promissory notes issued by AN Systems and, at December 31, 2001, totaled $5,424,000. Effective January 1, 2002, AN Systems was merged into Civia, Inc. (Civia) and, immediately prior to the merger, the Company elected to convert $2,000,000 of such loans into a 65.1% equity interest in Civia. At December 31, 2001, AN Systems was indebted to the Company for occupancy and related costs amounting to $334,000. Also, at December 31, 2001, the Company is contingently obligated in the amount of $1,568,000 as guarantor of a bank credit facility on behalf of AN Systems. The Company has not recognized income from management fees and interest amounting to $400,000 and $343,000, respectively, as it has agreed to defer collection of such amounts. These amounts have also been excluded from the Loss in equity investees in the consolidated statement of Income. 54 Investments in equity investees are summarized as follows (in thousands): South West Tulalip Oregon Estates Television AN Systems Total ----------- ----------- ------------- --------- Balance, December 31, 1998 $ 180 $ 180 Acquisition $ 2,730 2,730 Equity in net income (loss) (1) 95 94 ----------- ------------ ------------- --------- Balance, December 31, 1999 179 2,825 3,004 Loans $ 1,315 1,315 Distributions received (179) (125) (304) Equity in net income (loss) 122 (1,080) (958) ----------- ------------ ------------- --------- Balance, December 31, 2000 0 2,822 235 3,057 Loans 4,109 4,109 Equity in net income (loss) 7 (4,579) (4,572) ----------- ------------ ------------- --------- Balance, December 31, 2001 $ 0 $ 2,829 $ (235) $ 2,594 ----------- ------------ ------------- --------- Operating results of a 50% interest in a limited liability company owned by the milling subsidiary are excluded from 1999 amounts above as they are now included in discontinued operations. NOTE 5 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are summarized as follows (in thousands): December 31 2001 2000 ------------ ------------ Building and improvements $ 189,405 $ 179,743 Machinery and equipment 105,825 100,849 Land and improvements 23,227 23,406 ------------ ----------- 318,457 303,998 Less-Accumulated depreciation 109,036 90,169 ------------ ----------- 209,421 213,829 Construction in progress 34,673 5,820 ------------ ----------- $ 244,094 $ 219,649 ------------ ----------- Net property, plant and equipment of the discontinued milling operations amounting to $2,612,000 and $31,996,000, respectively, are not included in the December 31, 2001 and 2000 amounts above. Property, plant and equipment additions totaling $3,377,000 are included in current liabilities at December 31, 2001. 55 The Company receives rental income principally from the lease of warehouse, office and retail space, and boat moorages under gross and net leases and agreements which expire at various dates through 2010. These leases and agreements are accounted for as operating leases. The Company generally limits lease terms to periods not in excess of five years. Minimum future rentals from leases and agreements which were in effect at December 31, 2001 are (in thousands): Year Rentals ------------ 2002 $ 12,796 2003 11,001 2004 7,472 2005 4,478 2006 2,609 Thereafter 1,925 ----------- $ 40,281 ----------- Property, plant and equipment includes property leased to third parties and to other subsidiaries of the Company. The investment in property held for lease to third parties included in property, plant and equipment at December 31, 2001 includes buildings, equipment and improvements of $141,247,000, land and improvements of $17,390,000, and accumulated depreciation of $40,716,000. Interest capitalized relating to construction of property, plant and equipment amounted to approximately $1,816,000, $4,215,000, and $2,270,000 in 2001, 2000, and 1999, respectively. Other income, net during the year ended December 31, 2000 includes $15,722,000 gain on sale of KJEO TV which was sold on August 1, 2000 for $60,000,000. Proceeds from the sale were used to reduce the senior credit facilities and other borrowings. Other income, net during the year ended December 31, 1999 includes $12,825,000 gain from condemnation of real estate. Proceeds amounted to $16,500,000, and were primarily reinvested in property leased to third parties. NOTE 6 NOTES PAYABLE AND LONG-TERM DEBT Notes payable The Company maintains bank lines of credit which totaled ------------- $25,000,000 at December 31, 2001. The lines are unsecured and bear interest at rates no higher than the prime rate. At December 31, 2001, $5,355,000 was outstanding under the lines at an interest rate of 5.5%. The weighted average interest rate on borrowings outstanding during 2001 was 5.76%. The lines of credit expired January 31, 2002 and were subsequently extended to March 15, 2002 in the amount of $10,000,000. The notes payable to directors, shareholders and others are comprised of notes payable on demand. Such notes bear interest at rates equivalent to those available to the Company for short-term cash investments. At December 31, 2001, $4,096,000 was outstanding under such notes at an interest rate of 0.87%. The weighted average interest rate on borrowings outstanding during 2001 was 2.87%. Interest on such notes amounted to $129,000, $314,000, and $281,000 in 2001, 2000, and 1999, respectively. Notes payable are summarized as follows (in thousands): December 31 2001 2000 ---------- ---------- Banks $ 5,355 $ 5,075 Directors, stockholders and others 4,097 4,936 Current maturities of long-term debt 16,017 15,631 ---------- ---------- $ 25,469 $ 25,642 ---------- ---------- Long-term debt -------------- Lines of credit The Company maintains an unsecured revolving line of --------------- credit with a bank in the principal amount of $100,000,000 to finance construction of the Fisher Plaza project (see Note 13) and for general corporate purposes. The revolving line of credit is governed by a credit agreement that provides that borrowings under the line will bear interest at a variable rate not to exceed the bank's publicly announced reference rate. The agreement also places limitations on certain aspects of the Company's operations and requires the Company to maintain certain financial ratios. The line matures in 2003. At December 31, 2001, $100,000,000 was outstanding under the line at a blended interest rate of 5.74%. In June 1999, the Company entered into an eight-year senior secured credit facility (senior credit facility) with a group of banks in the principal amount of $230,000,000 to finance the acquisition of television stations (see Note 12) and for general corporate purposes. The senior credit facility is secured by a first priority perfected security interest in the broadcasting subsidiary's capital stock that is owned by the Company. The senior credit facility also places limitations on various aspects of the Company's operations (including the payment of dividends) and requires compliance with certain financial ratios. In addition to an amortization schedule that requires repayment of all borrowings under the senior credit facility by June 2007, the amount available under the senior credit facility reduces each year beginning in 2002. Amounts borrowed under the senior credit facility bear interest at variable rates based on the Company's ratio of funded debt to 56 operating cash flow. At December 31, 2001, $119,946,000 was outstanding under the senior credit facility at a blended interest rate of 6.0%. The unsecured revolving line of credit and the senior credit facility required the Company to comply with several covenants, including covenants with respect to the maintenance of some financial ratios. As of December 31, 2001, the Company was not in compliance with certain covenants. As a result of such noncompliance, the lenders could have required the Company to immediately repay all principal and interest outstanding, thus causing the long-term debt to be classified as current. However, subsequent to year-end the Company requested and received agreement from the lenders to forbear from exercising remedies under the revolving line of credit and the senior credit facility during the period from December 31, 2001 through March 31, 2002. Subsequent to year-end the Company repaid these obligations through the use of proceeds from new financings (see Note 14). As a result, the Company has continued to present the debt as long-term on the balance sheet. In addition, as a result of such repayment of the unsecured revolving line of credit and the senior credit facility the Company will record an extraordinary loss of approximately $3,500,000 as a result of its write off of the related deferred loan costs. The Company will also record a loss of approximately $2,700,000 as a result of termination of a related interest rate swap agreement. Mortgage loans The real estate subsidiary maintains the following mortgage -------------- loans: Principal amount of $4,088,000, collateralized by an industrial park. The nonrecourse loan requires monthly payments including interest of $31,000. The loan matures in May 2006 and bears interest at 7.19%. Principal amount of $9,242,000, collateralized by an industrial park, and principal amount of $12,004,000, collateralized by two office buildings. The loans mature in 2008, bear interest at 7.04% and require monthly payments of $78,000 and $101,000, respectively, including interest. These mortgage loans are nonrecourse. The interest rates are subject to adjustment in December 2003 to the then prevailing rate for loans of a similar type and maturity; all or a portion of the outstanding principal balance may be prepaid on those dates. Principal amount of $22,820,000, collateralized by an office building and parking structure. The nonrecourse loan matures in February 2006, bears interest at 7.72% and requires monthly payments of principal and interest amounting to $221,000. Principal amount of $9,150,000, collateralized by an industrial park. The nonrecourse loan matures in January 2012, bears interest at 6.32% and requires monthly payments of principal and interest amounting to $61,000. The interest rate is subject to adjustment in January 2007 to the then-prevailing market rate for loans of a similar type and maturity; the real estate subsidiary may prepay all or part of the loan on that date. Long-term debt is summarized as follows (in thousands): December 31 2001 2000 ------------ ------------ Notes payable under bank lines of credit $ 219,946 $ 223,062 Mortgage loans payable 57,304 49,709 Other 247 273 ------------ ------------ 277,497 273,044 Less-current maturities 16,017 15,631 ------------ ------------ $ 261,480 $ 257,413 ------------ ------------ Future maturities of notes payable and long-term debt are as follows (in thousands):
Directors, Mortagage Stockholders Bank Liners Loans Banks and Others of Credit and Other Total ---------- ------------- ------------ ----------- ----------- 2002 $ 5,355 $ 4,097 $ 14,160 $ 1,857 $ 25,469 2003 114,992 1,992 116,984 2003 18,739 2,140 20,879 2004 19,850 2,301 22,151 2005 19,803 23,507 43,310 Thereafter 32,402 25,754 58,156 ---------- ------------- ------------ ----------- ---------- $ 5,335 $ 4,097 $ 219,946 $ 57,551 $ 286,949 ---------- ------------- ------------ ----------- ----------
Cash paid for interest (net of amounts capitalized) during 2001, 2000, and 1999 was $17,564,000, $22,445,000, and $13,324,000, respectively. We are a party to an interest rate swap agreement fixing the interest rate at 6.52%, plus a margin based on the our ratio of funded debt to operating cash flow, on a portion of the variable-rate debt outstanding under the senior credit facility. The notional amount of the swap 57 reduces as payments are made on principal outstanding under the senior credit facility until termination of the contract on December 30, 2004. At December 31, 2001, the fair value of the swap agreement was ($3,471,000). NOTE 7 TELEVISION AND RADIO BROADCAST RIGHTS Television and radio broadcast rights acquired under contractual arrangements were $17,044,000 and $16,170,000 in 2001 and 2000, respectively. At December 31, 2001, the broadcasting subsidiary had executed license agreements amounting to $31,032,000 for future rights to television and radio programs. As these programs will not be available for broadcast until after December 31, 2001, they have been excluded from the financial statements. NOTE 8 STOCKHOLDERS' EQUITY The Company maintains two incentive plans (the Plans), the Amended and Restated Fisher Communications Plan of 1995 (the 1995 Plan) and the Fisher Communication Incentive Plan of 2001 (the 2001 Plan). The 1995 Plan provided that up to 560,000 shares of the Company's common stock may be issued to eligible key management employees pursuant to options and rights through 2002. As of December 31, 2001 options and rights for 479,443 shares, net of forfeitures, had been issued. No further options and rights will be issued pursuant to the 1995 Plan. The 2001 Plan provides that up to 600,000 shares of the Company's common stock may be issued to eligible key management employees pursuant to options and rights through 2008. Stock options The Plans provide that eligible key management employees may ------------- be granted options to purchase the Company's common stock at the fair market value on the date the options are granted. The options generally vest over five years and generally expire ten years from the date of grant. Restricted stock rights The Plans also provide that eligible key ----------------------- management employees may be granted restricted stock rights which entitle such employees to receive a stated number of shares of the Company's common stock. The rights generally vest over five years and expire upon termination of employment. Non-cash compensation expense of $69,000, $330,000, and $421,000 related to the rights was recorded during 2001, 2000, and 1999, respectively. A summary of stock options and restricted stock rights is as follows: Restricted Stock Options Stock Rights --------------------------------- --------------- Weighted Number Average Exercise Number of Shares Price Per Share of Shares ------------ ----------------- --------------- Balance, December 31, 1998 173,078 $ 55.94 23,698 Shares granted 63,900 63.00 3,520 Options exercised (900) 37.25 Stock rights vested (7,657) Shares forfeited (685) 61.24 (88) ------------ ------------ --------------- Balance, December 31, 1999 235,393 57.91 19,473 Shares granted 121,100 59.88 500 Options exercised (505) 37.25 Stock rights vested (6,942) Shares forfeited (850) 61.74 (44) ------------ ---------- --------------- Balance, December 31, 2000 355,138 58.60 12,987 Shares granted 135,850 60.00 Options exercised (25,535) 48.93 Stock rights vested (8,331) Shares forfeited (51,840) 60.73 (1,044) ------------ ---------- --------------- Balance, December 31, 2001 413,613 $ 59.39 3,612 ------------ ---------- --------------- The weighted average remaining contractual life of options outstanding at December 31, 2001 is 6.0 years. At December 31, 2001 and 2000, options for 201,662 and 117,240 shares are exercisable at a weighted average exercise price of $58.80 and $54.94 per share, respectively. The Company accounts for common stock options and restricted common stock rights issued pursuant to the Plans in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations. Statement 58 of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (FAS 123), requires companies who elect to adopt its provisions to utilize a fair value approach for accounting for stock compensation. The Company has elected to continue to apply the provisions of APB 25 in its financial statements. If the provisions of FAS 123 were applied to the Company's stock options, net income, net income per share and net income per share assuming dilution would have been reduced by approximately $942,000, $767,000, and $500,000, or $0.11, $0.09, and $0.06 per share during 2001, 2000, and 1999, respectively. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 2001, 2000, and 1999, respectively: dividend yield of 1.55%, 1.61%, and 1.70%, volatility of 30.0%, 15.47%, and 14.96%, risk-free interest rate of 5.34%, 6.61%, and 5.13%, assumed forfeiture rate of 0%, and an expected life of five years in all three years. Under FAS 123, the weighted average fair value of stock options granted during 2001, 2000, and 1999, respectively, was $18.56, $14.36, and $12.45. Cash dividends were paid at the rate of $1.04 per share in 2001, 2000 and 1999. On February 13, 2002 the Board of Directors declared a dividend in the amount of $.26 per share payable March 1, 2002 to stockholders of record on February 15, 2002. Preferred stock redemption During the second quarter of 2001 the -------------------------- broadcasting subsidiary redeemed outstanding preferred stock held by minority investors for $6,675,000. The redemption has been accounted for as a capital transaction. NOTE 9 INCOME TAXES Income taxes have been provided as follows (in thousands): Year Ended December 31 2001 2000 1999 ------------ ------------ ------------ Payable (receivable) currently Continuing operations $ (6,069) $ 12,756 $ 6,534 Discontinued operation (6,124) (1,516) (3,367) ------------ ------------ ------------ $ (12,193) $ 11,240 $ 3,167 ------------ ------------ ------------ Current and noncurrent deferred income taxes Continuing operations $ (490) $ 3,800 $ 5,653 Discontinued operations 5,951 (7,880) 710 ------------ ------------ ------------ $ 5,461 $ (4,080) $ 6,363 ------------ ------------ ------------ Total Continuing operations $ (6,559) $ 16,556 $ 12,187 Discontinued operations (173) (9,396) (2,657) ------------ ------------ ------------ $ (6,732) $ 7,160 $ 9,530 ------------ ------------ ------------ For income tax reporting purposes the Company had net operating losses of approximately $48,900,000 as of December 31, 2001, of which approximately $33,151,000 will be carried back to 1999 and 2000. The remaining $15,749,000 may be carried forward to reduce income subject to tax through 2021. In addition, at December 31, 2001, the Company had Alternative Minimum Tax Credit of approximately $819,000 which may be carried forward indefinitely, and can be used to reduce the Company's regular income tax liability. Reconciliation of income taxes computed at federal statutory rates to the reported provisions for income taxes on continuing operations is as follows (in thousands): Year Ended December 31 2001 2000 1999 ----------- ----------- ----------- Normal provision (benefit) computed at 35% of pretax income $ (5,073) $ 16,944 $ 12,337 Dividends received credit (707) (1,115) (1,086) State taxes, net of federal tax benefit (974) 560 688 Other 195 167 248 ----------- ----------- ----------- $ (6,559) $ 16,556 $ 12,187 ----------- ----------- ----------- 59 Deferred tax assets (liabilities) are summarized as follows (in thousands): December 31 2001 2000 ----------- ------------ Assets Net operating loss and credit carryforwards $ 6,350 Accrued employee benefits 3,844 $ 3,413 Allowance for doubtful accounts 248 294 Other 90 54 ----------- ------------ 10,532 3,761 ----------- ------------ Liabilities Accumulated other comprehensive income (32,364) (35,319) Property, plant and equipment (27,132) (20,822) Accrued property tax (530) (547) ----------- ------------ (60,026) (56,688) ----------- ------------ Net $ (49,494) $ (52,927) ----------- ------------ Current $ 1,500 $ 721 Noncurrent (50,994) (53,648) ----------- ------------ $ (49,494) $ (52,927) ----------- ------------ The current deferred tax asset is reflected in prepaid expenses. Current and noncurrent deferred tax assets of the discontinued milling operations as of December 31, 2000 amounted to $2,805,000 and $3,168,000, respectively. Cash received from income tax refunds during 2001 was $2,690,000. Cash paid for income taxes during 2000, and 1999, was $12,425,100, and $4,869,000, respectively. NOTE 10 RETIREMENT BENEFITS The Company has qualified defined benefit pension plans covering substantially all employees not covered by union plans. Benefits are based on years of service and, in one of the pension plans, on the employees' compensation at retirement. The Company annually accrues the normal costs of the pension plans plus the amortization of prior service costs over periods ranging to 15 years. Such costs are funded in accordance with provisions of the Internal Revenue Code. In June 2000 benefit accruals ceased under the pension plan for employees of the broadcasting subsidiary, and that plan is in the process of being terminated. Substantially all plan assets were distributed to participants in January 2002. In July 2001 benefit accruals ceased under the pension plan for non-broadcasting employees, and that plan is in the process of being terminated. The Company does not anticipate a reversion of excess plan assets, if any. Changes in the projected benefit obligation and the fair value of assets for the Company's pension plans are as follows (in thousands): December 31 2001 2000 ---------- ----------- Projected benefit obligation - beginning of year $ 26,887 $ 26,940 Service cost 309 1,065 Interest cost 1,871 1,918 Liability experience 2,030 (79) Benefit payments (10,971) (2,611) Other (1,534) (346) ---------- ----------- Projected benefit obligation - end of year $ 18,592 $ 26,887 ---------- ----------- Fair value of plan assets - beginning of year $ 26,991 $ 28,085 Actual return on plan assets 1,872 1,641 Benefits paid (10,971) (2,611) Plan expenses (261) (124) ---------- ----------- Fair value of plan assets - end of year $ 17,631 $ 26,991 ---------- ----------- 60 The composition of the prepaid pension cost and the funded status are as follows (in thousands): December 31 2001 2000 --------------- --------------- Projected benefit obligation $ 18,592 $ 26,887 Fair value of plan assets 17,631 26,991 --------------- --------------- Funded status (961) 104 Unrecognized prior service cost 165 Unrecognized net gain 422 (970) --------------- --------------- Accrued prepaid pension cost $ (539) $ (701) --------------- --------------- The net periodic pension cost for the Company's qualified defined benefit pension plans is as follows (in thousands): Year Ended December 31 2001 2000 1999 ------------ ------------ ------------ Service cost $ 309 $ 1,119 $ 1,590 Interest cost 1,871 1,918 2,106 Expected return on assets (2,044) (2,375) (2,459) Amortization of transition asset Amortization of prior service cost 39 45 58 Amortization of (gain) loss (2) 245 Settlement 1,021 Curtailment (1,358) Other 84 ------------ ------------ ------------ Net periodic pension cost $ (162) $ 789 $ 1,540 ------------ ------------ ------------ The discount rate used in determining the actuarial present value of the projected benefit obligation at December 31, 2001 ranged from 6.0% to 7.0%. The discount rate used in determining the actuarial present value of the projected benefit obligation at December 31,2000 was 7.75%. The rate of increase in future compensation ranged from 4.0% to 4.5% in both years. The expected long-term rate of return on assets ranged from 7.0% to 9.25% in 2001 and 8.5% to 9.25% in 2000. The Company has a noncontributory supplemental retirement program for key management. The program provides for vesting of benefits under certain circumstances. Funding is not required, but generally the Company has acquired annuity contracts and life insurance on the lives of the individual participants to assist in payment of retirement benefits. The Company is the owner and beneficiary of such policies; accordingly, the cash values of the policies as well as the accrued liability are reported in the financial statements. The program requires continued employment through the date of expected retirement and the cost of the program is accrued over the participants' remaining years of service. Changes in the projected benefit obligation and accrued pension cost of the Company's supplemental retirement program are as follows (in thousands):
December 31 2001 2000 --------------- ----------------- Projected benefit obligation - beginning of year $ 12,740 $ 12,459 Service cost 560 417 Interest cost 886 769 Assumption changes 892 158 Liability experience 2,492 Benefit payments (1,268) (1,063) ---------------- ----------------- Projected benefit obligation - end of year 16,302 12,740 Appreciation of policy value (129) 439 Unrecognized net loss (3,573) (794) ---------------- ----------------- Accrued pension cost $ 12,600 $ 12,385 ---------------- -----------------
61 The net periodic pension cost for the Company's supplemental retirement program is as follows (in thousands): Year Ended December 31 2001 2000 1999 ------------ ------------- ------------ nService cost $ 560 $ 417 $ 439 Interest cost 886 769 702 Amortization of transition asset (1) (1) (1) Amortization of loss 38 72 78 ------------ ------------- ------------ Net periodic pension cost $ 1,483 $ 1,257 $ 1,218 ------------ ------------- ------------ The discount rate used in determining the actuarial present value of the projected benefit obligation at December 31, 2001 was 7.25% and 7.75% at December 31, 2000. The rate of increase in future compensation was 4.5%. The Company has a defined contribution retirement plan which is qualified under Section 401(k) of the Internal Revenue Code. All full-time U.S. employees are eligible to participate. The Company matches employee contributions up to a maximum of 3% of gross pay. Employer contributions to the plans were $1,786,000, $1,720,000, and $1,283,000 in 2001, 2000, and 1999, respectively. Health care and life insurance benefits were provided to all retired non-broadcasting employees until June 2001 when, coincidental with sale of the milling businesses, such benefits were terminated. In connection with the termination, the Company distributed to each retired participant an amount equivalent to the present value, based on the participant's age and life expectancy, of the monthly health care premium that was currently being paid on behalf of the participant. Such payments totaled $772,000. The Company also distributed to each participant the face value of the group life coverage that was maintained on behalf of the participant. Such payments totaled $101,000. 62 NOTE 11 SEGMENT INFORMATION The continuing operations of the Company have been organized into two principal business segments; broadcasting and real estate. Operating results and other financial data for each segment are as follows (in thousands):
Corporate, Discontinued Eliminations Continuing Milling Broadcasting Real Estate & Other Operations Operations Consolidated -------------- -------------- -------------- ------------- ---------------- --------------- Revenue 2001 $ 145,513 $ 16,128 $ 161,641 $ 44,675 $ 206,316 2000 195,812 13,850 209,662 112,102 321,764 1999 152,128 11,747 163,875 114,942 278,817 Income from operations 2001 $ 8,613 $ 6,946 $ (10,845) $ 4,714 $ 538 $ 5,252 2000 51,764 4,875 (7,107) 49,532 (917) 48,615 1999 34,554 3,203 (7,822) 29,935 (5,332) 24,603 Interest expense 2001 $ 266 $ 2,949 $ 14,632 $ 17,847 $ 382 $ 18,229 2000 30 2,880 18,450 21,360 1,782 23,142 1999 18 3,807 8,542 12,367 1,504 13,871 Identifiable assets 2001 $ 341,914 $ 152,997 $ 126,355 $ 621,266 $ 1,851 $ 623,117 2000 356,230 127,681 113,131 597,042 49,762 646,804 1999 405,415 92,256 93,366 591,037 87,475 678,512 Capital expenditures 2001 $ 9,877 $ 32,904 $ 1,603 $ 44,384 $ 50 $ 44,434 2000 32,223 25,203 741 58,167 1,420 59,587 1999 41,584 9,735 170 51,489 4,887 56,376 Depreciation and amortization 2001 $ 19,350 $ 5,270 $ 189 $ 24,809 $ 1,553 $ 26,362 2000 17,293 4,470 126 21,889 4,257 26,146 1999 10,352 4,348 84 14,784 3,191 17,975
Intersegment sales are not significant. Income from operations by business segment consist of revenue, less operating expenses and depreciation and amortization. In computing income from operations by business segment, other income, net, has not been added, and interest expense, income taxes and unusual items have not been deducted. Identifiable assets by business segment are those assets used in the operations of each segment. Corporate assets are principally marketable securities. Capital expenditures are reported exclusive of acquisitions. Capital expenditures for the Fisher Plaza project are allocated to the broadcasting and real estate segments. No geographic areas outside the United States were material relative to consolidated sales and other revenue, income from operations or identifiable assets. Export sales by the milling subsidiary were $554,000 and $540,000 in 2000 and 1999, respectively. NOTE 12 ACQUISITIONS On July 1, 1999, the Company and its broadcasting subsidiary completed the acquisition of network-affiliated television stations and 50% of the outstanding stock of a corporation that owns one television station. The acquired properties were in seven markets located in California, the Pacific Northwest, and Georgia. Total consideration was $216.7 million, which included $7.6 million of working capital. Funding for the transaction was from an eight-year senior credit facility in the amount of $230 million. Also on July 1, 1999, the Company and its milling subsidiary purchased from Koch Agriculture Company its 50% interest in the limited liability company (LLC) which owns and operates flour milling facilities in Blackfoot, Idaho. The $19 million purchase price was funded from bank lines of credit. Prior to July 1, the milling subsidiary used the equity method to account for its 50% interest in the LLC. Subsequent to the acquisition the LLC became a wholly-owned subsidiary and operating results were fully consolidated in the milling segment, now presented as discontinued operations. 63 The above transactions are accounted for under the purchase method. Accordingly, the Company has recorded identifiable assets and liabilities of the acquired properties at their fair market value. The excess of the purchase price over the fair market value of the assets acquired has been allocated to goodwill. The results of operations of the acquired properties are included in the financial statements from the date of acquisition. Unaudited pro forma results as if the acquired properties had been included in the financial results during 1999 are as follows:
Year Ended December 31 1999 ---------------- (in thousands, except per share amounts. All amounts are unaudited) Revenue $ 175,398 Broadcasting 11,747 ---------------- Real Estate $ 187,145 ---------------- Income from continuing operations $ 18,289 Income per share: From continuing operations $2.14 From continuing operations assuming dilution $2.13
The milling acquisition has been excluded from the above summary as it is now included in discontinued operations. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been in effect for the entire period presented. In addition, they are not intended to be a projection of future results and do not reflect any efficiencies that might be achieved from combined operations. NOTE 13 COMMITMENTS AND CONTINGENCIES In May 1998 the Company began redevelopment of the site on which KOMO Television was located. The project, known as Fisher Plaza, encompasses several elements including two new buildings and associated underground parking facilities that serve the needs of KOMO Television and certain subsidiaries of the Company as well as third parties. The project is being constructed in two phases. The first clients of the project began moving into the facility during May 2000. Completion of the parking facility is anticipated in early 2002 and completion of the second building is anticipated in Fall 2002. Estimated cost of the project is $131,400,000. Costs incurred at December 31, 2001 totaled $97,700,000. Financial results for the portion of the project not occupied by KOMO Television are included in the real estate segment. The Company is subject to certain legal proceedings that have arisen in the ordinary course of its business. After consultation with legal counsel management does not anticipate that disposition of these proceedings will have a material effect on the consolidated financial position or results of operations. NOTE 14 SUBSEQUENT EVENTS (Unaudited) On March 21, 2002, the Company's media services subsidiary entered into a three-year senior secured credit facility (media facility) with two banks in the principal amount of $60,000,000 to fund partial payment of the unsecured revolving line of credit (see Note 6). The media facility is collateralized by a first deed of trust on the Fisher Plaza property. The maximum amount available under the media facility may be reduced in August 2003 if the amount outstanding is equal to or less than a specified percentage of the appraised value of the Fisher Plaza property at that time. The media facility is governed by a credit agreement that provides that borrowings will bear interest at variable rates based, at the media services subsidiary's option, on the LIBOR rate plus a maximum margin of 450 basis points, or the prime rate plus a maximum margin of 325 basis points. The credit agreement places limitations on various aspects of the Company's operations (including the payment of dividends and limitations on capital expenditures), requires compliance with certain financial ratios, and requires prepayment upon the occurrence of certain events. The media facility expires March 15, 2005 and the amount outstanding is due and payable on that date. On March 21, 2002 the Company obtained from a financial institution a $42,400,000 loan (margin loan) collateralized by 3,000,000 shares of SAFECO Corporation common stock owned by the Company. Proceeds from the loan were used to fund partial payment of the unsecured line of credit and to pay amounts due under bank lines of credit (see Note 6). On March 21, 2002, the Company entered into a variable forward sales transaction (forward transaction) with a financial institution. The Company's obligations under the forward transaction are collateralized by 3,000,000 shares of SAFECO Corporation common stock owned by the Company. A portion of the forward transaction will be considered a derivative and, as such, the Company will periodically measure its fair value and recognize the derivative as an asset or a liability. The change in the fair value of the derivative will be recorded either in the income statement or in other comprehensive income depending on its effectiveness. Under the terms of the forward 64 transaction, the Company will receive up to $70,000,000. Proceeds from the forward transaction will be used to repay the margin loan discussed above, to finance construction of the Fisher Plaza project (see Note 13), and for general corporate purposes. The forward transaction will mature in five separate six-month intervals beginning March 15, 2005 through March 15, 2007. The amount due at each maturity date will be determined based on the market value of SAFECO common stock on such maturity date. Although the Company will have the option of settling the amount due in cash, or by delivery of shares of SAFECO common stock, the Company currently intends to settle in cash rather than by delivery of shares. The Company may prepay amounts due in connection with the forward transaction. During the term of the forward transaction, the Company will continue to receive dividends paid by SAFECO; however, any increase in the dividend amount above the present rate must be paid to the financial institution that is a party to the forward transaction. Also on March 21, 2002, the Company's broadcasting subsidiary entered into an eight-year credit facility (broadcast facility) with a group of banks in the amount of $150,000,000, of which $130,000,000 was borrowed at closing, to fund payment of the senior credit facility (see Note 6), repayment of other borrowings, and for general corporate purposes. The broadcast facility is collateralized by a first priority lien on: (i) the broadcasting subsidiary's capital stock, (ii) all equity interests in direct and indirect subsidiaries of the broadcast subsidiary, and (iii) all tangible and intangible assets of the broadcasting subsidiary and its direct and indirect subsidiaries. The broadcast facility places limitations on various aspects of the broadcast subsidiary's operations (including the payment of dividends to the Company) and requires compliance with certain financial ratios. In addition to amortization schedules that require repayment of all borrowings under the broadcast facility by February 2010, the amount available under the broadcast facility reduces each year beginning in 2003. Amounts borrowed under the broadcast facility bear interest at variable rates based, at the broadcast subsidiary's option, on the LIBOR rate plus a maximum margin of 425 basis points, or the prime rate plus a maximum margin of 250 basis points. Maximum margins are determined based on the broadcasting subsidiary's ratio of consolidated funded debt to consolidated EBITDA. 65 NOTE 15 Interim Financial Information (Unaudited) - Data may not add due to rounding (in thousands except per share amounts).
First Second Third Fourth Quarter Quarter Quarter Quarter Annual ---------- ---------- ---------- --------- ---------- Revenue 2001 $ 39,233 $ 42,361 $ 37,442 $ 42,605 $ 161,641 Reclassification adjustment 385 387 384 ---------- ---------- ---------- --------- ---------- As previously reported $ 39,618 $ 42,748 $ 37,826 $ 42,605 $ 161,641 2000 47,975 53,135 49,878 58,675 209,662 Income from continuing operations 2001 $ (2,315) $ (193) $ (3,666) $ (1,762) $ (7,936) 2000 3,386 5,435 13,319 9,717 31,857 Loss from discontinued operations 2001 $ 0 $ (327) $ 0 $ 0 $ (327) 2000 (1,188) (23) (14,166) (1,950) (17,327) Net income 2001 $ (2,315) $ (520) $ (3,666) $ (1,762) $ (8,263) 2000 2,198 5,412 (847) 7,767 14,530 Income per share: From continuing operations 2001 $ (0.27) $ (0.02) $ (0.43) $ (0.20) $ (0.92) 2000 0.40 0.63 1.56 1.14 3.72 From discontinued operations 2001 $ 0.00 $ (0.04) $ 0.00 $ 0.00 $ (0.04) 2000 (0.14) 0.00 (1.66) (0.23) (2.02) Net income 2001 $ (0.27) $ (0.06) $ (0.43) $ (0.20) $ (0.96) 2000 0.26 0.63 (0.10) 0.91 1.70 Net income per share assuming dilution: From continuing operations 2001 $ (0.27) $ (0.02) $ (0.43) $ (0.20) $ (0.92) 2000 0.39 0.63 1.55 1.13 3.71 From discontinued operations 2001 $ 0.00 $ (0.04) $ 0.00 $ 0.00 $ (0.04) 2000 (0.14) 0.00 (1.65) (0.23) (2.02) Net income 2001 $ (0.27) $ (0.06) $ (0.43) $ (0.20) $ (0.96) 2000 0.26 0.63 (0.10) 0.90 1.69 Dividends paid per share 2001 $ 0.26 $ 0.26 $ 0.26 $ 0.26 $ 1.04 2000 0.26 0.26 0.26 0.26 1.04 Common stock closing market prices ( see Note 8) 2001 High $ 61.25 $ 72.89 $ 70.50 $ 54.02 $ 72.89 Low 51.50 50.00 44.50 40.50 40.50 2000 High $ 65.00 $ 83.50 $ 76.00 $ 73.00 $ 83.50 Low 51.50 60.75 71.00 44.00 44.00
66 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Fisher Communications, Inc. Our audits of the consolidated financial statements referred to in our report dated March 21, 2002 appearing in this December 31, 2001 Annual Report to the Stockholders of Fisher Communications, Inc. on Form 10-K also included an audit of the financial statement schedules listed in Item 14(a) (2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Seattle, Washington March 21, 2002 67 Schedule II FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts (in thousands) Year Ended December 31 2001 2000 1999 ---------- ---------- --------- Allowance for doubtful accounts Balance at beginning of year $ 1,012 $ 2,009 $ 1,356 Additions charged to expense 1,047 1,318 2,333 Acquistions 295 Balances written off, net of recoveries (1,354) (1,615) (1,975) Reclassified to net working capital of discontinued operations (700) ---------- ---------- --------- Balance at end of year $ 705 $ 1,012 $ 2,009 ========== ========== ========= 68 Schedule III FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES Real Estate and Accumulated Depreciation (note 1) December 31, 2001
Cost capitalized Initial cost to Subsequent to Gross amount at which carried Accumu- Company Acquisition at December 31, 2001 lated ---------------- ---------------- ----------------------------- depre- Date of Buildings Land Buildings ciation Comple- and Carrying and And and tion of Date Encum- Improve- Improve- costs Improve- Improve- amorti- construc- Acquired Description Brances Land ments ments (note 2) ments ments Total zation tion (Note 3) - ----------------- -------- ------ --------- -------- -------- -------- ------- ------- -------- -------- --------- (in thousands) MARINA Marina Mart Moorings Various to Seattle, WA - (note 4) (note 4) $ 3,514 $ 346 $ 3,168 $ 3,514 $ 1,426 1987 1939 OFFICE West Lake Union Center Seattle, WA $22,820 $ 266 $36,253 3,205 1,372 38,352 39,724 11,529 1994 Fisher Business Center Lynnwood, WA 12,004 2,230 17,850 8,694 3,155 25,619 28,774 11,010 1986 1980 Marina Mart Renovated Seattle, WA - (note 4) (note 4) 3,579 122 3,457 3,579 1,056 1993 Latitude 47 Restaurant Renovated Seattle, WA - (note 4) (note 4) 2,333 (note 5) 2,333 2,333 1,085 1987 1530 Building Renovated Seattle, WA - (note 4) (note 4) 2,291 (note 5) 2,291 2,291 1,102 1985 INDUSTRIAL Fisher Industrial Park 1982 and Kent, WA 9,242 2,019 4,739 11,450 4,618 13,590 18,208 7,548 1992 1980 Fisher Commerce Center Kent, WA 4,088 1,804 4,294 2,301 2,173 6,226 8,399 2,898 Purchased 1989 Pacific North Equipment, WA - 1,582 1,344 - 1,582 1,344 2,926 1,064 Purchased 1997 Fisher Industrial Technology Center Auburn, WA 9,150 3,378 11,540 2,971 3,379 14,511 17,890 324 2000 2000 MISCELLANEOUS INVESTMENTS, less than 5% of total - 154 - 532 - 424 424 255 Various Various ------- ------ ------ ------- ------- -------- -------- ------- $57,304 $11,433 $76,020 $40,870 $16,747 $111,315 $128,062 $39,297 ======= ======= ======= ======= ======= ======== ======== ======= (Continued) Life on which depre- ciation in latest income state- ment is Description computed - ------------- MARINA Marina Mart Moorings Seattle, WA (note 9) OFFICE West Lake Union Center Seattle, WA (note 9) Fisher Business Center Lynnwood, WA (note 9) Marina Mart Seattle, WA (note 9) Latitude 47 Restaurant Seattle, WA (note 9) 1530 Building Seattle, WA (note 9) INDUSTRIAL Fisher Industrial Park Kent, WA (note 9) Fisher Commerce Center Kent, WA (note 9) Pacific North Equipment Kent, WA (note 9) Fisher Industrial Technology Center Auburn, WA (note 9) MISCELLANEOUS INVESTMENTS, less than 5% of total (note 9) (Continued)
69 Schedule III, continued FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES Real Estate and Accumulated Depreciation (note 1) December 31, 2001 Notes: (1) Schedule III includes property held for lease to third parties by the Company's real estate subsidiary. Reference is made to notes 1, 5 and 6 to the consolidated financial statements. The Fisher Plaza project is not included in Schedule III as a substantial portion of the project is occupied by KOMO TV. Amounts related to the portion of the Fisher Plaza project that is in service as of December 31, 2001 are: Land and improvements $1,497,000, buildings and improvements $69,690,000, and accumulated depreciation $3,305,000. (2) The determination of these amounts is not practicable and, accordingly, they are included in improvements. (3) Where specific acquisition date is not shown property investments were acquired prior to 1971 and have been renovated or redeveloped as indicated. (4) Initial cost is not readily available as property has been renovated or redeveloped. Initial cost is included in subsequent improvements. (5) Undivided land portion of Marina. (6) The changes in total cost of properties for the years ended December 31, 2001, 2000, and 1999 are as follows (in thousands):
2001 2000 1999 ---- ---- ---- Balance at beginning of year $124,075 $107,055 $113,091 Cost of improvements 4,684 17,020 2,239 Cost of properties sold (319) (8,090) Cost of improvements retired (117) (185) -------- -------- ------- Balance at end of year $128,323 $124,075 $107,055 ======== ======== =======
(7) The changes in accumulated depreciation and amortization for the years ended December 31, 2001, 2000, and 1999 are as follows (in thousands):
2001 2000 1999 ---- ---- ---- Balance at beginning of year $35,431 $32,042 $32,995 Depreciation and amortization charged to operations 3,928 3,389 3,970 Retirements and other (62) (4,923) ------- ------- ------- Balance at end of year $39,297 $35,431 $32,042 ======= ======= =======
(8) The aggregate cost of properties for Federal income tax purposes is approximately $128,368,000 at December 31, 2001. (9) Reference is made to note 1 to the consolidated financial statements for information related to depreciation. 70 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 22nd day of March, 2002. FISHER COMMUNICATIONS, INC. ----------------------------------- (Registrant) By: /s/ Donald G. Graham, Jr. -------------------------- Donald G. Graham, Jr. Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
Signatures Title Date - ---------- ----- ---- Principal Executive Officer: /s/ William W. Krippaehne, Jr. President, Chief Executive March 22, 2002 - ------------------------------ Officer, and Director William W. Krippaehne Jr. Principal Operating Officer /s/ Warren J. Spector Executive Vice President and March 22, 2002 - --------------------- Chief Operating Officer Warren J. Spector Chief Financial and Accounting Officer: /s/ David D. Hillard Senior Vice President and March 22, 2002 - -------------------- Chief Financial Officer, and David D. Hillard Assistant Secretary A Majority of the Board of Directors: /s/ James W. Cannon Director March 22, 2002 - ------------------- James W. Cannon /s/ Phelps K. Fisher Director March 22, 2002 - -------------------- Phelps K. Fisher /s/ Donald G. Graham, III Director March 22, 2002 - ------------------------- Donald G. Graham, III /s/ Robin J. Campbell Knepper Director March 22, 2002 - ----------------------------- Robin J. Campbell Knepper /s/ John D. Mangels Director March 22, 2002 - ------------------- John D. Mangels
71
Signatures Title Date - ---------- ----- ---- /s/ Jean F. McTavish Director March 22, 2002 - -------------------- Jean F. McTavish /s/ Jacklyn F. Meurk Director March 22, 2002 - -------------------- Jacklyn F. Meurk /s/ George F. Warren, Jr. Director March 22, 2002 - ------------------------- George F. Warren, Jr. /s/ William W. Warren, Jr. Director March 22, 2002 - -------------------------- William W. Warren, Jr.
72 EXHIBIT INDEX -------------
Exhibit No. Description ----------- ----------- 2.1* Asset Purchase and Sale Agreement Among Fisher Companies Inc., and Fisher Broadcasting Inc., as the Purchaser and Retlaw Enterprises, Inc., Retlaw Broadcasting, L.L.C., Retlaw Broadcasting of Boise, L.L.C., Retlaw Broadcasting of Fresno, L.L.C., Retlaw Broadcasting of Idaho Falls, L.L.C., Retlaw Broadcasting of Yakima, L.L.C., Retlaw Broadcasting of Eugene, L.L.C., Retlaw Broadcasting of Columbus, L.L.C., and Retlaw Broadcasting of Augusta, L.L.C., as the Sellers dated November 18, 1998, as amended November 30, 1998 and December 7, 1998 (filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 000-22439)). 2.2* Amendment No. 3 to Asset Purchase and Sale Agreement dated as of June 30, 1999 (filed as Exhibit 2.2 of the Company's Current Report on Form 8-K dated July 1, 1999 (File No. 000-22439)). 2.3* Amendment No. 4 to Asset Purchase and Sale Agreement dated as of July 1, 1999 (filed as Exhibit 2.3 of the Company's Current Report on Form 8-K dated July 1, 1999 (File No. 000-22439)). 2.4* Purchase Agreement, dated May 8, 2000, by and between Fisher Broadcasting Inc, Fisher Broadcasting-Fresno and AK Media Group (filed as Exhibit 10.1 of the Company's Current Report on Form 8-K dated May 8, 2000 (File No. 000-22439)). 3.1* Articles of Incorporation (filed as Exhibit 3.1 of the Company's Registration Statement on Form 10 (File No. 000-22439)). 3.2* Articles of Amendment to the Amended and Restated Articles of Incorporation filed December 10, 1997 (filed as Exhibit 3.2 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 000-22439)). 3.3* Articles of Amendment to the Amended and Restated Articles of Incorporation filed March 8, 2001 (filed as Exhibit 3.3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (File No. 000-22439)). 3.4 Bylaws. 10.1* Primary Television Affiliation Agreement between Fisher Broadcasting Inc. and American Broadcasting Companies, Inc., dated April 17, 1995, regarding KOMO TV (filed as Exhibit 10.1 of the Company's Registration Statement on Form 10 (File No. 000-22439)). 10.2* Side letter amendment to Primary Television Affiliation Agreement between Fisher Broadcasting Inc. and American Broadcasting Companies, Inc., dated June 30, 1999, regarding KOMO TV (filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-22439)).
73 10.3* Primary Television Affiliation Agreement between Fisher Broadcasting Inc. and American Broadcasting Companies, Inc., dated April 17, 1995, regarding KATU TV (filed as Exhibit 10.2 of the Company's Registration Statement on Form 10 (File No. 000-22439)). 10.4* Side letter amendment to Primary Television Affiliation Agreement between Fisher Broadcasting Inc. and American Broadcasting Companies, Inc., dated June 30, 1999, regarding KATU TV (filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-22439)). 10.5* Fisher Companies Inc. Supplemental Pension Plan, dated February 29, 1996 (filed as Exhibit 10.4 of the Company's Registration Statement on Form 10 (File No. 000-22439)). 10.6* Fisher Broadcasting Inc. Supplemental Pension Plan, dated March 7, 1996 (filed as Exhibit 10.5 of the Company's Registration Statement on Form 10 (File No. 000-22439)). 10.7* Fisher Mills Inc. Supplemental Pension Plan, dated March 1, 1996 (filed as Exhibit 10.6 of the Company's Registration Statement on Form 10 (File No. 000-22439)). 10.8* Fisher Properties Inc. Supplemental Pension Plan, dated March 1, 1996 (filed as Exhibit 10.7 of the Company's Registration Statement on Form 10 (File No. 000-22439)). 10.9* Membership Purchase Agreement between Koch Agriculture Company, Fisher Mills Inc. and Fisher Companies Inc. (filed as Exhibit 10.1 to the Company's Quarterly Report for the period ended September 30, 1999 (File No. 000-2439)). 10.10* Form of Affiliation Agreement between CBS Television Network and Retlaw Enterprises, Inc. regarding KJEO-TV, KJEO-TV, KIMA-TV, KBCI-TV, KIDK-TV, KVAL-TV, KCBY-TV and KPIC-TV (filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-22439)). 10.11* Form of Demand Note between the Registrant and certain of its directors and affiliates of its directors (filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-22439)). 10.12* Agreement dated June 29,2000 between Patrick M. Scott, Karen L. Scott, Fisher Companies Inc., and Fisher Broadcasting Inc. (filed as Exhibit 10.1 to the Company's Quarterly Report for the period ended September 30, 2000 (File No. 000-22439)). 10.13* Agreement dated March 31, 2000 between Fisher Mills Inc. and R. Bryce Seidl. (Filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. (File No. 000-22439)).
74 10.14* Amended and Restated Fisher Communications Incentive Plan of 1995. (Filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (File No. 000-22439)). 10.15* Fisher Communications Incentive Plan of 2001. (Filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (File No. 000-22439)). 10.16* Asset Purchase Agreement, dated March 16, 2001, between Pendleton Flour Mills, L.L.C., Fisher Mills Inc., Fisher Mills - Blackfoot L.L.C., and Fisher Properties Inc. (Filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed dated March 16, 2001 (File No. 000-22439)). 10.17 Station Affiliation Agreement between Fox Broadcasting Company and Fisher Broadcasting - Georgia, L.L.C., regarding WXTX TV, dated April 20, 2001. 10.18 Station Affiliation Agreement between Fox Broadcasting Company and Fisher Broadcasting - Georgia, L.L.C., regarding WFXG TV, dated April 20, 2001. 10.19 Investor CreditLine Service Client Agreement, dated as of February 30, 2002, between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated. 10.21 Amended and Restated Indicative Term Sheet, effective as of March 21, 2002 between the Registrant and Merrill Lynch International. 10.22 Credit Agreement among Fisher Broadcasting Company as Borrower, Its Domestic Subsidiaries as Guarantors, the Lenders Parties Thereto, First Union National Bank, as Administrative Agent, Bank of America, N.A. and The Bank of New York, as Co-Syndication Agents, and National City Bank, as Documentation Agent dates as of March 21, 2002 10.23 Loan Agreement dated as of March 21, 2002 among Fisher Media Services Company as the Borrower, Bank of America, as the Agent, and Bank of America, N.A. U.S. Bank National Association, as the Lenders 21.1 Subsidiaries of the Registrant. 23.1 Consent of PricewaterhouseCoopers LLP. 24.1 Form of Power of Attorney authorizing certain officers to execute Form 10-K for the year ended December 31, 2001 and any and all amendments thereto, signed by James W. Cannon, Phelps K. Fisher, Donald G. Graham, Jr., Donald G. Graham, III, Robin J. Campbell Knepper, John D. Mangels, Jean F. McTavish, Jacklyn F. Meurk, George F. Warren, Jr., and William W. Warren, Jr.
* Incorporated by reference. 75 EX-3.4 3 dex34.txt BYLAWS OF FISHER COMMUNICATIONS, INC. Exhibit 3.4 BYLAWS OF FISHER COMMUNICATIONS, INC. (Incorporated Under the Laws of the State of Washington) As amended February 13, 2002 ---------------------------- ARTICLE I --------- REGISTERED OFFICE ----------------- The location and post office address of the registered office of the corporation shall be 1525 One Union Square, Seattle, Washington 98101. ARTICLE II ---------- STOCKHOLDERS' MEETINGS ---------------------- 1. Annual Meeting. The annual meeting of the stockholders of the -------------- corporation for the election of Directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting shall be held each year at the principal place of business of the corporation (unless a different place within or without the State of Washington is specified in the notice of the meeting), on a day in the last two weeks of April to be set by the Directors, at 10:00 o'clock in the forenoon unless otherwise stated in the notice of meeting. In the event of failure to hold an election of Directors at the annual meeting of the stockholders or in the event the annual meeting of the stockholders shall be omitted by oversight or otherwise, a meeting of the stockholders may be held at a later date for the election of Directors and for the transaction of such other business as may properly come before the meeting. Any election held or other business transacted at any such later meeting shall be as valid as if done or transacted at the annual meeting of the stockholders. Any such later meeting shall be called in the same manner as a special meeting of the stockholders and notice of the time, place and purpose thereof shall be given in the same manner as notice of a special meeting of the stockholders. 2. Special Meetings. Special meetings of the stockholders for any ---------------- purpose or purposes may be called at any time by the Board of Directors to be held at such time and place as the Board may prescribe. At any time, upon the request of the Chairman of the Board, the President, or of any three (3) Directors, or of any stockholder or stockholders holding in the aggregate at least twenty percent (20%) of the voting power of all stockholders, it shall be the duty of the Secretary to call a special meeting of the stockholders to be held at such place and at such time as the Secretary may fix, not less than ten (10) nor more than sixty (60) days after the receipt of said request, and if the Secretary shall neglect or refuse to issue such call, the Directors or stockholders making the request may do so. -1- 3. Notices of Meetings. Written notice stating the place, day and hour ------------------- of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, unless a purpose of the meeting is to act on an amendment to the Articles of Incorporation, a plan of merger or share exchange, a proposed sale of all or substantially all of the assets of the corporation, or the dissolution of the corporation, in which case notice will be delivered not less than twenty (20) nor more than sixty (60) days before the date of the meeting. Notice of any shareholders' meeting will be delivered either personally or by mail, by or at the direction of the Chairman of the Board, the President, the Secretary, or the person or persons calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the stockholder at his address as it appears in the stockholder address records of the corporation, with postage thereon prepaid. 4. Waiver of Notice. Notice of any stockholders' meeting may be waived ---------------- in writing by any stockholder at any time, either before or after any such meeting, and shall be deemed waived by the presence of such stockholder at the meeting unless such stockholder (a) shall have made his written objection to the transaction of business at such meeting for the reason that it is not lawfully called or convened, and (b) shall, at or prior to the commencement of such meeting, deliver such written objection to the chairman of the meeting or other officer of the corporation present at such meeting. 5. Adjourned Meetings. An adjournment or adjournments of any ------------------ stockholders' meeting may be taken until such time and place as those present may determine without new notice being given, whether by reason of the failure of a quorum to attend or otherwise; but any meeting at which Directors are to be elected shall be adjourned only from day to day until such Directors are elected. If a new record date for the adjourned meeting is or must be fixed, however, notice of the adjourned meeting must be given to persons who are stockholders as of the new record date. 6. Quorum of Stockholders. A majority of the shares entitled to vote, ---------------------- represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter under consideration shall be the act of the stockholders, unless the vote of a greater number is required by law or by the Articles of Incorporation. 7. Voting of Shares. Each outstanding share shall be entitled to one ---------------- vote on each matter submitted, except in the case of election of Directors as provided in this section. All voting at stockholders' meetings shall be by voice vote, unless any qualified voter or voters holding a minimum of one percent (1%) of the outstanding shares of voting stock shall demand a vote by ballot. A stockholder may vote either in person or by proxy executed in writing by the stockholder or his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in such proxy. At each election for Directors, every stockholder entitled to vote at such election shall have the right to vote in person or by proxy the number of shares owned by him for as many persons as there are Directors to be elected and for whose election he has a right to vote, or to cumulate his votes by giving one candidate as many votes as the number of such Directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principle among any number of such candidates. -2- 8. Business and Nominations at Shareholders' Meetings. -------------------------------------------------- (a) Nominations of persons for election to the Board of Directors and the proposal of business to be transacted by the shareholders may be made at an annual meeting of shareholders (i) pursuant to the corporation's notice with respect to such meeting, (ii) by or at the direction of the Board of Directors or (iii) by any shareholder of record of the corporation who was a shareholder of record at the time of the giving of the notice provided for in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this section. (b) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of the foregoing paragraph, (1) the shareholder must have given timely notice thereof in writing to the Secretary of the corporation, (2) such business must be a proper matter for shareholder action under the Washington Business Corporation Act, (3) if the shareholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice, as that term is defined in this paragraph, such shareholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation's voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation's voting shares reasonably believed by such shareholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such shareholder, and must, in either case, have included in such materials the Solicitation Notice and (4) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section 8 of Article II, the shareholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 8 of Article II. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation not less than 90 days or more than 120 days prior to the first anniversary (the "Anniversary") of the date on which the corporation first mailed its proxy materials for the preceding year's annual meeting of shareholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to, or delayed by more than 30 days after, the anniversary of the preceding year's annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of the annual meeting and not later than the close of business on the later of (i) the 90th day prior to the date of the annual meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written consent to serve as a director if elected; (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; (c) as to the shareholder giving -3- the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on the corporation's books, and of such beneficial owner, (ii) the class and number of shares of the corporation that are owned beneficially and of record by such shareholder and such beneficial owner, and (iii) whether either such shareholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the corporation's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation's voting shares to elect such nominee or nominees (an affirmative statement of such intent, a "Solicitation Notice"). (c) Notwithstanding anything in the second sentence of the second paragraph of this Section 8 of Article II to the contrary, in the event that the number of directors to be elected to the Board is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least 100 days prior to the Anniversary, a shareholder's notice required by this Section 8 of Article II shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation. (d) Only persons nominated in accordance with the procedures set forth in this Section 8 of Article II shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 8 of Article II. The chair of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposed business or nomination shall not be presented for shareholder action at the meeting and shall be disregarded. (e) Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the corporation's notice of meeting (i) by or at the direction of the Board or (ii) by any shareholder of record of the corporation who is a shareholder of record at the time of giving of notice provided for in this paragraph, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 8 of Article II. Nominations by shareholders of persons for election to the Board of Directors may be made at such a special meeting of shareholders if the shareholder's notice required by the second paragraph of this Section 8 of Article II shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the close of business on the 120/th/ day prior to the date of such special meeting and not later than the close of business on the later of the 90th day prior to the date of such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. -4- (f) For purposes of this section, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (g) Notwithstanding the foregoing provisions of this Section 8 of Article II, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 8 of Article II. Nothing in this Section 8 of Article II shall be deemed to affect any rights of shareholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. ARTICLE III ----------- BOARD OF DIRECTORS ------------------ 1. Number and Qualifications. The business and affairs of the ------------------------- corporation shall be managed by a board of fourteen (14) Directors who need not be stockholders of the corporation nor residents of the State of Washington. 2. Election - Term of Office. The Board of Directors shall be divided ------------------------- into three classes: Class 1, Class 2, and Class 3. Each such Class shall consist, as nearly as possible, of one-third of the total number of directors constituting the entire Board of Directors. In no event shall a Class be comprised of fewer than 3 directors. Each director shall serve for a term ending on the date of the third annual meeting of shareholders following the annual meeting at which such director was elected; provided, however, that each initial -------- ------- director in Class 1 shall hold office until the annual meeting of shareholders in 1997; each initial director in Class 2 shall hold office until the annual meeting of shareholders in 1998; and each initial director in Class 3 shall hold office until the annual meeting of shareholders in 1999; and in each case until their successors are duly elected and have qualified or until their earlier resignation, removal from office or death. In the event of an increase or decrease in the authorized number of directors, (a) each director then serving as such shall nevertheless continue as a director of the Class in which he or she is a member until the expiration of his or her current term, or his or her earlier resignation, removal from office or death, and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three Classes of Directors so as to maintain such classes as nearly equal as possible. 3. Vacancies. Except as otherwise provided by law, vacancies in the --------- Board of Directors, whether caused by resignation, death or otherwise, may be filled by a majority of the remaining Directors attending any regular meeting of the Board of Directors, or any special meeting if the notice of such special meeting indicates that filling such vacancy is a purpose of the meeting. A Director thus elected to fill in a vacancy shall hold office during the unexpired term of his predecessor and until his successor is elected and qualified. 4. Annual Meeting. The first meeting of each newly elected Board of -------------- Directors shall be known as the annual meeting thereof and shall be held immediately after and at the same place as the annual stockholders' meeting or any later stockholders' meeting at which a Board of Directors is elected. -5- 5. Chairman of the Board. At its annual meeting, the Board of --------------------- Directors shall elect a Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders, the Directors, and the Executive Committee, and shall perform such other duties as may from time to time be assigned by the Board or the Executive Committee. 6. Regular Meetings. Regular Meetings of the Board of Directors shall ---------------- be held on such dates and at such times and places as the Board of Directors by resolution may decide. 7. Special Meetings. Special meetings of the Board of Directors may be ---------------- held at any time or at any place whenever called by the Chairman of the Board, the President or by the Secretary at the request of any three (3) or more Directors. 8. Place of Meetings. Any meeting of the Board of Directors may be ----------------- held within or without the State of Washington. 9. Notice of Meetings. Notice of the annual meeting of the Board of ------------------ Directors shall not be required. Notice of the time and place of all other meetings of the Board of Directors shall be given by the Chairman of the Board, the President, the Secretary or any person or persons calling the meeting by mail, radio, telegram or personal communication over the telephone or otherwise, at least three (3) days prior to the day upon which the meeting is to be held; provided, that no notice need be given if the time and place thereof shall have been fixed by resolution of the Board of Directors and a copy of such resolution has been mailed to every Director at least three (3) days before the first of any meeting or meetings held in pursuance thereof. 10. Waiver of Notice. Notice of any meeting of the Board of Directors ---------------- need not be given to any Director if such notice is waived in a writing signed by the Director, whether before or after such meeting is held, and delivered to the corporation for inclusion in the minutes or filing with the corporate records. Notice of any meeting shall be deemed waived by the presence of a Director at the meeting unless such Director (a) at the beginning of the meeting or promptly upon the Director's arrival, shall have made his written objection to the holding of the meeting or the transaction of business at the meeting, and (b) does not thereafter vote for or assent to action taken at the meeting. Any meeting of the Board shall be a legal meeting without any notice thereof having been given if all of the Directors are either present, other than for the sole purpose just described, or waive notice thereof. 11. Directors' Fees. Each Director shall receive a fee, as set by the --------------- Board of Directors from time to time, for services rendered at each regular or special meeting of the Board of Directors or meeting of a committee thereof and, in addition, shall be reimbursed for expenses of travel and lodging reasonably incurred in attending any such meeting. In addition to the foregoing, each outside Director shall receive an annual retainer fee as set by the Directors. An outside Director is a Director who is not a salaried officer or employee of this corporation or any of its subsidiaries. Nothing in this section shall be construed to preclude a Director from serving the corporation in any other capacity and receiving compensation therefor. If there are simultaneous Board Meetings of Fisher companies, and a Director of Fisher Companies Inc. is a Director of one or more of the other companies involved, he will receive only one fee for the meeting, namely his fee as Director of Fisher Companies Inc. -6- 12. Quorum of Directors. A majority of the number of Directors fixed by ------------------- these Bylaws shall constitute a quorum for the transaction of business, but a less number may adjourn any meeting from time to time and the same may be held without further notice. When a quorum is present at any meeting, a majority vote of the members in attendance shall decide any question brought before such meeting, except that no sale or exchange of unissued stock shall be made without the affirmative vote of three-fourths (3/4) of the entire Board of Directors declaring that the sale or exchange of such stock is necessary for a specific business purpose of the corporation other than the acquisition of additional capital funds in cash. The act of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. ARTICLE IV ---------- COMMITTEES ---------- 1. Designation of Committees. The Board of Directors of this ------------------------- corporation may, by resolution adopted at any regular or special meeting of such Board, designate from among its members one or more committees each of which shall have two or more members and, to the extent provided in this Article IV or in such resolution, shall have and may exercise all of the authority of the Board of Directors, but no such committee shall have the authority of the Board of Directors in reference to: amending the Articles of Incorporation or the Bylaws of the corporation, adopting a plan of merger or consolidation, recommending to the shareholders, the sale, lease, exchange or other disposition of all or substantially all the property and assets of the corporation other than in the usual and regular course of its business, or recommending to the shareholders a voluntary dissolution of the corporation or a revocation thereof. The designation of any such committee by the Board of Directors and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any of its members, of any responsibility imposed by law. 2. Executive Committee. ------------------- (a) Membership. The Executive Committee shall be comprised of the ---------- Chairman of the Board, the President and three (3) other Directors elected by the Board of the Directors. Members of the Executive Committee shall be elected by the Board of Directors at each annual meeting, to hold office until their successors are elected and qualified. The Chairman of the Board shall be chairman of the Committee unless the Board designates some other member of the Committee as its chairman. Each member of the Committee shall continue as a member of the Committee at the pleasure of the Board. (b) Vacancies. Vacancies on the Committee arising from any cause --------- may be filled by the Board of Directors at any regular or special meeting. (c) Powers and Duties. The Executive Committee shall have and may ----------------- exercise all of the authority of the Board of Directors. The Executive Committee shall specifically have the power and duty to vote the stock of fully and partially owned subsidiary companies, which power and duty of the Executive Committee shall include authority to make all determinations and decisions with -7- respect thereto. All actions of the Executive Committee shall be recorded in minutes of its meetings and shall be reported to the Board of Directors at its meeting next succeeding any such action and shall be subject to revision or alteration by the Board, except that existing rights of third parties shall not be affected thereby. (d) Rules of Procedure. The Executive Committee shall fix its ------------------ own rules of procedure and shall meet where and as provided by such rules. Special meetings of the Committee may be called at any time by the President, the chairman of the Committee if not the President, or any two (2) members. At all meetings of the Committee, the presence of at least three (3) members shall be necessary to constitute a quorum. The affirmative vote of a majority of the members present shall be necessary and sufficient for the adoption of any resolutions. 3. Compensation Committee. ---------------------- (a) Membership. The Compensation Committee shall consist of not ---------- less than four (4) Directors of the corporation elected by the Board of Directors, none of whom shall be an employee of the corporation or of any of its subsidiaries. Each member of the Committee shall continue as a member of the Committee at the pleasure of the Board. (b) Vacancies. Vacancies on the Committee arising from any cause --------- may be filled by the Board of Directors at any regular or special meeting. (c) Powers and Duties. The Compensation Committee shall: ----------------- (1) Review and establish the salary of officers and selected other key management employees of the corporation and its subsidiaries. (2) Review and establish all cash bonuses under and pursuant to the Management Incentive Plans of the corporation and its subsidiaries (3) Review and recommend changes in compensation for members of the corporation's Board of Directors and its Chairman; (4) Administer the Fisher Companies Incentive Plans and review and establish all stock options and stock rights to be granted to officers and selected other key management employees of the corporation and its subsidiaries, pursuant to such Plans; (5) Authorize the enrollment of selected management employees of the corporation and its subsidiaries as new participants in the supplemental pension plans. -8- (6) Recommend to the Board any additional compensation or employee benefit programs of a substantial nature and changes to existing programs of the corporation or its subsidiaries; (7) Record all actions of the Committee in minutes of its meetings; and (8) Report to the Board compensation actions of the Committee prior to their effective date. (d) Rules of Procedure. The Compensation Committee shall fix its ------------------ own rules of procedure and shall meet where and as provided by such rules. Special meetings of the Committee may be called at any time by the chairman of the Committee or any two (2) members. At all meetings of the Committee, the presence of at least three (3) members shall be necessary to constitute a quorum. The affirmative vote of a majority of the members present shall be necessary and sufficient for the adoption of any resolution. 4. Audit Committee. --------------- (a) Membership. The Membership of the Audit Committee shall be ---------- determined in accordance with the Audit Committee Charter. (b) Vacancies. Vacancies on the Committee arising from any cause --------- may be filled by the Board of Directors at any regular or special meeting. (c) Powers and Duties. The Audit Committee shall have the ----------------- powers, responsibilities and duties as set forth in the Audit Committee Charter. (d) Rules of Procedure. The Audit Committee shall fix its own ------------------ rules of procedure and shall meet where and as provided by such rules. Special meetings of the Committee may be called at any time by the chairman of the Committee or any two (2) members. At all meetings of the Committee, the presence of at least three (3) members shall be necessary to constitute a quorum. The affirmative vote of a majority of the members present shall be necessary and sufficient for the adoption of any resolution. 5. Nominating Committee. -------------------- (a) Membership. The Nominating Committee shall consist of not ---------- less than five (5) Directors of the corporation elected by the Board of Directors, none of whom shall be an employee of the corporation or of any of its subsidiaries. Each member of the Committee shall continue as a member of the Committee at the pleasure of the Board. (b) Vacancies. Vacancies on the Committee arising from any cause --------- may be filled by the Board of Directors at any regular or special meeting. (c) Powers and Duties. The Nominating Committee shall: ----------------- -9- (1) Review qualifications of candidates for Board membership from whatever source received; (2) Recommend to the Board the slate of Director candidates to be proposed for election by stockholders at the annual meeting; (3) Recommend to the Board candidates to fill Director vacancies which occur between annual meetings of stockholders; (4) Recommend to the Board criteria regarding personal qualifications for nomination as Director, including experience, skills, affiliations and characteristics; (5) Recommend to the Board criteria regarding the composition of the Board, including total size and number of employee-Directors; (6) Recommend to the Board criteria relating to tenure as a Director, including retirement age and continuation of a Director in an honorary or similar capacity; (7) Record all actions of the Committee and minutes of its meeting; and (8) Report to the Board all actions and recommendations of the Committee. (d) Rules of Procedure. The Nominating Committee shall fix its own ------------------ rules of procedure and shall meet where and as provided by such rules. Special meetings of the Committee may be called at any time by the chairman of the Committee or any two (2) members. At all meetings of the Committee, the presence of at least three (3) members shall be necessary to constitute a quorum. The affirmative vote of a majority of the members present shall be necessary and sufficient for the adoption of any resolution. ARTICLE V --------- OFFICERS -------- 1. Officers Enumerated - Election. The officers of the corporation shall ------------------------------ be a President, one or more Vice Presidents, a Secretary and a Treasurer, and such assistants to such officers as the Board of Directors may determine, all of whom shall be elected by the Board of Directors at the annual meeting thereof to hold office for the term of one year and until their successors are elected and qualified. 2. Qualification. None of the officers of the corporation except the ------------- President need be a Director. Excluding the President, any two of the other corporate offices may be combined in one person. 3. President. The President shall be the chief executive officer of the --------- corporation and, -10- subject to the Board of Directors and the Executive Committee, shall supervise and control the business and affairs of the corporation. In the absence of the Chairman of the Board, the President shall preside at meetings of the stockholders, the Directors and the Executive Committee. 4. Vice Presidents. Each Vice President shall perform such duties as the --------------- Board of Directors, the Executive Committee, or the President may from time to time designate or assign. In the absence or disability of the President, one of the Vice Presidents, in the order determined by the order of their election, shall act as President, but a Vice President who is not a Director cannot succeed to or fill the office of President. (a) One such Vice President shall be designated Chief Financial Officer and be accountable for the corporation's overall financial plans and policies, consistent with the corporation's Financial Accounting Charter, and the conduct of the corporation's relationships with banks and lending institutions, and the financial community. The chief financial officer shall also have charge and custody of and be responsible for all funds and securities of the corporation. He shall deposit all such funds in the name of the corporation in such depositories or invest them in such manner as may be designated or approved by the Board of Directors, and shall authorize disbursement of the funds of the corporation in payment of just demands against the corporation. 5. Secretary. The Secretary shall issue notices of meetings of --------- stockholders and Directors and shall make and keep minutes of meetings of stockholders and Directors. The Secretary shall keep and, when proper, affix the seal of the corporation. The Secretary shall keep the stock book of the corporation, a record of certificates representing shares of stock issued by the corporation, and a record of transfers of such certificates. The Secretary shall exercise the usual authority pertaining to the office of Secretary, and he shall perform such other duties as the Board of Directors, the Executive Committee or the President may from time to time designate. 6. Vacancy. Vacancies in any office arising from any cause may be filled ------- by the Board of Directors at any regular or special meeting. 7. Other Officers and Agents. The Board of Directors may appoint such ------------------------- other officers and agents as it shall deem necessary or expedient. Such other officers shall hold their offices for terms as provided in Section 1 of this Article V and such other agents shall hold their offices for such period as shall be determined from time to time by the Board of Directors. Such other officers and agents shall exercise such authority and perform such duties as the Board of Directors, Executive Committee or President may prescribe, which authority and duties may include, in the case of the other officers, one or more of the duties of the named officers of the corporation. 8. Removal of Officers. Any officer or agent may be removed by the Board ------------------- of Directors whenever in its judgment the best interest of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 9. Salaries. Salaries of all officers and agents of the corporation -------- appointed by the Board of Directors shall be fixed by the Board of Directors. -11- ARTICLE VI ---------- STOCK ----- 1. Certificate of Stock. Certificates of stock shall be issued in -------------------- numerical order and each stockholder shall be entitled to a certificate signed by the President or Vice President and the Secretary or an Assistant Secretary and sealed with the corporate seal. Every certificate of stock shall state (1) the name of the corporation and that it is incorporated under the laws of the State of Washington, (2) the name of the registered holder of the shares represented thereby, and (3) the number and class of shares the certificate represents. 2. Transfers. Shares of stock may be transferred by delivery of the --------- certificates therefor accompanied either by an assignment in writing on the back of the certificate or by a separate written assignment and power of attorney to transfer the same, which in either event is signed by the record holder of the certificate. No transfer shall be valid, except as between the parties thereto, until such transfer shall have been made upon the books of the corporation, as maintained by the transfer agent, if any. Except as otherwise specifically provided in these Bylaws, no shares of stock shall be transferred on the books of the corporation until the outstanding certificate or certificates therefor have been surrendered to the corporation, or to the transfer agent, if any. 3. Stockholders of Record. The corporation, or the transfer agent, if ---------------------- any, shall be entitled to treat the holder of record on the books of the corporation of any share or shares of stock as the holder in fact thereof for all purposes, including the payment of dividends on such stock and the right to vote on such stock. 4. Loss or Destruction of Certificates. In case of loss or destruction ----------------------------------- of any certificate of stock, another may be issued in its place upon proof of such loss or destruction and upon the giving of a satisfactory bond of indemnity to the corporation. A new certificate may be issued without requiring any bond when, in the judgment of the Board of Directors, or of the transfer agent, if any, it is proper to do so. 5. Closing of Transfer Books. The Board of Directors may close, or ------------------------- direct the transfer agent, if any, to close the books of the corporation against transfers of stock of the corporation for such period as the Directors may from time to time determine, in anticipation of stockholders' meetings, the payment of any dividend or distribution, or any change, conversion or exchange of shares of the corporation. 6. Regulations. The Board of Directors shall have the power and ----------- authority to make all such rules and regulations as it may deem expedient, or may delegate to a transfer agent, if any, such power and authority to make such rules and regulations concerning the issue, transfer, conversion and registration of certificates for shares of the stock of the corporation not inconsistent with these Bylaws, the Articles of Incorporation, or the laws of the State of Washington. -12- ARTICLE VII ----------- BOOKS AND RECORDS ----------------- 1. Records of Corporate Meetings and Share Register. The corporation ------------------------------------------------ shall keep either at its principal place of business or at its registered office (a) complete records of all of the proceedings of the Board of Directors and stockholders, and (b) a share register giving the names of the stockholders in alphabetical order and showing their respective addresses, the number of shares held by each and the dates upon which they acquired the same; provided, however, such share register may be maintained by the transfer agent of the corporation, if any. 2. Copies of Resolutions. Any person dealing with the corporation may --------------------- rely upon a copy of any of the records of the proceedings, resolutions or votes of the Board of Directors or stockholders when certified by the President, a Vice President, the Secretary or an Assistant-Secretary. ARTICLE VIII ------------ CORPORATE SEAL -------------- The corporate seal of the corporation shall consist of a flat-faced circular die producing in raised form, words, letters and figures, the design of which shall conform to the impression which appears upon this page opposite to this Bylaw. ARTICLE IX ---------- INDEMNIFICATION --------------- 1. Definitions. As used in this Article IX and, if applicable, Article ----------- V of the corporation's Articles of Incorporation: (a) The term "egregious conduct" by a person shall mean acts or omissions that involve intentional misconduct or a knowing violation of law, conduct violating Section 23B.08.310, as amended, of the Revised Code of Washington, or participation in any transaction from which the person personally received a benefit in money, property, or services to which the person is not legally entitled. (b) The term "finally adjudged" shall mean stated in a final judgment based on clear and convincing evidence by a court having jurisdiction, from which there is no further right to appeal. (c) The term "director" shall mean any person who is a director of the corporation or a subsidiary corporation and any person who, while a director of the corporation or a subsidiary corporation, is serving at the request of the corporation as a director, officer, manager, partner, -13- trustee, employee, or agent of another foreign or domestic corporation, limited liability company, partnership, joint venture, trust, or other enterprise, or is a fiduciary or party in interest in relation to any employee benefit plan maintained by the corporation or any subsidiary corporation; and "conduct as a director" shall include conduct while such a person is or was acting in any of such capacities. (d) The term "officer-director" shall mean any person who is simultaneously both an officer and director of the corporation, or an officer and director of a subsidiary corporation, and any person who, while simultaneously both an officer and director of the corporation, or a subsidiary corporation, is serving at the request of the corporation as a director, officer, manager, partner, trustee, employee, or agent of another foreign or domestic corporation, limited liability company, partnership, joint venture, trust, or other enterprise, or is a fiduciary or party in interest in relation to any employee benefit plan maintained by the corporation or any subsidiary corporation; and "conduct as an officer-director" shall include conduct while such a person is or was acting as an officer of the corporation or a subsidiary corporation or in any of such capacities. (e) The term "subsidiary corporation" shall mean any corporation or limited liability company at least 51 percent of the voting interests of which is held beneficially by the corporation. (f) No person shall be deemed to be serving at the request of the corporation unless the Board of Directors has expressly stated so in a duly adopted resolution. 2. Indemnification - Generally. The corporation shall indemnify any --------------------------- person who is, or is threatened to be made, a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and whether formal or informal, and whether by or in the right of the corporation or its stockholders or by any other party, by reason of the fact that the person is or was a director or officer-director against judgments, penalties or penalty taxes, fines, settlements (even if paid or payable to the corporation or its stockholders or to a subsidiary corporation) and reasonable expenses, including attorneys' fees, actually incurred in connection with such action, suit or proceeding unless the liability and expenses were on account of conduct finally adjudged to be egregious conduct. The reasonable expenses, including attorneys' fees, of such person incurred in connection with such action, suit or proceeding shall be paid or reimbursed by the corporation, upon request of such person, in advance of the final disposition of such action, suit or proceeding upon receipt by the corporation of a written, unsecured promise by the person to repay such amount if it shall be finally adjudged that the person is not eligible for indemnification. All expenses incurred by such person in connection with such action, suit or proceeding shall be considered reasonable. 3. No Determination. Except as stated in Section 4 of this Article IX, no ---------------- action by the board of directors, the stockholders, independent counsel, or any other person or persons shall be necessary or appropriate to the determination of the corporation's indemnification obligation in any specific case, to the determination of the reasonableness of any expenses incurred by a person entitled to indemnification under this Article IX or Article V of the corporation's Articles of Incorporation, nor to the authorization of indemnification in any specific case. 4. Limitation on Expenses. Notwithstanding Section 3 of this Article IX, ---------------------- the corporation shall not be obligated to indemnify any person for any expenses, including attorneys' fees, incurred to assert any claim against the corporation or a subsidiary corporation (except a claim based on Section 6 of this Article IX) or against any person related to or associated with the corporation or a subsidiary corporation. -14- 5. Submission of Claim; Presumption. If a claim under this Article IX -------------------------------- or Article V of the corporation's Articles of Incorporation is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, except in the case of a claim for expenses incurred in defending an action, suit or proceeding in advance of its final disposition, in which case the applicable period shall be 20 days, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, to the extent successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. The claimant shall be presumed to be entitled to indemnification under Article V of the corporation's Articles of Incorporation and this Article IX upon submission of a written claim (and, in an action brought to enforce a claim for expenses incurred in defending any action, suit or proceeding in advance of its final disposition, where the required undertaking has been tendered to the corporation), and thereafter the corporation shall have the burden of proving that the claimant is not so entitled. The claimant is entitled to indemnification even if the corporation (including its Board of Directors, independent legal counsel or its stockholders) failed to determine prior to the commencement of such action that indemnification or reimbursement or advancement of expenses to the claimant is proper in the circumstances or even if the corporation (including its Board of Directors, independent legal counsel or its stockholders) actually determined that the claimant is not entitled to indemnification or to the reimbursement or advancement of expenses. 6. Enforcement Expenses. The corporation shall indemnify any person -------------------- granted indemnification rights under this Article IX or Article V of the corporation's Articles of Incorporation against any reasonable expenses incurred by the person to enforce such rights. 7. Set-Off. Any person granted indemnification rights under this ------- Article IX or Article V of the corporation's Articles of Incorporation may directly assert such rights in set-off of any claim raised against the person by or in the right of the corporation and shall be entitled to have the same tribunal that adjudicates the corporation's claim adjudicate the person's entitlement to indemnification by the corporation. 8. Rights Not Exclusive. The right to indemnification and the payment -------------------- of expenses incurred in defending an action, suit or proceeding in advance of its final disposition conferred by this Article IX and Article V of the corporation's Articles of Incorporation shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise. 9. Officers, Employees and Agents. As provided by the Washington ------------------------------ Business Corporation Act, as amended from time to time, the corporation may by action of its Board of Directors provide indemnification and pay expenses in advance of the final disposition of an action, suit or proceeding to officers, employees and agents of the corporation or a subsidiary corporation with the same scope and effect as the provisions of this Article IX and Article V of the corporation's Articles of Incorporation with respect to the indemnification and advancement of expenses of directors and officer-directors. 10. Cessation of Service. The indemnification rights provided in this -------------------- Article IX and Article V of the corporation's Articles of Incorporation shall continue as to a person who has ceased to be a director or officer-director and shall inure to the benefit of the heirs, executors, and administrators of such person. -15- 11. Interpretation. The provisions of this Article IX shall be -------------- construed to be adopted in furtherance of, and not in limitation of, Article V of the corporation's Articles of Incorporation. 12. Amendment and Repeal. Notwithstanding anything in these Bylaws to -------------------- the contrary, this Article IX may only be amended by the stockholders in accordance with the statutory requirements that would be applicable to such stockholder action if this Article IX were part of the corporation's Articles of Incorporation. No amendment or repeal of this Article IX or Article V of the corporation's Articles of Incorporation shall adversely affect any right or protection of a director or officer-director or person formerly serving in any of such capacities existing at the time of such amendment or repeal with respect to acts or omissions occurring prior to such amendment or repeal. 13. Severability. Each of the substantive provisions of this Article ------------ IX and Article V of the corporation's Articles of Incorporation is separate and independent of the others, so that if any provision of this Article IX or Article V of the corporation's Articles of Incorporation shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of any other provisions. ARTICLE X --------- AMENDMENT OF BYLAWS ------------------- 1. By the Stockholders. These Bylaws may be amended, altered or ------------------- repealed at any regular or special meeting of the stockholders if notice of the proposed alteration or amendment is contained in the notice of the meeting. 2. By the Board of Directors. These Bylaws may be amended, altered ------------------------- or repealed, so long as consistent with the Articles of Incorporation, by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board if notice of the proposed alteration or amendment is contained or transmitted in the notice of the meeting. Any action of the Board of Directors with respect to the amendment, alteration or repeal of these Bylaws is hereby made expressly subject to change or repeal by the stockholders. -16- EX-10.17 4 dex1017.txt FOX BROADCASTING AFFILIATION AGMT - WXTX Exhibit 10.17 FOX BROADCASTING COMPANY STATION AFFILIATION AGREEMENT April 20, 2001 Fisher Broadcasting-Georgia, LLC WXTX-TV 6524 Buena Vista Road Columbus, GA 31907 Attention: General Manager This sets forth the terms and conditions of the agreement between Fox Broadcasting Company ("Fox"), on behalf of itself, Fox Children's Network, Inc. ("FCN") and Fox News Network, L.L.C. ("FNN"), and Fisher Broadcasting-Georgia, LLC ("Licensee"), for the carriage of programming over the facilities of Licensee's television station WXTX ("Station"). As used in this Agreement, the terms "program", "programming" and "Fox programming" and any derivations thereof shall mean, unless specifically indicated otherwise, the programming of Fox and the programming of FCN, and all terms of this Agreement shall apply to both. 1. Fox Programming: Fox will deliver to the Station for free over-the-air television broadcasting, programming which Fox and FCN make available to Station for broadcasting in the community to which Station is presently licensed by the FCC, which is Columbus, GA. The selection, scheduling, substitution and withdrawal of any program or portion thereof shall at all times remain within Fox's sole discretion and control. Licensee shall not and shall not authorize others to broadcast or otherwise use any program (or part thereof) or other material supplied by Fox except as specified in this Agreement, and without limiting the foregoing, Station may broadcast Fox programming only: (i) as scheduled by Fox, (ii) over Station's facilities in the Community specified above in this Paragraph 1 ("Station's Community"), and (iii) by free over-the-air television broadcasting. 2. Delivery: Fox will transmit the programming hereunder by satellite and shall keep Licensee apprised of both the satellite and transponder being used for that transmission. Any and all costs of whatever kind that Station incurs to pickup the programming from the satellite and rebroadcast it shall be the sole responsibility of Licensee. 3. Carriage & Preemption: (a) (1) On the dates and at the times scheduled by Fox, Licensee agrees to broadcast over Station's facilities in its entirety, in the form transmitted by Fox, without interruption, deletion, compression, addition, squeezing, alteration or other changes (except for adding Licensee's commercial announcements to the extent permitted by this Agreement) the Fox signal, and all the program-related Fox content contained therein, delivered by Fox to Station during Programmed Time Periods and New Programmed Time Periods in accordance with this Agreement, including without limitation, all Fox programs (including without limitation, all commercial announcements, Fox i.d.'s, and Fox promos and credits) and all other material, information and program-related data included by Fox in the Fox signal. (2) Without limitation of subparagraph (1) immediately above, Station must not, in retransmitting the Fox signal, degrade or reduce the quality of the signal's video, audio and other program-related components, and (without limitation to the foregoing provisions of this sentence) Station must, with regard to digital television: (i) retransmit the Fox signal to deliver video and audio of a quality equal to that of the Fox signal's video and audio if viewed and heard at the point the signal is delivered to Station, and (ii) with respect to all program-related components of the signal other than the video and audio, retransmit the Fox signal at not less than the number of megabits per second specified by Fox for the applicable Fox content. (b) Fox commits to supply sufficient programming throughout the term of this Agreement for the hours presently programmed by it (the "Programmed Time Periods"), which Programmed Time Periods are as follows (for programming other than FCN and Daytime programming, the specified times apply for the Eastern or Pacific Time Zones, and the Mountain and Central Time Zones are one hour earlier; for FCN and Daytime programming, the specified times apply to all Time Zones, unless Fox agrees otherwise): Daytime: 9-10 A.M. Monday thru Friday and Sunday Prime Time: 7-10 P.M. Sunday 8-10 P.M. Monday thru Saturday Late Night: 11 P.M.-12:00 A.M. Monday thru Saturday FCN: 7:00 A.M.-8:00 A.M. Monday thru Friday 3:00 P.M.- 5:00 P.M. Monday thru Friday 8:00 A.M.-12:00 Noon Saturday Weekend, Allstar & Post Season Sports: As scheduled for Station by Fox, including pre-game and post-game shows. 2 Subject to the preemption rights in Paragraph 11 below, Licensee shall broadcast over Station for the term of this Agreement, during the Programmed Time Periods, all Fox programing specified by Fox, except to the extent that Licensee is broadcasting programing pursuant to (and within the specific limits of a commitment expressly set forth on Exhibit A (for non-sports programming) or Exhibit B (for sports programming) to this Agreement (but not including any extension or renewal of such commitment by option extension or otherwise). If any Fox programming is not broadcast in its Programmed Time Period due to any such commitment, Licensee shall broadcast that Fox programming in the "make good" time period specified in Exhibit A or B, as applicable. (c) Without limiting subparagraph (b) above, each time that Licensee for any reason fails to (or advises Fox it will not) telecast any Fox programming as provided for in this Agreement, then upon Fox's request, Licensee shall telecast that programming (or replacement programming selected by Fox) and the commercial announcements contained in it, in a substitute time period that is within the same A.C. Nielsen broadcast ratings week as, and that is of a quality and rating value as nearly as possible equal to that of, the time period during which the programming was not telecast. Licensee shall give Fox at least 72 hours advance notice that it intends not to broadcast any Fox programming and in such notice shall identify the substitute time period that Licensee selects, which time period shall be subject to Fox's prior approval. Notwithstanding anything to the contrary in this Agreement, if Licensee does not fully comply with the foregoing, then, without limitation to any other rights of Fox under this Agreement or otherwise, Fox shall have the right to license the broadcast rights to the applicable omitted programming (or replacement programming) to another television station located in Station's Community. In addition to the foregoing, with respect to programming for broadcast within the New Programmed Time Periods (as defined in subparagraph 3(e) below), Fox will provide Licensee with a minimum of six months notice for each program addition, and Licensee shall be required to advise Fox within ten days of receiving notification if Licensee does not wish to televise said programming as scheduled by Fox. If Licensee refuses to broadcast any program within a New Programmed Time Period for any reason other than (i) a program conflict specified in subparagraph 3(e) below, or (ii) those specified in Paragraph 11 below, then Fox shall have the right to terminate this Agreement upon six months prior notice to Licensee. (d) Under this Agreement, an "Approved Preemption" shall mean: any failure to broadcast due to force majeure under Paragraph 7 below, any preemption permitted by Exhibit A or B hereto that is "made good" in accordance therewith and any preemption permitted by Paragraph 11 below. Any other preemption or failure to broadcast any Fox programming is an "Unauthorized Preemption" and without limiting any other rights of Fox under this Agreement or otherwise, if 3 within any 12-month period during the term of this Agreement, Station makes three (3) or more Unauthorized Preemptions of any Fox programming (or Licensee or Station states, either in general or specific terms, that Station intends to make such Unauthorized Preemptions or Fox reasonably concludes, based upon Licensee's or Station's actions or otherwise, that such Unauthorized Preemptions will occur), Fox may, upon 30 days' prior written notice to Licensee, elect to either: (1) terminate Station's right to broadcast any one or more series or other Fox programs, as Fox shall elect, and, to the extent and for the period(s) that Fox elects, thereafter license the broadcast rights to the applicable series or other Fox programs to any other television station or stations located in Station's Community, or (2) terminate this Agreement. (e) Licensee shall broadcast over Station's facilities all Fox programming to be offered during time periods not presently programmed by Fox ("New Programmed Time Periods"), subject to Fox providing to Licensee at least six months notice prior to delivering any additional programming within these time periods. Furthermore, if Licensee has entered into any agreement(s) prior to an announcement by Fox to program a specific time period and the agreement(s) is (are) for barter programming that Licensee is required by the terms of the agreement(s) to broadcast during a New Programmed Time Period, then Licensee shall not be required to broadcast the new Fox programming within the same time period, and the provisions of subparagraph 3(c) of this Agreement shall govern; provided, however, in any such instance(s) Licensee agrees not to renew or otherwise extend its rights to broadcast such conflicting programming within a New Programmed Time Period. (f) Commencing seven days from each request by Fox to Licensee for such negotiation, Licensee and Fox will negotiate in good faith for a period of 60 days in connection with Licensee's transmission or retransmission of Fox programs or other data, information or content (or any combination of the foregoing) using Station's digital broadcast spectrum or signal capacity other than as provided for under subparagraph 3(a) above (the "New Plan"), which use will not commence earlier than six months from the date of such request. If Fox and Licensee are unable to agree on the New Plan within the 60-day negotiation period, Fox will have the right at any time to terminate this Agreement on six months prior notice to Licensee. 4. Promotion: (a) Fox will provide Licensee with on-air promotional announcements, which may be for any Fox programming ("Fox Promos"), including without limitation, any FCN programming, for broadcast in Station's non-Fox programming. Licensee shall use its good faith, best efforts to provide an on-air promotional schedule 4 consistent with Fox's recommendations and in coordination with Fox, and to budget Station's annual advertising funds so as to enable Station to participate, on a year-round basis, in Fox's "co-op" advertising plan. Without limitation to the foregoing, in each instance, if any, that Fox determines that Station's "Sweeps Rating" (as defined below) is below the average Sweeps Rating for all Fox affiliated stations, then Station shall be deemed to be "Performing Below Average" and shall, within 15 days of Fox giving Licensee written notice thereof, commence full compliance with the following: (1) Station shall not broadcast, during each one-half hour of all periods that Station is not broadcasting Fox programming (the "Non-Fox Time Periods"), less than one (1) thirty (30) second promotional announcement (or promotional announcements aggregating 30 seconds, to the extent Fox so elects) for Station's local, syndicated or Fox programming, and (2) during all Non-Fox Time Periods, Licensee shall broadcast Fox Promos for not less than 45% of 100% (the "Applicable Percentage") of the total, aggregate "gross ratings points" for all the promotional announcements broadcast by Licensee ("Aggregate Promotional GRP's") within the Non-Fox Time Periods (the specific Fox Promos broadcast by Licensee and number of broadcasts of each Fox Promo shall be, to the extent Fox elects, as specified by Fox, and the broadcasts of the Fox Promos shall be made so that the GRP's allocated thereto are distributed fairly and reasonably across the Non-Fox Time Periods); provided, however, that if Station's Sweeps Rating ranks Station within the bottom 50% (ranked highest to lowest) of those Fox affiliated stations that are Performing Below Average, then the Applicable Percentage for Station shall be not less than 55% of 100% of said Aggregate Promotional GRP's. Licensee's full compliance with the immediately foregoing sentence shall continue until Licensee is no longer Performing Below Average, as determined by the most recent Sweeps Rating. For purposes hereof, the "Sweeps Rating" shall mean for each station the average A.C. Nielsen rating for the most-current completed "sweeps" period for Adults 18-49 for all prime time hours programmed by Fox. Licensee agrees to maintain complete and accurate records of all promotional announcements broadcast as provided herein. Within two (2) weeks following each request by Fox therefor, Licensee will submit copies of all such records to Fox. Notwithstanding anything to the contrary in (and without limitation to the above provisions of) this subparagraph 4(a), and as a material term of this Agreement, Licensee shall, in coordination with Fox, cause Station to broadcast in the one-half (1/2) hour immediately preceding prime-time, not less than one (1) :30 promotional announcement for Fox programming provided by Fox hereunder. (b) In addition to providing the promotion announcements referred to above, Fox shall make available to Licensee, at reasonable costs, such other promotional and sales materials as Fox and Licensee may mutually consider appropriate. Licensee shall not delete any copyright, trademark, logo or other notice, or any credit, included in any materials delivered pursuant to this paragraph or otherwise, and 5 Licensee shall not exhibit, display, distribute or otherwise use any trademark, logo or other material or item delivered pursuant to this paragraph or otherwise, except as instructed by Fox at the time. (c) Licensee shall make annually, in accordance with each A.C. Nielsen "Sweeps" co-op plan determined by Fox during the term of this Agreement, not less than an amount determined by Fox in its sole discretion (the "Co-Op Commitment") in local cash expenditures to promote Fox on Station. Subject to Licensee's full performance of its obligations under this Paragraph 4, Fox will reimburse Licensee for 50% of such cash expenditures as are made in accordance with Fox's co-op plan, up to a maximum annual Fox contribution equal to 50% of the Co-Op Commitment. 5. Commercial Announcements: (a) In each individual Fox program, Fox will have the right in its sole discretion to determine: (1) the number and length of commercial announcement slots (including station breaks) that will be available to Fox affiliates for insertion of affiliate commercial announcements and (2) the terms and conditions applicable to the availability and use of the commercial announcement slots. Fox will make available to Licensee for Station's use in each individual Fox program the same number and length of commercial announcements (including station breaks) as Fox makes available generally in that program to Fox affiliates on a national basis, on the terms and conditions that Fox generally applies to those affiliates on a national basis. Licensee agrees to be bound by Fox's decisions as provided for in this Paragraph 5. (b) Fox shall determine the placement, timing and format of Fox's and Licensee's commercial announcements. Fox shall have the right to include commercial announcements in all of the commercial time available in each hour of the programming other than that expressly allocated to Licensee in this Agreement. (c) Licensee's broadcast over the Station of all commercial announcements included by Fox in Fox programming is of the essence of this Agreement, and nothing contained in Paragraph 3 above or elsewhere in this Agreement (other than Paragraph 11 below) shall limit Fox's rights or remedies at law or otherwise relating to failure to so broadcast said commercial announcements. Licensee agrees to maintain complete and accurate records of all commercial announcements broadcast as provided in this Agreement. Within two (2) weeks following each request by Fox therefor, Licensee will submit copies of all such records to Fox. 6 6. Supplemental Agreements: Each of the 1998 FKW Supplemental Agreement (and Addendum #1 and #2 thereto), the 1998 NFL Supplemental Agreement, the 1999 Prime-Time-Inventory-Purchase Supplemental Agreement, the presently existing (if any) Fox Network Non-Duplication Amendment for Station and the presently existing (if any) Fox Agreement and Amendment to Station Affiliation Agreement relating to retransmission consent, as they may have been amended or supplemented (collectively the "Supplementals"), between Licensee and Fox, are in full force and effect, and this Agreement is now deemed the applicable Station Affiliation Agreement referenced in the Supplementals. Licensee shall fully perform all terms and conditions of the Supplementals in their entirety throughout the term of this Agreement. 7. Force Majeure: Neither Fox nor FCN shall be liable to Licensee for failure to supply any programming or any part thereof, nor shall Licensee be liable to Fox or FCN for failure to broadcast any such programming or any part thereof, by reason of any act of God, labor dispute, non-delivery by program suppliers or others, failure or breakdown of satellite or other facilities, legal enactment, governmental order or regulation or any other similar or dissimilar cause beyond their respective control ("force majeure event"). If, due to any force majeure event(s), Fox substantially fails to provide the programming to be delivered to Licensee under Paragraph 1 above, or Licensee substantially fails to broadcast such programming as scheduled by Fox, for 4 consecutive weeks, or for 6 weeks in the aggregate during any 12-month period, then the other party hereto (the "unaffected party") may terminate this Agreement upon thirty (30) days prior written notice to the party so failing, which notice may be given at any time prior to the expiration of 7 days after the unaffected party's receipt of actual notice that the force majeure event(s) has ended. 8. Assignment: This Agreement shall not be assigned by Licensee without the prior written consent of Fox, and any permitted assignment shall not relieve Licensee of its obligations hereunder. Any purported assignment by Licensee without such consent shall be null and void and not enforceable against Fox. Licensee also agrees that if any application is made to the Federal Communications Commission pertaining to an assignment or a transfer of control of Licensee's license for the Station, or any interest therein, Licensee shall immediately notify Fox in writing of the filing of such application. Except as to "short form" assignments or transfers of control made pursuant to Section 73.3540(f) of the Rules and Regulations of the Federal Communications Commission, Fox shall have the right to terminate this Agreement, effective upon thirty (30) days notice to Licensee and the transferee or assignee of such termination, which notice may be given at any time within ninety (90) days after the later occurring of: (a) the date on which Fox learns that such assignment or transfer has become effective or (b) the date on which Fox receives written notice of such assignment or transfer. Licensee agrees, that upon Fox's request, Licensee shall procure and deliver to Fox, in form satisfactory to Fox, the agreement of the proposed assignee or transferee that, upon consummation of the assignment or transfer of control of the Station's authorization, the assignee or transferee will assume and perform this Agreement in its entirety without limitation of any kind. If Licensee fails to notify Fox of the proposed assignment or transfer of control of said Station's authorization, or fails to 7 procure the agreement of the proposed assignee or transferee in accordance with this Paragraph, then such failure shall be deemed a material breach of this Agreement. Without limitation to any other provision of this Agreement or to any of Fox's rights or remedies, if, without Fox's prior written consent, Licensee enters into any "Local Management Agreement", "Time Brokerage Agreement" or similar arrangement or agreement pertaining to Station operations, or for the use (by lease or otherwise) by any party other than Licensee of any Programmed Time Period or New Programmed Time Period or any significant portion of Station's broadcast time outside of those Fox Time Periods, Fox will have the right at any time to terminate this Agreement on thirty (30) days' notice to Licensee. 9. Unauthorized Copying: Licensee shall not, and shall not authorize others to, record, copy or duplicate any programming or other material furnished by Fox hereunder, in whole or in part, and shall take all reasonable precautions to prevent any such recordings, copying or duplicating. Notwithstanding the foregoing, if Station is located in the Mountain Time Zone, Licensee may pre-record programming from the satellite feed for later telecast at the times scheduled by Fox. Licensee shall erase all such pre-recorded programming promptly after its scheduled telecast. 10. Term: The term of this Agreement shall commence on or before June 30, 2001 and shall continue through May 31, 2004 (the "initial period"). After the initial period, the term of this Agreement may be extended for additional successive periods of one (1) year each, by Fox, in its sole discretion, giving written notice of such extension (the "extension notice") to Licensee at least one hundred twenty (120) days prior to the expiration of the then-current period; provided, however, that if, within thirty (30) days of Licensee's receipt of the extension notice, Licensee, in its sole discretion, gives Fox written notice that Licensee rejects such extension, then the extension notice shall not be effective and this Agreement shall terminate upon expiration of the then-current period. Notwithstanding anything to the contrary contained in this Agreement, upon the termination or expiration of the term of this Agreement, all of Licensee's and Station's rights to broadcast or otherwise use any Fox program or any trademark, logo or other material or item hereunder shall immediately cease and neither Licensee nor Station shall have any further rights whatsoever with respect to any such program, material or item. 11. Applicable Law: The obligations of Licensee and Fox under this Agreement are subject to all applicable federal, state, and local laws, rules and regulations (including, but not limited to, the Communications Act of 1934, as amended, and the rules and regulations of the Federal Communications Commission) and this Agreement shall be deemed to have been negotiated and entered into, and this Agreement and all matters or issues collateral thereto shall be governed by, the law of the State of California applicable to contracts negotiated, executed and performed entirely within that state. With respect to programs offered or already contracted for pursuant to this Agreement, nothing in any other Paragraph hereof shall be construed to prevent or hinder Licensee from (a) rejecting or refusing Fox programs which Licensee reasonably believes to be unsatisfactory, unsuitable or contrary to the public interest, or (b) substituting a program which, in Licensee's opinion, is of greater local or national importance; provided, however, Licensee shall give Fox written notice of each such rejection or substitution, and the justification therefor, 8 at least 72 hours in advance of the scheduled broadcast, or as soon thereafter as possible (including an explanation of the cause for any lesser notice). Programming will be deemed to be unsatisfactory or unsuitable only if it (i) is delivered in a form which does not meet accepted standards of good engineering practice; (ii) does not comply with the rules and regulations of the FCC; or (iii) is programming which Licensee reasonably believes would not meet prevailing contemporary standards of good taste in its community of license. In view of the limited nature of the Fox programming within each day-part as specified in subparagraph 3(b) above, Licensee does not foresee any need to substitute programming of greater local or national importance for Fox programming, except to present locally originated, non-entertainment, non-religious timely public interest programming, such as election coverage, live coverage of fast-breaking news events, political debates, town hall-type meetings and telethons that serve the public interest and that are approved by Fox, which approval shall not be unreasonably withheld. Notwithstanding anything to the contrary expressed or implied herein, the parties acknowledge that Station has the ultimate responsibility to determine the suitability of the subject matter of program content, including commercial, promotional or public service announcements. 12. Station Acquisition by Fox: If Fox or any of Fox's parent, affiliated, subsidiary or related companies or other entities enters into any agreement to acquire any significant ownership and/or controlling interest in any television broadcast station licensed to any community within Station's television market, then Fox shall have the right at any time after that agreement is made, to terminate this Agreement upon not less than sixty (60) days notice to Licensee. Said termination shall be effective as of such date as Fox shall designate in said notice. 13. Change in Operations: If at any time Station's transmitter location, power, frequency, programming format, hours of operation, technical quality of transmissions or any other material aspect of Station's operations is such that Fox determines in its reasonable judgement that Station is of less value to Fox as a broadcaster of Fox programming than at the date of this Agreement, then Fox shall have the right to terminate this Agreement upon thirty (30) days prior written notice to Licensee. 14. Non-Liability of Board Members: To the extent the Fox Broadcasting Company Affiliates' Association Board of Governors (the "Board") and its members are acting in their capacity as such, then the Board and each such member so acting shall not have any obligation or legal or other liability whatsoever to Licensee in connection with this Agreement, including without limitation, with respect to the Board's or such member's approval or non-approval of any matter, exercise or non-exercise of any right or taking of or failing to take any other action in connection therewith. 15. Warranties and Indemnities: (a) Fox represents and warrants that Station's broadcast, in accordance with this Agreement, of any Fox programming provided by Fox to Station shall not violate or infringe upon the trade name, trademark, copyright, literary or dramatic right, 9 or right of privacy or publicity of any party, or constitute a libel or slander of any party; provided, however, that the foregoing representations and warranties shall not apply: (1) to public performance rights in music, (2) to any material furnished or added by any party other than Fox after delivery of the programming to Station or (3) to the extent such programming is changed or otherwise affected by deletion of any material by any party other than Fox after delivery of the programming to Station. Fox agrees to indemnify and hold harmless Station and its parents, affiliates, subsidiaries, successors and assigns, and the respective owners, officers, directors, agents and employees of each, from and against all liability, actions, claims, demands, losses, damages or expenses (including reasonable attorneys' fees, but excluding Licensee's or Station's lost profits or consequential damages, if any) caused by or arising out of Fox's breach of the representations and warranties set forth in the foregoing sentence. Fox makes no representations, warranties or indemnities, express or implied, except as expressly set forth in this subparagraph (a). (b) Without limitation to any of Licensee's other obligations and agreements under this Agreement, Licensee agrees to indemnify and hold harmless Fox and its parents, affiliates, subsidiaries, successors and assigns, and the respective owners, officers, directors, agents and employees of each, from and against all liability, actions, claims, demands, losses, damages or expenses (including reasonable attorneys' fees, but excluding Fox's lost profits or Fox's consequential damages, if any) caused by or arising out of any matters excluded from Fox's representations and warranties by subparagraphs (a)(1), (2) or (3) above, or any breach of any of Licensee's representations, warranties or agreements hereunder or any programming broadcast by Station other than that provided by Fox hereunder. (c) The indemnitor may assume, and if the indemnitee requests in writing shall assume, the defense of any claim, demand or action covered by indemnity hereunder, and upon the written request of the indemnitee, shall allow the indemnitee to cooperate in the defense at the indemnitee's sole cost and expense. The indemnitee shall give the indemnitor prompt written notice of any claim, demand or action covered by indemnity hereunder. If the indemnitee settles any claim, demand or action without the prior written consent of the indemnitor, the indemnitor shall be released from the indemnity in that instance. 16. Notices: All notices to each party required or permitted hereunder to be in writing shall be deemed given when personally delivered (including, without limitation, upon delivery by overnight courier or other messenger or upon receipt of facsimile copy), upon the date of mailing postage prepaid or when delivered charges prepaid to the telegraph office for transmission, addressed as specified below, or addressed to such other address as such party may hereafter specify in a written notice given as provided herein. Such notices to Licensee shall be to the address set forth for Licensee on page 1 of this Agreement. Such notices to Fox shall be to: Fox 10 Broadcasting Company, 10201 West Pico Boulevard, Los Angeles, CA 90035, Attn: Network Distributions; with a copy to: Fox Broadcasting Company, 10201 West Pico Boulevard, Los Angeles, CA 90035, Attn: Legal Affairs. 17. Retransmission Consent: Without Fox's prior written approval, Licensee shall not grant its consent to the transmission or retransmission, by any cable system, satellite, other multichannel video programming distributor, telephone system, microwave carrier, wireless cable system or other technology wherever located, of Station's broadcast of any Fox programming. Neither this Agreement nor any grant by Licensee of retransmission consent conveys any license or sublicense in or to the copyrights of Fox programming, and Fox shall in no way be a party to or incur any duty or other obligation in connection with any retransmission consent granted by Licensee. 18. Change In Fox Operations: Notwithstanding anything to the contrary in this Agreement and without limitation to any of Fox's rights, Fox reserves the right to make changes in its operations (and/or terms of doing business) that conflict with (or do not conform to) the terms of this Agreement and that will be applicable to its affiliates generally. Fox shall notify Licensee in writing that Fox has made such change and the effective date thereof, and as of said effective date, this Agreement will be deemed amended to reflect such change, unless within 10 days of Fox's notification to Licensee of such change, Licensee notifies Fox in writing that Licensee rejects such change. If Licensee does so reject said change, then Fox shall have the right for a period of six months from Fox's receipt of Licensee's rejection notice to terminate this Agreement by providing not less than ninety (90) days' written notice to Licensee. 19. Miscellaneous: (a) Nothing contained in this Agreement shall create any partnership, association, joint venture, fiduciary or agency relationship between Fox and Licensee. (b) No waiver of any failure of any condition or of the breach of any obligation hereunder shall be deemed to be a waiver of any preceding or succeeding failure of the same or any other condition, or a waiver of any preceding or succeeding breach of the same or any other obligation. (c) In connection with Fox programming, Station shall at all times permit Fox, without charge, to place, maintain and use on Station's premises, at Fox's expense, such reasonable amounts of devices and equipment as Fox shall require, in such location and manner, as to allow Fox to economically, efficiently and accurately achieve the purposes of such equipment. Station shall operate such equipment for Fox, to the extent Fox reasonably requests, and no fee shall be charged by Station therefor. 11 (d) This Agreement, together with the Supplementals, constitutes the entire understanding between Fox and Licensee concerning the subject matter hereof and shall not be amended, modified, changed, renewed, extended or discharged except by an instrument in writing signed by Fox and Licensee or as otherwise expressly provided herein or therein. Fox and Licensee each hereby acknowledges that neither is entering into this Agreement in reliance upon any term, condition, representation or warranty not stated herein. All actions, proceedings or litigation brought against Fox by Licensee shall be instituted and prosecuted solely within the County of Los Angeles, California. Licensee hereby consents to the jurisdiction of the state courts of California and the federal courts located in the Central District of California as to any matter arising out of, or related to this Agreement. (e) Without limitation to Paragraph 1 above, for purposes of this Agreement, the term "programs" (and the derivations thereof including, without limitation, "programming") will include, without limitation, to the extent Fox reasonably elects, television specials, made-for-television movies, television series and all other traditional forms of television motion pictures and programs, as well as any other program-related material or matter sent, transmitted or otherwise communicated by Fox with the intent that it be perceived or otherwise received, visually or visually and aurally, by television receiver, television monitor or any other device or equipment whatsoever now known or hereafter devised. (f) Each and all of the several rights and remedies of each party hereto under or contained in or by reason of this Agreement shall be cumulative, and the exercise of one or more of said rights or remedies shall not preclude the exercise of any other right or remedy under this Agreement, at law, or in equity. Notwithstanding anything to the contrary contained in this Agreement, in no event shall either party hereto be entitled to or recover any lost profits or consequential damages because of a breach or failure by the other party, and except as expressly provided in this Agreement to the contrary, neither Fox nor Licensee shall have any right against the other with respect to claims by any third person or other third entity. (g) If any provision of this Agreement (the "Void Provision"), as applied to either Fox or Licensee or any circumstances, is found to be against public policy or otherwise void or unenforceable, or in conflict with any applicable federal, state or local law, rule or regulation (including without limitation any rule or regulation of the Federal Communications Commission), then commencing within 10 days following such finding, Fox and Licensee must negotiate in good faith for a period of 30 days regarding a provision to replace the Void Provision, which provision shall materially meet the intent of the parties as set forth in the Void Provision and essentially preserve the benefits provided by this Agreement to both parties. If the parties are unable to agree on such a replacement provision for any reason whatsoever, including without limitation due to any constraints imposed 12 by any law, rule or regulation, then either party will have the right to terminate this Agreement at any time on six months prior notice. (h) It is understood that FCN is indemnifying Fox in connection with all costs, expenses, liabilities and other matters relating to the FCN programming covered hereunder. (i) Paragraph headings are inserted for convenience only and shall not be used to interpret this Agreement or any of the provisions hereof or given any legal or other effect whatsoever. (j) Licensee acknowledges that Station's rights contained in this Agreement are subject to and must be exercised consistent with the rights conveyed to Fox by the NFL, the NHL or any other licenser of programming delivered under this Agreement and any limitations and restrictions thereon. 20. News Agreement: (a) As a material term of this Agreement, by June 30, 2001, Licensee shall best efforts to: (i) launch and continue to broadcast on Station, in consultation with Fox, throughout the term of this Agreement, a self-produced, on-air 10:00 pm, Monday through Friday, local newscast (i.e., Station shall originate said newscast program and shall not produce such newscast program pursuant to any news-sharing arrangement), which newscast shall be not less than 30 minutes per night, or (ii) enter into a news-sharing agreement for Station with a network-affiliated television station in Station's television market ("Cooperating Station"), and thereby commence and continue to broadcast on Station, throughout the term of this Agreement, a first-class regularly-scheduled 10:00 pm local newscast program, which shall not be less than 30 minutes per night (in which instance Licensee shall title Station's news set, mic flags, music, graphics, supers and news promotion that separately brands Station's local newscast as a Fox news program, and provide a local newscast producer and the exclusive services of a news anchor person(s) for Station's local newscast). Licensee shall notify Fox in writing of which newscast program under this subparagraph 20(a) that Licensee shall broadcast on Station no later than sixty (60) days prior to Licensee's launch on Station of such newscast program. (b) Licensee shall simultaneously with the execution of this Agreement execute and return with this Agreement four (4) copies of the standard News Service Agreement (and Addendum thereto executed by the appropriate representative of the Cooperating Station, if Licensee broadcasts on Station a newscast subject to subparagraph 20(a)(ii) above) (collectively "News Agreement") between Licensee and FNN, as provided to Licensee by FNN. Upon Licensee's execution of the News Agreement, it shall be deemed attached to this Agreement as Exhibit E and 13 incorporated herein by this reference. As a material term of this Agreement, whether or not Licensee broadcasts a local newscast program on Station, Licensee shall continue to pay to FNN, throughout the term of this Agreement, any and all license fees provided under the News Agreement. Without limitation to any provision of this Agreement or of the News Agreement, if the News Agreement is terminated for any reason other than the material breach of the News Agreement by FNN, Fox shall have the right to terminate this Agreement effective upon such date as Fox may elect in its sole discretion. Any breach by Licensee of the News Agreement will be a breach by Licensee of this Agreement of equivalent materiality (e.g., a material breach of the News Agreement by Licensee will be a material breach of this Agreement by Licensee). IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. Fox Broadcasting Company Fischer Broadcasting-Georgia, LLC ("Fox") ("Licensee") By: /s/ D.M. By: /s/ B.W. T --------------------------------- --------------------------------- Title: SVP Network Dist. Title: President ------------------------------ ------------------------------ 14 WXTX/COLUMBUS, GA As of 1/15/02 EXHIBIT A: - ---------- *No non-sports preemptions. Licensee Initial & Date: /s/ BWT 2/8/02 ---------------- FBC Initial & Date: /s/ DW 2/12/02 --------------------- WXTX/COLUMBUS, GA As of 1/15/02 EXHIBIT B: - ---------- *No sports preemptions. Licensee Initial & Date: /s/ BWT 2/8/02 ---------------- FBC Initial & Date: /s/ DW 2/12/02 --------------------- EX-10.18 5 dex1018.txt FOX BROADCASTING AFFILIATION AGMT - WFXG Exhibit 10.18 FOX BROADCASTING COMPANY STATION AFFILIATION AGREEMENT April 20, 2001 Fisher Broadcasting-Georgia, LLC WFXG-TV 3933 Washington Road Augusta, GA 30907 Attention: General Manager This sets forth the terms and conditions of the agreement between Fox Broadcasting Company ("Fox"), on behalf of itself, Fox Children's Network, Inc. ("FCN") and Fox News Network, L.L.C. ("FNN"), and Fisher Broadcasting-Georgia, LLC ("Licensee"), for the carriage of programming over the facilities of Licensee's television station WFXG ("Station"). As used in this Agreement, the terms "program," "programming" and "Fox programming" and any derivations thereof shall mean, unless specifically indicated otherwise, the programming of Fox and the programming of FCN, and all terms of this Agreement shall apply to both. 1. Fox Programming Fox will deliver to the Station for free over-the-air television broadcasting, programming which Fox and FCN make available to Station for broadcasting in the community to which Station is presently licensed by the FCC, which is Augusta, GA. The selection, scheduling, substitution and withdrawal of any program or portion thereof shall at all times remain within Fox's sole discretion and control. Licensee shall not and shall not authorize others to broadcast or otherwise use any program (or part thereof) or other material supplied by Fox except as specified in this Agreement, and without limiting the foregoing, Station may broadcast Fox programming only: (i) as scheduled by Fox, (ii) over Station's facilities in the Community specified above in this Paragraph 1 ("Station's Community"), and (iii) by free over-the-air television broadcasting. 2. Delivery Fox will transmit the programming hereunder by satellite and shall keep Licensee apprised of both the satellite and transponder being used for that transmission. Any and all costs of whatever kind that Station incurs to pickup the programming from the satellite and rebroadcast it shall be the sole responsibility of Licensee. 3. Carriage & Preemption (a) (1) On the dates and at the times scheduled by Fox, Licensee agrees to broadcast over Station's facilities in its entirety, in the form transmitted by Fox, without interruption, deletion, compression, addition, squeezing, alteration or other changes (except for adding Licensee's commercial announcements to the extent permitted by this Agreement) the Fox signal, and all the program-related Fox content contained therein, delivered by Fox to Station during Programmed Time Periods and New Programmed Time Periods in accordance with this Agreement, including without limitation, all Fox programs (including without limitation, all commercial announcements, Fox i.d.'s, and Fox promos and credits) and all other material, information and program-related data included by Fox in the Fox signal. (2) Without limitation of subparagraph (1) immediately above, Station must not, in retransmitting the Fox signal, degrade or reduce the quality of the signal's video, audio and other program-related components, and (without limitation to the foregoing provisions of this sentence) Station must, with regard to digital television: (i) retransmit the Fox signal to deliver video and audio of a quality equal to that of the Fox signal's video and audio if viewed and heard at the point the signal is delivered to Station, and (ii) with respect to all program-related components of the signal other than the video and audio, retransmit the Fox signal at not less than the number of megabits per second specified by Fox for the applicable Fox content. (b) Fox commits to supply sufficient programming throughout the term of this Agreement for the hours presently programmed by it (the "Programmed Time Periods"), which Programmed Time Periods are as follows (for programming other than FCN and Daytime programming, the specified times apply for the Eastern or Pacific Time Zones, and the Mountain and Central Time Zones are one hour earlier; for FCN and Daytime programming, the specified times apply to all Time Zones, unless Fox agrees otherwise): Daytime: 9-10 A.M. Monday thru Friday and Sunday Prime Time: 7-10 P.M. Sunday 8-10 P.M. Monday thru Saturday Late Night: 11 P.M.-12:00 A.M. Monday thru Saturday FCN: 7:00 A.M.-8:00 A.M. Monday thru Friday 3:00 P.M.-5:00 P.M. Monday thru Friday 8:00 A.M.-12:00 Noon Saturday Weekend, Allstar & Post Season Sports: As scheduled for Station by Fox, including pre-game and post-game shows. -2- Subject to the preemption rights in Paragraph 11 below, Licensee shall broadcast over Station for the term of this Agreement, during the Programmed Time Periods, all Fox programming specified by Fox, except to the extent that Licensee is broadcasting programming pursuant to (and within the specific limits of) a commitment expressly set forth on Exhibit A (for non-sports programming) or Exhibit B (for sports programming) to this Agreement (but not including any extension or renewal of such commitment by option extension or otherwise). If any Fox programming is not broadcast in its Programmed Time Period due to any such commitment, Licensee shall broadcast that Fox programming in the "make good" time period specified in Exhibit A or B, as applicable. (c) Without limiting subparagraph (b) above, each time that Licensee for any reason fails to (or advises Fox it will not) telecast any Fox programming as provided for in this Agreement, then upon Fox's request, Licensee shall telecast that programming (or replacement programming selected by Fox) and the commercial announcements contained in it, in a substitute time period that is within the same A.C. Nielsen broadcast ratings week as, and that is of a quality and rating value as nearly as possible equal to that of, the time period during which the programming was not telecast. Licensee shall give Fox at least 72 hours advance notice that it intends not to broadcast any Fox programming and in such notice shall identify the substitute time period that Licensee selects, which time period shall be subject to Fox's prior approval. Notwithstanding anything to the contrary in this Agreement, if Licensee does not fully comply with the foregoing, then, without limitation to any other rights of Fox under this Agreement or otherwise, Fox shall have the right to license the broadcast rights to the applicable omitted programming (or replacement programming) to another television station located in Station's Community. In addition to the foregoing, with respect to programming for broadcast within the New Programmed Time Periods (as defined in subparagraph 3(e) below), Fox will provide Licensee with a minimum of six months notice for each program addition, and Licensee shall be required to advise Fox within ten days of receiving notification if Licensee does not wish to televise said programming as scheduled by Fox. If Licensee refuses to broadcast any program within a New Programmed Time Period for any reason other than (i) a program conflict specified in subparagraph 3(e) below, or (ii) those specified in Paragraph 11 below, then Fox shall have the right to terminate this Agreement upon six months prior notice to Licensee. (d) Under this Agreement, an "Approved Preemption" shall mean: any failure to broadcast due to force majeure under Paragraph 7 below, any preemption permitted by Exhibit A or B hereto that is "made good" in accordance therewith and any preemption permitted by Paragraph 11 below. Any other preemption or failure to broadcast any Fox programming is an "Unauthorized Preemption" and without limiting any other rights of Fox under this Agreement or otherwise, if -3- within any 12-month period during the term of this Agreement, Station makes three (3) or more Unauthorized Preemptions of any Fox programming (or Licensee or Station states, either in general or specific terms, that Station intends to make such Unauthorized Preemptions or Fox reasonably concludes, based upon Licensee's or Station's actions or otherwise, that such Unauthorized Preemptions will occur), Fox may, upon 30 days prior written notice to Licensee, elect to either: (1) terminate Station's right to broadcast any one or more series or other Fox programs, as Fox shall elect, and, to the extent and for the period(s) that Fox elects, thereafter license the broadcast rights to the applicable series or other Fox programs to any other television station or stations located in Station's Community, or (2) terminate this Agreement. (e) Licensee shall broadcast over Station's facilities all Fox programming to be offered during time periods not presently programmed by Fox ("New Programmed Time Periods"), subject to Fox providing to Licensee at least six months notice prior to delivering any additional programming within these time periods. Furthermore, if Licensee has entered into any agreement(s) prior to an announcement by Fox to program a specific time period and the agreement(s) is (are) for barter programming that Licensee is required by the terms of the agreement(s) to broadcast during a New Programmed Time Period, then Licensee shall not be required to broadcast the new Fox programming within the same time period, and the provisions of subparagraph 3(c) of this Agreement shall govern; provided, however, in any such instance(s) Licensee agrees not to renew or otherwise extend its rights to broadcast such conflicting programming within a New Programmed Time Period. (f) Commencing seven days from each request by Fox to Licensee for such negotiation, Licensee and Fox will negotiate in good faith for a period of 60 days in connection with Licensee's transmission or retransmission of Fox programs or other data, information or content (or any combination of the foregoing) using Station's digital broadcast spectrum or signal capacity other than as provided for under subparagraph 3(a) above (the "New Plan"), which use will not commence earlier than six months from the date of such request. If Fox and Licensee are unable to agree on the New Plan within the 60-day negotiation period, Fox will have the right at any time to terminate this Agreement on six months prior notice to Licensee. 4. Promotion (a) Fox will provide Licensee with on-air promotional announcements, which may be for any Fox programming ("Fox Promos"), including without limitation, any FCN programming, for broadcast in Station's non-Fox programming. Licensee shall use its good faith, best efforts to provide an on-air promotional schedule -4- consistent with Fox's recommendations and in coordination with Fox, and to budget Station's annual advertising funds so as to enable Station to participate, on a year-round basis, in Fox's "co-op" advertising plan. Without limitation to the foregoing, in each instance, if any, that Fox determines that Station's "Sweeps Rating" (as defined below) is below the average Sweeps Rating for all Fox affiliated stations, then Station shall be deemed to be "Performing Below Average" and shall, within 15 days of Fox giving Licensee written notice thereof, commence full compliance with the following: (1) Station shall not broadcast, during each one-half hour of all periods that Station is not broadcasting Fox programming (the "Non-Fox Time Periods"), less than one (1) thirty (30) second promotional announcement (or promotional announcements aggregating 30 seconds, to the extent Fox so elects) for Station's local, syndicated or Fox programming, and (2) during all Non-Fox Time Periods, Licensee shall broadcast Fox Promos for not less than 45% of 100% (the "Applicable Percentage") of the total, aggregate "gross ratings points" for all the promotional announcements broadcast by Licensee ("Aggregate Promotional GRP's") within the Non-Fox Time Periods (the specific Fox Promos broadcast by Licensee and number of broadcasts of each Fox Promo shall be, to the extent Fox elects, as specified by Fox, and the broadcasts of the Fox Promos shall be made so that the GRP's allocated thereto are distributed fairly and reasonably across the Non-Fox Time Periods); provided, however, that if Station's Sweeps Rating ranks Station within the bottom 50% (ranked highest to lowest) of those Fox affiliated stations that are Performing Below Average, then the Applicable Percentage for Station shall be not less than 55% of 100% of said Aggregate Promotional GRP's. Licensee's full compliance with the immediately foregoing sentence shall continue until Licensee is no longer Performing Below Average, as determined by the most recent Sweeps Rating. For purposes hereof, the "Sweeps Rating" shall mean for each station the average A.C. Nielsen rating for the most-current completed "sweeps" period for Adults 18-49 for all prime time hours programmed by Fox. Licensee agrees to maintain complete and accurate records of all promotional announcements broadcast as provided herein. Within two (2) weeks following each request by Fox therefor, Licensee will submit copies of all such records to Fox. Notwithstanding anything to the contrary in (and without limitation to the above provisions of) this subparagraph 4(a), and as a material term of this Agreement, Licensee shall, in coordination with Fox, cause Station to broadcast in the one-half (1/2) hour immediately preceding prime-time, not less than one (1) :30 promotional announcement for Fox programming provided by Fox hereunder. (b) In addition to providing the promotion announcements referred to above, Fox shall make available to Licensee, at reasonable costs, such other promotional and sales materials as Fox and Licensee may mutually consider appropriate. Licensee shall not delete any copyright, trademark, logo or other notice, or any credit, included in any materials delivered pursuant to this paragraph or otherwise, and -5- Licensee shall not exhibit, display, distribute or otherwise use any trademark, logo or other material or item delivered pursuant to this paragraph or otherwise, except as instructed by Fox at the time. (c) Licensee shall make annually, in accordance with each A.C. Nielsen "Sweeps" co-op plan determined by Fox during the term of this Agreement, not less than an amount determined by Fox in its sole discretion (the "Co-Op Commitment") in local cash expenditures to promote Fox on Station. Subject to Licensee's full performance of its obligations under this Paragraph 4, Fox will reimburse Licensee for 50% of such cash expenditures as are made in accordance with Fox's co-op plan, up to a maximum annual Fox contribution equal to 50% of the Co-Op Commitment. 5. Commercial Announcements (a) In each individual Fox program, Fox will have the right in its sole discretion to determine: (1) the number and length of commercial announcement slots (including station breaks) that will be available to Fox affiliates for insertion of affiliate commercial announcements and (2) the terms and conditions applicable to the availability and use of the commercial announcement slots. Fox will make available to Licensee for Station's use in each individual Fox program the same number and length of commercial announcements (including station breaks) as Fox makes available generally in that program to Fox affiliates on a national basis, on the terms and conditions that Fox generally applies to those affiliates on a national basis. Licensee agrees to be bound by Fox's decisions as provided for in this Paragraph 5. (b) Fox shall determine the placement, timing and format of Fox's and Licensee's commercial announcements. Fox shall have the right to include commercial announcements in all of the commercial time available in each hour of the programming other than that expressly allocated to Licensee in this Agreement. (c) Licensee's broadcast over the Station of all commercial announcements included by Fox in Fox programming is of the essence of this Agreement, and nothing contained in Paragraph 3 above or elsewhere in this Agreement (other than Paragraph 11 below) shall limit Fox's rights or remedies at law or otherwise relating to failure to so broadcast said commercial announcements. Licensee agrees to maintain complete and accurate records of all commercial announcements broadcast as provided in this Agreement. Within two (2) weeks following each request by Fox therefor, Licensee will submit copies of all such records to Fox. -6- 6. Supplemental Agreements Each of the 1998 FKW Supplemental Agreement (and Addendum #1 and #2 thereto), the 1998 NFL Supplemental Agreement, the 1999 Prime-Time-Inventory-Purchase Supplemental Agreement, the presently existing (if any) Fox Network Non-Duplication Amendment for Station and the presently existing (if any) Fox Agreement and Amendment to Station Affiliation Agreement relating to retransmission consent, as they may have been amended or supplemented (collectively the "Supplementals"), between Licensee and Fox, are in full force and effect, and this Agreement is now deemed the applicable Station Affiliation Agreement referenced in the Supplementals. Licensee shall fully perform all terms and conditions of the Supplementals in their entirety throughout the term of this Agreement. 7. Force Majeure Neither Fox nor FCN shall be liable to Licensee for failure to supply any programming or any part thereof, nor shall Licensee be liable to Fox or FCN for failure to broadcast any such programming or any part thereof, by reason of any act of God, labor dispute, non-delivery by program suppliers or others, failure or breakdown of satellite or other facilities, legal enactment, governmental order or regulation or any other similar or dissimilar cause beyond their respective control ("force majeure event"). If, due to any force majeure event(s), Fox substantially fails to provide the programming to be delivered to Licensee under Paragraph 1 above, or Licensee substantially fails to broadcast such programming as scheduled by Fox, for 4 consecutive weeks, or for 6 weeks in the aggregate during any 12-month period, then the other party hereto (the "unaffected party") may terminate this Agreement upon thirty (30) days prior written notice to the party so failing, which notice may be given at any time prior to the expiration of 7 days after the unaffected party's receipt of actual notice that the force majeure event(s) has ended. 8. Assignment This Agreement shall not be assigned by Licensee without the prior written consent of Fox, and any permitted assignment shall not relieve Licensee of its obligations hereunder. Any purported assignment by Licensee without such consent shall be null and void and not enforceable against Fox. Licensee also agrees that if any application is made to the Federal Communications Commission pertaining to an assignment or a transfer of control of Licensee's license for the Station, or any interest therein, Licensee shall immediately notify Fox in writing of the filing of such application. Except as to "short form" assignments or transfers of control made pursuant to Section 73.3540(f) of the Rules and Regulations of the Federal Communications Commission, Fox shall have the right to terminate this Agreement, effective upon thirty (30) days notice to Licensee and the transferee or assignee of such termination, which notice may be given at any time within ninety (90) days after the later occurring of: (a) the date on which Fox learns that such assignment or transfer has become effective or (b) the date on which Fox receives written notice of such assignment or transfer. Licensee agrees, that upon Fox's request, Licensee shall procure and deliver to Fox, in form satisfactory to Fox, the agreement of the proposed assignee or transferee that, upon consummation of the assignment or transfer of control of the Station's authorization, the assignee or transferee will assume and perform this Agreement in its entirety without limitation of any kind. If Licensee fails to notify Fox of the proposed assignment or transfer of control of said Station's authorization, or fails to -7- procure the agreement of the proposed assignee or transferee in accordance with this Paragraph, then such failure shall be deemed a material breach of this Agreement. Without limitation to any other provision of this Agreement or to any of Fox's rights or remedies, if, without Fox's prior written consent, Licensee enters into any "Local Management Agreement", "Time Brokerage Agreement" or similar arrangement or agreement pertaining to Station operations, or for the use (by lease or otherwise) by any party other than Licensee of any Programmed Time Period or New Programmed Time Period or any significant portion of Station's broadcast time outside of those Fox Time Periods, Fox will have the right at any time to terminate this Agreement on thirty (30) days' notice to Licensee. 9. Unauthorized Copying Licensee shall not, and shall not authorize others to, record, copy or duplicate any programming or other material furnished by Fox hereunder, in whole or in part, and shall take all reasonable precautions to prevent any such recordings, copying or duplicating. Notwithstanding the foregoing, if Station is located in the Mountain Time Zone, Licensee may pre-record programming from the satellite feed for later telecast at the times scheduled by Fox. Licensee shall erase all such pre-recorded programming promptly after its scheduled telecast. 10. Term The term of this Agreement shall commence on or before June 30, 2001 and shall continue through May 31, 2004 (the "initial period"). After the initial period, the term of this Agreement may be extended for additional successive periods of one (1) year each, by Fox, in its sole discretion, giving written notice of such extension (the "extension notice") to Licensee at least one hundred twenty (120) days prior to the expiration of the then-current period; provided, however, that if, within thirty (30) days of Licensee's receipt of the extension notice, Licensee, in its sole discretion, gives Fox written notice that Licensee rejects such extension, then the extension notice shall not be effective and this Agreement shall terminate upon expiration of the then-current period. Notwithstanding anything to the contrary contained in this Agreement, upon the termination or expiration of the term of this Agreement, all of Licensee's and Station's rights to broadcast or otherwise use any Fox program or any trademark, logo or other material or item hereunder shall immediately cease and neither Licensee nor Station shall have any further rights whatsoever with respect to any such program, material or item. 11. Applicable Law The obligations of Licensee and Fox under this Agreement are subject to all applicable federal, state, and local laws, rules and regulations (including, but not limited to, the Communications Act of 1934, as amended, and the rules and regulations of the Federal Communications Commission) and this Agreement shall be deemed to have been negotiated and entered into, and this Agreement and all matters or issues collateral thereto shall be governed by, the law of the State of California applicable to contracts negotiated, executed and performed entirely within that state. With respect to programs offered or already contracted for pursuant to this Agreement, nothing in any other Paragraph hereof shall be construed to prevent or hinder Licensee from (a) rejecting or refusing Fox programs which Licensee reasonably believes to be unsatisfactory, unsuitable or contrary to the public interest, or (b) substituting a program which, in Licensee's opinion, is of greater local or national importance; provided, however, Licensee shall give Fox written notice of each such rejection or substitution, and the justification therefor, -8- at least 72 hours in advance of the scheduled broadcast, or as soon thereafter as possible (including an explanation of the cause for any lesser notice). Programming will be deemed to be unsatisfactory or unsuitable only if it (i) is delivered in a form which does not meet accepted standards of good engineering practice; (ii) does not comply with the rules and regulations of the FCC; or (iii) is programming which Licensee reasonably believes would not meet prevailing contemporary standards of good taste in its community of license. In view of the limited nature of the Fox programming within each day-part as specified in subparagraph 3(b) above, Licensee does not foresee any need to substitute programming of greater local or national importance for Fox programming, except to present locally originated, non-entertainment, non-religious timely public interest programming, such as election coverage, live coverage of fast-breaking news events, political debates, town hall-type meetings and telethons that serve the public interest and that are approved by Fox, which approval shall not be unreasonably withheld. Notwithstanding anything to the contrary expressed or implied herein, the parties acknowledge that Station has the ultimate responsibility to determine the suitability of the subject matter of program content, including commercial, promotional or public service announcements. 12. Station Acquisition by Fox If Fox or any of Fox's parent, affiliated, subsidiary or related companies or other entities enters into any agreement to acquire any significant ownership and/or controlling interest in any television broadcast station licensed to any community within Station's television market, then Fox shall have the right at any time after that agreement is made, to terminate this Agreement upon not less than sixty (60) days notice to Licensee. Said termination shall be effective as of such date as Fox shall designate in said notice. 13. Change in Operations If at any time Station's transmitter location, power, frequency, programming format, hours of operation, technical quality of transmissions or any other material aspect of Station's operations is such that Fox determines in its reasonable judgment that Station is of less value to Fox as a broadcaster of Fox programming than at the date of this Agreement, then Fox shall have the right to terminate this Agreement upon thirty (30) days prior written notice to Licensee. 14. Non-Liability of Board Members To the extent the Fox Broadcasting Company Affiliates' Association Board of Governors (the "Board") and its members are acting in their capacity as such, then the Board and each such member so acting shall not have any obligation or legal or other liability whatsoever to Licensee in connection with this Agreement, including without limitation, with respect to the Board's or such member's approval or non-approval of any matter, exercise or non-exercise of any right or taking of or failing to take any other action in connection therewith. 15. Warranties and Indemnities (a) Fox represents and warrants that Station's broadcast, in accordance with this Agreement, of any Fox programming provided by Fox to Station shall not violate or infringe upon the trade name, trademark, copyright, literary or dramatic right, -9- or right of privacy or publicity of any party, or constitute a libel or slander of any party; provided, however, that the foregoing representations and warranties shall not apply: (1) to public performance rights in music, (2) to any material furnished or added by any party other than Fox after delivery of the programming to Station or (3) to the extent such programming is changed or otherwise affected by deletion of any material by any party other than Fox after delivery of the programming to Station. Fox agrees to indemnify and hold harmless Station and its parents, affiliates, subsidiaries, successors and assigns, and the respective owners, officers, agents and employees of each, from and against all liability, actions, claims, demands, losses, damages or expenses (including reasonable attorneys' fees, but excluding Licensee's or Station's lost profits or consequential damages, if any) caused by or arising out of Fox's breach of the representations and warranties set forth in the foregoing sentence. Fox makes no representations, warranties or indemnities, express or implied, except as expressly set forth in this subparagraph (a). (b) Without limitation to any of Licensee's other obligations and agreements under this Agreement, Licensee agrees to indemnify and hold harmless Fox and its parents, affiliates, subsidiaries, successors and assigns, and the respective owners, officers, directors, agents and employees of each, from and against all liability, actions, claims, demands, losses, damages or expenses (including reasonable attorneys' fees, but excluding Fox's lost profits or Fox's consequential damages, if any) caused by or arising out of any matters excluded from Fox's representations and warranties by subparagraphs (a)(1), (2) or (3) above, or any breach of any of Licensee's representations, warranties or agreements hereunder or any programming broadcast by Station other than that provided by Fox hereunder. (c) The indemnitor may assume, and if the indemnitee requests in writing shall assume, the defense of any claim, demand or action covered by indemnity hereunder, and upon the written request of the indemnitee, shall allow the indemnitee to cooperate in the defense at the indemnitee's sole cost and expense. The indemnitee shall give the indemnitor prompt written notice of any claim, demand or action covered by indemnity hereunder. If the indemnitee settles any claim, demand or action without the prior written consent of the indemnitor, the indemnitor shall be released from the indemnity in that instance. 16. Notices All notices to each party required or permitted hereunder to be in writing shall be deemed given when personally delivered (including, without limitation, upon delivery by overnight courier or other messenger or upon receipt of facsimile copy), upon the date of mailing postage prepaid or when delivered charges prepaid to the telegraph office for transmission, addressed as specified below, or addressed to such other address as such party may hereafter specify in a written notice given as provided herein. Such notices to Licensee shall be to the address set forth for Licensee on page 1 of this Agreement. Such notices to Fox shall be to: Fox -10- Broadcasting Company, 10201 West Pico Boulevard, Los Angeles, CA 90035, Attn: Network Distributions; with a copy to: Fox Broadcasting Company, 10201 West Pico Boulevard, Los Angeles, CA 90035, Attn: Legal Affairs. 17. Retransmission Consent Without Fox's prior written approval, Licensee shall not grant its consent to the transmission or retransmission, by any cable system, satellite, other multichannel video programming distributor, telephone system, microwave carrier, wireless cable system or other technology wherever located, of Station's broadcast of any Fox programming. Neither this Agreement nor any grant by Licensee of retransmission consent conveys any license or sublicense in or to the copyrights of Fox programming, and Fox shall in no way be a party to or incur any duty or other obligation in connection with any retransmission consent granted by Licensee. 18. Change In Fox Operations Notwithstanding anything to the contrary in this Agreement and without limitation to any of Fox's rights, Fox reserves the right to make changes in its operations (and/or terms of doing business) that conflict with (or do not conform to) the terms of this Agreement and that will be applicable to its affiliates generally. Fox shall notify Licensee in writing that Fox has made such change and the effective date thereof, and as of said effective date, this Agreement will be deemed amended to reflect such change, unless within 10 days of Fox's notification to Licensee of such change, Licensee notifies Fox in writing that Licensee rejects such change. If Licensee does so reject said change, then Fox shall have the right for a period of six months from Fox's receipt of Licensee's rejection notice to terminate this Agreement by providing not less than ninety (90) days' written notice to Licensee. 19. Miscellaneous (a) Nothing contained in this Agreement shall create any partnership, association, joint venture, fiduciary or agency relationship between Fox and Licensee. (b) No waiver of any failure of any condition or of the breach of any obligation hereunder shall be deemed to be a waiver of any preceding or succeeding failure of the same or any other condition, or a waiver of any preceding or succeeding breach of the same or any other obligation. (c) In connection with Fox programming, Station shall at all times permit Fox, without charge, to place, maintain and use on Station's premises, at Fox's expense, such reasonable amounts of devices and equipment as Fox shall require, in such location and manner, as to allow Fox to economically, efficiently and accurately achieve the purposes of such equipment. Station shall operate such equipment for Fox, to the extent Fox reasonably requests, and no fee shall be charged by Station therefor. -11- (d) This Agreement, together with the Supplementals, constitutes the entire understanding between Fox and Licensee concerning the subject matter hereof and shall not be amended, modified, changed, renewed, extended or discharged except by an instrument in writing signed by Fox and Licensee or as otherwise expressly provided herein or therein. Fox and Licensee each hereby acknowledges that neither is entering into this Agreement in reliance upon any term, condition, representation or warranty not stated herein. All actions, proceedings or litigation brought against Fox by Licensee shall be instituted and prosecuted solely within the County of Los Angeles, California. Licensee hereby consents to the jurisdiction of the state courts of California and the federal courts located in the Central District of California as to any matter arising out of, or related to this Agreement. (e) Without limitation to Paragraph 1 above, for purposes of this Agreement, the term "programs" (and the derivations thereof including, without limitation, "programming") will include, without limitation, to the extent Fox reasonably elects, television specials, made-for-television movies, television series and all other traditional forms of television motion pictures and programs, as well as any other program-related material or matter sent, transmitted or otherwise communicated by Fox with the intent that it be perceived or otherwise received, visually or visually and aurally, by television receiver, television monitor or any other device or equipment whatsoever now known or hereafter devised. (f) Each and all of the several rights and remedies of each party hereto under or contained in or by reason of this Agreement shall be cumulative, and the exercise of one or more of said rights or remedies shall not preclude the exercise of any other right or remedy under this Agreement, at law, or in equity. Notwithstanding anything to the contrary contained in this Agreement, in no event shall either party hereto be entitled to or recover any lost profits or consequential damages because of a breach or failure by the other party, and except as expressly provided in this Agreement to the contrary, neither Fox nor Licensee shall have any right against the other with respect to claims by any third person or other third entity. (g) If any provision of this Agreement (the "Void Provision"), as applied to either Fox or Licensee or any circumstances, is found to be against public policy or otherwise void or unenforceable, or in conflict with any applicable federal, state or local law, rule or regulation (including without limitation any rule or regulation of the Federal Communications Commission), then commencing within 10 days following such finding, Fox and Licensee must negotiate in good faith for a period of 30 days regarding a provision to replace the Void Provision, which provision shall materially meet the intent of the parties as set forth in the Void Provision and essentially preserve the benefits provided by this Agreement to both parties. If the parties are unable to agree on such a replacement provision for any reason whatsoever, including without limitation due to any constraints imposed -12- by any law, rule or regulation, then either party will have the right to terminate this Agreement at any time on six months prior notice. (h) It is understood that FCN is indemnifying Fox in connection with all costs, expenses, liabilities and other matters relating to the FCN programming covered hereunder. (i) Paragraph headings are inserted for convenience only and shall not be used to interpret this Agreement or any of the provisions hereof or given any legal or other effect whatsoever. (j) Licensee acknowledges that Station's rights contained in this Agreement are subject to and must be exercised consistent with the rights conveyed to Fox by the NFL, the NHL or any other licenser of programming delivered under this Agreement and any limitations and restrictions thereon. 20. News Agreement (a) As a material term of this Agreement, by June 30, 2001, Licensee shall best efforts to: (i) launch and continue to broadcast on Station, in consultation with Fox, throughout the term of this Agreement, a self-produced, on-air 10:00 pm, Monday through Friday, local newscast (i.e., Station shall originate said newscast program and shall not produce such newscast program pursuant to any news-sharing arrangement), which newscast shall be not less than 30 minutes per night, or (ii) enter into a news-sharing agreement for Station with a network-affiliated television station in Station's television market ("Cooperating Station"), and thereby commence and continue to broadcast on Station, throughout the term of this Agreement, a first-class regularly-scheduled 10:00 pm local newscast program, which shall not be less than 30 minutes per night (in which instance Licensee shall title Station's news set, mic flags, music, graphics, supers and news promotion that separately brands Station's local newscast as a Fox news program, and provide a local newscast producer and the exclusive services of a news anchor person(s) for Station's local newscast). Licensee shall notify Fox in writing of which newscast program under this subparagraph 20(a) that Licensee shall broadcast on Station no later than sixty (60) days prior to Licensee's launch on Station of such newscast program. (b) Licensee shall simultaneously with the execution of this Agreement execute and return with this Agreement four (4) copies of the standard News Service Agreement (and Addendum thereto executed by the appropriate representative of the Cooperating Station, if Licensee broadcasts on Station a newscast subject to subparagraph 20(a)(ii) above) (collectively "News Agreement") between Licensee and FNN, as provided to Licensee by FNN. Upon Licensee's execution of the News Agreement, it shall be deemed attached to this Agreement as Exhibit E and -13- incorporated herein by this reference. As a material term of this Agreement, whether or not Licensee broadcasts a local newscast program on Station, Licensee shall continue to pay to FNN, throughout the term of this Agreement, any and all license fees provided under the News Agreement. Without limitation to any provision of this Agreement or of the News Agreement, if the News Agreement is terminated for any reason other than the material breach of the News Agreement by FNN, Fox shall have the right to terminate this Agreement effective upon such date as Fox may elect in its sole discretion. Any breach by Licensee of the News Agreement will be a breach by Licensee of this Agreement of equivalent materiality (e.g., a material breach of the News Agreement by Licensee will be a material breach of this Agreement by Licensee). IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. Fox Broadcasting Company Fisher Broadcasting-Georgia, LLC ("Fox") ("Licensee") By: /s/ D.M. By: /s/ B.W. T ------------------------------- ------------------------------------- Title: SVP Network Dist. Title: President ---------------------------- ---------------------------------- -14- WFXG / AUGUSTA, GA As of 1/15/02 EXHIBIT A: - ---------- * No non-sports preemptions. Licensee Initial & Date: /s/ BWT 2/8/02 -------------------- FBC Initial & Dated: /s/ DW 2/12/02 ------------------------ WFXG / AUGUSTA, GA As of 1/15/02 EXHIBIT B: - ---------- * No sports preemptions. Licensee Initial & Date: /s/ BWT 2/8/02 -------------------- FBC Initial & Dated: /s/ DW 2/12/02 ------------------------ EX-10.19 6 dex1019.txt CREDITLINE SERVICE CLIENT AGREEMENT Exhibit 10.19 The Investor CreditLine/SM/ Service Client Agreement NOTE: CMA, CBA and WCMA clients who have already signed this agreement need not return this form. In consideration of your accepting and carrying one or more accounts for the undersigned, the undersigned hereby consents and agrees that: 1. Applicable Rules and Regulations All transactions shall be subject to the constitution, rules, regulations, customs and usages of the exchange or market and its clearinghouse, if any, on which such transactions are executed by you (Merrill Lynch, Pierce, Fenner & Smith Incorporated) or your agents, including your subsidiaries and affiliates. 2. Definition For purposes of this agreement, "securities and other property" shall include, but not be limited to, money, securities, financial instruments and commodities of every kind and nature and all contracts and options relating thereto, whether for present or future delivery. 3. Collateral Requirements and Credit Charges for the Investor CreditLine Service The undersigned will maintain such securities and other property in the accounts of the undersigned for collateral purposes as you shall require from time to time; and the monthly debit balance of such accounts shall be charged, in accordance with your usual custom, with interest at a rate permitted by the laws of the State of New York. It is understood that the interest charge made to the undersigned's account at the close of a charge period will, unless paid, be added to the opening balance for the next charge period and that interest will be charged upon such opening balance, including all interest so added. 4. Security Interest All securities and other property now or hereafter held, carried or maintained by you or by any of your affiliates in your possession or control, or in the possession or control of any such affiliate, for any purpose, in or for any account of the undersigned now or hereafter opened, including any account in which the undersigned may have an interest, shall be subject to a lien for the discharge of all the indebtedness and other obligations of the undersigned to you, and are to be held by you as security for the payment of any liability or indebtedness of the undersigned to you in any of said accounts. You shall have the right to transfer securities and other property so held by you from or to any other of the accounts of the undersigned whenever in your judgment you consider such a transfer necessary for your protection. In enforcing your lien, you shall have the discretion to determine which securities and property are to be sold and which contracts are to be closed. 5. Representations as to Beneficial Ownership and Control The undersigned represents that, with respect to securities against which credit is or may be extended by you: (a) the undersigned is not the beneficial owner of more than three percent (3%) of the number of outstanding shares of any class of equity securities, and (b) does not control, is not controlled by, and is not under common control with, the issuer of any such securities. In the event that any of the foregoing representations are inaccurate or become inaccurate, the undersigned will promptly so advise you in writing. 6. Calls for Additional Collateral--Liquidation Rights (a) You shall have the right to require additional collateral: (1) in accordance with your general policies for the Investor CreditLine/SM/ service maintenance requirements, as such may be modified, amended or supplemented from time to time; or (2) if in your discretion you consider it necessary for your protection at an earlier or later point in time than called for by said general policies; or (3) in the event that a petition in bankruptcy or for appointment of a receiver is filed by or against the undersigned; or (4) if an attachment is levied against the accounts of the undersigned; or (5) in the event of the death of the undersigned. (b) If the undersigned does not provide you with additional collateral as you may require in accordance with (a) (1) or (2), or should an event described in (a) (3), (4) or (5) occur (whether or not you elect to require additional collateral), you shall have the right: (1) to sell any or all securities and other property in the accounts of the undersigned with you or with any of your affiliates, whether carried individually or jointly with others; (2) to buy any or all securities and other property which may be short in such accounts; and (3) to cancel any open orders and to close any or all outstanding contracts. 2 You may exercise any or all of your rights under (b) (1), (2) or (3) without further demand for additional collateral, or notice of sale or purchase, or other notice or advertisement. Any such sales or purchases may be made at your discretion on any exchange or other market where such business is usually transacted, or at public auction or private sale; and you may be the purchaser for your own account. It is understood that your giving of any prior demand or call or prior notice of the time and place of such sale or purchase shall not be considered a waiver of your right to sell or buy without any such demand, call or notice as herein provided. 7. Payment of Indebtedness Upon Demand The undersigned shall at all times be liable for the payment upon demand of any debit balance or other obligations owing in any of the accounts of the undersigned with you, and the undersigned shall be liable to you for any deficiency remaining in any such accounts in the event of the liquidation thereof, in whole or in part, by you or by the undersigned; and the undersigned shall make payment of such obligations and indebtedness upon demand. 8. Liability for Costs of Collection To the extent permitted by the laws of the State of New York, the reasonable costs and expenses of collection of the debit balance and any unpaid deficiency in the accounts of the undersigned with you, including but not limited to, attorney's fees incurred and payable or paid by you, shall be payable to you by the undersigned. 9. Pledge of Securities and Other Property All securities and other property now or hereafter held, carried or maintained by you in your possession or control in any of the accounts or the undersigned may be pledged and repledged by you from time to time without notice to the undersigned, either separately or in common with other such securities and other property, for any amount due in the accounts of the undersigned, or for any greater amount, and you may do so without retaining in your possession or under your control for delivery a like amount of similar securities or other property. 10. Lending Agreement In return for the extension or maintenance of any credit by you, the undersigned acknowledges and agrees that the securities in the undersigned's account, together with all attendant rights of ownership may be lent to you or lent out to others to the extent not prohibited by applicable laws, rules and regulations. In connection with such securities loans, and in connection with securities loans made to me to facilitate short sales, you may receive and retain certain benefits to which the undersigned will not be entitled. The undersigned understands that, in certain circumstances, such loans could limit the undersigned's ability to exercise voting rights, in whole or in part, with respect to the securities lent. 3 11. Presumption of Receipt of Communications Communications may be sent to the undersigned at the address of the undersigned or at such other address as the undersigned may hereafter give you in writing. All communications so sent, whether by mail, telegraph, messenger or otherwise, shall be deemed given to the undersigned personally, whether actually received or not. 12. Accounts Carried as Clearing Broker If you are carrying the account of the undersigned as clearing broker by arrangement with another broker through whose courtesy the account of the undersigned has been introduced to you, then until receipt from the undersigned of written notice to the contrary, you may accept from such other broker, without inquiry or investigation by you (a) orders for the purchase or sale in said account of securities and other property on credit or otherwise, and (b) any other instructions concerning said account. You shall not be responsible or liable for any acts or omissions of such other broker or its employees. 13. Agreement to Arbitrate Controversies o Arbitration is final and binding on the parties. o The parties are waiving their right to seek remedies in court, including the right to jury trial. o Prearbitration discovery is generally more limited than and different from court proceedings. o The arbitrators' award is not required to include factual findings or legal reasoning and any party's right to appeal or to seek modification of rulings by the arbitrators is strictly limited. o The panel of arbitrators will typically include a minority of arbitrators who were or are affiliated with the securities industry. The undersigned agrees that all controversies which may arise between us, including, but not limited to, those involving any transaction or the construction, performance or breach of this or any other agreement between us, whether entered into prior, on or subsequent to the date hereof, shall be determined by arbitration. Any arbitration under this agreement shall be conducted only before the New York Stock Exchange, Inc., the American Stock Exchange, Inc. or arbitration facility provided by any other exchange of which you are a member, the National Association of Securities Dealers, Inc. or the Municipal Securities Rulemaking Board, and in accordance with its arbitration rules then in force. The undersigned may elect in the first instance whether arbitration shall be conducted before the New York Stock Exchange, Inc., the American Stock Exchange, Inc., other exchanges of which you are a member, the National Association of Securities Dealers, Inc. or the Municipal Securities 4 Rulemaking Board, but if the undersigned fails to make such election, by registered letter or telegram addressed to you at the office where the undersigned maintains the account, before the expiration of five days after receipt of a written request from you to make such election, then you may make such election. Judgment upon the award of arbitrators may be entered in any court, state or federal, having jurisdiction. No person shall bring a putative or certified class action to arbitration, nor seek to enforce any predispute arbitration agreement against any person who has initiated in court a putative class action, or who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: (i) the class certification is denied; (ii) the class is decertified; or (iii) the customer is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall not constitute a waiver of any rights under this agreement except to the extent stated herein. 14. Joint and Several Liability If the undersigned shall consist of more than one person, their obligations under this agreement shall be joint and several. 15. Representation as to Capacity to Enter Into Agreement The undersigned represents that no one except the undersigned has an interest in the account or accounts of the undersigned with you. If a natural person, the undersigned represents that the undersigned is of full age, is not an employee of any exchange, nor of any corporation of which any exchange owns a majority of the capital stock, nor of a member of any exchange, nor of a member firm or member corporation registered on any exchange, nor of a bank, trust company, insurance company or any corporation, firm or individual engaged in the business of dealing either as broker or as principal in securities, bills of exchange, acceptances or other forms of commercial paper. If any of the foregoing representations is inaccurate or becomes inaccurate, the undersigned will promptly so advise you in writing. 16. Extraordinary Events You shall not be liable for loss caused directly or indirectly by government restrictions, exchange or market rulings, suspension of trading, war, strikes or other conditions beyond your control. 17. The Laws of the State of New York Govern This agreement and its enforcement shall be governed by the laws of the State of New York; and shall cover individually and collectively all accounts which the undersigned may open or reopen with you; and shall inure to the benefit of your successors, whether by merger, consolidation, or otherwise, and assigns, and you may transfer the accounts of the undersigned to your successors and assigns; and this agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the undersigned. 5 18. Amendments The undersigned agrees that you shall have the right to amend this Agreement, by modifying or rescinding any of its existing provisions or by adding any new provision. Any such amendment shall be effective as of the date to be established by you, which shall not be earlier than thirty days after you send notification of any such amendment to the undersigned. 19. Separability If any provision or condition of this agreement shall be held to be invalid or unenforceable by any court, or regulatory or self-regulatory agency or body, such invalidity or unenforceability shall attach only to such provision or condition. The validity of the remaining provisions and conditions shall not be affected thereby and this agreement shall be carried out as if any such invalid or unenforceable provision or condition were not contained herein. 20. Headings Are Descriptive The heading of each provision hereof is for descriptive purposes only and shall not be deemed to modify or qualify any of the rights or obligations set forth in each such provision. CMA, CBA, and WCMA clients may have already signed and returned this agreement. If so, please disregard. BY SIGNING THIS AGREEMENT, THE UNDERSIGNED ACKNOWLEDGES: (1) THAT, IN ACCORDANCE WITH PARAGRAPH 13,THE UNDERSIGNED IS AGREEING IN ADVANCE TO ARBITRATE ANY CONTROVERSIES THAT MAY ARISE WITH YOU; (2) THAT, PURSUANT TO PARAGRAPH 10 ABOVE CERTAIN OF THE UNDERSIGNED'S SECURITIES MAY BE LOANED TO YOU OR LOANED OUT TO OTHERS; AND (3) RECEIPT OF A COPY OF THIS AGREEMENT. Fisher Communications, Inc. By: Signature /s/ Warren J. Spector Date 2/30/02 ------------------------------------- ------------- Title Executive Vice President ------------------------------------------------------------- (for special accounts, example Trustee) Signature Date ----------------------------------- ------------- Title ------------------------------------------------------------- (for special accounts, example Co-Trustee) Account No. ------------------------------------------------------- 6 EX-10.21 7 dex1021.txt AMENDED AND RESTATED INDICATIVE TERM SHEET EXHIBIT 10.21 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets Variable Forward ("Prepaid Forward") on Common Shares of SAFECO Corporation This amended and restated Term Sheet, effective as of March 21, 2002, amends, restates, and supersedes the Term Sheet dated as of March 21, 2002 Prepaid Forward Seller: Fisher Communications, Inc. ("Counterparty") Prepaid Forward Buyer: Merrill Lynch International ("MLI") Underlying Stock: Common Shares ("Shares") of SAFECO Corporation ("Issuer") (Security Symbol: SAFC, NASDAQ) Notional Share Amount: Approximately 3,000,000 Shares (the "Number of Shares") in tranched maturities (subject to current volume limitations of Rule 144 under the Securities Act of 1933, as amended (the "Securities Act")); see the pricing chart attached hereto as Annex A ("Pricing Chart"). Notional Dollar Amount: Notional Share Amount x Initial Price Prepaid Forward Description: Counterparty may receive Initial Proceeds in exchange for the obligation to deliver an amount (as described below) of the Underlying Stock on the Termination Date. Trade Date: March 21, 2002 Effective Date: The date on which the Initial Price is established (the last day of each hedge period per tranche). Pledge Date: The exchange business day three (3) exchange business days immediately following the applicable Effective Date. Initial Price: The average execution price per share of MLI's hedging activity, which is to occur in five (5) tranches. Each tranche hedge period shall not exceed five (5) exchange business days, unless the parties otherwise agree to extend such hedge period. Final Price: The average of the closing prices per Share of the Underlying Stock on the two (2) exchange business days immediately prior to, and including, the Termination Date. Floor Price: See Pricing Chart. Cap Price: See Pricing Chart. Participation Percentage: See Pricing Chart. - -------------------------------------------------------------------------------- Prepaid Forward Agreement - -------------------------------------------------------------------------------- Initial Proceeds: Expressed as a % of the Floor Price x Notional Share Amount (which shall constitute a Payment Amount if drawn by Counterparty). Notwithstanding the "Payments" provision below, (i) a draw down of the Initial Proceeds for each tranche may be made on the applicable Effective Date and (ii) written notice to MLI requesting such draw down of the Initial Proceeds with respect to the first tranche shall be delivered on the Trade Date and for each successive draw down on the Effective Date of the immediately preceding tranche; see Pricing Chart. Premium: If the Initial Proceeds are not drawn down in full by or on the Effective Date, Counterparty shall pay to MLI a premium in an amount determined by MLI in a commercially reasonable manner. Payment Description: Counterparty may from time to time elect for Payment Amounts to be paid to it by MLI and/or for Repayment Amounts to be paid to MLI by Counterparty, in accordance with the provisions set forth below. 1 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets Payment Period: The period commencing on the date three (3) exchange business days after the Effective Date and ending on the Termination Date. Payments: Counterparty may from time to time during the Payment Period designate a date on which a "Payment Amount" (as defined below) will be paid as described herein. Such designation will be made by providing MLI with (i) at least seven (7) Currency Business Days' prior written notice of the Currency Business Day during the Payment Period (a "Payment Amount Date") on which such payment is to be made, and (ii) notice of the portion expressed as a USD amount of the Outstanding Notional Payment Amount for such Payment Amount Date (a "Payment Amount Portion"). Unless the Payment Amount Portion is equal to the entire Outstanding Notional Payment Amount on such Payment Amount Date, such Payment Amount Portion shall be equal to at least 20% of the Initial Notional Payment Amount. On each Payment Amount Date, MLI shall pay to Counterparty the Payment Amount. "Payment Amount" means an amount in USD equal to the present value on a Payment Amount Date of the related Payment Amount Portion (such present value to be determined by the Calculation Agent using a discount rate equal to the Rate for the period from, and including, such Payment Amount Date to, but excluding, the Settlement Date (the "Payment Calculation Period"), plus the Spread Amount as set forth on the Pricing Chart. Notwithstanding any provision in this Agreement to the contrary, if at any time during the Term of this Transaction any obligation (whether present or future, contingent or otherwise) is owed by Counterparty to Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("MLPFS") (such obligation, a "Loan Obligation") in respect of borrowed money ("Counterparty Loan"), Counterparty shall be deemed to have requested at such time a Payment Amount Portion equal to the entire Outstanding Notional Payment Amount, or if the related Payment Amount of the Outstanding Notional Payment Amount is greater than the Loan Obligation, a Payment Amount Portion with a related Payment Amount equal to the Loan Obligation. Such Payment Amount will not be paid to Counterparty on the related Payment Date, but instead shall be paid to MLPFS in satisfaction of all or part of such Loan Obligation. Counterparty hereby irrevocably authorizes and instructs MLI to use any such Payment Amount solely to satisfy, in whole or in part, on behalf of Counterparty, any Loan Obligation. Initial Notional Payment Amount: The Number of Shares x Floor Price Outstanding Notional Payment Amount: An amount in USD equal to the excess, if any, of (i) the Initial Notional Payment Amount over (ii) (a) the sum of the Payment Amount Portions for all Payment Amount Dates occurring prior to such date (the "Prepaid Notional Amount") less (b) the sum of all prior Repayment Amounts. Repayments: Counterparty may from time to time during the Payment Period designate a date on which all or a portion of the Prepaid Notional Amount will be re-paid to MLI as described herein. Such designation will be made by providing MLI with (i) at least seven (7) Currency Business Days' prior written notice of the Currency Business Day during the Payment Period (a "Repayment Date") on which such payment is to be made, and (ii) notice of the portion expressed as a USD amount of the Prepaid Notional Amount to be repaid on such Repayment Date (a "Repayment Amount"). Unless the Repayment Amount is equal to the entire Outstanding Notional Payment Amount on such Repayment Date, such Repayment Amount shall be equal to at least 20% of the Initial Notional Payment Amount. On the Repayment Date, Counterparty shall pay to MLI an amount in USD equal to (i) the present value on such Repayment Date of the related Repayment Amount (such present value to be 2 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets determined by the Calculation Agent using a discount rate equal to the Rate for the period from, and including, such Repayment Date, to but excluding, the Settlement Date (the "Repayment Calculation Period"), plus the Spread Amount as set forth on the Pricing Chart) plus (ii) any breakage costs. Rate: If the Payment Calculation Period or the Repayment Calculation Period, as applicable, is (i) equal to or less than 360 calendar days, the rate shall be the zero coupon rate derived from the prevailing LIBOR curve that appears on page IYC1 I5Z of Bloomberg. If such rate does not appear on page IYC1 I5Z of Bloomberg, the rate will be determined as if the parties had specified "USD-LIBOR-BBA", or (ii) greater than 360 calendar days, the rate shall be the zero coupon rate derived from the prevailing rate curve that appears on page IYC1 I5Z of Bloomberg. If such rate does not appear on page IYC1 I5Z of Bloomberg, the rate will be determined as if the parties had specified "USD-ISDA-Swap Rate", in each case, (x) on a semi-annual basis, (y) with a Day Count Fraction (as defined in the 2000 ISDA Definitions) equal to Actual/360, and (z) interpolated as necessary to account for the actual number of calendar days within such Payment Calculation Period or Repayment Calculation Period, as reasonably determined by the Calculation Agent. Initial Hedge Shares ("Delta"): Approximately 2,220,000 Shares of the Underlying Stock, which is equivalent to the Notional Share Amount multiplied by the respective Initial Hedge Delta Ratio; see Pricing Chart. Termination Date: Effective Date + Term; see Pricing Chart. - -------------------------------------------------------------------------------- Other Provisions - -------------------------------------------------------------------------------- Dividend Adjustment: In the event the issuer of the Underlying Stock makes a change in dividends payable on the Underlying Stock, Counterparty shall notify MLI of its election either: (i) to have the Calculation Agent adjust the Cap Price in a commercially reasonable manner to reflect the cumulative impact of such change or (ii) to pay MLI a US dollar amount (determined by the Calculation Agent) three (3) exchange business days after each applicable dividend payment date as determined by the Calculation Agent. Settlement: Physical Settlement: Counterparty may elect to satisfy its forward obligation by delivering registered, unrestricted and freely transferable physical Shares. Cash Settlement: Counterparty may elect to satisfy its forward obligation in cash. Settlement Date: Three (3) exchange business days after the Termination Date. Physical Settlement: A. On the Settlement Date, MLI shall pay to Counterparty an amount in cash equal to the Outstanding Notional Payment Amount ("MLI Settlement Obligation"); and B. Counterparty shall deliver to MLI a number of Shares equal to the Number of Shares multiplied by the Variability Factor ("Counterparty Settlement Shares"). Variability Factor: A factor calculated by the Calculation Agent on the Termination Date based on one of the following three scenarios (as applicable): Scenario 1: If the Final Price is less than the Floor Price then: 1 3 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets Scenario 2: If the Final Price is greater than the Cap Price, then: Floor Price + ((Final Price - Cap Price) x (1 - Participation Percentage)) / Final Price Scenario 3: If the Final Price is greater than Floor Price and less than the Cap Price, then: Floor Price / Final Price Cash Settlement: If the Cash Settlement Amount is a positive number, MLI will pay the Cash Settlement Amount to Counterparty. If the Cash Settlement Amount is a negative number, Counterparty will pay the absolute value of the Cash Settlement Amount to MLI. Such amounts will be paid on the Settlement Date. Cash Settlement Amount: An amount determined by the Calculation Agent on the Termination Date based on the following formula: MLI Settlement Obligation - Counterparty Cash Settlement Amount; Where, "Counterparty Cash Settlement Amount" means: Counterparty Settlement Shares x Final Price Buyer Early Termination: Upon the occurrence of an Event of Default, Termination Event or a Stock Borrow Event, MLI shall have the right to cause immediate settlement of this transaction. Collateral: On or prior to the Trade Date, Counterparty shall deliver and shall thereafter continually maintain with MLI or its custodian ("Custodian") during the Term of this Transaction, 3,000,000 Shares and a stock transfer power related thereto (such Shares, the "Collateral"). Counterparty represents that (i) it is the legal and record owner of all Collateral free of all liens, claims, equities, and encumbrances, (ii) it has the power and has obtained all of the necessary consents and approvals to grant to MLI a legal, valid, binding and enforceable first priority security interest in, and lien on, the Collateral and (iii) the pledge of the Collateral to MLI hereunder shall not breach any covenant in any agreement or contract entered into by Counterparty or any Affiliate thereof. Throughout the term of this transaction, Counterparty hereby grants MLI a first-priority security interest in, and a first-priority lien on, the Collateral for its obligations under this Transaction and the Agreement; provided, however, that if any Counterparty Loan is outstanding at any time from and including the Trade Date to but excluding the third exchange business day immediately following the Effective Date, MLI's security interest will be subordinate to any security interest and/or lien on the Collateral granted in favor of MLPFS in connection with such Counterparty Loan. Notwithstanding Section 9-207 of the New York Uniform Commerical Code, MLI will have the right to (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business, any Collateral it holds free from any claim or right of any nature whatsoever of Counterparty, including any equity or right of redemption by Counterparty ("Use of Collateral"), provided that MLI shall not have Use of Collateral five exchange business days 4 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets following the effectiveness of notice from Counterparty to MLI restricting MLI's Use of Collateral , and (ii) register any Collateral in the name of MLI, its Custodian or a nominee for either. For the avoidance of doubt, nothing in the foregoing is intended to restrict or impede in any way MLI's ability to foreclose, sell, dispose of, or otherwise exercise its rights and remedies with respect to the Collateral upon a Counterparty Event of Default, Termination Event. Collateral Agent: Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("Merrill Lynch") Calculation Agent: MLI Events of Default; Termination Events: Events of Default and Termination Events as set forth in Section 5 of the ISDA Master Agreement; provided, however, that for the sole purpose of this transaction and provided that no other transactions under the ISDA Master Agreement other than this transaction or other substantially similar variable forward sale transactions shall be outstanding between Counterparty and MLI, (i) the "Cross Default" provisions of Section 5(a)(vi) of the Agreement will not apply to MLI and will apply to Counterparty, and for such purpose, "Specified Indebtedness" means solely any Counterparty Loan and the "Threshold Amount" means zero and (ii) the "Credit Event Upon Merger" provisions of Section 5(b)(iv) of the Agreement will not apply to Counterparty and will not apply to MLI. Stock Borrow Event: The occurrence of a Hedging Disruption Event shall constitute an Additional Termination Event with respect to Counterparty, giving MLI the right to designate an Early Termination Date in respect of this Transaction. For this purpose, "Hedging Disruption Event" means (i) any inability of MLI due to market illiquidity, Illegality (as defined in the Agreement, but with respect to the transaction hedge) or lack of availability of third-party institutional stock lenders or MLI is otherwise unable to borrow the Shares, to establish, re-establish or maintain any hedging transaction(s) necessary in the normal course of MLI's business of hedging the price and market risk of entering into and performing under the Transaction, provided that if MLI is able to borrow Shares from MLPFS under the Counterparty Loan or from Counterparty (including by way of rehypothecation as contemplated in the Collateral provison hereunder) this clause (i) shall not apply; or (ii) an increase in the cost of borrowing the Shares (from an entity other than Counterparty) and Counterparty's failure to agree (within five Business Days of its receipt of written notice from MLI in this regard) to adjustments to the terms of the Transaction as the Calculation Agent, in its reasonable discretion, deems necessary to compensate MLI for such increase in costs, including, without limitation, costs incurred by MLI during such five Business Day period. Representations and Acknowledgements: . Counterparty (i) has such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of entering into the Transaction; (ii) has consulted with its own legal, financial, accounting and tax advisors in connection with the Transaction; (iii) is entering into the Transaction for a bona fide business purpose to hedge an existing position; and (iv) acknowledges that in return for downside protection against a decline in the market price of the Shares below the Floor Price, Counterparty is foregoing, in part, the upside value of an increase in the market price of the Shares above the Cap Price. . Neither Counterparty nor any person who would be considered to be the same "person" (as such term is used in Rule 144(a)(2) under the Securities Act has sold any Shares (or security entitlements in respect thereof) or hedged (through swaps, options, short sales or otherwise) any long position in the Shares (or security entitlements in respect thereof), including any sales pursuant to an agreement to act in concert by such persons for the purpose of selling such Shares, during the preceding three (3) months prior to the Trade Date of this Transaction. Counterparty covenants and agrees that until the last Effective Date, it will not sell, nor will it permit any person to sell, Shares without the prior written consent of MLI. The Shares shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under Rule 144(e) under the Securities Act. 5 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets . As of the Trade Date, Counterparty owns 3,002,376 Shares. . Counterparty acknowledges and agrees that (i) it has not taken and will not take any action that would cause any sale deemed to be made under the Interpretive Letter (as defined below) to exceed the volume limitation of Rule 144(e), (ii) it has not taken and will not take any action that could cause any sale deemed to be made under the Interpretive Letter to fail to meet all applicable requirements of Rule 144 and (iii) on the Trade Date of this Transaction it has transmitted a Form 144 for filing with the Securities and Exchange Commission. Counterparty covenants that it will send to MLI via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Securities and Exchange Act relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC. . Counterparty does not know or have any reason to believe that the Issuer has not complied with the reporting requirements of Rule 144. . Counterparty shall file the appropriate Form 144 concurrently with the execution of this Term Sheet pursuant to the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999 (the "Interpretive Letter"). The parties shall further comply with all additional terms the Interpretive Letter. . The directors, officers and/or employees of Counterparty ("Contract Persons") who are directly or indirectly involved with the negotiation, execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement have no material, nonpublic information in respect of the Issuer. Counterparty further represents that (1) it has established and implemented written policies and procedures to ensure that no Contract Person will violate federal and state securities laws prohibiting the purchase or sale of securities on the basis of material nonpublic information in connection with this transaction and (2) if any third-party cause of action asserts that Counterparty has violated such federal and state securities laws, Counterparty may duly and in good faith assert in its responsive pleading an affirmative defense under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. . Counterparty represents that all proceeds from the Counterparty Loan and any other credit facility entered into by Counterparty as of the date hereof through and including March 31, 2002 shall be used to satisfy in full all outstanding payment obligations (principal, interest or otherwise) of Counterparty pursuant to (i) the Credit Agreement dated as of May 26, 1998 among Counterparty, Bank of America, N.A., and U.S. Bank National Association, as lenders, and Bank of America, N.A., as administrative agent, as amended; and (ii) the Credit Agreement dated as of June 24, 1999 among Counterparty, the various lenders thereto, Bank of America, N.A., as administrative agent, and Credit Suisse First Boston, as syndication agent, as amended. A breach of this representation shall constitute an Additional Termination Event with respect to Counterparty with Counterparty as the Affected Party, giving MLI a right to designate an Early Termination Date (as defined in the ISDA Master Agreement). . Counterparty is not insolvent. . The parties intend for the transaction to qualify for applicable bankruptcy safe-harbor treatment as more fully set forth in MLI's standard Confirmation. . Counterparty shall make such further representations and acknowledgments as are contained in MLI's standard Confirmation. Documentation: ISDA Master Agreement, Schedule to the ISDA, and Transaction Confirmation. Except as specifically modified below, until we enter into an ISDA Master Agreement and a 6 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets Confirmation for this Transaction, this Term Sheet shall (i) constitute a complete binding agreement between us as to the terms and conditions of the Transaction to which this Term Sheet relates, and (ii) supplement, form a part of, and be subject to an agreement in the form of the ISDA Master Agreement (without any Schedule thereto) as if we had actually executed an agreement in such form. Underlying Stock Merger Event: . Share-for-Share Consideration: The share consideration will be substituted for the underlying Shares on the exchange business day following the business combination or other similar event ("Merger Event) with mutually agreed upon commercially reasonable adjustments to the transaction terms to preserve the economics of the transaction as originally bargained for pursuant to the terms stated herein, provided that after the Merger Event, MLI shall be permitted to elect to cancel the transaction and pay or receive the value thereof ("Cancellation and Payment") within three (3) exchange business days of such Merger Event. . Share for Other Consideration: Cancellation and Payment on the business day following the Merger Event. . Share for Combined Consideration: As soon as practicable but not to exceed three (3) exchange business days after the Merger Event has occurred, the parties shall mutually agree upon appropriate adjustments to the terms of the transaction and, if the parties are unable to so agree, Cancellation and Payment shall apply. Indemnity: . Counterparty agrees to indemnify MLI for any losses arising from Counterparty's failure to perform its obligations hereunder, including any failure to enter into the definitive documentation described in "Documentation" above. Counterparty further agrees to indemnify MLI and its Affiliates and their respective directors, officers, agents and controlling parties (MLI and each such person being an "Indemnified Party") from and against any and all losses, claims, damages and liabilities, joint and several, to which such Indemnified Party may become subject under, in connection with, relating to, or arising out of, this Agreement or Transaction with respect to any applicable securities laws and will reimburse any Indemnified Party for all reasonable expenses (including reasonable legal fees and reasonable expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. Counterparty will not be liable under this Indemnity paragraph to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted from MLI's gross negligence, fraud, bad faith and/or willful misconduct. 7 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets This term sheet serves as the agreement between Counterparty and MLI during the initial hedge period of the above transaction until a formal confirmation can be executed. Counterparty also represents to MLI that it is not relying on any communication (written or oral) of MLI as investment advice or as a recommendation to enter into this Transaction, it being understood that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. No communication (written or oral) received by Counterparty from MLI shall be deemed to be an assurance or guarantee as to the expected results of this Transaction. Counterparty represents and warrants that it is legally and financially able to enter into the above transaction and that the signatory to this document is authorized to transact on Counterparty's behalf. For Fisher Communications Inc. For Merrill Lynch International By: /s/ Warren Spector By: /s/ Vivian Jackson -------------------------------- -------------------------------- Warren Spector Vivian Jackson - ------------------------------------- ------------------------------------- Print Name Print Name Exec. V.P. V.P. - ------------------------------------- ------------------------------------- Title Title March 27, 2002 March 27, 2002 - ------------------------------------- ------------------------------------- Date Date 8 EX-10.22 8 dex1022.txt CREDIT AGREEMENT DATED MARCH 21, 2002 Exhibit 10.22 - -------------------------------------------------------------------------------- CREDIT AGREEMENT among FISHER BROADCASTING COMPANY, as Borrower, ITS DOMESTIC SUBSIDIARIES FROM TIME TO TIME PARTIES HERETO, as Guarantors, THE LENDERS PARTIES HERETO, FIRST UNION NATIONAL BANK, as Administrative Agent, BANK OF AMERICA, N.A. and THE BANK OF NEW YORK, as Co-Syndication Agents, and NATIONAL CITY BANK, as Documentation Agent Dated as of March 21, 2002 FIRST UNION SECURITIES, INC., d/b/a WACHOVIA SECURITIES, and BANC OF AMERICA SECURITIES LLC, as Joint Book Runners and Co-Lead Arrangers - -------------------------------------------------------------------------------- TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS............................................................................................1 Section 1.1 Defined Terms...............................................................................1 ---------------------------------------------------------------------------------------------------------- Section 1.2 Other Definitional Provisions..............................................................29 ---------------------------------------------------------------------------------------------------------- Section 1.3 Accounting Terms...........................................................................30 ---------------------------------------------------------------------------------------------------------- ARTICLE II THE LOANS; AMOUNT AND TERMS..........................................................................30 Section 2.1 Revolving Loans............................................................................30 ---------------------------------------------------------------------------------------------------------- Section 2.2 Tranche A Term Loans.......................................................................32 ---------------------------------------------------------------------------------------------------------- Section 2.3 Tranche B Term Loans.......................................................................34 ---------------------------------------------------------------------------------------------------------- Section 2.4 Incremental Facilities.....................................................................35 ---------------------------------------------------------------------------------------------------------- Section 2.5 Letter of Credit Subfacility...............................................................36 ---------------------------------------------------------------------------------------------------------- Section 2.6 Fees.......................................................................................40 ---------------------------------------------------------------------------------------------------------- Section 2.7 Commitment Reductions......................................................................41 ---------------------------------------------------------------------------------------------------------- Section 2.8 Prepayments................................................................................42 ---------------------------------------------------------------------------------------------------------- Section 2.9 Minimum Principal Amount of Loans and Tranches; Lending Offices............................44 ---------------------------------------------------------------------------------------------------------- Section 2.10 Default Rate and Payment Dates.............................................................45 ---------------------------------------------------------------------------------------------------------- Section 2.11 Conversion Options.........................................................................45 ---------------------------------------------------------------------------------------------------------- Section 2.12 Computation of Interest and Fees...........................................................46 ---------------------------------------------------------------------------------------------------------- Section 2.13 Pro Rata Treatment and Payments............................................................47 ---------------------------------------------------------------------------------------------------------- Section 2.14 Non-Receipt of Funds by the Administrative Agent...........................................49 ---------------------------------------------------------------------------------------------------------- Section 2.15 Inability to Determine Interest Rate.......................................................50 ---------------------------------------------------------------------------------------------------------- Section 2.16 Illegality.................................................................................51 ---------------------------------------------------------------------------------------------------------- Section 2.17 Requirements of Law........................................................................51 ---------------------------------------------------------------------------------------------------------- Section 2.18 Indemnity..................................................................................53 ---------------------------------------------------------------------------------------------------------- Section 2.19 Taxes......................................................................................53 ---------------------------------------------------------------------------------------------------------- Section 2.20 Indemnification; Nature of Issuing Lender's Duties.........................................55 ---------------------------------------------------------------------------------------------------------- ARTICLE III REPRESENTATIONS AND WARRANTIES......................................................................57 Section 3.1 Financial Condition........................................................................57 ---------------------------------------------------------------------------------------------------------- Section 3.2 No Change..................................................................................57 ---------------------------------------------------------------------------------------------------------- Section 3.3 Corporate Existence........................................................................57 ---------------------------------------------------------------------------------------------------------- Section 3.4 Corporate Power; Authorization; Enforceable Obligations....................................58 ---------------------------------------------------------------------------------------------------------- Section 3.5 Compliance with Laws; No Conflict; No Default..............................................58 ---------------------------------------------------------------------------------------------------------- Section 3.6 No Material Litigation.....................................................................59 ---------------------------------------------------------------------------------------------------------- Section 3.7 Investment Company Act; PUHCA..............................................................59 ---------------------------------------------------------------------------------------------------------- Section 3.8 Margin Regulations.........................................................................59 ---------------------------------------------------------------------------------------------------------- Section 3.9 ERISA......................................................................................60 ---------------------------------------------------------------------------------------------------------- Section 3.10 Environmental Matters......................................................................60 ---------------------------------------------------------------------------------------------------------- Section 3.11 Purpose of Loans...........................................................................61 ---------------------------------------------------------------------------------------------------------- Section 3.12 Subsidiaries...............................................................................61 ---------------------------------------------------------------------------------------------------------- Section 3.13 Ownership..................................................................................62 ---------------------------------------------------------------------------------------------------------- Section 3.14 Indebtedness...............................................................................62 ---------------------------------------------------------------------------------------------------------- Section 3.15 Taxes......................................................................................62 ---------------------------------------------------------------------------------------------------------- Section 3.16 Intellectual Property Rights...............................................................62 ---------------------------------------------------------------------------------------------------------- Section 3.17 Solvency...................................................................................63 ---------------------------------------------------------------------------------------------------------- Section 3.18 Investments................................................................................63 ----------------------------------------------------------------------------------------------------------
i Section 3.19 Location of Collateral.....................................................................63 ---------------------------------------------------------------------------------------------------------- Section 3.20 No Burdensome Restrictions.................................................................63 ---------------------------------------------------------------------------------------------------------- Section 3.21 Labor Matters..............................................................................64 ---------------------------------------------------------------------------------------------------------- Section 3.22 Accuracy and Completeness of Information...................................................64 ---------------------------------------------------------------------------------------------------------- Section 3.23 Material Contracts.........................................................................64 ---------------------------------------------------------------------------------------------------------- Section 3.24 FCC and Station Matters....................................................................64 ---------------------------------------------------------------------------------------------------------- ARTICLE IV CONDITIONS PRECEDENT.................................................................................65 Section 4.1 Closing Conditions.........................................................................65 ---------------------------------------------------------------------------------------------------------- Section 4.2 Conditions to All Extensions of Credit.....................................................70 ---------------------------------------------------------------------------------------------------------- ARTICLE V AFFIRMATIVE COVENANTS.................................................................................71 Section 5.1 Financial Statements.......................................................................71 ---------------------------------------------------------------------------------------------------------- Section 5.2 Certificates; Other Information............................................................73 ---------------------------------------------------------------------------------------------------------- Section 5.3 Payment of Taxes and Other Obligations.....................................................74 ---------------------------------------------------------------------------------------------------------- Section 5.4 Conduct of Business and Maintenance of Existence...........................................74 ---------------------------------------------------------------------------------------------------------- Section 5.5 Maintenance of Property; Insurance.........................................................74 ---------------------------------------------------------------------------------------------------------- Section 5.6 Inspection of Property; Books and Records; Discussions.....................................75 ---------------------------------------------------------------------------------------------------------- Section 5.7 Notices....................................................................................75 ---------------------------------------------------------------------------------------------------------- Section 5.8 Environmental Laws.........................................................................77 ---------------------------------------------------------------------------------------------------------- Section 5.9 Financial Covenants........................................................................78 ---------------------------------------------------------------------------------------------------------- Section 5.10 Additional Guarantors......................................................................78 ---------------------------------------------------------------------------------------------------------- Section 5.11 Compliance with Law........................................................................79 ---------------------------------------------------------------------------------------------------------- Section 5.12 Pledged Assets.............................................................................79 ---------------------------------------------------------------------------------------------------------- Section 5.13 Hedging Agreements.........................................................................79 ---------------------------------------------------------------------------------------------------------- Section 5.14 Covenants Regarding Patents, Trademarks and Copyrights.....................................79 ---------------------------------------------------------------------------------------------------------- Section 5.15 Leases; Landlord Consent Letters...........................................................81 ---------------------------------------------------------------------------------------------------------- Section 5.16 Deposit and Securities Accounts............................................................81 ---------------------------------------------------------------------------------------------------------- Section 5.17 Fisher Plaza Lease.........................................................................81 ---------------------------------------------------------------------------------------------------------- Section 5.18 Wholly-Owned Subsidiaries..................................................................82 ---------------------------------------------------------------------------------------------------------- Section 5.19 Post-Closing Requirement...................................................................82 ---------------------------------------------------------------------------------------------------------- ARTICLE VI NEGATIVE COVENANTS...................................................................................82 Section 6.1 Indebtedness...............................................................................82 ---------------------------------------------------------------------------------------------------------- Section 6.2 Liens......................................................................................83 ---------------------------------------------------------------------------------------------------------- Section 6.3 Guaranty Obligations.......................................................................83 ---------------------------------------------------------------------------------------------------------- Section 6.4 Nature of Business.........................................................................83 ---------------------------------------------------------------------------------------------------------- Section 6.5 Consolidation, Merger, Sale or Purchase of Assets, etc.....................................84 ---------------------------------------------------------------------------------------------------------- Section 6.6 Advances, Investments and Loans............................................................85 ---------------------------------------------------------------------------------------------------------- Section 6.7 Transactions with Affiliates; Allocation of Overhead.......................................85 ---------------------------------------------------------------------------------------------------------- Section 6.8 Ownership of Subsidiaries; Restrictions....................................................85 ---------------------------------------------------------------------------------------------------------- Section 6.9 Fiscal Year; Organizational Documents; Material Contracts..................................86 ---------------------------------------------------------------------------------------------------------- Section 6.10 Limitation on Restricted Actions...........................................................86 ---------------------------------------------------------------------------------------------------------- Section 6.11 Restricted Payments........................................................................86 ---------------------------------------------------------------------------------------------------------- Section 6.12 Prepayments of Indebtedness, etc...........................................................87 ---------------------------------------------------------------------------------------------------------- Section 6.13 Sale Leasebacks............................................................................87 ---------------------------------------------------------------------------------------------------------- Section 6.14 No Further Negative Pledges................................................................87 ---------------------------------------------------------------------------------------------------------- Section 6.15 FCC Licenses...............................................................................87 ---------------------------------------------------------------------------------------------------------- Section 6.16 Activities of the Parent...................................................................87 ----------------------------------------------------------------------------------------------------------
ii ARTICLE VII EVENTS OF DEFAULT...................................................................................88 Section 7.1 Events of Default..........................................................................88 ---------------------------------------------------------------------------------------------------------- Section 7.2 Acceleration; Remedies.....................................................................91 ---------------------------------------------------------------------------------------------------------- ARTICLE VIII THE ADMINISTRATIVE AGENT...........................................................................92 Section 8.1 Appointment................................................................................92 ---------------------------------------------------------------------------------------------------------- Section 8.2 Delegation of Duties.......................................................................92 ---------------------------------------------------------------------------------------------------------- Section 8.3 Exculpatory Provisions.....................................................................92 ---------------------------------------------------------------------------------------------------------- Section 8.4 Reliance by Administrative Agent...........................................................93 ---------------------------------------------------------------------------------------------------------- Section 8.5 Notice of Default..........................................................................93 ---------------------------------------------------------------------------------------------------------- Section 8.6 Non-Reliance on Administrative Agent and Other Lenders.....................................94 ---------------------------------------------------------------------------------------------------------- Section 8.7 Indemnification............................................................................94 ---------------------------------------------------------------------------------------------------------- Section 8.8 The Administrative Agent in Its Individual Capacity........................................95 ---------------------------------------------------------------------------------------------------------- Section 8.9 Successor Administrative Agent.............................................................95 ---------------------------------------------------------------------------------------------------------- Section 8.10 Other Agents...............................................................................95 ---------------------------------------------------------------------------------------------------------- ARTICLE IX MISCELLANEOUS........................................................................................96 Section 9.1 Amendments, Waivers and Release of Collateral..............................................96 ---------------------------------------------------------------------------------------------------------- Section 9.2 Notices....................................................................................97 ---------------------------------------------------------------------------------------------------------- Section 9.3 No Waiver; Cumulative Remedies.............................................................99 ---------------------------------------------------------------------------------------------------------- Section 9.4 Survival of Representations and Warranties.................................................99 ---------------------------------------------------------------------------------------------------------- Section 9.5 Payment of Expenses and Taxes..............................................................99 ---------------------------------------------------------------------------------------------------------- Section 9.6 Successors and Assigns; Participations; Purchasing Lenders................................100 ---------------------------------------------------------------------------------------------------------- Section 9.7 Adjustments; Set-off......................................................................103 ---------------------------------------------------------------------------------------------------------- Section 9.8 Table of Contents and Section Headings....................................................104 ---------------------------------------------------------------------------------------------------------- Section 9.9 Counterparts..............................................................................104 ---------------------------------------------------------------------------------------------------------- Section 9.10 Effectiveness.............................................................................104 ---------------------------------------------------------------------------------------------------------- Section 9.11 Severability..............................................................................104 ---------------------------------------------------------------------------------------------------------- Section 9.12 Integration...............................................................................105 ---------------------------------------------------------------------------------------------------------- Section 9.13 Governing Law.............................................................................105 ---------------------------------------------------------------------------------------------------------- Section 9.14 Consent to Jurisdiction and Service of Process............................................105 ---------------------------------------------------------------------------------------------------------- Section 9.15 Confidentiality...........................................................................105 ---------------------------------------------------------------------------------------------------------- Section 9.16 Acknowledgments...........................................................................106 ---------------------------------------------------------------------------------------------------------- Section 9.17 Waivers of Jury Trial.....................................................................106 ---------------------------------------------------------------------------------------------------------- ARTICLE X GUARANTY.............................................................................................107 Section 10.1 The Guaranty..............................................................................107 ---------------------------------------------------------------------------------------------------------- Section 10.2 Bankruptcy................................................................................107 ---------------------------------------------------------------------------------------------------------- Section 10.3 Nature of Liability.......................................................................108 ---------------------------------------------------------------------------------------------------------- Section 10.4 Independent Obligation....................................................................108 ---------------------------------------------------------------------------------------------------------- Section 10.5 Authorization.............................................................................108 ---------------------------------------------------------------------------------------------------------- Section 10.6 Reliance..................................................................................109 ---------------------------------------------------------------------------------------------------------- Section 10.7 Waiver....................................................................................109 ---------------------------------------------------------------------------------------------------------- Section 10.8 Limitation on Enforcement.................................................................110 ---------------------------------------------------------------------------------------------------------- Section 10.9 Confirmation of Payment...................................................................110 ----------------------------------------------------------------------------------------------------------
iii Schedules - --------- Schedule 1.1-1 Account Designation Letter Schedule 1.1-2 Investments Schedule 1.1-3 Permitted Parent Debt Schedule 1.1-4 Permitted Parent Liens Schedule 2.1(a) Schedule of Lenders and Commitments Schedule 2.1(b)(i) Form of Notice of Borrowing Schedule 2.1(e) Form of Revolving Note Schedule 2.2(d) Form of Tranche A Term Note Schedule 2.3(d) Form of Tranche B Term Note Schedule 2.11 Form of Notice of Conversion/Extension Schedule 2.19 Section 2.19 Certificate Schedule 3.3 Jurisdictions of Organization and Qualification Schedule 3.6 Litigation Schedule 3.9 ERISA Schedule 3.12 Subsidiaries Schedule 3.16 Intellectual Property Schedule 3.19(a) Location of Real Property Schedule 3.19(b) Location of Collateral Schedule 3.19(c) Chief Executive Offices Schedule 3.21 Labor Matters Schedule 3.23 Material Contracts Schedule 3.24 FCC and Station Matters Schedule 4.1-1 Form of Secretary's Certificate Schedule 4.1-2 Form of Solvency Certificate Schedule 5.2(b) Form of Compliance Certificate Schedule 5.5(b) Insurance Schedule 5.10 Form of Joinder Agreement Schedule 6.1(b) Indebtedness Schedule 9.2 Lenders' Lending Offices Schedule 9.6(c) Form of Commitment Transfer Supplement iv CREDIT AGREEMENT, dated as of March 21, 2002, among FISHER BROADCASTING COMPANY, a Washington corporation (the "Borrower"), each of those -------- Domestic Subsidiaries of the Borrower identified as a "Guarantor" on the signature pages hereto and such other Domestic Subsidiaries of the Borrower as may from time to time become a party hereto (collectively the "Guarantors" and ---------- individually a "Guarantor"), the several banks and other financial institutions --------- from time to time parties to this Credit Agreement (collectively the "Lenders" ------- and individually a "Lender"), FIRST UNION NATIONAL BANK, a national banking ------ association, as administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent" or the "Agent"), BANK OF AMERICA, N.A., a -------------------- ----- national banking association, and THE BANK OF NEW YORK, a national banking association, as co-syndication agents for the Lenders hereunder (in such capacity, the "Co-Syndication Agents"), and NATIONAL CITY BANK, a national --------------------- banking association, as documentation agent for the Lenders hereunder (in such capacity, the "Documentation Agent"). ------------------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower has requested, and the Lenders have agreed to extend, certain credit facilities to the Borrower on the terms and conditions set forth herein; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINED TERMS. ------------- As used in this Credit Agreement, terms defined in the preamble to this Credit Agreement have the meanings therein indicated, and the following terms have the following meanings: "ABR Default Rate" shall have the meaning set forth in Section 2.10. ---------------- "Account Designation Letter" shall mean the Notice of Account -------------------------- Designation Letter dated the Closing Date from the Borrower to the Administrative Agent in substantially the form attached hereto as Schedule 1.1-1. "Additional Credit Party" shall mean each Person that becomes a ----------------------- Guarantor by execution of a Joinder Agreement in accordance with Section 5.10. "Additional Loan" shall have the meaning set forth in Section 2.4. --------------- "Administrative Agent" or "Agent" shall have the meaning set forth in -------------------- the first paragraph of this Credit Agreement and any successors in such capacity. "Administrative Fees" shall have the meaning set forth in Section ------------------- 2.6(d). "Affiliate" shall mean as to any Person, any other Person (excluding --------- any Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, a Person shall be deemed to be "controlled by" a Person if such Person possesses, directly or indirectly, power either (a) to vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Affiliation Agreements" shall mean any network affiliation agreements ---------------------- in effect at any time for any Station affiliated with a Network, and all renewals, extensions and replacements of such agreements. "Agent Fee Letter" shall have the meaning set forth in the definition ---------------- of Fee Letters. "Agreement or Credit Agreement" shall mean this Credit Agreement, as ----------------------------- amended, modified or supplemented from time to time in accordance with its terms. "Alternate Base Rate" shall mean, for any day, a rate per annum equal ------------------- to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean, at any time, the rate of interest per annum publicly ---------- announced or otherwise identified from time to time by First Union at its principal office in Charlotte, North Carolina as its prime rate. The parties hereto acknowledge that the rate announced publicly by First Union as its Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks; and "Federal Funds Effective ----------------------- Rate" shall mean, for any day, the weighted average of the rates on overnight - ---- federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published on the next succeeding Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive in the absence of manifest error) that it is unable to ascertain the Federal Funds Effective Rate, for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the opening of business on the date of such change. 2 "Alternate Base Rate Loans" shall mean Loans that bear interest at an ------------------------- interest rate based on the Alternate Base Rate. "Applicable Percentage" shall mean, for any day, the rate per annum --------------------- set forth below opposite the applicable Level then in effect, it being understood that the Applicable Percentage for (i) Revolving Loans and Tranche A Term Loans which are Alternate Base Rate Loans shall be the percentage set forth under the column "Alternate Base Rate Margin for Revolving Loans and Tranche A Term Loans", (ii) Revolving Loans and Tranche A Term Loans which are LIBOR Rate Loans and the Letter of Credit Fee shall be the percentage set forth under the column "LIBOR Rate Margin for Revolving Loans, Tranche A Term Loans and Letter of Credit Fee", (iii) Tranche B Term Loans which are Alternate Base Loans shall be the percentage set forth under the column "Alternate Base Rate Margin for Tranche B Term Loans", (iv) Tranche B Term Loans which are LIBOR Rate Loans shall be the percentage set forth under the column "LIBOR Rate Margin for Tranche B Term Loans" and (v) the Commitment Fee shall be the percentage set forth under the column "Commitment Fee":
- ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- Alternate Base Rate LIBOR Rate Margin Alternate Base Margin for for Revolving Loans, Rate Margin LIBOR Rate Revolving Loans and Tranche A Term for Margin Tranche A Term Loans and Letter of Tranche B for Tranche B Commitment Level Leverage Ratio Loans Credit Fee Term Loans Term Loans Fee - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- I **** 5.5 to 1.0 2.50% 3.75% 3.00% 4.25% 0.500% - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- II **** 5.0 to 1.0 but * 2.25% 3.50% 3.00% 4.25% 0.500% 5.5 to 1.0 - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- III **** 4.5 to 1.0 but * 2.00% 3.25% 2.75% 4.00% 0.500% 5.0 to 1.0 - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- IIII **** 4.0 to 1.0 but * 1.75% 3.00% 2.75% 4.00% 0.500% 4.5 to 1.0 - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- V **** 3.5 to 1.0 but * 1.50% 2.75% 2.75% 4.00% 0.500% 4.0 to 1.0 - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- VI **** 3.0 to 1.0 but * 1.25% 2.50% 2.75% 4.00% 0.375% 3.5 to 1.0 - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- VII **** 2.5 to 1.0 but * 1.00% 2.25% 2.75% 4.00% 0.375% 3.0 to 1.0 - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- ------------- VIII * 2.5 to 1.0 0.75% 2.00% 2.75% 4.00% 0.375% - ---------- ----------------------- --------------------- ---------------------- ---------------- --------------- -------------
The Applicable Percentage shall, in each case, be determined and adjusted quarterly on the date five (5) Business Days after the date on which the Administrative Agent has received from the Borrower the quarterly financial information and certifications required to be delivered to the Administrative Agent and the Lenders in accordance with the provisions of Sections 5.1(a) and (b) and 5.2(b) (each an "Interest Determination Date"). Such Applicable --------------------------- Percentage shall be effective from such Interest Determination Date until the next such Interest Determination Date. The initial Applicable Percentages shall be based on Level I for the first six months following the Closing Date. If the Borrower shall fail to provide the financial information and certifications in accordance with the provisions of Sections 5.1(a) and (b) and 5.2(b), the Applicable Percentage * represents less than **** represents greater than or equal to 3 shall, on the date five (5) Business Days after the date by which the Borrower was so required to provide such financial information and certifications to the Administrative Agent and the Lenders, be based on Level I until such time as such information and certifications are provided, whereupon the Level shall be determined by the then current Leverage Ratio. "Approved Fund" shall mean, with respect to any Lender that is a fund ------------- that invests in bank loans, any other fund that invests in bank loans and is managed by the same investment advisor as such Lender or by an affiliate of such investment advisor. "Arrangers" shall mean First Union Securities, Inc., d/b/a Wachovia --------- Securities and Banc of America Securities LLC. "Asset Disposition" shall mean the disposition of any or all of the ----------------- assets (including, without limitation, the Capital Stock of a Subsidiary or any ownership interest in a joint venture) of the Borrower or any Subsidiary whether by sale, lease, transfer or otherwise. The term "Asset Disposition" shall not include (i) the sale, lease or transfer of assets permitted by Sections 6.5(a)(i), 6.5(a)(ii) or 6.5(a)(iii) or (ii) any Equity Issuance. "Bank of America" shall mean Bank of America, N.A., a national banking --------------- association. "Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the --------------- United States Code, as amended, modified, succeeded or replaced from time to time. "Beneficial Owner" shall have the meaning provided in Rules 13d-3 and ---------------- 13d-5 under the Securities Exchange Act of 1934, except that a Person shall be deemed to be a "Beneficial Owner" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time. "Borrower" shall have the meaning set forth in the first paragraph of -------- this Credit Agreement. "Borrowing Date" shall mean, in respect of any Loan, the date such -------------- Loan is made. "Broadcasting Properties" shall mean the facilities and properties ----------------------- owned, leased or operated by the Borrower or any of its Subsidiaries and utilized in such Person's (or another Subsidiary's) television and/or radio ------------ broadcasting business, whether now owned or hereafter acquired. "Business" shall have the meaning set forth in Section 3.10. -------- "Business Day" shall mean a day other than a Saturday, Sunday or other ------------ day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to close; provided, however, that when -------- ------- used in connection with a rate determination, borrowing or payment in respect of a LIBOR Rate Loan, the term "Business Day" 4 shall also exclude any day on which banks in London, England are not open for dealings in Dollar deposits in the London interbank market. "Capital Lease" shall mean any lease of property, real or personal, ------------- the obligations with respect to which are required to be capitalized on a balance sheet of the lessee in accordance with GAAP. "Capital Lease Obligations" shall mean the capitalized lease ------------------------- obligations relating to a Capital Lease determined in accordance with GAAP. "Capital Stock" shall mean (i) in the case of a corporation, capital ------------- stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" shall mean (i) securities issued or directly and ---------------- fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition ("Government Obligations"), ---------------------- (ii) U.S. dollar denominated (or foreign currency fully hedged to U.S. dollar) time deposits, certificates of deposit, Eurodollar time deposits and Eurodollar certificates of deposit of (y) any domestic commercial bank of recognized standing having capital and surplus in excess of $250,000,000 or (z) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank being an "Approved Bank"), in each case with maturities of not ------------- more than 364 days from the date of acquisition, (iii) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within six months of the date of acquisition, (iv) repurchase agreements with a bank or trust company (including a Lender) or a recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America, (v) obligations of any state of the United States or any political subdivision thereof for the payment of the principal and redemption price of and interest on which there shall have been irrevocably deposited Government Obligations maturing as to principal and interest at times and in amounts sufficient to provide such payment, and (vi) auction preferred stock rated in the highest short-term credit rating category by S&P or Moody's. "Change of Control" shall mean the occurrence of any of the following ----------------- events: (a) any "person" or "group" (as such terms are used in Section 13(d) or 14(d) of the Securities Exchange Act of 1934), other than the Current Stockholders, is or becomes, directly or indirectly, the Beneficial Owner (by way of merger, consolidation or otherwise) of 33% or more of the Voting Stock or of the economic interests of the Parent on a fully-diluted basis, after giving effect to the 5 conversion and exercise of all outstanding warrants, options and other securities of the Parent (whether or not such securities are then currently convertible or exercisable), (b) the failure of the Parent to own, directly or indirectly, 100% of the Voting Stock and of the economic interests of the Borrower or (c) Continuing Directors shall cease for any reason to constitute a majority of the members of the board of directors of the Parent then in office. "Closing Date" shall mean the date of this Credit Agreement. ------------ "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time. "Collateral" shall mean a collective reference to the collateral which ---------- is identified in, and at any time will be covered by, the Security Documents. "Commitment" shall mean the Revolving Commitment, the LOC Commitment, ---------- the Tranche A Term Loan Commitment and the Tranche B Term Loan Commitment, individually or collectively, as appropriate. "Commitment Fee" shall have the meaning set forth in Section 2.6(a). -------------- "Commitment Percentage" shall mean the Revolving Commitment --------------------- Percentage, the LOC Commitment Percentage, the Tranche A Term Loan Commitment Percentage and/or the Tranche B Term Loan Commitment Percentage, as appropriate. "Commitment Period" shall mean the period from and including the ----------------- Closing Date to but not including the Revolving Commitment Termination Date. "Commitment Transfer Supplement" shall mean a Commitment Transfer ------------------------------ Supplement, in substantially the form of Schedule 9.6(c). --------------- "Commonly Controlled Entity" shall mean an entity, whether or not -------------------------- incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code. "Communications Law" shall mean the Communications Act of 1934, as ------------------ amended, and all rules and regulations thereunder (including, without limitation, the Telecommunications Act of 1996), or any successor statute or statutes, and all rules and regulations of the FCC, any PUC or any other applicable Governmental Authority related to the provision of communication or broadcast services, each as amended or supplemented from time to time. "Compliance Certificate" shall mean a certificate of a Responsible ---------------------- Officer in the form of Schedule 5.2(b) (a) stating that (i) the financial statements delivered pursuant to Sections 5.1(a) and 5.1(b) concurrently with such certificate present fairly the financial position of the Borrower and its Subsidiaries for the periods indicated in conformity with GAAP applied on a consistent basis, (ii) each of the Credit Parties during such periods observed or performed in all material 6 respects all of its covenants and other agreements, and satisfied in all material respects every condition, contained in this Credit Agreement to be observed, performed or satisfied by it, and (iii) such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, (b) including calculations in reasonable detail required to indicate compliance with Section 5.9 as of the last day of such period and (c) setting forth the amount of Investments permitted by clauses (v) and (viii) of the definition of Permitted Investments that are outstanding as of the last day of such period. "Consolidated" means, when used with reference to financial statements ------------ or financial statement items of the Borrower and its Subsidiaries or any other Person, such statements or items on a consolidated basis in accordance with the consolidation principles of GAAP. "Consolidated Capital Expenditures" shall mean, for any period, all --------------------------------- expenditures of the Borrower and its Subsidiaries on a Consolidated basis for such period which in accordance with GAAP would be classified as capital expenditures, including without limitation, Capital Lease Obligations. The applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Cash Taxes" shall mean, for any period, the aggregate of ----------------------- all taxes (including, without limitation, any federal, state, local and foreign income taxes) actually paid (either directly to the applicable Governmental Authority or the Parent) by the Borrower and its Subsidiaries on a Consolidated basis during such period. The applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated EBITDA" shall mean, as of any date of determination for ------------------- the four quarter period ending on such date, (i) Consolidated Net Income for such period plus (ii) the sum of the following to the extent deducted in ---- calculating Consolidated Net Income: (A) Consolidated Interest Expense for such period, (B) tax expense (including, without limitation, any federal, state, local and foreign income, value added and similar taxes) of the Borrower and its Subsidiaries for such period and (C) depreciation, amortization (including Programming Amortization Expense) and other non-cash charges for such period minus (iii) Programming Cash Payments; provided that, for purposes of - ----- -------- calculating Consolidated EBITDA, South West Oregon Television Broadcast Corporation, the owner of the KPIC-TV license, shall be considered a Subsidiary of the Borrower and 50% of each of the foregoing components of Consolidated EBITDA (e.g. Consolidated Net Income) with respect to South West Oregon Television Broadcast Corporation shall be included in such calculation for the applicable period. The applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Fixed Charges" shall mean, as of any date of -------------------------- determination for the four quarter period ending on such date, the sum of (i) Consolidated Interest Expense for such period plus (ii) Consolidated Scheduled ---- Debt Payments for such period plus (iii) Consolidated Capital Expenditures for ---- such period plus (iv) cash dividend payments (other than cash dividend payments ---- made in connection with an asset sale permitted by Section 6.5(a)) and cash stock repurchases that are made during such period plus (v) Consolidated Cash ---- Taxes for such period, in each case for the Borrower and its Subsidiaries on a Consolidated basis. The applicable period 7 shall be for the four consecutive quarters ending as of the date of computation; provided that, with respect to clauses (ii), (iii) and (iv) above, -------- during the first twelve months following the Closing Date the applicable period shall begin on the Closing Date and end on the date of computation. "Consolidated Funded Debt" shall mean, on any date of calculation, ------------------------ Funded Debt of the Borrower and its Subsidiaries on a Consolidated basis. "Consolidated Interest Expense" shall mean, as of any date of ----------------------------- determination for the four quarter period ending on such date, all interest expense, excluding amortization of debt discount and premium but including the interest component under Capital Leases for such period of the Borrower and its Subsidiaries on a Consolidated basis. The applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Net Income" shall mean, for any period, the net income ----------------------- (excluding extraordinary or non-recurring losses and gains and all non-cash income) of the Borrower and its Subsidiaries on a Consolidated basis for such period. The applicable period shall be for the four consecutive quarters ending as of the date of computation. "Consolidated Scheduled Debt Payments" shall mean, for any period, the ------------------------------------ sum of all scheduled payments of principal on Consolidated Funded Debt for such period (including the principal component of payments due on Capital Leases during the applicable period ending on such date); it being understood that scheduled payments on Consolidated Funded Debt shall not include optional prepayments or the mandatory prepayments required pursuant to Section 2.8(b)(ii)-(vi). The applicable period shall be for the four consecutive quarters ending as of the date of computation. "Continuing Directors" shall mean during any period of 24 consecutive -------------------- months commencing after the Closing Date, individuals who at the beginning of such 24 month period were directors of the Parent (together with any new director whose election by the Parent's board of directors or whose nomination for election by the Parent's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved). "Contractual Obligation" shall mean, as to any Person, any provision ---------------------- of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Copyright Licenses" shall mean any agreement, whether written or ------------------ oral, providing for the grant by or to a Person of any right under any Copyright, including, without limitation, any thereof referred to in Schedule -------- 3.16 to this Credit Agreement. - ---- "Copyrights" shall mean all copyrights (other than copyrights of de ---------- minimus value) of the Borrower and its Subsidiaries in all works, now existing or hereafter created or acquired, all 8 registrations and recordings thereof, and all applications in connection therewith, whether in the United States Copyright Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof, or otherwise, including, without limitation, any thereof referred to in Schedule 3.16 and all renewals thereof. ------------- "Co-Syndication Agents" shall have the meaning set forth in the first --------------------- paragraph of this Credit Agreement. "Credit Documents" shall mean this Credit Agreement, each of the ---------------- Notes, any Joinder Agreement, the Letters of Credit, the LOC Documents and the Security Documents. "Credit Party" shall mean any of the Borrower or the Guarantors. ------------ "Credit Party Obligations" shall mean, without duplication, (i) all of ------------------------ the obligations of the Credit Parties to the Lenders (including the Issuing Lender) and the Administrative Agent, whenever arising, under this Credit Agreement, the Notes or any of the other Credit Documents (including, but not limited to, any interest accruing after the occurrence of a filing of a petition of bankruptcy under the Bankruptcy Code with respect to any Credit Party, regardless of whether such interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities and obligations, whenever arising, owing from any Credit Party to any Lender, or any Affiliate of a Lender, arising under any Hedging Agreement permitted by Section 6.1(d). "Current Stockholders" shall mean all Persons that, as of the date of -------------------- this Credit Agreement, are Beneficial Owners, directly or indirectly, of the outstanding Voting Stock of the Parent. "Debt Issuance" shall mean the issuance of any Indebtedness for ------------- borrowed money by the Borrower or any of its Subsidiaries. The term "Debt Issuance" shall not include any Equity Issuance or any Indebtedness of the Borrower and its Subsidiaries permitted to be incurred pursuant to Section 6.1 hereof. "Default" shall mean any of the events specified in Section 7.1, ------- whether or not any requirement for the giving of notice or the lapse of time, or both, or any other condition, has been satisfied. "Defaulting Lender" shall mean, at any time, any Lender that, at such ----------------- time (a) has failed to make a Loan required pursuant to the terms of this Credit Agreement, including the funding of a Participation Interest in accordance with the terms hereof and such default remains uncured, (b) has failed to pay to the Administrative Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement and such default remains uncured, or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official. "Documentation Agent" shall have the meaning set forth in the first ------------------- paragraph of this Credit Agreement. 9 "Dollars" and "$" shall mean dollars in lawful currency of the United ------- - States of America. "Domestic Lending Office" shall mean, initially, the office of each ----------------------- Lender designated as such Lender's Domestic Lending Office shown on Schedule -------- 9.2; and thereafter, such other office of such Lender as such Lender may from - --- time to time specify to the Administrative Agent and the Borrower as the office of such Lender at which Alternate Base Rate Loans of such Lender are to be made. "Domestic Subsidiary" shall mean any Subsidiary that is organized and ------------------- existing under the laws of the United States or any state or commonwealth thereof or under the laws of the District of Columbia. "Environmental Laws" shall mean any and all applicable foreign, ------------------ federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirement of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time be in effect during the term of this Credit Agreement. "Equity Issuance" shall mean any issuance by the Borrower or any --------------- Subsidiary to any Person which is not a Credit Party of (a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of options or warrants or (c) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity. The term "Equity Issuance" shall not include any Asset Disposition or any Debt Issuance. "ERISA" shall mean the Employee Retirement Income Security Act of ----- 1974, as amended from time to time. "Eurodollar Reserve Percentage" shall mean for any day, the percentage ----------------------------- (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for such day as prescribed by the Federal Reserve Board (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) in respect of Eurocurrency liabilities, as defined in Regulation D of such Board as in effect from time to time, or any similar category of liabilities for a member bank of the Federal Reserve System in New York City. "Event of Default" shall mean any of the events specified in Section ---------------- 7.1; provided, however, that any requirement for the giving of notice or the -------- ------- lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow" shall mean, with respect to any fiscal year period ---------------- of the Borrower and its Subsidiaries on a Consolidated basis, an amount equal to (a) Consolidated EBITDA for such period plus (b) decreases in working ---- capital for such period (with cash and Cash Equivalents to be excluded from current assets for purposes of determining such working capital) 10 minus (c) Consolidated Capital Expenditures for such period minus (d) - ----- ----- Consolidated Interest Expense for such period to the extent paid or payable in cash minus (e) Consolidated Cash Taxes paid during such period minus (f) ----- ----- Consolidated Scheduled Debt Payments made during such period minus (g) ----- increases in working capital for such period (with cash and Cash Equivalents to be excluded from current assets for purposes of determining such working capital) and minus (h) cash dividend payments (other than cash dividend ----- payments made in connection with an asset sale permitted by Section 6.5(a)) made by the Borrower during such period to the extent permitted by Section 6.11. "Extension of Credit" shall mean, as to any Lender, the making of a ------------------- Loan by such Lender or the issuance of, or participation in, a Letter of Credit by such Lender. "Fair Market Rental Rate" shall mean, with respect to that portion of ----------------------- Fisher Plaza that is leased by one or more Credit Parties, a rental rate less than or equal to the rental rate that would be obtained for such premises in an arms'-length transaction between an informed and willing lessee and an informed and willing lessor, in each case under no compulsion to enter into such lease transaction. "FCC" shall mean the Federal Communications Commission and any --- successor governmental agency performing functions similar to those performed by the Federal Communications Commission on the date hereof. "FCC License" shall mean any of the licenses, permits or other ----------- authorizations issued by the FCC relating to the Stations, including all extensions, additions and renewals thereto or thereof, and all other licenses, authorizations, waivers and permits required under Communications Law for the Borrower and its Subsidiaries to own and operate the Stations and their property and to carry on their business, including, without limitation, any of the FCC Licenses set forth on Schedule 3.24. ------------- "Federal Funds Effective Rate" shall have the meaning set forth in the ---------------------------- definition of "Alternate Base Rate". "Fee Letters" shall mean (a) that certain letter agreement, dated ----------- December 10, 2001 addressed to the Borrower from First Union and First Union Securities, Inc., d/b/a Wachovia Securities (the "Agent Fee Letter") and (b) ---------------- that certain letter agreement, dated December 10, 2001, addressed to the Borrower from Bank of America and Banc of America Securities LLC, in each case as amended, modified or otherwise supplemented. "First Union" shall mean First Union National Bank, a national banking ----------- association. "Fisher Plaza" shall mean the building located at 140 4th Avenue ------------ North, Seattle, Washington 98109. "Fisher Plaza Lease" shall mean that certain Master Services ------------------ Agreement, entered into as of February 7, 2002, between Fisher Broadcasting-Seattle TV, L.L.C. and Fisher Media Services 11 Company, together with any services addendum entered into in connection with such Master Services Agreement, any replacement of such Master Services Agreement or any additional Master Services Agreement (and/or services addendum to such Master Services Agreement) entered into between a Credit Party and Fisher Media Services Company, in each case on substantially the same terms as the Master Services Agreement in effect on the Closing Date. "Fixed Charge Coverage Ratio" shall mean the ratio of (i) Consolidated --------------------------- EBITDA to (ii) Consolidated Fixed Charges. "Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic ------------------ Subsidiary. "Fronting Fee" shall have the meaning set forth in Section 2.6(b). ------------ "Funded Debt" shall mean, with respect to any Person, without ----------- duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person incurred, issued or assumed as the deferred purchase price of property or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) the principal portion of all obligations of such Person under Capital Leases, (f) the maximum amount of all letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (g) all preferred Capital Stock issued by such Person and which by the terms thereof could be (at the request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption or other acceleration, (h) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product, (i) obligations of such Person under non-compete agreements, (j) all obligations of such Person under Hedging Agreements, excluding any portion thereof which would be accounted for as interest expense under GAAP, (k) all Indebtedness of others of the type described in clauses (a) through (j) hereof secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (l) all Guaranty Obligations of such Person with respect to Indebtedness of another Person of the type described in clauses (a) through (j) hereof, and (m) all Indebtedness of the type described in clauses (a) through (j) hereof of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer; provided, however, that Funded Debt shall not include -------- ------- Indebtedness among the Credit Parties to the extent such Indebtedness would be eliminated on a Consolidated basis. "GAAP" shall mean generally accepted accounting principles in effect ---- in the United States of America applied on a consistent basis, subject, ------- however, in the case of determination of compliance with the financial - ------- covenants set out in Section 5.9 to the provisions of Section 1.3. 12 "Government Acts" shall have the meaning set forth in Section 2.20. --------------- "Governmental Approvals" shall mean all authorizations, consents, ---------------------- approvals, permits, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities, including, without limitation, all FCC Licenses and PUC Authorizations. "Governmental Authority" shall mean any nation or government, any ---------------------- state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranty Obligations" shall mean, with respect to any Person, without -------------------- duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made. "Guarantor" shall have the meaning set forth in the first paragraph of --------- this Credit Agreement. "Guaranty" shall mean the guaranty of the Guarantors set forth in -------- Article X. "Hedging Agreements" shall mean, with respect to any Person, any ------------------ agreement entered into to protect such Person against fluctuations in interest rates, or currency or raw materials values, including, without limitation, any interest rate swap, cap or collar agreement or similar arrangement between such Person and one or more counterparties, any foreign currency exchange agreement, currency protection agreements, commodity purchase or option agreements or other interest or exchange rate hedging agreements. "Immaterial FCC License" shall mean any FCC License that is not ---------------------- material to the operation of the Stations and is designated on Schedule 3.24 as ------------- an "Immaterial FCC License." "Immaterial PUC Authorization" shall mean any PUC Authorization that ---------------------------- is not material to the operation of the Stations and is designated on Schedule -------- 3.24 as an "Immaterial PUC Authorization." - ---- 13 "Incremental Facility" shall have the meaning set forth in Section -------------------- 2.4. "Indebtedness" shall mean, with respect to any Person, without ------------ duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of property or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) all obligations of such Person under take-or-pay or similar arrangements or under commodities agreements, (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all Guaranty Obligations of such Person with respect to Indebtedness of another Person, (h) the principal portion of all Capital Lease Obligations of such Person, (i) all obligations of such Person under Hedging Agreements, excluding any portion thereof which would be accounted for as interest expense under GAAP, (j) the maximum amount of all letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (k) all preferred Capital Stock issued by such Person and which by the terms thereof could be (at the request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption or other acceleration, (l) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product, (m) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer and (n) obligations of such Person under non-compete agreements. "Insolvency" shall mean, with respect to any Multiemployer Plan, the ---------- condition that such Plan is insolvent within the meaning of such term as used in Section 4245 of ERISA. "Insolvent" shall mean being in a condition of Insolvency. --------- "Intellectual Property" shall mean the Copyrights, Copyright Licenses, --------------------- Patents, Patent Licenses, Trademarks and Trademark Licenses of the Borrower and its Subsidiaries, all goodwill associated therewith and all rights to sue for infringement thereof. "Interest Coverage Ratio" shall mean the ratio of (i) Consolidated ----------------------- EBITDA to (ii) Consolidated Interest Expense paid or payable in cash during the applicable testing period. "Interest Payment Date" shall mean (a) as to any Alternate Base Rate --------------------- Loan, the last Business Day of each March, June, September and December and on the applicable Maturity Date, (b) as to any LIBOR Rate Loan having an Interest Period of three months or less, the last 14 day of such Interest Period and on the applicable Maturity Date, and (c) as to any LIBOR Rate Loan having an Interest Period longer than three months, (i) each three (3) month anniversary following the first day of such Interest Period, (ii) the last day of such Interest Period and (iii) on the applicable Maturity Date. "Interest Period" shall mean, with respect to any LIBOR Rate Loan, --------------- (i) initially, the period commencing on the Borrowing Date or conversion date, as the case may be, with respect to such LIBOR Rate Loan and ending one, two, three or six months thereafter, as selected by the Borrower in the notice of borrowing or notice of conversion given with respect thereto; and (ii) thereafter, each period commencing on the last day of the immediately preceding Interest Period applicable to such LIBOR Rate Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that the foregoing provisions are subject to the -------- following: (A) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month; (C) if the Borrower shall fail to give notice as provided above, the Borrower shall be deemed to have selected an Alternate Base Rate Loan to replace the affected LIBOR Rate Loan; (D) any Interest Period in respect of any Loan that would otherwise extend beyond the applicable Maturity Date shall end on the applicable Maturity Date and, further with regard to (1) the Term Loans, no Interest Period shall extend beyond any principal amortization payment date unless the portion of such Term Loans consisting of Alternate Base Rate Loans together with the portion of such Term Loans consisting of LIBOR Rate Loans with Interest Periods expiring prior to or concurrently with the date such principal amortization payment date is due, is at least equal to the amount of such principal amortization payment due on such date and (2) Revolving Loans, no Interest Period shall extend beyond any Reduction Date unless the portion of Revolving Loans consisting of Alternate 15 Base Rate Loans together with the portion of Revolving Loans consisting of LIBOR Rate Loans with Interest Periods expiring prior to or concurrently with such Reduction Date, is at least equal to the Regularly Scheduled Reduction Amount due on such Reduction Date; and (E) no more than six (6) LIBOR Rate Loans may be in effect at any time. For purposes hereof, LIBOR Rate Loans with different Interest Periods shall be considered as separate LIBOR Rate Loans, even if they shall begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new LIBOR Rate Loan with a single Interest Period. "Investment" shall mean (a) the acquisition (whether for cash, ---------- property, services, assumption of Indebtedness, securities or otherwise) of assets, shares of Capital Stock, bonds, notes, debentures, partnership, joint ventures or other ownership interests or other securities of any Person or (b) any deposit with, or advance, loan or other extension of credit to, such Person (other than deposits made in connection with the purchase of equipment or other assets in the ordinary course of business) or (c) any other capital contribution to or investment in such Person, including, without limitation, any Guaranty Obligation (including any support for a Letter of Credit issued on behalf of such Person) incurred for the benefit of such Person. "Issuing Lender" shall mean First Union. -------------- "Issuing Lender Fees" shall have the meaning set forth in Section ------------------- 2.6(c). "Joinder Agreement" shall mean a Joinder Agreement in substantially ----------------- the form of Schedule 5.10, executed and delivered by an Additional Credit Party ------------- in accordance with the provisions of Section 5.10. "Leases" shall mean any leases, licenses, permits, rights of way or ------ other interests of the Credit Parties in real property of the Credit Parties related to the Broadcasting Properties. "Lender" shall have the meaning set forth in the first paragraph of ------ this Credit Agreement. "Letters of Credit" shall mean any letter of credit issued by the ----------------- Issuing Lender pursuant to the terms hereof, as such Letters of Credit may be amended, modified, extended, renewed or replaced from time to time. "Letter of Credit Fee" shall have the meaning set forth in Section -------------------- 2.6(b). "Leverage Ratio" shall mean the ratio of (i) Consolidated Funded Debt -------------- to (ii) Consolidated EBITDA. "LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period ----- therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 16 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen -------- ------- LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). If, for any reason, neither of such rates is available, then "LIBOR" shall mean the rate per annum at which, as determined by the Administrative Agent, Dollars in an amount comparable to the Loans then requested are being offered to leading banks at approximately 11:00 A.M. London time, two (2) Business Days prior to the commencement of the applicable Interest Period for settlement in immediately available funds by leading banks in the London interbank market for a period equal to the Interest Period selected. "LIBOR Lending Office" shall mean, initially, the office of each -------------------- Lender designated as such Lender's LIBOR Lending Office shown on Schedule 9.2; ------------ and thereafter, such other office of such Lender as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office of such Lender at which the LIBOR Rate Loans of such Lender are to be made. "LIBOR Rate" shall mean a rate per annum (rounded upwards, if ---------- necessary, to the nearest 1/100th of 1%) determined by the Administrative Agent pursuant to the following formula: LIBOR Rate = LIBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage "LIBOR Rate Loan" shall mean Loans the rate of interest applicable to --------------- which is based on the LIBOR Rate. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, ---- deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Capital Lease having substantially the same economic effect as any of the foregoing). "Loan" shall mean a Revolving Loan, a Tranche A Term Loan, a Tranche B ---- Term Loan and/or an Additional Loan, as appropriate. "LOC Commitment" shall mean the commitment of the Issuing Lender to -------------- issue Letters of Credit and with respect to each Lender that has a Revolving Commitment, the commitment of such Lender to purchase participation interests in the Letters of Credit up to such Lender's LOC 17 Committed Amount as specified in Schedule 2.1(a), as such amount may be reduced --------------- from time to time in accordance with the provisions hereof. "LOC Commitment Percentage" shall mean, for each Lender, the ------------------------- percentage identified as its LOC Commitment Percentage on Schedule 2.1(a), as --------------- such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 9.6(c). "LOC Committed Amount" shall have the meaning set forth in Section -------------------- 2.5(a). "LOC Documents" shall mean, with respect to any Letter of Credit, such ------------- Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (i) the rights and obligations of the parties concerned or (ii) any collateral security for such obligations. "LOC Obligations" shall mean, at any time, the sum of (i) the maximum --------------- amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit plus (ii) the ---- aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed. "LOC Participant" shall have the meaning set forth in Section 2.5(c). --------------- "Mandatory Borrowing" shall have the meaning set forth in Section ------------------- 2.5(e). "Material Adverse Effect" shall mean a material adverse effect on (a) ----------------------- the business, operations, property, assets (including any Governmental Approvals), condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower or any Guarantor to perform its obligations, when such obligations are required to be performed, under this Credit Agreement, any of the Notes or any other Credit Document or (c) the validity or enforceability of this Credit Agreement, any of the Notes or any of the other Credit Documents or any material provision of any of the foregoing or any of the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder; provided, that it is understood and -------- agreed that the changes in results of operations and financial condition of the Borrower and its Subsidiaries from December 31, 2000 to December 31, 2001 (as reflected in the unaudited financial statements of the Borrower and its Subsidiaries dated December 31, 2001), shall not constitute a "Material Adverse Effect". "Material Contract" shall mean (a) the FCC Licenses, (b) the ----------------- Affiliation Agreements, (c) those individual Program Contracts involving monetary liability in excess of $1,000,000 per annum, (d) any contract or other agreement, written or oral, of the Borrower or any of its Subsidiaries involving monetary liability of or to any such Person in an amount in excess of $1,000,000 per annum and (e) any other contract, agreement, permit or license, written or oral, of the Borrower or any of its Subsidiaries the failure to comply with which could reasonably be expected to have a Material Adverse Effect. 18 "Material FCC License" shall mean any FCC License other than an -------------------- Immaterial FCC License, including, without limitation, any FCC License designated as a "Material FCC License" on Schedule 3.24. ------------- "Material PUC Authorization" shall mean any PUC Authorization other -------------------------- than an Immaterial PUC Authorization, including, without limitation, any PUC Authorization designated as a "Material PUC Authorization" on Schedule 3.24. ------------- "Materials of Environmental Concern" shall mean any gasoline or ---------------------------------- petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Maturity Date" shall mean (i) with respect to the Tranche A Term ------------- Loan, the Tranche A Term Loan Maturity Date, (ii) with respect to the Tranche B Term Loan, the Tranche B Term Loan Maturity Date and (iii) with respect to Revolving Loans, the Revolving Commitment Termination Date. "Moody's" shall mean Moody's Investors Service, Inc. ------- "Multiemployer Plan" shall mean a Plan that is a multiemployer plan as ------------------ defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" shall mean the aggregate cash proceeds received by ----------------- the Borrower or any Subsidiary in respect of any Asset Disposition, Equity Issuance or Debt Issuance, net of (a) direct costs (including, without limitation, legal, accounting and investment banking fees, and sales commissions), (b) unless and until released to the Borrower or such Subsidiary, amounts held in escrow to be applied as part of the purchase price of any Asset Disposition and (c) taxes paid or payable as a result thereof; it being understood that "Net Cash Proceeds" shall include, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received by the Borrower or any Subsidiary in any Asset Disposition, Equity Issuance or Debt Issuance and any cash released from escrow as part of the purchase price in connection with any Asset Disposition. "Network" shall mean any of the National Broadcasting Company, Inc., ------- American Broadcasting Company, Inc., CBS Television Network, Inc., Fox Broadcasting Company, United Paramount Network or the Warner Brothers Network. "Note" or "Notes" shall mean the Revolving Notes, the Tranche A Term ---- ----- Notes and/or the Tranche B Term Notes, collectively, separately or individually, as appropriate. "Notice of Borrowing" shall mean the written notice of borrowing as ------------------- referenced and defined in Section 2.1(b)(i). 19 "Notice of Conversion/Extension" shall mean the written notice of ------------------------------ extension or conversion as referenced and defined in Section 2.11. "Obligations" shall mean, collectively, Loans and LOC Obligations. ----------- "Ownership Reports" shall mean with respect to any Television Station ----------------- owned by any Credit Party, the report and certifications filed with the FCC pursuant to 47 C.F.R. [sec]73.3615, or any comparable reports filed pursuant to any successor regulation thereto or otherwise required by applicable Communications Law. "Parent" shall mean Fisher Communications, Inc., a Washington ------ corporation. "Parent Pledge Agreement" shall mean the Pledge Agreement dated as of ----------------------- the Closing Date executed by the Parent and delivered to the Administrative Agent. "Participant" shall have the meaning set forth in Section 9.6(b). ----------- "Participation Interest" shall mean a participation interest purchased ---------------------- by a Lender in LOC Obligations as provided in Section 2.5(c). "Patent Licenses" shall mean all agreements, whether written or oral, --------------- providing for the grant by or to a Person of any right to manufacture, use or sell any invention covered by a Patent, including, without limitation, any thereof referred to in Schedule 3.16 to the Credit Agreement. ------------- "Patents" shall mean all letters patent of the United States or any ------- other country, now existing or hereafter arising, and all improvement patents, reissues, reexaminations, patents of additions, renewals and extensions thereof, including, without limitation, any thereof referred to in Schedule -------- 3.16 to this Credit Agreement, and (ii) all applications for letters patent of - ---- the United States or any other country, now existing or hereafter arising, and all provisionals, divisions, continuations and continuations-in-part and substitutes thereof, including, without limitation, any thereof referred to in Schedule 3.16 to this Credit Agreement. - ------------- "PBGC" shall mean the Pension Benefit Guaranty Corporation established ---- pursuant to Subtitle A of Title IV of ERISA. "Permitted Acquisition" shall mean an acquisition or any series of --------------------- related acquisitions of the type of business permitted to be engaged in by the Borrower and its Subsidiaries pursuant to Section 6.4 hereof so long as (a) no Default or Event of Default shall then exist or would exist after giving effect thereto, (b) the Credit Parties shall demonstrate to the reasonable satisfaction of the Administrative Agent that the Credit Parties will be in pro forma compliance with all of the terms and provisions of the financial covenants set forth in Section 5.9, (c) the Administrative Agent, on behalf of the Lenders, shall have received (or shall receive in connection with the closing of such acquisition) a first priority perfected security interest in the property acquired and (d) if the total consideration (including, without limitation, assumed liabilities, earnout payments and any other deferred payment) for the business or property acquired in such acquisition or 20 series of related acquisitions exceeds $5,000,000, the Required Lenders shall have approved such acquisition(s); provided that no such approval of the -------- Required Lenders shall be required if, after giving effect to such acquisition(s) on a pro forma basis consistent with Section 1.3, the Leverage Ratio is less than 3.5 to 1.0. "Permitted Investments" shall mean: --------------------- (i) cash and Cash Equivalents; (ii) Investments existing as of the Closing Date and set forth on Schedule 1.1-2; -------------- (iii) receivables owing to the Borrower or any of its Subsidiaries or any receivables and advances to suppliers, in each case if created, acquired or made in the ordinary course of business and payable or dischargeable in accordance with customary trade terms, business practices consistent with those of the Borrower and its Subsidiaries existing on the Closing Date and prudent industry practices; (iv) Investments in and loans to any Credit Party expressly subordinated in all cases to the Credit Party Obligations pursuant to the terms of the Subordination Agreement; (v) loans and advances to officers, directors and employees in an aggregate amount not to exceed $1,000,000 at any time outstanding; (vi) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (vii) Investments, acquisitions or transactions permitted under Section 6.5(b); and (viii) additional loans, advances and/or Investments of a nature not contemplated by the foregoing clauses hereof, provided that such loans, advances and/or investments made pursuant to this clause (viii) shall not exceed an aggregate amount of $2,000,000. "Permitted Liens" shall mean: --------------- (i) Liens created by or otherwise existing under or in connection with this Credit Agreement or the other Credit Documents in favor of the Lenders; (ii) Liens in favor of a Lender or any affiliate of a Lender hereunder in connection with Hedging Agreements, but only (A) to the extent such Liens secure 21 obligations under Hedging Agreements with any Lender, or any affiliate of a Lender, (B) to the extent such Liens are on the same collateral as to which the Administrative Agent on behalf of the Lenders also has a Lien, (C) if such Hedging Agreement counterparty and the Lenders shall share pari passu in the collateral subject to such Liens and (D) to the ---- ----- extent such Hedging Agreements are permitted by Section 6.1(d); (iii) Liens securing purchase money indebtedness and Capital Lease Obligations (and refinancings thereof) to the extent permitted under Section 6.1(c); provided, that (A) any such Lien attaches to such property concurrently with or within 30 days after the acquisition thereof and (B) such Lien attaches solely to the property so acquired in such transaction; (iv) Liens for taxes, assessments, charges or other governmental levies not yet due or as to which the period of grace (not to exceed 60 days), if any, related thereto has not expired or which are being contested in good faith by appropriate proceedings, provided -------- that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of Subsidiaries with significant operations outside of the United States of America, generally accepted accounting principles in effect from time to time in their respective jurisdictions of organization); (v) statutory Liens such as carriers', warehousemen's, mechanics', materialmen's, landlords', repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings; (vi) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (vii) deposits to secure leases incurred in the ordinary course of business; (viii) easements, rights of way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; and (ix) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Lien referred to in the foregoing clauses; provided that such extension, -------- renewal or replacement Lien shall be limited to all or a part of the property which secured the Lien so extended, renewed or replaced (plus improvements on such property). 22 "Permitted Parent Debt" shall mean any Indebtedness of the Parent that --------------------- (a) is existing as of the Closing Date and set forth on Schedule 1.1-3 (together -------------- with renewals, refinancings or extensions thereof in a principal amount not in excess of the principal amount outstanding as of the date of any such renewal, refinancing or extension) or (b) is incurred after the Closing Date and approved by the Administrative Agent. "Permitted Parent Liens" shall mean any Liens securing Permitted Parent ---------------------- Debt that (a) are existing as of the Closing Date and set forth on Schedule -------- 1.1-4 or (b) granted after the Closing Date and approved by the Administrative - ----- Agent. "Person" shall mean an individual, partnership, corporation, limited ------ liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan" shall mean, at any particular time, any employee benefit plan ---- which is covered by Title IV of ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreements" shall mean (i) the Pledge Agreement dated as of the ----------------- Closing Date executed by the Borrower and the Guarantors and delivered to the Administrative Agent, (ii) the Parent Pledge Agreement and (iii) any other Pledge Agreement executed by a Credit Party or an Additional Credit Party and delivered to the Administrative Agent, in each case as the same may from time to time be amended, supplemented or otherwise modified in accordance with the terms hereof and thereof. "Prime Rate" shall have the meaning set forth in the definition of ---------- Alternate Base Rate. "Program" shall mean any television series or other program produced or ------- distributed television release (including any syndicated series or other program regardless of its medium of initial exploitation), in each case whether recorded on film, videotape, audiotape, cassette cartridge, disc or by any other means, method, process or device, whether now known or hereafter developed. "Program Contracts" shall mean all contracts for television, film, ----------------- programs, music and related audio rights, syndicated series exhibition rights and other similar rights acquired under license agreements. "Program Rights" shall mean any right whether arising under Program -------------- Contracts or otherwise, to sell, distribute, subdistribute, exhibit, lease, sublease, license, sublicense or otherwise exploit Programs. "Program Rights Costs" shall mean the maximum amount which the Borrower -------------------- and/or any of its Subsidiaries or its or their co-ventures have furnished or have contractually committed to 23 furnish (whether or not such commitments shall be reflected as an asset or liability on the Consolidated balance sheet of the Borrower) toward the production or acquisition by the Borrower and/or any of its Subsidiaries or its or their co-venturers of any Program Rights with respect to any Program. "Programming Amortization Expense" shall mean as at any date of -------------------------------- determination, total amortization expense of the Borrower and its Subsidiaries for the period of four (4) immediately preceding consecutive fiscal quarters ending on or prior to such date of determination which is directly attributable to Programs, Program Rights or Program Contracts, determined on a Consolidated basis. "Programming Cash Payments" shall mean, for any period, the aggregate ------------------------- cash payments actually made by Borrower and its Subsidiaries on a Consolidated basis during such period in respect of Programming Obligations. "Programming Obligations" shall mean, as at any date of determination, ----------------------- all direct or indirect liabilities (including, but without duplication, any Guaranty Obligations relating to or arising in connection with a Programming Obligation), contingent or otherwise, with respect to Program Contracts, Programs or Program Rights (including, without limitation, all Program Rights Costs) of the Borrower and its Subsidiaries, whether or not reflected on the Consolidated balance sheet of the Borrower and its Subsidiaries. "Properties" shall have the meaning set forth in Section 3.10(a). ---------- "PUC" shall mean any state, provincial or other local regulatory agency --- or body that exercises jurisdiction over the rates or services or the ownership, construction or operation of any television or radio station or over Persons who own, construct or operate any television or radio station, in each case by reason of the nature or type of the business subject to regulation and not pursuant to laws and regulations of general applicability to Persons conducting business in any such jurisdiction. "PUC Authorizations" shall mean any application or registration with, ------------------ and any validation, exemption, franchise, waiver, approval, order or authorization, consent, license, certificate and permit (other than any building permit) from any PUC. "Purchasing Lenders" shall have the meaning set forth in Section ------------------ 9.6(c). "Radio Groups" shall mean Radio Stations that are grouped together for ------------ financial reporting purposes, including the "Radio Seattle Group," the "Radio Portland Group," the "Regional Radio Group" and any other set of Radio Stations designated by the Borrower as a group for financial reporting purposes. "Radio Station" shall mean all of the radio stations owned and operated ------------- by the Borrower and its Subsidiaries (including all radio stations acquired through Permitted Acquisitions); 24 provided, in the case of a disposition permitted pursuant to the terms hereof, such term shall not include any radio station transferred in connection with such disposition. "Recovery Event" shall mean the receipt by the Borrower or any of its -------------- Subsidiaries of any cash insurance proceeds or condemnation award payable by reason of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective property or assets. "Reduction Date" shall have the meaning set forth in Section -------------- 2.7(b)(ii). "Register" shall have the meaning set forth in Section 9.6(d). -------- "Regularly Scheduled Reduction Amounts" shall have the meaning set ------------------------------------- forth in Section 2.7(b)(ii). "Reimbursement Obligation" shall mean the obligation of the Borrower to ------------------------ reimburse the Issuing Lender pursuant to Section 2.5(d) for amounts drawn under Letters of Credit. "Reorganization" shall mean, with respect to any Multiemployer Plan, -------------- the condition that such Plan is in reorganization within the meaning of such term as used in Section 4241 of ERISA. "Reportable Event" shall mean any of the events set forth in Section ---------------- 4043(c) of ERISA, other than those events as to which the thirty-day notice period is waived under PBGC Reg. [sec]4043. "Required Lenders" shall mean Lenders holding in the aggregate not less ---------------- than 51% of the sum of (i) all Revolving Loans and LOC Obligations then outstanding at such time plus the aggregate unused Revolving Commitments at such time (treating for purposes hereof in the case of LOC Obligations, in the case of the Issuing Lender, only the portion of the LOC Obligations of the Issuing Lender which is not subject to the Participation Interests of the other Lenders and, in the case of the Lenders other than the Issuing Lender, the Participation Interests of such Lenders in LOC Obligations hereunder as direct Obligations) and (ii) the principal amount of the Term Loans then outstanding at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time, - -------- ------- then there shall be excluded from the determination of Required Lenders, Obligations (including Participation Interests) owing to such Defaulting Lender and such Defaulting Lender's Commitments, or after termination of the Commitments, the principal balance of the Obligations owing to such Defaulting Lender. "Requirement of Law" shall mean, as to any Person, the Certificate of ------------------ Incorporation and By-laws or other organizational or governing documents of such Person, and each law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 25 "Responsible Officer" shall mean, (a) as to the Borrower, the ------------------- President, the Assistant Secretary or the sole Director or (b) as to any other Credit Party, the Manager, the President or the Assistant Secretary. "Restricted Payment" shall mean (a) any dividend or other distribution, ------------------ direct or indirect, on account of any shares of any class of Capital Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding, (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding and (d) the payment by the Borrower or any of its Subsidiaries of any management or consulting fee to any Person or of any salary, bonus or other form of compensation to any Person who is directly or indirectly a significant partner, shareholder, owner or executive officer of any such Person, to the extent such salary, bonus or other form of compensation is not included in the corporate overhead of the Borrower or such Subsidiary. "Revolving Commitment" shall mean, with respect to each Lender, the -------------------- commitment of such Lender to make Revolving Loans in an aggregate principal amount at any time outstanding up to such Lender's Revolving Committed Amount as specified in Schedule 2.1(a), as such amount may be reduced from time to time in --------------- accordance with the provisions hereof. "Revolving Commitment Percentage" shall mean, for each Lender, the ------------------------------- percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a), --------------- as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 9.6(c). "Revolving Commitment Termination Date" shall mean February 29, 2008. ------------------------------------- "Revolving Committed Amount" shall have the meaning set forth in -------------------------- Section 2.1(a). "Revolving Loans" shall have the meaning set forth in Section 2.1. --------------- "Revolving Note" or "Revolving Notes" shall mean the promissory notes -------------- --------------- of the Borrower in favor of each of the Lenders evidencing the Revolving Loans provided pursuant to Section 2.1(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, supplemented, extended, renewed or replaced from time to time. "S&P" shall mean Standard & Poor's Ratings Services, a division of The --- McGraw Hill Companies, Inc. "Security Agreements" shall mean (i) the Security Agreement dated as of ------------------- the Closing Date executed by the Borrower and the Guarantors and delivered to the Administrative Agent and (ii) any other Security Agreement executed by a Credit Party or an Additional Credit Party 26 and delivered to the Administrative Agent, in each case as amended, modified or supplemented from time to time in accordance with its terms. "Security Documents" shall mean the Security Agreements, the Pledge ------------------ Agreements and such other documents executed and delivered in connection with the attachment and perfection of the Administrative Agent's security interests and Liens arising thereunder, including, without limitation, UCC financing statements and patent, trademark and copyright filings. "Single Employer Plan" shall mean any Plan that is not a Multiemployer -------------------- Plan. "Specified Sales" shall mean (a) the sale, transfer, lease or other --------------- disposition of inventory, materials and other assets in the ordinary course of business (which in no event shall be deemed to include the sale of all or substantially all of the assets of a Station) and (b) the sale, transfer or other disposition of cash or Cash Equivalents. "Stations" shall mean a collective reference to the Television Stations -------- and the Radio Stations. "Subordination Agreement" shall mean the Subordination Agreement dated ----------------------- as of the Closing Date executed by the Credit Parties in favor of the Administrative Agent, pursuant to which the Credit Parties have agreed to subordinate intercompany loans between or among the Credit Parties to the payment in full of the Credit Party Obligations. "Subsidiary" shall mean, as to any Person, a corporation, partnership, ---------- limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Credit Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "Taxes" shall have the meaning set forth in Section 2.19. ----- "Television Station" shall mean all of the television stations owned ------------------ and operated by the Borrower and its Subsidiaries (including all television stations acquired through Permitted Acquisitions); provided, in the case of a disposition permitted pursuant to the terms hereof, such term shall not include any television station transferred in connection with such disposition. "Term Loans" shall mean, collectively, the Tranche A Term Loans and the ---------- Tranche B Term Loans. 27 "Trademark License" shall mean any agreement, whether written or oral, ----------------- providing for the grant by or to a Person of any right to use any Trademark, including, without limitation, any thereof referred to in Schedule 3.16 to this ------------- Credit Agreement. "Trademarks" shall mean all trademarks, trade names, corporate names, ---------- company names, business names, fictitious business names, service marks, elements of package or trade dress of goods or services, logos and other source or business identifiers (other than such items that are of de minimus value), together with the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, including, without limitation, any thereof referred to in Schedule 3.16 to this ------------- Credit Agreement, and (ii) all renewals thereof including, without limitation, any thereof referred to in Schedule 3.16. ------------- "Tranche" shall mean the collective reference to (a) LIBOR Rate Loans ------- whose Interest Periods begin and end on the same day and (b) Alternate Base Rate Loans made on the same day. A Tranche with respect to LIBOR Rate Loans may sometimes be referred to as a "Eurodollar Tranche". "Tranche A Term Loan" shall have the meaning set forth in Section ------------------- 2.2(a). "Tranche A Term Loan Commitment" shall mean, with respect to each ------------------------------ Lender, the commitment of such Lender to make its portion of the Tranche A Term Loan in a principal amount equal to such Lender's Tranche A Term Loan Commitment Percentage of the Tranche A Term Loan Committed Amount. "Tranche A Term Loan Commitment Percentage" shall mean, for any Lender, ----------------------------------------- the percentage identified as its Tranche A Term Loan Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any - --------------- assignment made in accordance with the provisions of Section 9.6(c). "Tranche A Term Loan Committed Amount" shall have the meaning set forth ------------------------------------ in Section 2.2(a). "Tranche A Term Loan Maturity Date" shall mean February 29, 2008. --------------------------------- "Tranche A Term Note" or "Tranche A Term Notes" shall mean the -------------------- ---------------------- promissory notes of the Borrower in favor of each of the Lenders evidencing the portion of the Tranche A Term Loan provided pursuant to Section 2.2(d), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "Tranche B Term Loan" shall have the meaning set forth in Section ------------------- 2.3(a). 28 "Tranche B Term Loan Commitment" shall mean, with respect to each ------------------------------ Lender, the commitment of such Lender to make its portion of the Tranche B Term Loan in a principal amount equal to such Lender's Tranche B Term Loan Commitment Percentage of the Tranche B Term Loan Committed Amount. "Tranche B Term Loan Commitment Percentage" shall mean, for any Lender, ----------------------------------------- the percentage identified as its Tranche B Term Loan Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any - --------------- assignment made in accordance with the provisions of Section 9.6(c). "Tranche B Term Loan Committed Amount" shall have the meaning set forth ------------------------------------ in Section 2.3(a). "Tranche B Term Loan Maturity Date" shall mean February 28, 2010. --------------------------------- "Tranche B Term Note" or "Tranche B Term Notes" shall mean the -------------------- ---------------------- promissory notes of the Borrower in favor of each of the Lenders evidencing the portion of the Tranche B Term Loan provided pursuant to Section 2.3(d), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "Transfer Effective Date" shall mean the effective date of any ----------------------- Commitment Transfer Supplement. "2.19 Certificate" shall have the meaning set forth in Section 2.19. ---------------- "Type" shall mean, as to any Loan, its nature as an Alternate Base Rate ---- Loan or LIBOR Rate Loan, as the case may be. "Voting Stock" of a corporation, limited liability company or ------------ partnership shall mean, at any time, all classes of the Capital Stock or other voting securities of such Person then outstanding and ordinarily entitled to vote in the election of directors (or similar governing authority). SECTION 1.2 OTHER DEFINITIONAL PROVISIONS. ------------------------------ (a) Unless otherwise specified therein, all terms defined in this Credit Agreement shall have the defined meanings when used in the Notes or other Credit Documents or any certificate or other document made or delivered pursuant hereto. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Credit Agreement shall refer to this Credit Agreement as a whole and not to any particular provision of this Credit Agreement, and Section, subsection, Schedule and Exhibit references are to this Credit Agreement unless otherwise specified. 29 (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 1.3 ACCOUNTING TERMS. ---------------- Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP applied on a basis consistent with the most recent audited Consolidated financial statements of the Borrower delivered to the Lenders; provided that, if the Borrower notifies the Administrative Agent that it wishes - -------- to amend any covenant in Section 5.9 to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Section 5.9 for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. The Borrower shall deliver to the Administrative Agent and each Lender at the same time as the delivery of any annual or quarterly financial statements given in accordance with the provisions of Section 5.1, (i) a description in reasonable detail of any material change in the application of accounting principles employed in the preparation of such financial statements from those applied in the most recently preceding quarterly or annual financial statements as to which no objection shall have been made in accordance with the provisions above and (ii) a reasonable estimate of the effect on the financial statements on account of such changes in application. For purposes of computing the financial covenants set forth in Section 5.9 for any applicable test period, any Permitted Acquisition or permitted sale of assets (including a stock sale) shall have been deemed to have taken place as of the first day of such applicable test period. ARTICLE II THE LOANS; AMOUNT AND TERMS SECTION 2.1 REVOLVING LOANS. --------------- (a) Revolving Commitment. During the Commitment Period, -------------------- subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ("Revolving Loans") to the --------------- Borrower from time to time for the purposes hereinafter set forth; provided, however, that (i) with regard to each Lender individually, -------- ------- the sum of such Lender's share of outstanding Revolving Loans plus such ---- Lender's LOC Commitment Percentage of LOC Obligations shall not exceed such Lender's Revolving Commitment Percentage of the aggregate Revolving Committed Amount, and (ii) with regard to the Lenders collectively, the sum of the aggregate amount of outstanding Revolving Loans 30 plus LOC Obligations shall not exceed the aggregate Revolving ---- Committed Amount then in effect. For purposes hereof, the aggregate amount of Revolving Loans available hereunder shall be TWENTY-FIVE Million DOLLARS ($25,000,000) (as such aggregate maximum amount may be reduced from time to time as provided in Section 2.7, the "Revolving --------- Committed Amount"). Revolving Loans may consist of Alternate Base Rate ---------------- Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower may request, and may be repaid and reborrowed in accordance with the provisions hereof; provided, however, Revolving Loans made on the -------- ------- Closing Date or on any of the three Business Days following the Closing Date may only consist of Alternate Base Rate Loans. (b) Revolving Loan Borrowings. ------------------------- (i) Notice of Borrowing. The Borrower shall ------------------- request a Revolving Loan borrowing by written notice (or telephone notice promptly confirmed in writing which confirmation may be by fax) to the Administrative Agent not later than 1:00 P.M. (Charlotte, North Carolina time) on the Business Day prior to the date of the requested borrowing in the case of Alternate Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of LIBOR Rate Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Alternate Base Rate Loans, LIBOR Rate Loans or a combination thereof, and if LIBOR Rate Loans are requested, the Interest Period(s) therefor. A form of Notice of Borrowing (a "Notice of Borrowing") is attached ------------------- as Schedule 2.1(b)(i). If the Borrower shall fail to specify ------------------ in any such Notice of Borrowing (I) an applicable Interest Period in the case of a LIBOR Rate Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for an Alternate Base Rate Loan hereunder. The Administrative Agent shall give notice to each Lender promptly upon receipt of each Notice of Borrowing, the contents thereof and each such Lender's share thereof. (ii) Advances. Each Lender will make its -------- Revolving Commitment Percentage of each Revolving Loan borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 9.2, or at such other office as the Administrative Agent may designate in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing, in Dollars and in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. 31 (c) Repayment. The principal amount of all Revolving --------- Loans shall be due and payable in full on the Revolving Commitment Termination Date. (d) Interest. Subject to the provisions of Section 2.10, -------- Revolving Loans shall bear interest as follows: (i) Alternate Base Rate Loans. During such ------------------------- periods as Revolving Loans shall be comprised of Alternate Base Rate Loans, each such Alternate Base Rate Loan shall bear interest at a per annum rate equal to the sum of the Alternate Base Rate plus the Applicable Percentage; and ---- (ii) LIBOR Rate Loans. During such periods as ---------------- Revolving Loans shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at a per annum rate equal to the sum of the LIBOR Rate plus the Applicable ---- Percentage. Interest on Revolving Loans shall be payable in arrears on each Interest Payment Date. (e) Revolving Notes. The Borrower's obligation to pay ---------------- each Lender's Revolving Loans shall be evidenced by a Revolving Note made payable to such Lender in substantially the form of Schedule -------- 2.1(e). ------ SECTION 2.2 TRANCHE A TERM LOANS. -------------------- (a) Tranche A Term Loan. Subject to the terms and ------------------- conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Administrative Agent on the Closing Date such Lender's Tranche A Term Loan Commitment Percentage of a term loan in Dollars (the "Tranche A Term Loans") in the aggregate principal -------------------- amount of FORTY-FIVE MILLION DOLLARS ($45,000,000) (the "Tranche A --------- Term Loan Committed Amount") for the purposes hereinafter set forth. -------------------------- The Tranche A Term Loans may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower may request; provided, however, Tranche A Term Loans made on the Closing -------- ------- Date may only consist of Alternate Base Rate Loans. Amounts repaid on the Tranche A Term Loans may not be reborrowed. (b) Repayment of Tranche A Term Loans. The principal --------------------------------- amount of the Tranche A Term Loans shall be repaid in twenty (20) consecutive calendar quarterly installments as follows, unless accelerated sooner pursuant to Section 7.2: 32
------------------------------- ------------------------------------ ------------------------------------ Tranche A Term Loan Principal Percentage of Tranche A Term Loan Principal Amortization Amortization Payment Committed Amount Amortized Payment Dates ------------------------------- ------------------------------------ ------------------------------------ May 31, 2003 $1,125,000 2.50% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2003 $1,125,000 2.50% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2003 $1,125,000 2.50% ------------------------------- ------------------------------------ ------------------------------------ February 29, 2004 $1,125,000 2.50% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2004 $1,687,500 3.75% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2004 $1,687,500 3.75% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2004 $1,687,500 3.75% ------------------------------- ------------------------------------ ------------------------------------ February 28, 2005 $1,687,500 3.75% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2005 $1,687,500 3.75% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2005 $1,687,500 3.75% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2005 $1,687,500 3.75% ------------------------------- ------------------------------------ ------------------------------------ February 28, 2006 $1,687,500 3.75% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2006 $2,250,000 5.00% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2006 $2,250,000 5.00% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2006 $2,250,000 5.00% ------------------------------- ------------------------------------ ------------------------------------ February 28, 2007 $2,250,000 5.00% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2007 $4,500,000 10.00% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2007 $4,500,000 10.00% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2007 $4,500,000 10.00% ------------------------------- ------------------------------------ ------------------------------------ Tranche A Term Loan Maturity $4,500,000 10.00% Date ------------------------------- ------------------------------------ ------------------------------------
(c) Interest on the Tranche A Term Loans. Subject to the ------------------------------------ provisions of Section 2.10, the Tranche A Term Loans shall bear interest as follows: (i) Alternate Base Rate Loans. During such ------------------------- periods as the Tranche A Term Loans shall be comprised of Alternate Base Rate Loans, each such Alternate Base Rate Loan shall bear interest at a per annum rate equal to the sum of the Alternate Base Rate plus the Applicable Percentage; and ---- (ii) LIBOR Rate Loans. During such periods as the ---------------- Tranche A Term Loans shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at a per annum rate equal to the sum of the LIBOR Rate plus the Applicable ---- Percentage. Interest on the Tranche A Term Loans shall be payable in arrears on each Interest Payment Date. (d) Tranche A Term Loan Notes. The Borrower's obligation ------------------------- to pay each Lender's portion of the Tranche A Term Loan shall be evidenced by a Tranche A Term Loan Note made payable to such Lender in substantially the form of Schedule 2.2(d). --------------- 33 SECTION 2.3 TRANCHE B TERM LOANS. -------------------- (a) Tranche B Term Loan. Subject to the terms and ------------------- conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Administrative Agent on the Closing Date such Lender's Tranche B Term Loan Commitment Percentage of a term loan in Dollars (the "Tranche B Term Loans") in the aggregate principal -------------------- amount of EIGHTY MILLION DOLLARS ($80,000,000) (the "Tranche B Term -------------- Loan Committed Amount") for the purposes hereinafter set forth. The --------------------- Tranche B Term Loans may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower may request; provided, however, Tranche B Term Loans made on the Closing -------- ------- Date may only consist of Alternate Base Rate Loans. Amounts repaid on the Tranche B Term Loans may not be reborrowed. (b) Repayment of Tranche B Term Loans. The principal --------------------------------- amount of the Tranche B Term Loans shall be repaid in twenty-eight (28) consecutive calendar quarterly installments as follows, unless accelerated sooner pursuant to Section 7.2:
------------------------------- ------------------------------------ ------------------------------------ Principal Amortization Tranche B Term Loan Principal Percentage of Tranche B Term Loan Payment Dates Amortization Payment Committed Amount Amortized ------------------------------- ------------------------------------ ------------------------------------ May 31, 2003 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2003 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2003 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ February 29, 2004 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2004 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2004 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2004 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ February 28, 2005 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2005 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2005 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2005 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ February 28, 2006 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2006 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2006 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2006 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ February 28, 2007 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2007 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2007 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2007 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ February 29, 2008 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2008 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2008 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2008 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------
34
------------------------------- ------------------------------------ ------------------------------------ Principal Amortization Tranche B Term Loan Principal Percentage of Tranche B Term Loan Payment Dates Amortization Payment Committed Amount Amortized ------------------------------- ------------------------------------ ------------------------------------ February 28, 2009 $200,000 0.25% ------------------------------- ------------------------------------ ------------------------------------ May 31, 2009 $18,800,000 23.5% ------------------------------- ------------------------------------ ------------------------------------ August 31, 2009 $18,800,000 23.5% ------------------------------- ------------------------------------ ------------------------------------ November 30, 2009 $18,800,000 23.5% ------------------------------- ------------------------------------ ------------------------------------ Tranche B Term Loan Maturity $18,800,000 23.5% Date ------------------------------- ------------------------------------ ------------------------------------
(c) Interest on the Tranche B Term Loans. Subject to the ------------------------------------ provisions of Section 2.10, the Tranche B Term Loans shall bear interest as follows: (i) Alternate Base Rate Loans. During such ------------------------- periods as the Tranche B Term Loans shall be comprised of Alternate Base Rate Loans, each such Alternate Base Rate Loan shall bear interest at a per annum rate equal to the sum of the Alternate Base Rate plus the Applicable Percentage; and ---- (ii) LIBOR Rate Loans. During such periods as the ---------------- Tranche B Term Loans shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at a per annum rate equal to the sum of the LIBOR Rate plus the Applicable ---- Percentage. Interest on the Tranche B Term Loans shall be payable in arrears on each Interest Payment Date. (d) Tranche B Term Loan Notes. The Borrower's obligation ------------------------- to pay each Lender's portion of the Tranche B Term Loan shall be evidenced by a Tranche B Term Loan Note made payable to such Lender in substantially the form of Schedule 2.3(d). --------------- SECTION 2.4 INCREMENTAL FACILITIES. ---------------------- Subject to the terms and conditions set forth herein, the Borrower shall have the right, at any time and from time to time from the Closing Date until the second anniversary of the Closing Date, to incur additional Indebtedness under this Agreement in the form of one or more additional term loan facilities or an increase to the existing Tranche B Term Loan facility (each an "Incremental Facility") by an aggregate amount of up to $25,000,000. -------------------- The following terms and conditions shall apply to each Incremental Facility: (a) the loans made under any such Incremental Facility (each an "Additional Loan") --------------- shall constitute Credit Party Obligations and will be secured and guaranteed with the other Loans on a pari passu basis, (b) any such Incremental Facility shall either (i) be in the form of an increase to the existing Tranche B Term Loan facility and shall have the same terms (including interest rate, weighted average life and maturity date) as the existing Tranche B Term Loan facility or (ii) have (A) a weighted average life to maturity greater than the weighted average life to maturity of the Tranche B Term Loans, (B) a final maturity at least six months longer than the Tranche B Term Loan Maturity Date and 35 (C) an interest rate margin to be determined at the time such Incremental Facility is made available, (c) any such Incremental Facility shall be entitled to the same voting rights as the existing Loans and shall be entitled to receive proceeds of prepayments on the same basis as comparable Loans, (d) any such Incremental Facility shall be obtained from existing Lenders or from other banks, financial institutions or investment funds, in each case in accordance with the terms set forth below, (e) any such Incremental Facility shall be in a minimum principal amount of $10,000,000 and integral multiples of $1,000,000 in excess thereof, (f) the proceeds of any Additional Loan will be used to finance capital expenditures and working capital and other general corporate purposes, including Permitted Acquisitions, (g) the Borrower shall execute such promissory notes as are necessary to reflect the Additional Loans under any such Incremental Facility, (h) the conditions to Extensions of Credit in Section 4.2 shall have been satisfied and (i) the Agent shall have received from the Borrower updated financial projections and an officer's certificate, in each case in form and substance satisfactory to the Agent, demonstrating that, after giving effect to any such Incremental Facility, the Borrower will be in compliance with the financial covenants set forth in Section 5.9. Participation in any such Incremental Facility hereunder shall be offered first to each of the existing Lenders, but each such Lender shall have no obligation to provide all or any portion of such Incremental Facility. If the amount of the Incremental Facility requested by the Borrower shall exceed the commitments which the existing Lenders are willing to provide with respect to such Incremental Facility, then the Borrower may invite other banks, financial institutions and investment funds reasonably acceptable to the Administrative Agent to join this Agreement as Lenders hereunder for the portion of such Incremental Facility not taken by existing Lenders, provided that such other -------- banks, financial institutions and investment funds shall enter into such joinder agreements to give effect thereto as the Administrative Agent and the Borrower may reasonably request. The Administrative Agent is authorized to enter into, on behalf of the Lenders, any amendment to this Agreement or any other Credit Document as may be necessary to incorporate the terms of any new Incremental Facility therein. SECTION 2.5 LETTER OF CREDIT SUBFACILITY. ---------------------------- (a) Issuance. Subject to the terms and conditions hereof -------- and of the LOC Documents, if any, and any other terms and conditions which the Issuing Lender may reasonably require, during the Commitment Period the Issuing Lender shall issue, and the Lenders shall participate in, Letters of Credit for the account of the Borrower from time to time upon request in a form acceptable to the Issuing Lender; provided, however, that (i) the aggregate amount of LOC Obligations -------- ------- shall not at any time exceed TWO MILLION DOLLARS ($2,000,000) (the "LOC --- Committed Amount"), (ii) the sum of the aggregate amount of Revolving ---------------- Loans plus LOC Obligations shall not at any time exceed the aggregate ---- Revolving Committed Amount then in effect, (iii) all Letters of Credit shall be denominated in U.S. Dollars and (iv) Letters of Credit shall be issued for any lawful corporate purposes and may be issued as standby letters of credit, including in connection with workers' compensation and other insurance programs. Except as otherwise expressly agreed upon by all the Lenders, no Letter of Credit shall have an original expiry date more than twelve (12) months from the date of issuance; provided, however, so long as no Default or Event of -------- ------- Default has occurred and is continuing and subject to the other 36 terms and conditions to the issuance of Letters of Credit hereunder, the expiry dates of Letters of Credit may be extended annually or periodically from time to time on the request of the Borrower or by operation of the terms of the applicable Letter of Credit to a date not more than twelve (12) months from the date of extension; provided, further, that no Letter of Credit, as originally issued or -------- ------- as extended, shall have an expiry date extending beyond the Revolving Commitment Termination Date. Each Letter of Credit shall comply with the related LOC Documents. The issuance and expiry date of each Letter of Credit shall be a Business Day. Any Letters of Credit issued hereunder shall be in a minimum original face amount of $100,000. There will be no more than five (5) Letters of Credit outstanding at any time. (b) Notice and Reports. The request for the issuance of a ------------------ Letter of Credit shall be submitted to the Issuing Lender at least five (5) Business Days prior to the requested date of issuance. The Issuing Lender will promptly upon request provide to the Administrative Agent for dissemination to the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of any prior report, and including therein, among other things, the account party, the beneficiary, the face amount, expiry date as well as any payments or expirations which may have occurred. The Issuing Lender will further provide to the Administrative Agent promptly upon request copies of the Letters of Credit. The Issuing Lender will provide to the Administrative Agent promptly upon request a summary report of the nature and extent of LOC Obligations then outstanding. (c) Participations. Each Lender with a Revolving -------------- Commitment (each a "LOC Participant") upon issuance of a Letter of --------------- Credit shall be deemed to have purchased without recourse a risk participation from the Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its LOC Commitment Percentage of the obligations under such Letter of Credit and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the Issuing Lender therefor and discharge when due, its LOC Commitment Percentage of the obligations arising under such Letter of Credit. Without limiting the scope and nature of each Lender's participation in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any LOC Document, each such Lender shall pay to the Issuing Lender its LOC Commitment Percentage of such unreimbursed drawing in same day funds on the day of notification by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of subsection (d) hereof. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) Reimbursement. In the event of any drawing under any ------------- Letter of Credit, the Issuing Lender will promptly notify the Borrower and the Administrative Agent. The 37 Borrower shall reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Revolving Loan obtained hereunder or otherwise) in same day funds as provided herein or in the LOC Documents. If the Borrower shall fail to reimburse the Issuing Lender as provided herein, the unreimbursed amount of such drawing shall bear interest at a per annum rate equal to the ABR Default Rate. Unless the Borrower shall immediately notify the Issuing Lender and the Administrative Agent of its intent to otherwise reimburse the Issuing Lender, the Borrower shall be deemed to have requested a Revolving Loan in the amount of the drawing as provided in subsection (e) hereof, the proceeds of which will be used to satisfy the reimbursement obligations. The Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of any rights of set-off, counterclaim or defense to payment the Borrower may claim or have against the Issuing Lender, the Administrative Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation any defense based on any failure of the Borrower to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit. The Issuing Lender will promptly notify the other Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Administrative Agent for the account of the Issuing Lender, in Dollars and in immediately available funds, the amount of such Lender's LOC Commitment Percentage of such unreimbursed drawing. Such payment shall be made on the day such notice is received by such Lender from the Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time), otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received. If such Lender does not pay such amount to the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Administrative Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date of such drawing until such Lender pays such amount to the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business Days of the date of drawing, the Federal Funds Effective Rate and thereafter at a rate equal to the Alternate Base Rate. Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Credit Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the Credit Party Obligations hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Repayment with Revolving Loans. On any day on which ------------------------------ the Borrower shall have requested, or been deemed to have requested, a Revolving Loan to reimburse a drawing under a Letter of Credit, the Administrative Agent shall give notice to the Lenders that have a Revolving Commitment that a Revolving Loan has been requested or deemed requested in connection with a drawing under a Letter of Credit, in which case a Revolving Loan borrowing comprised entirely of Alternate Base Rate Loans (each such borrowing, a "Mandatory Borrowing") shall be ------------------- immediately made (without giving effect to any termination of the Commitments pursuant to Section 7.2) pro rata based on each Lender's --- ---- respective Revolving Commitment Percentage (determined before giving effect 38 to any termination of the Commitments pursuant to Section 7.2) and the proceeds thereof shall be paid directly to the Issuing Lender for application to the respective LOC Obligations. Each Lender hereby irrevocably agrees to make such Revolving Loans immediately upon any such request or deemed request on account of each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the same such date notwithstanding (i) the amount of Mandatory --------------- Borrowing may not comply with the minimum amount (or integral amount in excess thereof) for borrowings of Revolving Loans otherwise required hereunder, (ii) whether any conditions specified in Section 4.2 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) failure for any such request or deemed request for Revolving Loan to be made by the time otherwise required in Section 2.1(b), (v) the date of such Mandatory Borrowing, or (vi) any reduction in the Revolving Committed Amount after any such Letter of Credit may have been drawn upon. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each such Lender hereby agrees that it shall forthwith fund (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) its Participation Interests in the outstanding LOC Obligations; provided, further, that -------- ------- in the event any Lender shall fail to fund its Participation Interest on the day the Mandatory Borrowing would otherwise have occurred, then the amount of such Lender's unfunded Participation Interest therein shall bear interest payable by such Lender to the Issuing Lender upon demand, at the rate equal to, if paid within two (2) Business Days of such date, the Federal Funds Effective Rate, and thereafter at a rate equal to the Alternate Base Rate. (f) Modification, Extension. The issuance of any ----------------------- supplement, modification, amendment, renewal, or extension to any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (g) Uniform Customs and Practices. The Issuing Lender may ----------------------------- have the Letters of Credit be subject to The Uniform Customs and Practice for Documentary Credits, as published as of the date of issue by the International Chamber of Commerce (the "UCP"), in which case the --- UCP may be incorporated therein and deemed in all respects to be a part thereof. (h) Designation of Subsidiaries as Account Parties. ---------------------------------------------- Notwithstanding anything to the contrary set forth in this Agreement, including without limitation Section 2.5(a), a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of a Subsidiary of the Borrower, provided that notwithstanding such statement, the Borrower shall be the actual account party for all purposes of this Agreement for such Letter of Credit and such statement shall not affect the Borrower's reimbursement obligations hereunder with respect to such Letter of Credit. 39 SECTION 2.6 FEES. ---- (a) Commitment Fee. In consideration of the Revolving -------------- Commitments, the Borrower agrees to pay to the Administrative Agent for the ratable benefit of the Lenders holding Revolving Commitments a commitment fee (the "Commitment Fee") in an amount equal to the -------------- Applicable Percentage per annum on the average daily unused amount of the aggregate Revolving Committed Amount. For purposes of computation of the Commitment Fee, LOC Obligations shall be considered usage. The Commitment Fee shall be payable quarterly in arrears not later than three (3) Business Days following the last day of each calendar quarter for the prior calendar quarter. (b) Letter of Credit Fees. In consideration of the LOC --------------------- Commitments, the Borrower agrees to pay to the Issuing Lender a fee (the "Letter of Credit Fee") equal to the Applicable Percentage per -------------------- annum on the average daily maximum amount available to be drawn under each Letter of Credit from the date of issuance to the date of expiration. In addition to such Letter of Credit Fee, the Borrower agrees to pay to the Issuing Lender, for its own account without sharing by the other Lenders, an additional fronting fee (the "Fronting -------- Fee") of one-eighth of one percent (1/8%) per annum on the average --- daily maximum amount available to be drawn under each such Letter of Credit issued by it. The Issuing Lender shall promptly pay over to the Administrative Agent for the ratable benefit of the Lenders (including the Issuing Lender) the Letter of Credit Fee. The Letter of Credit Fee and the Fronting Fee shall each be payable quarterly in arrears not later than three (3) Business Days following the last day of each calendar quarter for the prior calendar quarter. (c) Issuing Lender Fees. In addition to the Letter of ------------------- Credit Fees payable pursuant to subsection (b) hereof, the Borrower shall pay to the Issuing Lender for its own account without sharing by the other Lenders the reasonable and customary charges from time to time of the Issuing Lender with respect to the amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit (collectively, the "Issuing Lender Fees"). ------------------- (d) Administrative Fee. The Borrower agrees to pay to the ------------------ Administrative Agent the annual administrative fee as described in the Agent Fee Letter (the "Administrative Fees"). ------------------- SECTION 2.7 COMMITMENT REDUCTIONS. --------------------- (a) Voluntary Reductions. The Borrower shall have the -------------------- right to terminate or permanently reduce the unused portion of the Revolving Committed Amount at any time or from time to time upon not less than five Business Days' prior written notice to the Administrative Agent (which shall notify the Lenders thereof as soon as practicable) of each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction which shall be in a minimum amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof and shall be irrevocable and effective 40 upon receipt by the Administrative Agent; provided that no such -------- reduction or termination shall be permitted if after giving effect thereto, and to any prepayments of the Revolving Loans made on the effective date thereof, the sum of the then outstanding aggregate principal amount of the Revolving Loans plus LOC Obligations would ---- exceed the aggregate Revolving Committed Amount then in effect. Any such reduction in the Revolving Committed Amount shall be applied to, and serve to reduce, the Regularly Scheduled Reduction Amounts which would otherwise be required under Section 2.7(b)(ii) hereof pro rata as to such amounts. (b) Mandatory Reductions. (i) On any date that the -------------------- Revolving Loans are required to be prepaid pursuant to the terms of Section 2.8(b) (ii) - (vi), the Revolving Committed Amount shall be automatically permanently reduced by the amount of such required prepayment and/or reduction. Any such reduction in the Revolving Committed Amount shall be applied to, and serve to reduce, the Regularly Scheduled Reduction Amounts which would otherwise be required under Section 2.7(b)(ii) hereof pro rata as to such amounts. (ii) The Revolving Committed Amount shall be automatically permanently reduced by the following amounts on the following dates (each a "Reduction Date"): --------------
- ------------------------------- ----------------------------------- ------------------------------------ Amount of Revolving Committed Percentage of Revolving Committed Reduction Dates Amount Reduction Amount Reduced - ------------------------------- ----------------------------------- ------------------------------------ May 31, 2003 $625,000 2.50% - ------------------------------- ----------------------------------- ------------------------------------ August 31, 2003 $625,000 2.50% - ------------------------------- ----------------------------------- ------------------------------------ November 30, 2003 $625,000 2.50% - ------------------------------- ----------------------------------- ------------------------------------ February 29, 2004 $625,000 2.50% - ------------------------------- ----------------------------------- ------------------------------------ May 31, 2004 $937,500 3.75% - ------------------------------- ----------------------------------- ------------------------------------ August 31, 2004 $937,500 3.75% - ------------------------------- ----------------------------------- ------------------------------------ November 30, 2004 $937,500 3.75% - ------------------------------- ----------------------------------- ------------------------------------ February 28, 2005 $937,500 3.75% - ------------------------------- ----------------------------------- ------------------------------------ May 31, 2005 $937,500 3.75% - ------------------------------- ----------------------------------- ------------------------------------ August 31, 2005 $937,500 3.75% - ------------------------------- ----------------------------------- ------------------------------------ November 30, 2005 $937,500 3.75% - ------------------------------- ----------------------------------- ------------------------------------ February 28, 2006 $937,500 3.75% - ------------------------------- ----------------------------------- ------------------------------------ May 31, 2006 $1,250,000 5.00% - ------------------------------- ----------------------------------- ------------------------------------ August 31, 2006 $1,250,000 5.00% - ------------------------------- ----------------------------------- ------------------------------------ November 30, 2006 $1,250,000 5.00% - ------------------------------- ----------------------------------- ------------------------------------ February 28, 2007 $1,250,000 5.00% - ------------------------------- ----------------------------------- ------------------------------------ May 31, 2007 $2,500,000 10.00% - ------------------------------- ----------------------------------- ------------------------------------ August 31, 2007 $2,500,000 10.00% - ------------------------------- ----------------------------------- ------------------------------------ November 30, 2007 $2,500,000 10.00% - ------------------------------- ----------------------------------- ------------------------------------ Revolving $2,500,000 10.00% - ------------------------------- ----------------------------------- ------------------------------------ Commitment Termination Date - ------------------------------- ----------------------------------- ------------------------------------
41 The foregoing mandatory reduction amounts shall hereinafter be referred to as the "Regularly Scheduled ------------------- Reduction Amounts". ----------------- (c) Maturity Date. The Revolving Commitment and the LOC ------------- Commitment shall automatically terminate on the Revolving Commitment Termination Date. SECTION 2.8 PREPAYMENTS. ----------- (a) Optional Prepayments. The Borrower shall have the -------------------- right to prepay Loans in whole or in part from time to time; provided, -------- however, that (i) each partial prepayment of LIBOR Loans shall be in a ------- minimum principal amount of $2,000,000 and integral multiples of $1,000,000 in excess thereof and (ii) each partial prepayment of Alternate Base Rate Loans shall be in a minimum principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof. The Borrower shall give five Business Days' irrevocable notice in the case of LIBOR Rate Loans and one Business Day's irrevocable notice in the case of Alternate Base Rate Loans, to the Administrative Agent (which shall notify the Lenders thereof as soon as practicable). Subject to the foregoing terms, amounts prepaid under this Section 2.8(a) shall be applied first to Revolving Loans and then pro rata between the Tranche A Term Loans and the Tranche B Term Loans (and within each tranche of Term Loans, to the remaining principal amortization payments with respect to such tranche of Term Loans on a pro rata basis), in each case first to Alternate Base Rate Loans and then to LIBOR Rate Loans in direct order of Interest Period maturities. All prepayments under this Section 2.8(a) shall be subject to Section 2.18, but otherwise without premium or penalty. Interest on the principal amount prepaid shall be due and payable on any date that a prepayment is made hereunder through the date of prepayment. Amounts prepaid on the Revolving Loans may be reborrowed in accordance with the terms hereof. Amounts prepaid on the Term Loans may not be reborrowed. (b) Mandatory Prepayments. --------------------- (i) Revolving Committed Amount. If at any time -------------------------- after the Closing Date, the sum of the aggregate principal amount of outstanding Revolving Loans plus LOC Obligations shall exceed the aggregate Revolving Committed Amount then in effect, the Borrower immediately shall prepay the Revolving Loans and (after all Revolving Loans have been repaid) cash collateralize the LOC Obligations, in an amount sufficient to eliminate such excess. 42 (ii) Excess Cash Flow. Within ninety (90) days ---------------- after the end of each fiscal year (commencing with the fiscal year ending December 31, 2003), the Borrower shall prepay the Loans in an amount equal to (x) 50% of the Excess Cash Flow earned during such prior fiscal year less (y) the amount of any optional prepayments of the Term Loans or (to the extent accompanied by a reduction in the Revolving Committed Amount) the Revolving Loans during such prior fiscal year. Any payments of Excess Cash Flow shall be applied as set forth in clause (vii) below. (iii) Asset Dispositions. Promptly following any ------------------ Asset Disposition, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds derived from such Asset Disposition (such prepayment to be applied as set forth in clause (vii) below); provided, -------- however, that such Net Cash Proceeds shall not be required to ------- be so applied if (A) such Asset Disposition occurs on or after January 1, 2003 and (B) the Borrower delivers to the Administrative Agent a certificate stating that a Credit Party intends to use such Net Cash Proceeds to acquire fixed or capital assets in replacement of the disposed assets within 270 days of the receipt of such Net Cash Proceeds, it being expressly agreed that any Net Cash Proceeds not so reinvested shall be applied to repay the Loans immediately thereafter. (iv) Debt Issuances. Immediately upon receipt by -------------- any Credit Party of proceeds from any Debt Issuance, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of such Debt Issuance to the Lenders (such prepayment to be applied as set forth in clause (vii) below). (v) Issuances of Equity. Immediately upon ------------------- receipt by a Credit Party of proceeds from any Equity Issuance, the Borrower shall prepay the Loans in an aggregate amount equal to 50% of the Net Cash Proceeds of such Equity Issuance (such prepayment to be applied as set forth in clause (vii) below). (vi) Recovery Event. To the extent any Credit -------------- Party receives cash proceeds in connection with a Recovery Event which are not applied in accordance with Section 6.5(a)(ii), immediately following the 270th day occurring after the receipt by such Credit Party of such cash proceeds, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of such cash proceeds not so applied (such prepayment to be applied as set forth in clause (vii) below). (vii) Application of Mandatory Prepayments. All ------------------------------------ amounts required to be paid pursuant to this Section 2.8(b) shall be applied as follows: (A) with respect to all amounts prepaid pursuant to Section 2.8(b)(i), to Revolving Loans and (after all Revolving Loans have been repaid) to a cash collateral account in respect of LOC Obligations and (B) with respect to all amounts prepaid pursuant to Sections 2.8(b)(ii) through (vi), (1) first to the Term Loans (pro rata between ----- the Tranche A Term Loans and the Tranche B Term Loans) to the remaining 43 amortization payments in inverse order of maturity; provided, however, promptly upon notification thereof, one or more holders of the Tranche B Term Loan may decline to accept a mandatory prepayment under Section 2.8(b)(ii) through (vi) to the extent there are sufficient amounts under the Tranche A Term Loans outstanding to be paid with such prepayment, in which case, such declined payments shall be allocated pro rata among the Tranche A Term Loans and (2) second to the ------ Revolving Loans (with a corresponding permanent reduction in the Revolving Committed Amount) and (after all Revolving Loans have been repaid) to a cash collateral account in respect of LOC Obligations. Within the parameters of the applications set forth above, prepayments shall be applied first to Alternate Base Rate Loans and then to LIBOR Rate Loans in direct order of Interest Period maturities. All prepayments under this Section 2.8(b) shall be subject to Section 2.18 and be accompanied by interest on the principal amount prepaid through the date of prepayment. SECTION 2.9 MINIMUM PRINCIPAL AMOUNT OF LOANS AND TRANCHES; ----------------------------------------------- LENDING OFFICES. --------------- (a) Minimum Amounts of Loans. Each Loan which is made as ------------------------ an Alternate Base Rate Loan shall be in a minimum aggregate amount of $1,000,000 and integral multiples of $500,000 in excess thereof (or, with respect to Revolving Loans, the remaining amount of the Revolving Committed Amount, if less). Each Loan which is made as a LIBOR Rate Loan shall be in a minimum aggregate amount of $2,000,000 and integral multiples of $1,000,000 in excess thereof (or, with respect to Revolving Loans, the remaining amount of the Revolving Committed Amount, if less). (b) Minimum Amounts of Tranches. All payments and --------------------------- prepayments (other than mandatory prepayments) in respect of Revolving Loans and Term Loans shall be in such amounts and be made pursuant to such elections so that after giving effect thereto the aggregate principal amount of the Revolving Loans and Term Loans comprising any Tranche shall be (i) with respect to Alternate Base Rate Loans, $1,000,000 or a whole multiple of $500,000 in excess thereof, and (ii) with respect to LIBOR Rate Loans, $2,000,000 or a whole multiple of $1,000,000 in excess thereof. (c) Lending Offices. LIBOR Rate Loans shall be made by --------------- each Lender at its LIBOR Lending Office and Alternate Base Rate Loans at its Domestic Lending Office. SECTION 2.10 DEFAULT RATE AND PAYMENT DATES. ------------------------------ (a) If all or a portion of the principal amount of any Loan which is a LIBOR Rate Loan shall not be paid when due or continued as a LIBOR Rate Loan in accordance with the provisions of Section 2.11 (whether at the stated maturity, by acceleration or otherwise), such overdue principal amount of such Loan shall be converted to an Alternate Base Rate Loan at the end of the Interest Period applicable thereto. 44 (b) (i) If all or a portion of the principal amount of any LIBOR Rate Loan shall not be paid when due, such overdue amount shall bear interest at a rate per annum which is equal to the rate that would otherwise be applicable thereto plus 2%, until the end of the ---- Interest Period applicable thereto, and thereafter at a rate per annum which is equal to the Alternate Base Rate plus the sum of the ---- Applicable Percentage then in effect for Alternate Base Rate Loans and 2% (the "ABR Default Rate") or (ii) if any interest payable on the ---------------- principal amount of any Loan or any fee or other amount, including principal of Alternate Base Rate Loans, payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is equal to the ABR Default Rate, in each case from the date of such non-payment until such amount is paid in full (after as well as before judgment). Upon the occurrence, and during the continuance, of any other Event of Default hereunder, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate which is (A) in the case of principal, the rate that would otherwise be applicable thereto plus 2% or (B) in the case of interest, fees or other amounts, the ABR ---- Default Rate (after as well as before judgment). (c) Interest on each Loan shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to -------- paragraph (b) of this Section 2.10 shall be payable from time to time on demand. SECTION 2.11 CONVERSION OPTIONS. ------------------ (a) The Borrower may, in the case of Revolving Loans and Term Loans, elect from time to time to convert Alternate Base Rate Loans to LIBOR Rate Loans by giving the Administrative Agent at least three Business Days' prior irrevocable written notice of such election. In addition, the Borrower may elect from time to time to convert LIBOR Rate Loans to Alternate Base Rate Loans by giving the Administrative Agent irrevocable written notice by 11:00 a.m. (Charlotte, North Carolina time) one Business Date prior to the proposed date of conversion. A form of Notice of Conversion/Extension is attached as Schedule 2.11. If the date upon which an Alternate Base ------------- Rate Loan is to be converted to a LIBOR Rate Loan is not a Business Day, then such conversion shall be made on the next succeeding Business Day. All or any part of outstanding Alternate Base Rate Loans may be converted as provided herein, provided that (i) no Loan may be -------- converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing and (ii) partial conversions shall be in an aggregate principal amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof. LIBOR Rate Loans may only be converted to Alternate Base Rate Loans on the last day of the applicable Interest Period. If the date upon which a LIBOR Rate Loan is to be converted to an Alternate Base Rate Loan is not a Business Day, then such conversion shall be made on the next succeeding Business Day and during the period from such last day of an Interest Period to such succeeding Business Day such Loan shall bear interest as if it were an Alternate Base Rate Loan. 45 (b) Any LIBOR Rate Loans may be continued as such upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in Section 2.11(a); provided, that no LIBOR Rate Loan may be continued as -------- such when any Default or Event of Default has occurred and is continuing, in which case such Loan shall be automatically converted to an Alternate Base Rate Loan at the end of the applicable Interest Period with respect thereto. If the Borrower shall fail to give timely notice of an election to continue a LIBOR Rate Loan, or the continuation of LIBOR Rate Loans is not permitted hereunder, such LIBOR Rate Loans shall be automatically converted to Alternate Base Rate Loans at the end of the applicable Interest Period with respect thereto. SECTION 2.12 COMPUTATION OF INTEREST AND FEES. -------------------------------- (a) Interest payable hereunder with respect to any Alternate Base Rate Loan based on the Prime Rate shall be calculated on the basis of a year of 365 days (or 366 days, as applicable) for the actual days elapsed. All other interest and all fees and other amounts payable hereunder shall be calculated on the basis of a 360 day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a LIBOR Rate on the Business Day of the determination thereof. Any change in the interest rate on a Loan resulting from a change in the Alternate Base Rate shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate shall become effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Credit Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the computations used by the Administrative Agent in determining any interest rate. (c) It is the intent of the Lenders and the Credit Parties to conform to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between the Lenders and the Credit Parties are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral. In no way, nor in any event or contingency (including but not limited to prepayment or acceleration of the maturity of any Obligation), shall the interest taken, reserved, contracted for, charged, or received under this Credit Agreement, under the Notes or otherwise, exceed the maximum nonusurious amount permissible under applicable law. If, from any possible construction of any of the Credit Documents or any other document, interest would otherwise be payable in excess of the maximum nonusurious amount, any such construction shall be subject to the provisions of this paragraph and such interest shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or new document. If any 46 Lender shall ever receive anything of value which is characterized as interest on the Loans under applicable law and which would, apart from this provision, be in excess of the maximum nonusurious amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Loans and not to the payment of interest, or refunded to the Borrower or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal amount of the Loans. The right to demand payment of the Loans or any other Indebtedness evidenced by any of the Credit Documents does not include the right to receive any interest which has not otherwise accrued on the date of such demand, and the Lenders do not intend to charge or receive any unearned interest in the event of such demand. All interest paid or agreed to be paid to the Lenders with respect to the Loans shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such indebtedness does not exceed the maximum nonusurious amount permitted by applicable law. SECTION 2.13 PRO RATA TREATMENT AND PAYMENTS. ------------------------------- (a) Allocation of Payments Before Event of Default. Each ---------------------------------------------- borrowing of Revolving Loans and any reduction of the Revolving Commitments shall be made pro rata according to the respective --- ---- Revolving Commitment Percentages of the Lenders. Each payment under this Credit Agreement or any Note shall be applied, first, to any fees ----- then due and owing by the Borrower pursuant to Section 2.6, second, to ------ interest then due and owing hereunder and under the Notes and, third, ----- to principal then due and owing hereunder and under the Notes. Each payment on account of any fees pursuant to Section 2.6 shall be made pro rata in accordance with the respective amounts due and owing --- ---- (except as to the Fronting Fees, the Issuing Lender Fees and the Administrative Fees). Each payment (other than prepayments) by the Borrower on account of principal of and interest on the Revolving Loans and on the Term Loans shall be applied to such Loans as directed by the Borrower or otherwise applied in accordance with the terms of Section 2.8(a) hereof. Each optional prepayment on account of principal of the Loans shall be applied in accordance with Section 2.8(a); provided, -------- that prepayments made pursuant to Section 2.16 shall be applied in accordance with such section. Each mandatory prepayment on account of principal of the Loans shall be applied in accordance with Section 2.8(b). All payments (including prepayments) to be made by the Borrower on account of principal, interest and fees shall be made without defense, set-off or counterclaim (except as provided in Section 2.19(b)) and shall be made to the Administrative Agent for the account of the Lenders at the Administrative Agent's office specified on Section 9.2 in Dollars and in immediately available funds not later than 1:00 P.M. (Charlotte, North Carolina time) on the date when due. The Administrative Agent shall distribute such payments to the Lenders entitled thereto promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the LIBOR Rate Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of 47 principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Rate Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (b) Allocation of Payments After Event of Default. --------------------------------------------- Notwithstanding any other provisions of this Credit Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Administrative Agent or any Lender on account of the Credit Party Obligations or any other amounts outstanding under any of the Credit Documents or in respect of the Collateral shall be paid over or delivered as follows: FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Administrative Agent in connection with enforcing the rights of the Lenders under the Credit Documents and any protective advances made by the Administrative Agent with respect to the Collateral under or pursuant to the terms of the Security Documents; SECOND, to payment of any fees owed to the Administrative Agent; THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys' and consultants' fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents or otherwise with respect to the Credit Party Obligations owing to such Lender; FOURTH, to the payment of all of the Credit Party Obligations consisting of accrued fees and interest, and including with respect to any Hedging Agreement between any Credit Party and any Lender, or any Affiliate of a Lender, to the extent such Hedging Agreement is permitted by Section 6.1(d), any fees, premiums and scheduled periodic payments due under such Hedging Agreement and any interest accrued thereon; FIFTH, to the payment of the outstanding principal amount of the Credit Party Obligations and the payment or cash collateralization of the outstanding LOC Obligations, and including with respect to any Hedging Agreement between any Credit Party and any Lender, or any Affiliate of a Lender, to the extent such Hedging Agreement is permitted by Section 6.1(d), any breakage, termination or other payments due under such Hedging Agreement and any interest accrued thereon; SIXTH, to all other Credit Party Obligations and other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and 48 SEVENTH, to the payment of the surplus, if any, to whomever may be lawfully entitled to receive such surplus. In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans, LOC Obligations and obligations outstanding under the Hedge Agreements (if any) permitted by Section 6.1(d) held by such Lender (and its Affiliates in the case of Hedge Agreement obligations) bears to the aggregate then outstanding Loans, LOC Obligations and obligations outstanding under the Hedge Agreements between any Credit Party and any Lender or any Affiliate of a Lender that are permitted by Section 6.1(d)) of amounts available to be applied pursuant to clauses "FOURTH" and "FIFTH" above; and (iii) to the extent that any amounts available for distribution pursuant to clause "FIFTH" above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Administrative Agent in a cash collateral account and applied (A) first, to reimburse the Issuing Lender from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses "FIFTH" and "SIXTH" above in the manner provided in this Section 2.13(b). SECTION 2.14 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. ------------------------------------------------ (a) Unless the Administrative Agent shall have been notified in writing by a Lender prior to the date a Loan is to be made by such Lender (which notice shall be effective upon receipt) that such Lender does not intend to make the proceeds of such Loan available to the Administrative Agent, the Administrative Agent may assume that such Lender has made such proceeds available to the Administrative Agent on such date, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent, the Administrative Agent shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent will promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent at a per annum rate equal to (i) from the Borrower at the applicable rate for the applicable borrowing pursuant to the Notice of Borrowing and (ii) from a Lender at the Federal Funds Effective Rate. 49 (b) Unless the Administrative Agent shall have been notified in writing by the Borrower, prior to the date on which any payment is due from it hereunder (which notice shall be effective upon receipt) that the Borrower does not intend to make such payment, the Administrative Agent may assume that such Borrower has made such payment when due, and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to each Lender on such payment date an amount equal to the portion of such assumed payment to which such Lender is entitled hereunder, and if the Borrower has not in fact made such payment to the Administrative Agent, such Lender shall, on demand, repay to the Administrative Agent the amount made available to such Lender. If such amount is repaid to the Administrative Agent on a date after the date such amount was made available to such Lender, such Lender shall pay to the Administrative Agent on demand interest on such amount in respect of each day from the date such amount was made available by the Administrative Agent to such Lender to the date such amount is recovered by the Administrative Agent at a per annum rate equal to the Federal Funds Effective Rate. (c) A certificate of the Administrative Agent submitted to the Borrower or any Lender with respect to any amount owing under this Section 2.14 shall be conclusive in the absence of manifest error. SECTION 2.15 INABILITY TO DETERMINE INTEREST RATE. ------------------------------------ Notwithstanding any other provision of this Credit Agreement, if (i) the Administrative Agent shall reasonably determine (which determination shall be conclusive and binding absent manifest error) that, by reason of circumstances affecting the relevant market, reasonable and adequate means do not exist for ascertaining LIBOR for such Interest Period, or (ii) the Required Lenders shall reasonably determine (which determination shall be conclusive and binding absent manifest error) that the LIBOR Rate does not adequately and fairly reflect the cost to such Lenders of funding LIBOR Rate Loans that the Borrower has requested be outstanding as a LIBOR Tranche during such Interest Period, the Administrative Agent shall forthwith give telephone notice of such determination, confirmed in writing, to the Borrower, and the Lenders at least two Business Days prior to the first day of such Interest Period. Unless the Borrower shall have notified the Administrative Agent upon receipt of such telephone notice that it wishes to rescind or modify its request regarding such LIBOR Rate Loans, any Loans that were requested to be made as LIBOR Rate Loans shall be made as Alternate Base Rate Loans and any Loans that were requested to be converted into or continued as LIBOR Rate Loans shall remain as or be converted into Alternate Base Rate Loans. Until any such notice has been withdrawn by the Administrative Agent, no further Loans shall be made as, continued as, or converted into, LIBOR Rate Loans for the Interest Periods so affected. SECTION 2.16 ILLEGALITY. ---------- Notwithstanding any other provision of this Credit Agreement, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by the relevant Governmental Authority to any Lender shall make it unlawful for such Lender or its LIBOR 50 Lending Office to make or maintain LIBOR Rate Loans as contemplated by this Credit Agreement or to obtain in the interbank eurodollar market through its LIBOR Lending Office the funds with which to make such Loans, (a) such Lender shall promptly notify the Administrative Agent and the Borrower thereof, (b) the commitment of such Lender hereunder to make LIBOR Rate Loans or continue LIBOR Rate Loans as such shall forthwith be suspended until the Administrative Agent shall give notice that the condition or situation which gave rise to the suspension shall no longer exist, and (c) such Lender's Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the last day of the Interest Period for such Loans or within such earlier period as required by law to Alternate Base Rate Loans. The Borrower hereby agrees promptly to pay any Lender, upon its demand, any additional amounts necessary to compensate such Lender for actual and direct costs (but not including anticipated profits) reasonably incurred by such Lender in making any repayment in accordance with this Section including, but not limited to, any interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Administrative Agent, to the Borrower shall be conclusive in the absence of manifest error. Each Lender agrees to use reasonable efforts (including reasonable efforts to change its LIBOR Lending Office) to avoid or to minimize any amounts which may otherwise be payable pursuant to this Section; provided, however, that such -------- ------- efforts shall not cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its sole discretion to be material. SECTION 2.17 REQUIREMENTS OF LAW. ------------------- (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject such Lender to any tax of any kind whatsoever with respect to any Letter of Credit, any participation therein or any application relating thereto, any LIBOR Rate Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the LIBOR Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining LIBOR Rate Loans or the Letters of Credit or the participations therein or to reduce any amount receivable hereunder or under any Note, then, in any such case, the 51 Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such additional cost or reduced amount receivable which such Lender reasonably deems to be material as determined by such Lender with respect to its LIBOR Rate Loans or Letters of Credit. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Administrative Agent, to the Borrower shall be conclusive in the absence of manifest error. Each Lender agrees to use reasonable efforts (including reasonable efforts to change its Domestic Lending Office or LIBOR Lending Office, as the case may be) to avoid or to minimize any amounts which might otherwise be payable pursuant to this paragraph of this Section; provided, however, that such efforts shall not cause the imposition -------- ------- on such Lender of any additional costs or legal or regulatory burdens deemed by such Lender to be material. (b) If any Lender shall have reasonably determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, within fifteen (15) days after demand by such Lender, the Borrower shall pay to such Lender such additional amount as shall be certified by such Lender as being required to compensate it for such reduction. Such a certificate as to any additional amounts payable under this Section submitted by a Lender (which certificate shall include a description of the basis for the computation), through the Administrative Agent, to the Borrower shall be conclusive absent manifest error. (c) The agreements in this Section 2.17 shall survive the termination of this Credit Agreement and payment of the Notes and all other amounts payable hereunder. Section 2.18 Indemnity. --------- The Borrower hereby agrees to indemnify each Lender and to hold such Lender harmless from any funding loss or expense which such Lender may sustain or incur as a consequence of (a) the failure by the Borrower to pay the principal amount of or interest on any Loan by such Lender in accordance with the terms hereof, (b) the failure of the Borrower to accept a borrowing after the Borrower has given a notice in accordance with the terms hereof, (c) the failure of the Borrower to make any prepayment after the Borrower has given a notice in accordance with the terms hereof, and/or (d) the making by the Borrower of a prepayment of a Loan, or the conversion thereof, on a day which is not the last day of the Interest Period with respect thereto, in each case including, but not limited to, any such loss or expense arising from interest or fees 52 payable by such Lender to lenders of funds obtained by it in order to maintain its Loans hereunder. A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender, through the Administrative Agent, to the Borrower (which certificate must be delivered to the Administrative Agent within thirty days following such default, prepayment or conversion) shall be conclusive in the absence of manifest error. The agreements in this Section shall survive termination of this Credit Agreement and payment of the Notes and all other amounts payable hereunder. SECTION 2.19 TAXES. ----- (a) All payments made by the Borrower hereunder or under any Note will be, except as provided in Section 2.19(b), made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any Governmental Authority or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any tax imposed on or measured by the net income or profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes ----- are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Credit Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. The Borrower will furnish to the Administrative Agent as soon as practicable after the date the payment of any Taxes is due pursuant to applicable law certified copies (to the extent reasonably available and required by law) of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender. (b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower and the Administrative Agent on or prior to the Closing Date, or in the case of a Lender that is an assignee or transferee of an interest under this Credit Agreement pursuant to Section 9.6(d) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) if the Lender is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying such Lender's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Credit Agreement and under any Note, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, either Internal Revenue Service Form 1001 or 4224 as set forth in clause (i) above, or (x) a certificate in substantially the form of Schedule 2.19 ------------- 53 (any such certificate, a "2.19 Certificate") and (y) two accurate and ---------------- complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying such Lender's entitlement to an exemption from United States withholding tax with respect to payments of interest to be made under this Credit Agreement and under any Note. In addition, each Lender agrees that it will deliver upon the Borrower's request updated versions of the foregoing, as applicable, whenever the previous certification has become obsolete or inaccurate in any material respect, together with such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Credit Agreement and any Note. Notwithstanding anything to the contrary contained in Section 2.19(a), but subject to the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold Taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. federal income tax purposes to the extent that such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 2.19(a) hereof to gross-up payments to be made to a Lender in respect of Taxes imposed by the United States if (I) such Lender has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 2.19(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such Taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 2.19, the Borrower agrees to pay additional amounts and to indemnify each Lender in the manner set forth in Section 2.19(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Closing Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes. (c) Each Lender agrees to use reasonable efforts (including reasonable efforts to change its Domestic Lending Office or LIBOR Lending Office, as the case may be) to avoid or to minimize any amounts which might otherwise be payable pursuant to this Section; provided, -------- however, that such efforts shall not cause the imposition on such ------- Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its sole discretion to be material. (d) If the Borrower pays any additional amount pursuant to this Section 2.19 with respect to a Lender, such Lender shall use reasonable efforts to obtain a refund of tax or credit against its tax liabilities on account of such payment; provided that such Lender shall -------- have no obligation to use such reasonable efforts if either (i) it is in an excess foreign tax credit position or (ii) it believes in good faith, in its sole discretion, that claiming a refund or credit would cause adverse tax consequences to it. In the event that 54 such Lender receives such a refund or credit, such Lender shall pay to the Borrower an amount that such Lender reasonably determines is equal to the net tax benefit obtained by such Lender as a result of such payment by the Borrower. In the event that no refund or credit is obtained with respect to the Borrower's payments to such Lender pursuant to this Section 2.19, then such Lender shall upon request provide a certification that such Lender has not received a refund or credit for such payments. Nothing contained in this Section 2.19 shall require a Lender to disclose or detail the basis of its calculation of the amount of any tax benefit or any other amount or the basis of its determination referred to in the proviso to the first sentence of this Section 2.19 to the Borrower or any other party. (e) The agreements in this Section 2.19 shall survive the termination of this Credit Agreement and the payment of the Notes and all other amounts payable hereunder. SECTION 2.20 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES. -------------------------------------------------- (a) In addition to its other obligations under Section 2.5, the Borrower hereby agrees to protect, indemnify, pay and save the Issuing Lender and each LOC Participant harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that the Issuing Lender or such LOC Participant may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit or (ii) the failure of the Issuing Lender to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions, herein called "Government Acts"). --------------- (b) As between the Borrower and the Issuing Lender and each LOC Participant, the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. Neither the Issuing Lender nor any LOC Participant shall be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply fully with conditions required in order to draw upon a Letter of Credit (unless the Issuing Lender or any LOC Participant makes a payment under such Letter of Credit against presentation of a draft or any accompanying document that does not substantially comply with the conditions required in order to draw upon such Letter of Credit); (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (vii) for any consequences arising from causes beyond the control of the Issuing Lender or any LOC 55 Participant, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (c) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Lender or any LOC Participant, under or in connection with any Letter of Credit or the related certificates, if taken or omitted in the absence of gross negligence or willful misconduct, shall not put such Issuing Lender or such LOC Participant under any resulting liability to the Borrower. It is the intention of the parties that this Credit Agreement shall be construed and applied to protect and indemnify the Issuing Lender and each LOC Participant against any and all risks involved in the issuance of the Letters of Credit, all of which risks are hereby assumed by the Borrower, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any Government Authority. The Issuing Lender and the LOC Participants shall not, in any way, be liable for any failure by the Issuing Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of the Issuing Lender and the LOC Participants. (d) Nothing in this Section 2.20 is intended to limit the reimbursement obligation of the Borrower contained in Section 2.5(d) hereof. The obligations of the Borrower under this Section 2.20 shall survive the termination of this Credit Agreement. No act or omissions of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Issuing Lender and the LOC Participants to enforce any right, power or benefit under this Credit Agreement. (e) Notwithstanding anything to the contrary contained in this Section 2.20, the Borrower shall have no obligation to indemnify the Issuing Lender or any LOC Participant in respect of any liability incurred by the Issuing Lender or such LOC Participant arising out of the gross negligence or willful misconduct of the Issuing Lender (including action not taken by the Issuing Lender or such LOC Participant), as determined by a court of competent jurisdiction or pursuant to arbitration. ARTICLE III REPRESENTATIONS AND WARRANTIES To induce the Lenders to enter into this Credit Agreement and to make the Extensions of Credit herein provided for, each of the Credit Parties hereby represents and warrants to the Administrative Agent and to each Lender that: SECTION 3.1 FINANCIAL CONDITION. ------------------- (a) (i) The audited Consolidated financial statements of the Parent and its Subsidiaries for the fiscal year ended December 31, 2000, together with the related 56 Consolidated statements of income or operations, equity and cash flows for the fiscal year ended on such dates and (ii) the unaudited Consolidated and consolidating balance sheet of the Borrower's television and radio operations for the month ended December 31, 2001, together with the related Consolidated statements of income or operations for the 12 months ended December 31, 2001: (A) were prepared in accordance with GAAP (to the extent applicable) consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (B) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof (subject, in the case of the unaudited financial statements, to normal year-end adjustments) and results of operations for the period covered thereby; and (C) show all indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, commitments, and as to the audited Consolidated financial statements, contingent obligations. (b) The eight-year projections of the Borrower and its Subsidiaries have been prepared in good faith based upon reasonable assumptions. SECTION 3.2 NO CHANGE. ---------- Since December 31, 2000, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. SECTION 3.3 CORPORATE EXISTENCE. ------------------- Each of the Credit Parties (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the requisite power and authority and the legal right to own and operate all its material property, to lease the material property it operates as lessee and to conduct the business in which it is currently engaged, and (c) is duly qualified to conduct business and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification. The jurisdictions in which the Credit Parties as of the Closing Date are organized and qualified to do business are described on Schedule 3.3. ------------ SECTION 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. ------------------------------------------------------- Each of the Credit Parties has full power and authority and the legal right to make, deliver and perform the Credit Documents to which it is party and has taken all necessary action to authorize the execution, delivery and performance by it of the Credit Documents to which it is party. No consent or authorization of, filing with, notice to or other act by or in respect of, any 57 Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery or performance of any Credit Document by any of the Credit Parties (other than those which have been obtained) or with the validity or enforceability of any Credit Document against any of the Credit Parties (except such filings as are necessary in connection with the perfection of the Liens created by such Credit Documents). Each Credit Document to which it is a party has been duly executed and delivered on behalf of the applicable Credit Party. Each Credit Document to which it is a party constitutes a legal, valid and binding obligation of each such Credit Party, enforceable against such Credit Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). SECTION 3.5 COMPLIANCE WITH LAWS; NO CONFLICT; NO DEFAULT. --------------------------------------------- (a) The execution, delivery and performance by each Credit Party of the Credit Documents to which such Credit Party is a party, in accordance with their respective terms, the borrowings hereunder and the transactions contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any Governmental Approval (other than such Governmental Approvals that have been obtained or made and not subject to suspension, revocation or termination) or violate any Requirement of Law relating to such Credit Party, (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws, articles of organization, operating agreement or other organizational documents of such Credit Party or any material indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person, or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by such Person other than Liens arising under the Credit Documents; provided, however, that (A) under Communications Laws -------- ------- governmental approval may be required prior to (x) the transfer of control of any Credit Party, (y) the assignment of any FCC License or PUC Authorization, (z) the exercise of any voting rights or management authority over any Credit Party to the extent that such exercise constitutes a transfer of control of such Credit Party or an assignment of any FCC License or PUC Authorization, and (B) the exercise by the Administrative Agent or any Lender of any right or remedy under the Credit Documents as described in, or that gives rise to an event described in, clause (A) may require governmental approval. (b) Each Credit Party (i) (x) has all Governmental Approvals required by law for it to conduct its business, each of which is in full force and effect, (y) each such Governmental Approval is final and not subject to review on appeal and (z) each such Governmental Approval is not the subject of any pending or, to the best of its knowledge, threatened attack by direct or collateral proceeding, and (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other Requirements of Law relating to it or any of its respective properties, in each case except to the extent the failure to obtain such Governmental Approval or failure to comply with such 58 Governmental Approval or Requirement of Law could not reasonably be expected to have a Material Adverse Effect. (c) None of the Credit Parties is in default under or with respect to any of its Material Contracts or under or with respect to any of its other material Contractual Obligations, or any judgment, order or decree to which it is a party, in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. SECTION 3.6 NO MATERIAL LITIGATION. ----------------------- Except as set forth in Schedule 3.6, no litigation, investigation or ------------ proceeding of or before any arbitrator or Governmental Authority is pending or, to the best knowledge of the Credit Parties, threatened by or against any of them or against any of their respective properties or revenues (a) with respect to the Credit Documents or any Loan or any of the transactions contemplated hereby, or (b) which, if adversely determined, could reasonably be expected to have a Material Adverse Effect. SECTION 3.7 INVESTMENT COMPANY ACT; PUHCA. ----------------------------- None of the Credit Parties (a) is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended or (b) is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935. SECTION 3.8 MARGIN REGULATIONS. ------------------ No part of the proceeds of any Loan hereunder will be used directly or indirectly for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. The Credit Parties (a) are not engaged, principally or as one of their important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" "margin stock" within the respective meanings of each of such terms under Regulation U and (b) taken as a group do not own "margin stock" except as identified in the financial statements referred to in Section 3.1 and the aggregate value of all "margin stock" owned by the Credit Parties taken as a group does not exceed 25% of the value of their assets. SECTION 3.9 ERISA. ----- Except as set forth in Schedule 3.9, neither a Reportable Event nor an ------------ "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code, except to the extent that any such occurrence 59 or failure to comply would not reasonably be expected to have a Material Adverse Effect. No termination of a Single Employer Plan has occurred resulting in any liability that has remained underfunded, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period which could reasonably be expected to have a Material Adverse Effect. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by an amount which, as determined in accordance with GAAP, could reasonably be expected to have a Material Adverse Effect. Neither the Borrower, nor any Subsidiary of the Borrower nor any Commonly Controlled Entity is currently subject to any liability for a complete or partial withdrawal from a Multiemployer Plan that could reasonably be expected to have a Material Adverse Effect. SECTION 3.10 ENVIRONMENTAL MATTERS. --------------------- (a) Except to the extent such violation or liability could not reasonably be expected to have a Material Adverse Effect, the facilities and properties owned, leased or operated by any of the Credit Parties (the "Properties") do not contain any Materials of ---------- Environmental Concern in amounts or concentrations which (i) constitute a violation of, or (ii) could give rise to liability under, any Environmental Law. (b) Except to the extent such non-compliance or violation could not reasonably be expected to have a Material Adverse Effect, the Properties and all operations of the Credit Parties at the Properties are in compliance, and, to the best of the Credit Parties' knowledge, have in the last five years been in compliance, in all material respects with all applicable Environmental Laws, and, to the best of the Credit Parties' knowledge there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the any of the Credit Parties (the "Business"), except to the extent the effects of such -------- contamination could not reasonably be expected to have a Material Adverse Effect. (c) None of the Credit Parties has received any written or actual notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does any of the Credit Parties have knowledge of any such threatened notice. (d) To the best of the Credit Parties' knowledge, Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could give rise to liability under any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law. 60 (e) No judicial proceeding or governmental or administrative action is pending or, to the best of the Credit Parties' knowledge, threatened, under any Environmental Law to which any of the Credit Parties is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (f) To the best of the Credit Parties' knowledge, there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of any of the Credit Parties in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. SECTION 3.11 PURPOSE OF LOANS. ---------------- The proceeds of the Loans will be used (a) to refinance existing Indebtedness, (b) for capital expenditures, (c) for transaction costs related to the negotiation, execution and delivery of the Credit Documents and (d) for working capital and other general corporate purposes, including Permitted Acquisitions. SECTION 3.12 SUBSIDIARIES. ------------ Set forth on Schedule 3.12 is a complete and accurate list of all ------------- direct and indirect Subsidiaries of the Borrower as of the Closing Date. Information on such Schedule includes the number of shares of each class of Capital Stock or other equity interests outstanding; the number and percentage of outstanding shares of each class of stock owned by the Borrower or any of its Subsidiaries; the number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and similar rights and the Televisions Stations and Radio Stations owned by such Subsidiary, if any, as of the Closing Date. The outstanding Capital Stock and other equity interests of all such Subsidiaries is validly issued, fully paid and non-assessable and is owned, free and clear of all Liens (other than those arising under or contemplated in connection with the Credit Documents). SECTION 3.13 OWNERSHIP. --------- Each of the Credit Parties is the owner of, and has good and marketable title to, all of its respective assets, which, together with assets leased or licensed by the Credit Parties, represents all assets individually or in the aggregate material to the conduct of the businesses of the Credit Parties, taken as a whole on the date hereof, and none of such assets is subject to any Lien other than Permitted Liens. Each Credit Party enjoys peaceful and undisturbed possession under all of its leases and all such leases are valid and subsisting and in full force and effect. The Credit Parties have delivered complete and accurate copies of all material leases to the Administrative Agent. 61 SECTION 3.14 INDEBTEDNESS. ------------ Except as otherwise permitted under Section 6.1, the Credit Parties have no Indebtedness. SECTION 3.15 TAXES. ----- Each of the Credit Parties has filed, or caused to be filed, all tax returns (federal, state, local and foreign) required to be filed and paid (a) all amounts of taxes shown thereon to be due (including interest and penalties) and (b) all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes (i) which are not yet delinquent or (ii) that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP. None of the Credit Parties is aware as of the Closing Date of any proposed tax assessments against it or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. SECTION 3.16 INTELLECTUAL PROPERTY RIGHTS. ---------------------------- Each of the Borrower and its Subsidiaries owns, or has the legal right to use, all Intellectual Property necessary for each of them to conduct its business as currently conducted. Set forth on Schedule 3.16 is a list of all ------------- Intellectual Property owned by each of the Borrower and its Subsidiaries or that the Borrower or any of its Subsidiaries has the right to use, as of the Closing Date. Except as disclosed in Schedule 3.16 hereto, (a) the specified Credit ------------- Party has the right to use the Intellectual Property disclosed in Schedule 3.16 ------------- hereto in perpetuity and without payment of royalties, (b) all registrations with and applications to Governmental Authorities in respect of such Intellectual Property are valid and in full force and effect and are not subject to the payment of any taxes or maintenance fees or the taking of any interest therein, held by any of the Credit Parties to maintain their validity or effectiveness, and (c) there are no restrictions on the direct or indirect transfer of any Contractual Obligation, or any interest therein, held by any of the Credit Parties in respect of such Intellectual Property. None of the Credit Parties is in default (or with the giving of notice or lapse of time or both, would be in default) under any license to use such Intellectual Property; no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower or any of its Subsidiaries know of any such claim; and, to the knowledge of the Borrower or any of its Subsidiaries, the use of such Intellectual Property by the Borrower or any of its Subsidiaries does not infringe on the rights of any Person. The Credit Parties have recorded or deposited with and paid to the United States Copyright Office, the Register of Copyrights, the Copyrights Royalty Tribunal or other Governmental Authority, all notices, statements of account, royalty fees and other documents and instruments required under the terms and conditions of any Contractual Obligation of the Credit Parties and/or under Title 17 of the United States Code and the rules and regulations issued thereunder (collectively, the "Copyright Act"), and are not liable to any Person for copyright infringement ------------- under the Copyright Act or any other law, rule, regulation, contract or license as a result of their business operations. 62 SECTION 3.17 SOLVENCY. -------- The fair saleable value, on a Consolidated basis, of the Credit Parties' assets, measured on a going concern basis, exceeds all probable liabilities, including those to be incurred pursuant to this Credit Agreement. None of the Credit Parties (a) has unreasonably small capital in relation to the business in which it is or proposes to be engaged or (b) has incurred, or believes that it will incur after giving effect to the transactions contemplated by this Credit Agreement, debts beyond its ability to pay such debts as they become due. In executing the Credit Documents and consummating the transactions contemplated thereby, none of the Credit Parties intends to hinder, delay or defraud either present or future creditors or other Persons to which one or more of the Credit Parties is or will become indebted. SECTION 3.18 INVESTMENTS. ----------- All Investments of each of the Credit Parties are Permitted Investments. SECTION 3.19 LOCATION OF COLLATERAL. ---------------------- Set forth on Schedule 3.19(a) is a list of the Properties of the ---------------- Borrower and its Subsidiaries as of the Closing Date with street address, county and state where located. Set forth on Schedule 3.19(b) is a list of all ---------------- locations as of the Closing Date where any tangible personal property of the Borrower and its Subsidiaries is located, including county and state where located. Set forth on Schedule 3.19(c) is the chief executive office and ---------------- principal place of business of each of the Borrower and its Subsidiaries as of the Closing Date. SECTION 3.20 NO BURDENSOME RESTRICTIONS. -------------------------- None of the Credit Parties is a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any provision of any applicable law, rule or regulation which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. SECTION 3.21 LABOR MATTERS. ------------- There are no collective bargaining agreements or Multiemployer Plans covering the employees of the Credit Parties as of the Closing Date, other than as set forth in Schedule 3.21 hereto, and none of the Credit Parties has ------------- suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years, other than as set forth in Schedule 3.21 ------------- hereto. SECTION 3.22 ACCURACY AND COMPLETENESS OF INFORMATION. ---------------------------------------- All factual information heretofore, contemporaneously or hereafter furnished by or on behalf of the Credit Parties in writing to the Administrative Agent or any Lender for purposes of or in connection with this Credit Agreement or any other Credit Document, or any transaction contemplated hereby or thereby, is or will be true and accurate in all material respects and not 63 incomplete by omitting to state any material fact necessary to make such information not misleading. There is no fact now known to any of the Credit Parties which has, or could reasonably be expected to have, a Material Adverse Effect which fact has not been set forth herein, in the financial statements of the Credit Parties furnished to the Administrative Agent and/or the Lenders, or in any certificate, opinion or other written statement made or furnished by or on behalf of the Credit Parties to the Administrative Agent and/or the Lenders. SECTION 3.23 MATERIAL CONTRACTS. ------------------ Schedule 3.23 sets forth a complete and accurate list of all Material ------------- Contracts of the Borrower and its Subsidiaries in effect as of the Closing Date. Other than as set forth in Schedule 3.23, each such Material Contract is, and ------------- after giving effect to the transactions contemplated by the Credit Documents will be, in full force and effect in accordance with the terms thereof. The Borrower and its Subsidiaries have delivered to the Administrative Agent a true and complete copy of each such Material Contract (other than Immaterial FCC Licenses and Immaterial PUC Authorizations). SECTION 3.24 FCC AND STATION MATTERS. ----------------------- (a) Schedule 3.24 correctly sets forth, as of the Closing ------------- Date, all of the FCC Licenses, PUC Authorizations and Affiliation Agreements held by the Credit Parties which are material to the operation of the Stations and correctly sets forth the termination date, if any, of each such FCC License, PUC Authorization and Affiliation Agreement. To the Credit Parties' knowledge, (i) each Material FCC License was duly and validly issued by the FCC and (ii) each Material PUC Authorization was duly and validly issued by the applicable PUC, in each case pursuant to procedures which comply in all material respects with all Requirements of Law and none of the Credit Parties has any knowledge of the occurrence of any event or the existence of any circumstance which, in the reasonable judgment of any such Credit Party, is likely to lead to modification, restriction or revocation of any Material FCC License or Material PUC Authorization or the termination or non-renewal of any Affiliation Agreement. The Credit Parties have the right to use all FCC Licenses required in the ordinary course of business for the Stations. To the best of the Credit Parties' knowledge, the Material FCC Licenses and Material PUC Authorizations are in full force and effect and the Credit Parties are in substantial compliance therewith and to the best of the Credit Parties' knowledge, the Material FCC Licenses and Material PUC Authorizations do not conflict with the valid rights of others in any way which could reasonably be expected to have a Material Adverse Effect. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation, termination, modification or restriction of any Material FCC License or Material PUC Authorization which could reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.24, each FCC License or PUC Authorization is held ------------- by the Credit Party directly operating the Station with respect to which such FCC License or PUC Authorization was issued or assigned. 64 (b) Each Credit Party (i) has duly filed in a timely manner all filings relating to Material FCC Licenses and Material PUC Authorizations which are required to be filed by each such Credit Party under Communications Law, (ii) has duly filed in a timely manner all other filings which are required to be filed by each such Credit Party under Communications Law, except such filings with respect to which the failure to file could not reasonably be expected to have a Material Adverse Effect and (iii) is in all material respects in substantial compliance with Communications Law, including, without limitation, the rules and regulations of the FCC relating to the broadcast of television and radio signals. (c) None of the Stations (including without limitation, the transmitter and tower sites owned or used by the Credit Parties) violate in any material respect the provisions of any applicable building codes, fire regulations, building restrictions or other governmental ordinances, orders or regulations and each such Station is zoned so as to permit the commercial uses intended by the owner or occupier thereof and there are no outstanding variances (other than permitted variances) or special use permits materially affecting any of the Stations or the uses thereof. ARTICLE IV CONDITIONS PRECEDENT SECTION 4.1 CLOSING CONDITIONS. ------------------ This Credit Agreement shall become effective upon, and the obligation of each Lender to make the initial Revolving Loans and the Term Loans on the Closing Date is subject to, the satisfaction of the following conditions precedent: (a) Execution of Credit Agreement and Credit Documents. The -------------------------------------------------- Administrative Agent shall have received (i) counterparts of this Credit Agreement, executed by a duly authorized officer of each party hereto, (ii) for the account of each Lender with a Revolving Commitment, a Revolving Note, (iii) for the account of each Lender with a Tranche A Term Loan Commitment, a Tranche A Term Note, (iv) for the account of each Lender with a Tranche B Term Loan Commitment, a Tranche B Term Note, (v) counterparts of the Security Agreements and the Pledge Agreements, in each case conforming to the requirements of this Credit Agreement and executed by duly authorized officers of the Credit Parties and the Parent, as applicable and (vi) counterparts of any other Credit Document, executed by the duly authorized officers of the parties thereto. 65 (b) Authority Documents. The Administrative Agent shall ------------------- have received the following: (i) Articles of Incorporation. Copies of the ------------------------- articles of incorporation or other charter documents of the Parent and each Credit Party certified to be true and complete as of a recent date by the appropriate governmental authority of the state of its incorporation. (ii) Resolutions. Copies of resolutions of the board ----------- of directors of the Parent and each Credit Party approving and adopting the Credit Documents, the transactions contemplated therein and authorizing execution and delivery thereof, certified by an officer of such Credit Party as of the Closing Date to be true and correct and in force and effect as of such date. (iii) Bylaws. A copy of the bylaws of the Parent and ------ each Credit Party certified by an officer of such Credit Party as of the Closing Date to be true and correct and in force and effect as of such date. (iv) Good Standing. Copies of (i) certificates of ------------- good standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the appropriate Governmental Authorities of the state of incorporation or organization and (ii) to the extent readily available, a certificate indicating payment of all corporate and other franchise taxes certified as of a recent date by the appropriate governmental taxing authorities. (v) Incumbency. An incumbency certificate of each ---------- Credit Party certified by a secretary or assistant secretary to be true and correct as of the Closing Date, in substantially the form of Schedule 4.1-1 hereto. -------------- (c) Personal Property Collateral. The Administrative ---------------------------- Agent shall have received, in form and substance satisfactory to the Administrative Agent: (i) searches of Uniform Commercial Code filings in the jurisdiction of the chief executive office and state of incorporation of each Credit Party and each jurisdiction where any Collateral is located or where a filing would need to be made in order to perfect the Administrative Agent's security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens; (ii) duly executed UCC financing statements for each appropriate jurisdiction as is necessary, in the Administrative Agent's sole discretion, to perfect the Administrative Agent's security interest in the Collateral; (iii) searches of ownership of Intellectual Property in the appropriate governmental offices and such patent/trademark/copyright filings as requested by 66 the Administrative Agent in order to perfect the Administrative Agent's security interest in the Intellectual Property; (iv) such patent/trademark/copyright filings as requested by the Administrative Agent in order to perfect the Administrative Agent's security interest in the Intellectual Property; (v) all stock certificates, if any, evidencing the Capital Stock pledged to the Administrative Agent pursuant to the Pledge Agreements (or in the case of the Capital Stock of the Borrower, a promise to deliver the same from the party currently in possession thereof, in form reasonably satisfactory to the Administrative Agent), together with duly executed in blank undated stock powers attached or for attachment thereto; (vi) all instruments and chattel paper in the possession of any of the Credit Parties, together with allonges or assignments as may be necessary or appropriate to perfect the Administrative Agent's security interest in the Collateral; (vii) duly executed consents as are necessary, in the Administrative Agent's sole discretion, to perfect the Lenders' security interest in the Collateral; (viii) in the case of any personal property Collateral located at premises leased by a Credit Party such estoppel letters, consents and waivers from the landlords on such real property as may be required by the Administrative Agent; and (ix) copies of the Affiliation Agreements, Material FCC Licenses, Material PUC Authorizations and other Material Contracts, certified by an officer of such Credit Party as of the Closing Date to be true and correct copies of such documents. (d) Liability and Casualty Insurance. The Administrative -------------------------------- Agent shall have received copies of insurance policies or certificates of insurance evidencing liability and casualty insurance (including, but not limited to, business interruption insurance) meeting the requirements set forth herein or in the Security Documents. The Administrative Agent shall be named as loss payee on all casualty insurance policies and as additional insured on all liability insurance policies, in each case for the benefit of the Lenders. (e) Fees. The Administrative Agent and Bank of America shall ---- have received all fees, if any, owing pursuant to the Fee Letters and Section 2.6. (f) Litigation. There shall not exist any material pending ---------- or threatened litigation, investigation, bankruptcy, insolvency, injunction, order or claim with respect to the Parent, the Borrower or any of their respective Subsidiaries, or affecting or relating to 67 this Credit Agreement and the other Credit Documents, that has not been settled, dismissed, vacated, discharged or terminated prior to the Closing Date. (g) Solvency Certificate. The Administrative Agent shall -------------------- have received an officer's certificate prepared by the chief financial officer of the Borrower as to the financial condition, solvency and related matters of the Borrower and its Subsidiaries, on a consolidated basis, after giving effect to the initial borrowings under the Credit Documents, in substantially the form of Schedule 4.1-2 hereto. -------------- (h) Account Designation Letter. The Administrative ---------------------------- Agent shall have received the executed Account Designation Letter in the form of Schedule 1.1-1 hereto. -------------- (i) Corporate Structure. The corporate capital and ownership ------------------- structure of the Credit Parties shall be as described in Schedule 3.12. ------------- The Administrative Agent shall be satisfied with management structure, legal structure, voting control, liquidity, total leverage and total capitalization of the Credit Parties. (j) Government Consent. The Administrative Agent shall have ------------------ received evidence that all governmental, shareholder and material third party consents and approvals necessary in connection with financings and other transactions contemplated hereby have been obtained. (k) Compliance with Laws. The financings and other -------------------- transactions contemplated hereby shall be in compliance with all applicable laws and regulations (including all Communications Law and all applicable securities and banking laws, rules and regulations). (l) Bankruptcy. There shall be no bankruptcy or ---------- insolvency proceedings with respect to the Parent, the Borrower or any of their respective Subsidiaries. (m) Existing Indebtedness of the Credit Parties. All of the ------------------------------------------- existing Indebtedness for borrowed money of the Credit Parties (other than Indebtedness permitted to exist pursuant to Section 6.1) shall be repaid in full and all security interests and Liens related thereto shall be terminated on the Closing Date. (n) Financial Statements. The Administrative Agent and the -------------------- Lenders shall have received copies of the financial statements and information referred to in Section 3.1 hereof, which shall be in form and substance satisfactory to the Administrative Agent. (o) No Material Adverse Change. Since December 31, -------------------------- 2000, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. (p) FCC Matters. (i) All necessary FCC Licenses with respect ----------- to the Stations owned or operated by the Credit Parties shall be in full force and effect, (ii) any necessary 68 PUC Authorizations shall have been obtained and shall be in form and substance satisfactory to the Administrative Agent and (iii) the Credit Parties will be in compliance with any applicable provisions of Section 310(b) of the Communications Act of 1934 concerning foreign ownership and with any other applicable ownership rules under the Communications Act of 1934, including, without limitation, multiple ownership, cross ownership and any other ownership limits. (q) Officer's Certificates. The Administrative Agent shall ---------------------- have received (i) a certificate, in form and substance satisfactory to the Administrative Agent and certified as accurate by a Responsible Officer, demonstrating compliance by the Borrower and its Subsidiaries as of the Closing Date with the financial covenants contained in Section 5.9 hereof and (ii) a closing officer's certificate in form and substance satisfactory to the Administrative Agent. (r) Legal Opinions of Counsel. The Administrative Agent ------------------------- shall have received (i) an opinion or opinions of counsel for the Credit Parties, dated the Closing Date and addressed to the Administrative Agent and the Lenders, in form and substance acceptable to the Administrative Agent (which shall include, without limitation, opinions with respect to the due organization and valid existence of each Credit Party and opinions as to perfection of the Liens granted to the Administrative Agent pursuant to the Security Documents) and (ii) an opinion of FCC counsel to the Credit Parties, dated the Closing Date and addressed to the Administrative Agent and the Lenders, in form and substance acceptable to the Administrative Agent. (s) Leverage Ratio. The Leverage Ratio as of the Closing -------------- Date (calculated using Consolidated Funded Debt as of the Closing Date and projected Consolidated EBITDA as of December 31, 2001), after giving pro forma effect to the initial Extensions of Credit hereunder, shall not exceed 5.25 to 1.0. (t) Revolving Loan Outstandings. The amount of --------------------------- Revolving Loans borrowed on the Closing Date shall not exceed $6,000,000. (u) Other Debt Instruments. The Administrative Agent shall ---------------------- have received copies of all agreements and instruments evidencing Indebtedness of the Parent and its Subsidiaries (other than the Credit Parties) and any Liens granted to secure such Indebtedness, (i) which agreements and instruments shall not contain any cross-default (other than direct or indirect cross-defaults related to the bankruptcy of a Credit Party, any material litigation or judgment affecting a Credit Party, the failure of a Credit Party to file a material tax return and the occurrence of a material adverse effect with respect to the Parent and its Subsidiaries take as a whole) or cross-acceleration to the Credit Documents, (ii) which Indebtedness shall be (A) on terms acceptable to the Administrative Agent and (B) non-recourse to the Credit Parties and (iii) which Liens shall not include Liens on any Capital Stock of the Borrower and its Subsidiaries or any assets of the Credit Parties. 69 (v) Fisher Plaza Lease. The Administrative Agent shall ------------------ have received an executed of, and approved the terms of, the Fisher Plaza Lease. (w) Additional Matters. All other documents and legal ------------------- matters in connection with the transactions contemplated by this Credit Agreement shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel. SECTION 4.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. -------------------------------------- The obligation of each Lender to make any Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent on the date of making such Extension of Credit: (a) Representations and Warranties. The representations and ------------------------------ warranties made by the Credit Parties in Section 3, in the Security Documents or which are contained in any certificate furnished at any time under or in connection herewith shall be true and correct in all material respects on and as of the date of such Extension of Credit as if made on and as of such date (except for those which expressly relate to an earlier date). (b) No Default or Event of Default. No Default or Event of ------------------------------ Default shall have occurred and be continuing on such date or after giving effect to the Extension of Credit to be made on such date unless such Default or Event of Default shall have been waived in accordance with this Credit Agreement. (c) Compliance with Commitments. Immediately after giving --------------------------- effect to the making of any such Extension of Credit (and the application of the proceeds thereof), (i) the sum of the aggregate principal amount of outstanding Revolving Loans plus LOC Obligations ---- shall not exceed the Revolving Committed Amount then in effect and (ii) the LOC Obligations shall not exceed the LOC Committed Amount. (d) Additional Conditions to Extensions of Credit. If such --------------------------------------------- Extension of Credit is made pursuant to Sections 2.1, 2.2, 2.3, 2.4 or 2.5, all conditions set forth in such Section shall have been satisfied. (e) Additional Conditions to Revolving Loans and Additional ------------------------------------------------------- Loans Made to Fund Permitted Acquisitions. If a Revolving Loan and/or ----------------------------------------- an Additional Loan is requested to fund a Permitted Acquisition, in addition to the conditions set forth in Section 2.1 and Section 2.4, as applicable, the Borrower shall deliver to the Administrative Agent a compliance certificate attaching pro forma financial and other information with respect to the Borrower and its Subsidiaries (after giving effect to the Permitted Acquisition and the making of the related Revolving Loan and/or Additional Loan), which compliance certificate shall be in form and substance satisfactory to the Administrative Agent. 70 Each request for an Extension of Credit and each acceptance by the Borrower of any such Extension of Credit shall be deemed to constitute a representation and warranty by the Borrower as of the date of such Extension of Credit that the applicable conditions in subsections (a) through (e) of this Section have been satisfied. ARTICLE V AFFIRMATIVE COVENANTS Each Credit Party hereby covenants and agrees that on the Closing Date, and thereafter for so long as this Credit Agreement is in effect and until (a) the Commitments have terminated, (b) all Letters of Credit have expired or been surrendered to the Issuing Lender, (c) no Note remains outstanding and unpaid and (d) the Credit Party Obligations, together with interest, Commitment Fees and all other amounts owing to the Agent or any Lender hereunder, are paid in full, such Credit Party shall, and shall cause each of its Subsidiaries, to: SECTION 5.1 FINANCIAL STATEMENTS. -------------------- Furnish to the Administrative Agent and each of the Lenders: (a) Annual Financial Statements. As soon as available, but --------------------------- in any event within ninety (90) days after the end of each fiscal year of the Borrower, a copy of the Consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and the related Consolidated statements of income and Consolidated statements of cash flows and retained earnings of the Borrower and its Subsidiaries for such year, audited by a firm of independent certified public accountants of nationally recognized standing reasonably acceptable to the Administrative Agent, and unaudited consolidating balance sheets and statements of income, setting forth in each case in comparative form the figures for the preceding fiscal year, reported on without a "going concern" or like qualification or exception, or qualification indicating that the scope of the audit was inadequate to permit such independent certified public accountants to certify such financial statements without such qualification; (b) Quarterly Financial Statements. As soon as available and ------------------------------ in any event within forty-five (45) days after the end of each of the first three fiscal quarters of the Borrower, a company-prepared Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such period and related company-prepared Consolidated and consolidating statements of income and Consolidated statements of cash flows and retained earnings for the Borrower and its Subsidiaries for such quarterly period and for the portion of the fiscal year ending with such period, in each case setting forth in comparative form the figures for the corresponding period or periods of the preceding fiscal year (subject to normal recurring year-end audit adjustments); 71 (c) Monthly Financial Statements. As soon as available and ---------------------------- in any event within thirty (30) days after the end of each calendar month (or (i) with respect to the last calendar month of the first three fiscal quarters of the Borrower, within forty-five (45) days after the end of each such calendar month and (ii) with respect to the last calendar month of the fourth fiscal quarter of the Borrower, within ninety (90) days after the end of such calendar month), a company-prepared balance sheet (unaudited and before any consolidating adjustments) of the Borrower and its Subsidiaries as at the end of such month and related company-prepared statements of income for the Borrower and its Subsidiaries for such month and for the portion of the fiscal year ending with such month, in substantially the same form as the monthly financial statements of the Borrower and its Subsidiaries for the month ended December 31, 2001 (subject to normal recurring year-end audit adjustments); all such financial statements delivered pursuant to subsections (a), (b) and (c) to fairly present in all material respects the financial condition and results from operations of the entities and for the periods specified and to be prepared in reasonable detail and in accordance with GAAP (subject, in the case of interim statements, to normal recurring year-end audit adjustments) applied consistently throughout the periods reflected therein and further accompanied by a description of, and an estimation of the effect on the financial statements on account of, a change in the application of accounting principles as provided in Section 1.3; and (d) Annual Financial Plans. As soon as practicable and in ---------------------- any event within thirty (30) days after the end of each fiscal year, a Consolidated and consolidating budget and cash flow projections on a monthly basis of the Borrower and its Subsidiaries for such fiscal year, reasonably acceptable to the Agent, such budget to be prepared by the Borrower in a manner consistent with GAAP and to include an operating and capital budget, a summary of the material assumptions made in the preparation of such budget and a breakout by Television Station and Radio Group. Such budget shall be accompanied by a certificate of the chief financial officer of the Borrower to the effect that the budgets and other financial data are based on reasonable estimates and assumptions, all of which are fair in light of the conditions which existed at the time the budget was made, have been prepared on the basis of the assumptions stated therein, and reflect, as of the time so furnished, the reasonable estimate of the Borrower and its Subsidiaries of the budgeted results of the operations and other information budgeted therein. SECTION 5.2 CERTIFICATES; OTHER INFORMATION. ------------------------------- Furnish to the Administrative Agent and each of the Lenders: (a) concurrently with the delivery of the financial statements referred to in Section 5.1(a) above, a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary 72 therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in Sections 5.1(a) and 5.1(b) above, a Compliance Certificate; (c) within thirty (30) days after the same are sent, copies of all reports (other than those otherwise provided pursuant to Section 5.1 and those which are of a promotional nature) and other financial information which the Borrower or the Parent sends to its shareholders; (d) within ninety (90) days after the end of each fiscal year of the Borrower, a certificate containing information regarding (i) the calculation of Excess Cash Flow and (ii) the amount of all Asset Dispositions, Debt Issuances, and Equity Issuances that were made during the prior fiscal year and amounts received in connection with any Recovery Event during the prior fiscal year; (e) promptly upon receipt thereof, a copy or summary of any other report or "management letter" submitted or presented by independent accountants to the Borrower or any of its Subsidiaries in connection with any annual, interim or special audit of the books of such Person; (f) promptly upon their becoming available, copies of (i) all press releases and other statements made available generally by the Borrower to the public concerning material developments in the business of the Borrower and its Subsidiaries, (ii) any non-routine correspondence or official notices received by the Borrower or any of its Subsidiaries from any federal, state or local governmental authority which regulates the operations of the Borrower and its Subsidiaries, and (iii) all Ownership Reports filed with the FCC and all other material reports or documents filed with the FCC or any other Governmental Authority; (g) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission or any successor entity, or with any national securities exchange; (h) concurrently with the delivery of the financial statements referred to in Sections 5.1(a) above, (A) an updated copy of Schedule 3.12 if the Borrower or any of its Subsidiaries has ------------- formed or acquired a new Subsidiary since the Closing Date or since Schedule 3.12 was last updated, as applicable, (B) an updated copy of ------------- Schedule 3.16 if the Borrower or any of its Subsidiaries has ------------- registered, applied for registration of, acquired or otherwise obtained ownership of any new Intellectual Property since the Closing Date or since Schedule 3.16 was last updated, as applicable, (C) an ------------- updated copy of Schedule 3.23 if any new Material Contract has been ------------- entered into since the Closing Date or since Schedule 3.23 was last ------------- updated, as applicable, together with a copy of each new Material 73 Contract and (D) an updated copy of Schedule 3.24 if any Credit Party ------------- has acquired any new FCC License, obtained any new PUC Authorization or entered into any new Affiliation Agreement (or if the designation of any FCC License or PUC Authorization as material or immaterial has changed) since the Closing Date or since Schedule 3.24 was last ------------- updated, as applicable; and (i) promptly, such additional financial and other information as the Administrative Agent, on behalf of any Lender, may from time to time reasonably request. SECTION 5.3 PAYMENT OF TAXES AND OTHER OBLIGATIONS. -------------------------------------- Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its taxes (Federal, state, local and any other taxes) and other obligations and liabilities of whatever nature and any additional costs that are imposed as a result of any failure to so pay, discharge or otherwise satisfy such taxes, obligations and liabilities, except when the amount or validity of any such taxes, obligations and liabilities is currently being contested in good faith by appropriate proceedings and reserves, if applicable, in conformity with GAAP with respect thereto have been provided on the books of the Credit Parties. SECTION 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. ------------------------------------------------ Continue to engage in business of the same general type as conducted by it on the Closing Date; preserve, renew and keep in full force and effect its existence and good standing; take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business (including, without limitation, all Material FCC Licenses) and to maintain its goodwill; comply with all Contractual Obligations and Requirements of Law applicable to it except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 5.5 MAINTENANCE OF PROPERTY; INSURANCE. ---------------------------------- (a) Keep all material property useful and necessary in its business in good working order and condition (ordinary wear and tear and obsolescence excepted). (b) Maintain with financially sound and reputable insurance companies insurance on all its property (including without limitation its tangible Collateral) in at least such amounts and against at least such risks as are commercially reasonable (including, without limitation, business interruption insurance); and furnish to the Administrative Agent, upon written request, full information as to the insurance carried. The Administrative Agent shall be named as loss payee or mortgagee, as its interest may appear, or an additional insured, as applicable, with respect to such insurance policies, and each provider of any such insurance shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Administrative Agent, 74 that it will give the Administrative Agent thirty (30) days prior written notice before any such policy or policies shall be altered or canceled, and that no act or default of any Credit Party or any other Person shall affect the rights of the Administrative Agent or the Lenders under such policy or policies. The present insurance coverage of the Credit Parties is outlined as to carrier, policy number, expiration date, type and amount on Schedule 5.5(b). --------------- (c) In case of any material loss, damage to or destruction of the Collateral of any Credit Party or any part thereof, such Credit Party shall promptly give written notice thereof to the Administrative Agent generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Collateral of any Credit Party or any part thereof, such Credit Party, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at such Credit Party's cost and expense, will promptly repair or replace the Collateral of such Credit Party so lost, damaged or destroyed unless such Credit Party shall have reasonably determined that such repair or replacement of the affected Collateral is not economically feasible or is not deemed in the best business interest of such Credit Party. SECTION 5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. ------------------------------------------------------ Keep proper books of records and accounts in which full, true and correct entries shall be made of all dealings and transactions in relation to its businesses and activities, such entries to be in conformity with GAAP and in conformity with Requirements of Law in all material respects; and permit, during regular business hours and upon reasonable notice by the Administrative Agent or any Lender, the Administrative Agent or any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time, upon reasonable notice and as often as may reasonably be desired, and to discuss the business, operations, properties and financial and other condition of the Credit Parties with officers and employees of the Credit Parties and with their independent certified public accountants. SECTION 5.7 NOTICES. ------- Promptly (but in no event later than five (5) Business Days (or thirty (30) days with respect to subsection (d) below) after any Credit Party obtains actual knowledge thereof) give written notice of the following to the Administrative Agent (which shall promptly transmit such notice to each Lender): (a) the occurrence of any Default or Event of Default; (b) the occurrence of any default or event of default under any Contractual Obligation of any of the Credit Parties which could reasonably be expected to have a Material Adverse Effect or involve a monetary claim in excess of $2,000,000; 75 (c) any litigation, or any investigation or proceeding affecting any of the Credit Parties which, if adversely determined, could reasonably be expected to have a Material Adverse Effect; (d) (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC (other than a Permitted Lien) or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or any Credit Party or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; (e) any notice of any material violation of any Requirement of Law received by any Credit Party from any Governmental Authority including, without limitation, any notice of violation of Environmental Laws or Communications Laws; (f) any labor controversy that has resulted in, or threatens to result in, a strike or other work action against any Credit Party which could reasonably be expected to have a Material Adverse Effect; (g) any attachment, judgment, lien, levy or order exceeding $2,000,000 that may be assessed against or threatened against any Credit Party other than Permitted Liens; (h) (i) any forfeiture, non-renewal, cancellation, termination, revocation, suspension, impairment or material modification of any Material FCC License held by any Credit Party or any Affiliation Agreement, (ii) any default or forfeiture with respect to any such Material FCC License or Affiliation Agreement, (iii) any hearing designation order concerning any FCC application filed by any Credit Party or any Material FCC License held by any Credit Party, (iv) any refusal by any governmental agency or authority (including, without limitation, the FCC) to renew or extend any such Material FCC License or (v) the occurrence of any event or the existence of any circumstances which is likely to lead to the termination or revocation of any Material FCC License or any Affiliation Agreement; (i) promptly, and in any event at least 30 days prior to the consummation thereof, any acquisition or series of related acquisitions that will qualify as a Permitted Acquisition if the total consideration (including, without limitation, assumed liabilities, earnout payments and any other deferred payment) for the business or property to be acquired in such acquisition or series of related acquisitions exceeds $2,000,000; and (j) promptly, any other development or event which could reasonably be expected to have a Material Adverse Effect. 76 Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. In the case of any notice of a Default or Event of Default, the Borrower shall specify that such notice is a Default or Event of Default notice on the face thereof. SECTION 5.8 ENVIRONMENTAL LAWS. ------------------ (a) Comply in all material respects with all applicable Environmental Laws and obtain and comply in all material respects with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect. (c) Defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Credit Parties or the Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. The agreements in this paragraph shall survive repayment of the Notes and all other amounts payable hereunder. SECTION 5.9 FINANCIAL COVENANTS. ------------------- Commencing on the day immediately following the Closing Date, the Borrower shall, and shall cause each of its Subsidiaries to, comply with the following financial covenants: (a) Leverage Ratio. At all times, the Leverage Ratio during -------------- the following periods shall be less than or equal to the ratios corresponding to such periods: 77 - ---------------------------------------------------------------- Period Maximum Ratio - ---------------------------------------------------------------- Closing Date through September 29, 2002 5.75 to 1.0 September 30, 2002 through December 30, 2002 5.25 to 1.0 December 31, 2002 through June 29, 2003 4.50 to 1.0 June 30, 2003 through December 30, 2003 4.00 to 1.0 December 31, 2003 through June 29, 2004 3.50 to 1.0 June 30, 2004 and thereafter 3.00 to 1.0 - ---------------------------------------------------------------- (b) Interest Coverage Ratio. At all times, the Interest ----------------------- Coverage Ratio during the following periods shall be greater than or equal to the ratios corresponding to such periods: - ---------------------------------------------------------------- Period Minimum Ratio - ---------------------------------------------------------------- Closing Date through September 29, 2002 2.25 to 1.0 September 30, 2002 through June 29, 2003 2.50 to 1.0 June 30, 2003 through June 29, 2004 2.75 to 1.0 June 30, 2004 and thereafter 3.00 to 1.0 - ---------------------------------------------------------------- (c) Fixed Charge Coverage Ratio. At all times, the Fixed --------------------------- Charge Coverage Ratio shall be greater than or equal to 1.15 to 1.0. (d) Consolidated Capital Expenditures. Consolidated Capital --------------------------------- Expenditures made in cash by the Credit Parties shall not exceed $5,000,000 in any fiscal year. SECTION 5.10 ADDITIONAL GUARANTORS. --------------------- The Credit Parties will cause each of their Domestic Subsidiaries, whether newly formed, after acquired or otherwise existing, to promptly become a "Guarantor" hereunder by way of execution of a Joinder Agreement. The guaranty obligations of any such Additional Credit Party shall be secured by, among other things, all of the tangible and intangible assets of the Additional Credit Party and a pledge of 100% of the Capital Stock of its Domestic Subsidiaries and 65% of the voting Capital Stock and 100% of the non-voting Capital Stock of its first-tier Foreign Subsidiaries to the extent that such pledge is permissible under applicable law, and a pledge by the Borrower or other Credit Party which is the owner of the Capital Stock in such Additional Credit Party of 100% of such Capital Stock. SECTION 5.11 COMPLIANCE WITH LAW. ------------------- Each Credit Party will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its property if noncompliance with any such law, rule, regulation, order or restriction could reasonably be expected to have a Material Adverse Effect. 78 SECTION 5.12 PLEDGED ASSETS. -------------- (a) Each Credit Party will, and will cause each of its Subsidiaries to, cause 100% of the Capital Stock of each of its direct or indirect Domestic Subsidiaries and 65% of the voting Capital Stock and 100% of the non-voting Capital Stock of each of its first-tier Foreign Subsidiaries to be subject at all times to a first priority, perfected Lien in favor of the Administrative Agent pursuant to the terms and conditions of the Security Documents or such other security documents as the Administrative Agent shall reasonably request. (b) If, subsequent to the Closing Date, a Credit Party shall acquire any securities, instruments, chattel paper or other personal property required for perfection to be delivered to the Administrative Agent as Collateral hereunder or under any of the Security Documents, the Borrower shall promptly (and in any event within three (3) Business Days) after such acquisition notify the Administrative Agent of same. Each Credit Party shall, and shall cause each of its Subsidiaries to, take such action at its own expense as may be necessary or otherwise requested by the Administrative Agent (including, without limitation, any of the actions described in Section 4.1(c) hereof) to ensure that the Administrative Agent has a first priority perfected Lien to secure the Credit Party Obligations in (i) all personal property of the Credit Parties located in the United States and (ii) to the extent deemed to be material by the Administrative Agent or the Required Lenders in its or their sole reasonable discretion, all other personal property of the Credit Parties, subject in each case only to Permitted Liens. Each Credit Party shall, and shall cause each of its Subsidiaries to, adhere to the covenants regarding the location of personal property as set forth in the Security Documents. SECTION 5.13 HEDGING AGREEMENTS. ------------------ Within 90 days following the Closing Date, the Borrower shall cause at least 50% of the outstanding principal of the Term Loans to be hedged for a period of at least 2 years at fixed rates pursuant to Hedging Agreements with a counterparty and on terms acceptable to the Administrative Agent. SECTION 5.14 COVENANTS REGARDING PATENTS, TRADEMARKS AND COPYRIGHTS. ------------------------------------------------------ (a) The Borrower shall notify the Administrative Agent promptly if it knows or has reason to know that any application, letters patent or registration relating to any Patent, Patent License, Trademark or Trademark License of the Borrower or any of its Subsidiaries may become abandoned, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office or any court) regarding the Borrower's or any of its Subsidiary's ownership of any Patent or Trademark, its right to patent or register the same, or to enforce, keep and maintain the same, or its rights under any Patent License or Trademark License. 79 (b) The Borrower shall notify the Administrative Agent promptly after it knows or has reason to know of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in any court) regarding any Copyright or Copyright License of the Borrower or any of its Subsidiaries, whether (i) such Copyright or Copyright License may become invalid or unenforceable prior to its expiration or termination, or (ii) the Borrower's or any of its Subsidiary's ownership of such Copyright, its right to register the same or to enforce, keep and maintain the same, or its rights under such Copyright License, may become affected. (c) (i) The Borrower shall promptly notify the Administrative Agent of any filing by the Borrower or any of its Domestic Subsidiaries, either itself or through any agent, employee, licensee or designee (but in no event later than the fifteenth day following such filing), of any application for registration of any Intellectual Property with the United States Copyright Office or United States Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof. (ii) Concurrently with the delivery of quarterly and annual financial statements of the Borrower pursuant to Section 5.1 hereof, the Borrower shall provide to the Administrative Agent and its counsel a complete and correct list of all new Intellectual Property owned by or licensed to the Borrower or any of its Domestic Subsidiaries with respect to which the Administrative Agent has not filed a notice of grant of security interest with the United States Patent and Trademark Office or the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, as applicable. (iii) Upon request of the Administrative Agent, the Borrower shall execute and deliver any and all agreements, instruments, documents, and papers as the Administrative Agent may reasonably request to evidence the Administrative Agent's security interest in the Intellectual Property and the general intangibles (including goodwill) related thereto or represented thereby. (d) The Borrower and its Subsidiaries will take all necessary actions, including, without limitation, in any proceeding before the United States Patent and Trademark Office or the United States Copyright Office, to maintain each item of Intellectual Property of the Borrower and its Subsidiaries, including, without limitation, payment of maintenance fees, filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings. (e) In the event that any Credit Party becomes aware that any Intellectual Property is infringed, misappropriated or diluted by a third party in any material respect, the Borrower shall notify the Administrative Agent promptly after it learns thereof and shall, unless the Borrower or the relevant Subsidiary, as the case may be, shall reasonably determine that such Intellectual Property is not material to the business of the Borrower 80 and its Subsidiaries taken as a whole, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and take such other actions as the Borrower or such Subsidiary, as the case may be, shall reasonably deem appropriate under the circumstances to protect such Intellectual Property. SECTION 5.15 LEASES; LANDLORD CONSENT LETTERS. -------------------------------- The Credit Parties shall maintain and cause the renewal of all material Leases (or other material leases, licenses, permits, rights of way or other interests in real property or contractual rights which, for purposes of this Section 5.15, shall be deemed to be within the definition of Leases) on which any tower, transmitter, satellite, microwave relay or other property used or useful in connection with the Broadcast Properties or the television and/or radio broadcasting business of any Credit Party is located in full force and effect and timely pay by the due date thereof all rentals, fees and expenses related thereto. In the event that any such Lease is terminated, canceled or not renewed, each Credit Party agrees to take such action, including entering into a substitute Lease, as may be reasonably required to enable such Credit Party's television and/or radio broadcasting business to continue in substantially the same manner as such business was being conducted and operated prior to the termination, cancellation or non-renewal of such Lease, and further agrees to notify the Administrative Agent of all action taken with respect thereto. For purposes of this Section 5.15, "material" shall be determined in the reasonable discretion of the Administrative Agent. SECTION 5.16 DEPOSIT AND SECURITIES ACCOUNTS. ------------------------------- The Credit Parties shall maintain each of their deposit and securities accounts with (a) a Lender or (b) a financial institution that has entered into an account control agreement in form and substance satisfactory to the Administrative Agent. SECTION 5.17 FISHER PLAZA LEASE. ------------------ One or more Credit Parties shall continue to lease a portion of Fisher Plaza during 2002 and 2003 in accordance with the terms of the Fisher Plaza Lease as in effect on the Closing Date. SECTION 5.18 WHOLLY-OWNED SUBSIDIARIES. ------------------------- Each Subsidiary of a Credit Party (other than a Subsidiary that is a joint venture permitted by the terms of this Credit Agreement) shall be wholly-owned by such Credit Party. SECTION 5.19 POST-CLOSING REQUIREMENT. ------------------------ The Borrower shall promptly (and in any event within 30 days after the Closing Date) deliver to the Administrative Agent copies of certificates of good standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the appropriate 81 Governmental Authorities of each state (other than its state of incorporation or organization) in which such Credit Party is qualified to do business. ARTICLE VI NEGATIVE COVENANTS Each Credit Party hereby covenants and agrees that on the Closing Date, and thereafter for so long as this Credit Agreement is in effect and until (a) the Commitments have terminated, (b) all Letters of Credit have expired or been surrendered to the Issuing Lender, (c) no Note remains outstanding and unpaid and (d) the Credit Party Obligations, together with interest, Commitment Fees and all other amounts owing to the Agent or any Lender hereunder, are paid in full, such Credit Party shall, and shall cause each of its Subsidiaries, to comply with the following covenants: SECTION 6.1 INDEBTEDNESS. ------------ The Credit Parties will not contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness arising or existing under this Credit Agreement and the other Credit Documents; (b) Indebtedness existing as of the Closing Date as referenced in the financial statements referenced in Section 3.1(a) (and set out more specifically in Schedule 6.1(b)) hereto and --------------- renewals, refinancings or extensions thereof in a principal amount not in excess of that outstanding as of the date of such renewal, refinancing or extension; (c) Indebtedness incurred after the Closing Date consisting of Capital Leases or Indebtedness incurred to provide all or a portion of the purchase price or cost of construction of an asset, and renewals, refinancings or extensions thereof in a principal amount not in excess of the principal amount outstanding as of the date of any such renewal, refinancing or extension; provided that (i) such Indebtedness when incurred shall not exceed the purchase price or cost of construction of such asset; and (ii) the total amount of all such Indebtedness shall not exceed $2,000,000 at any time outstanding; (d) Indebtedness and obligations owing under Hedging Agreements relating to the Loans hereunder and other Hedging Agreements entered into in order to manage existing or anticipated interest rate or exchange rate risks and not for speculative purposes; (e) Indebtedness and obligations of Credit Parties owing under documentary letters of credit for the purchase of goods or other merchandise (but not under standby, direct pay or other letters of credit except for the Letters of Credit hereunder) generally; 82 (f) unsecured Indebtedness owing by a Credit Party to another Credit Party; provided that any such Indebtedness shall be -------- fully subordinated to the Credit Party Obligations pursuant to the terms of the Subordination Agreement; and (g) other unsecured Indebtedness of Credit Parties which does not exceed $2,500,000 in the aggregate at any time outstanding. SECTION 6.2 LIENS. ----- The Credit Parties will not contract, create, incur, assume or permit to exist any Lien with respect to any of their respective property or assets of any kind (whether real or personal, tangible or intangible), whether now owned or hereafter acquired, except for Permitted Liens. Notwithstanding the foregoing, if a Credit Party shall grant a Lien on any of its assets in violation of this Section 6.2, then it shall be deemed to have simultaneously granted an equal and ratable Lien on any such assets in favor of the Administrative Agent for the benefit of the Lenders, to the extent such a Lien has not already been granted to the Administrative Agent. SECTION 6.3 GUARANTY OBLIGATIONS. -------------------- The Credit Parties will not enter into or otherwise become or be liable in respect of any Guaranty Obligations (excluding specifically therefrom endorsements in the ordinary course of business of negotiable instruments for deposit or collection) other than (i) those in favor of the Lenders in connection herewith, (ii) guaranties given by the Borrower or any of its Subsidiaries or by the Borrower or any of its Subsidiaries in favor of the Borrower or any such Subsidiary in connection with obligations not constituting Indebtedness including real property leases and other contracts entered into in the ordinary course of business and (iii) Guaranty Obligations by the Credit Parties permitted under Section 6.1 (except, as regards Indebtedness under subsection (b) thereof, only if and to the extent such Indebtedness was guaranteed on the Closing Date). SECTION 6.4 NATURE OF BUSINESS. ------------------ The Credit Parties will not alter the character of their business in any material respect from that conducted as of the Closing Date. SECTION 6.5 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. ------------------------------------------------------ No Credit Party shall: (a) dissolve, liquidate or wind up its affairs, sell, transfer, lease or otherwise dispose of its property or assets or agree to do so at a future time except the following, without duplication, shall be expressly permitted: (i) Specified Sales; 83 (ii) the disposition of property or assets as a result of a Recovery Event to the extent the net proceeds therefrom are used to repay Loans pursuant to Section 2.8(b) or repair or replace damaged property or to purchase or otherwise acquire new assets or property, provided that such -------- purchase or acquisition is consummated within 270 days of such receipt; (iii) the sale, lease or transfer of property or assets from a Credit Party to another Credit Party (including the liquidation or consolidation of any Credit Party (other than the Borrower) into another Credit Party); (iv) the sale of the Television Stations WFXG-TV in Augusta, Georgia and WXTX-TV located in Columbus, Georgia; (v) the contribution of certain assets by the Television Station KIDK-TV in Idaho Falls, Idaho to a joint venture (or similar entity or arrangement) with the American Broadcasting Company, Inc. affiliate located in Idaho Falls, Idaho on terms acceptable to the Administrative Agent; provided that the Administrative Agent, on behalf of the -------- Lenders, shall be granted a security interest in, or Lien on, the equity or contractual interests held by the Credit Parties in such joint venture (or similar entity or arrangement) on terms acceptable to the Administrative Agent; and (vi) the sale of two (2) parcels of real property in Coos Bay, Oregon following the relocation of Station KCBY to its new studio; provided, that, (A) with respect to clauses (i) and (ii) above (other -------- than Specified Sales consisting of trade-ins of vehicles or equipment), at least 75% of the consideration received therefor by the applicable Credit Party shall be in the form of cash or Cash Equivalents and (B) with respect to clause (iv) above, 100% of the consideration received therefor by the applicable Credit Party shall be in the form of cash or Cash Equivalents; or (b) purchase, lease or otherwise acquire (in a single transaction or a series of related transactions) the property or assets of any Person (other than purchases or other acquisitions of inventory, leases, materials, property and equipment in the ordinary course of business, except as otherwise limited or prohibited herein), or enter into any transaction of merger or consolidation, except for (i) Investments or acquisitions permitted pursuant to Section 6.6, (ii) Permitted Acquisitions and (iii) the merger or consolidation of the Borrower or one of its Subsidiaries with and into a Credit Party; provided that if the Borrower is a party thereto, the Borrower will be -------- the surviving corporation. 84 SECTION 6.6 ADVANCES, INVESTMENTS AND LOANS. ------------------------------- The Credit Parties will not lend money or extend credit or make advances to any Person, or purchase or acquire any Capital Stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person except for Permitted Investments. SECTION 6.7 TRANSACTIONS WITH AFFILIATES; ALLOCATION OF OVERHEAD. ---------------------------------------------------- (a) The Credit Parties will not enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any officer, director, shareholder or Affiliate other than on terms and conditions substantially as favorable as would be obtainable in a comparable arm's-length transaction with a Person other than an officer, director, shareholder or Affiliate, except that any Credit Party may (i) lease or continue to lease all or a portion of Fisher Plaza from Fisher Media Services Company so long as (A) the rent and other fees and expenses due and payable pursuant to such lease during 2002 and 2003 comply with the terms of Section 5.17 and (B) the rent and other fees and expenses due and payable pursuant to such lease after 2003 do not exceed the Fair Market Rental Rate for such portion of Fisher Plaza; (ii) continue to provide technology services to Affiliates on a direct-cost basis; and (iii) in addition to those transactions permitted under clauses (i) and (ii), enter into other transactions with Affiliates which are not arms' length transactions so long as the value of such transactions does not exceed $250,000 in any calendar year. (b) The Parent and the Credit Parties will not modify in any material respect the allocation of overhead between or among the Parent and its Subsidiaries (other than the Credit Parties) and the Borrower and its Subsidiaries from the manner in which such overhead is allocated as of the Closing Date. SECTION 6.8 OWNERSHIP OF SUBSIDIARIES; RESTRICTIONS. --------------------------------------- The Credit Parties will not create, form or acquire any Subsidiaries, except for Domestic Subsidiaries which are joined as Additional Credit Parties in accordance with the terms hereof. The Credit Parties will not sell, transfer, pledge or otherwise dispose of any Capital Stock or other equity interests in any of its Subsidiaries, nor will they permit any of their Subsidiaries to issue, sell, transfer, pledge or otherwise dispose of any of their Capital Stock or other equity interests, except in a transaction permitted by Section 6.5(a). SECTION 6.9 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS; MATERIAL ----------------------------------------------- CONTRACTS. --------- The Borrower will not, nor will it permit any of its Subsidiaries to, change its fiscal year. None of the Credit Parties will amend, modify or change its articles of incorporation (or corporate charter or other similar organizational document) or bylaws (or other similar document) or operating agreement in any respect adverse to the Lenders without the prior written consent of the Required Lenders. None of the Credit Parties will, without the prior written consent of the Administrative Agent, amend, modify, cancel or terminate or fail to renew or 85 extend or permit the amendment, modification, cancellation or termination of any of the Material Contracts, except in the event that such amendments, modifications, cancellations or terminations could not reasonably be expected to have a Material Adverse Effect. SECTION 6.10 LIMITATION ON RESTRICTED ACTIONS. -------------------------------- The Credit Parties will not, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Person to (a) pay dividends or make any other distributions to any Credit Party on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness or other obligation owed to any Credit Party, (c) make loans or advances to any Credit Party, (d) sell, lease or transfer any of its properties or assets to any Credit Party, or (e) act as a Guarantor and pledge its assets pursuant to the Credit Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (a)-(d) above) for such encumbrances or restrictions existing under or by reason of (i) this Credit Agreement and the other Credit Documents, (ii) applicable law, (iii) any document or instrument governing Indebtedness incurred pursuant to Section 6.1(c), provided that any such -------- restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith or (iv) any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any such restriction -------- contained therein relates only to the asset or assets subject to such Permitted Lien. SECTION 6.11 RESTRICTED PAYMENTS. ------------------- The Credit Parties will not, directly or indirectly, declare, order, make or set apart any sum for or pay any Restricted Payment, except (a) to make dividends payable solely in the same class of Capital Stock of such Person, (b) to make dividends or other distributions payable to the Borrower (directly or indirectly through its Subsidiaries), and (c) to make cash dividends or other distributions so long as the Leverage Ratio (as set forth in the most recent officer's certificate delivered pursuant to Section 5.2(b)) is less than or equal to 3.50 to 1.0 both before and after giving pro forma effect thereto and no Default or Event of Default shall have occurred and be continuing both before and after giving pro forma effect thereto; provided that the Borrower may make a -------- cash dividend payment to the Parent on or immediately after the Closing Date without complying with the requirements set forth in this subsection (c) so long as (i) such dividend payment does not exceed $127,573,101.63 and (ii) the proceeds of such dividend payment are used by the Parent to repay or refinance existing Indebtedness. SECTION 6.12 PREPAYMENTS OF INDEBTEDNESS, ETC. -------------------------------- The Credit Parties will not, after the issuance thereof, amend or modify (or permit the amendment or modification of) any of the terms of any Indebtedness if such amendment or modification would add or change any terms in a manner adverse to the issuer of such Indebtedness or to the Lenders, or shorten the final maturity or average life to maturity or require any payment to be made sooner than originally scheduled or increase the interest rate applicable thereto or change any subordination provision thereof. 86 SECTION 6.13 SALE LEASEBACKS. --------------- The Credit Parties will not, directly or indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (a) which any Credit Party has sold or transferred or is to sell or transfer to a Person which is not another Credit Party or (b) which any Credit Party intends to use for substantially the same purpose as any other property which has been sold or is to be sold or transferred by such Credit Party to another Person which is not another Credit Party in connection with such lease. SECTION 6.14 NO FURTHER NEGATIVE PLEDGES. --------------------------- The Credit Parties will not enter into, assume or become subject to any agreement prohibiting or otherwise restricting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or requiring the grant of any security for such obligation if security is given for some other obligation, except (a) pursuant to this Credit Agreement and the other Credit Documents and (b) pursuant to any document or instrument governing Indebtedness incurred pursuant to Section 6.1(c), provided that any such -------- restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith and (c) in connection with any Permitted Lien or any document or instrument governing any Permitted Lien, provided that any -------- such restriction contained therein relates only to the asset or assets subject to such Permitted Lien. SECTION 6.15 FCC LICENSES. ------------ On or after the 90/th/ day following the Closing Date, the Borrower shall not directly own or hold any FCC License. SECTION 6.16 ACTIVITIES OF THE PARENT. ------------------------ The Parent shall not (a) hold or incur any Indebtedness (other than Permitted Parent Debt), (b) grant any Liens (other than Permitted Parent Liens) upon any of its properties or assets or (c) engage in any operations, business or activity other than (i) holding the Capital Stock of its Subsidiaries, (ii) issuing its Capital Stock and making dividends and other distributions on its Capital Stock, and (iii) administrative activities in the ordinary course of business. 87 ARTICLE VII EVENTS OF DEFAULT SECTION 7.1 EVENTS OF DEFAULT. ----------------- An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): ---------------- (a) Payment Default. The Borrower shall fail to pay any --------------- principal on any Loan or Note when due (whether at maturity, by reason of acceleration or otherwise) in accordance with the terms thereof or hereof; or the Borrower shall fail to reimburse the Issuing Lender for any LOC Obligations when due (whether at maturity, by reason of acceleration or otherwise) in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Note or any fee or other amount payable hereunder when due (whether at maturity, by reason of acceleration or otherwise) in accordance with the terms thereof or hereof and such failure shall continue unremedied for three (3) Business Days (or any Guarantor shall fail to pay on the Guaranty in respect of any of the foregoing or in respect of any other Guaranty Obligations thereunder). (b) Misrepresentation. Any representation or warranty made ----------------- or deemed made herein, in the Security Documents or in any of the other Credit Documents or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Credit Agreement shall prove to have been incorrect, false or misleading in any material respect on or as of the date made or deemed made. (c) Covenant Default. (i) Any Credit Party shall fail to ---------------- perform, comply with or observe any term, covenant or agreement applicable to it contained in Sections 5.1, 5.2, 5.4, 5.7, 5.9, 5.11, 5.13 or Article VI hereof; (ii) the Parent shall violate the terms of Sections 6.7(b) or 6.16, or (iii) any Credit Party shall fail to comply with any other covenant, contained in this Credit Agreement or the other Credit Documents or any other agreement, document or instrument among any Credit Party, the Administrative Agent and the Lenders or executed by any Credit Party in favor of the Administrative Agent or the Lenders (other than as described in Sections 7.1(a) or 7.1(c)(i) and (ii) above), and such breach or failure to comply is not cured within thirty (30) days of its occurrence, or if such breach is curable but cannot be cured within thirty (30) days, then the Borrower has commenced to cure the breach within thirty (30) days, diligently pursues such cure thereafter and completes such cure within sixty (60) days. (d) Debt Cross-Default. Any Credit Party shall (i) default ------------------ in any payment of principal of or interest on any Indebtedness (other than the Loans, Reimbursement Obligations and the Guaranty) in a principal amount outstanding of at least $1,000,000 for the Borrower and any of its Subsidiaries in the aggregate beyond any applicable grace period (not to exceed 30 days), if any, provided in the instrument or agreement under 88 which such Indebtedness was created; or (ii) default in the observance or performance of any other agreement or condition relating to any Indebtedness (other than the Loans, Reimbursement Obligations and the Guaranty) in a principal amount outstanding of at least $1,000,000 in the aggregate for the Borrower and its Subsidiaries or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity. (e) Other Cross-Defaults. The Borrower or any of its -------------------- Subsidiaries shall default in (i) the payment when due under any Material Contract or (ii) in the performance or observance of any obligation or condition of any Material Contract and such failure to perform or observe such other obligation or condition continues unremedied for a period of thirty (30) days after notice of, or knowledge of the Borrower or any of its Subsidiaries of, the occurrence of such default unless, but only as long as, the existence of any such default is being contested by the Borrower or such Subsidiary in good faith by appropriate proceedings and adequate reserves in respect thereof have been established on the books of the Borrower or such Subsidiary to the extent required by GAAP. (f) Bankruptcy Default. (i) The Parent, the Borrower or any ------------------ of the Borrower's Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to have it judged bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Parent, the Borrower or any of the Borrower's Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Parent, the Borrower or any of the Borrower's Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Parent, the Borrower or any of the Borrower's Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; (v) the Parent shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (vi) the Borrower and its Subsidiaries on a 89 consolidated basis shall generally not, or shall be unable to, or shall admit in writing their inability to, pay their debts as they become due. (g) Judgment Default. One or more judgments, orders, decrees ---------------- or arbitration awards shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (to the extent not paid when due or covered by insurance) of $500,000 or more and all such judgments, orders, decrees or arbitration awards shall not have been paid and satisfied, vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof. (h) ERISA Default. (i) Any Person shall engage in any ------------- "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan (other than a Permitted Lien) shall arise on the assets of the Borrower, any of its Subsidiaries or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a Trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower, any of its Subsidiaries or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, any Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, is reasonably likely to have a Material Adverse Effect. (i) Change of Control. A Change of Control shall have ----------------- occurred. (j) Failure of Credit Documents. This Credit Agreement --------------------------- (including the Guaranty) or any other Credit Document or any provision hereof or thereof shall cease to be in full force and effect or to give the Administrative Agent and/or the Lenders the security interests, liens, rights, powers and privileges purported to be created thereby, or any Credit Party or any Person acting by or on behalf of any Credit Party shall deny or disaffirm such Person's obligations under this Credit Agreement or any other Credit Document. (k) Hedging Agreement. Any termination payment shall be due ----------------- by a Credit Party under any Hedging Agreement and such amount is not paid within the later to occur of five (5) Business Days after the due date thereof or the expiration of grace periods, if any, in such Hedging Agreement. 90 (l) Loss of License or Consent. Any Material FCC License -------------------------- or Material PUC Authorization of the Borrower or any of its Subsidiaries shall be revoked, suspended, canceled, otherwise terminated or fail to be renewed. (m) Interruption of Network Programs. Any refusal or -------------------------------- failure by any Network under any Affiliation Agreement or its affiliates to offer or deliver to the Borrower or any of its Subsidiaries network programs, or any interruption in the delivery of such network programs, as the result of any default by the Borrower or any of its Subsidiaries under the Affiliation Agreement; and any termination or failure to renew (together with the failure by the Network to provide service in accordance with such terminated or expired Affiliation Agreement), or any failure or refusal by the Network to provide service under, the Affiliation Agreement or any successor agreement, if such agreement is not replaced within 60 days of such termination or expiration by a new affiliation agreement with another Network reasonably acceptable to the Required Lenders or service is not resumed within 60 days, as applicable. (n) Interruption of Broadcasting. Any Station shall cease ---------------------------- broadcasting for a period of 30 days or more, except to the extent the earnings from such Station are adequately covered by business interruption insurance during such period or if other television stations or radio stations, as applicable, operating in the same market as such Station shall also have ceased to broadcast during such period. SECTION 7.2 ACCELERATION; REMEDIES. ---------------------- Upon the occurrence and during the continuation of an Event of Default, then, and in any such event, (a) if such event is an Event of Default specified in Section 7.1(f) above, (i) automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon), and all other amounts under the Credit Documents (including without limitation the maximum amount of all contingent liabilities under Letters of Credit) shall immediately become due and payable, and the Borrower shall immediately pay to the Administrative Agent cash collateral as security for the LOC Obligations for subsequent drawings under then outstanding Letters of Credit in an amount equal to the maximum amount which may be drawn under Letters of Credit then outstanding and (ii) the Administrative Agent may exercise on behalf of the Lenders all of its other rights and remedies under this Credit Agreement, the other Credit Documents and applicable law, (b) if such event is any other Event of Default, subject to the terms of Section 8.5, with the written consent of the Required Lenders, the Administrative Agent may, or upon the written request of the Required Lenders, the Administrative Agent shall, take any or all of the following actions: (i) by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; (ii) by notice of default to the Borrower declare the Loans (with accrued interest thereon) and all other amounts owing under this Credit Agreement and the Notes to be due and payable forthwith and direct the Borrower to pay to the Administrative Agent cash collateral as security for the LOC Obligations for subsequent drawings under then outstanding Letters of Credit in an amount equal to the maximum amount of which may be drawn under Letters of Credit then outstanding, whereupon the same shall immediately become due and payable; and/or (iii) exercise on behalf of the 91 Lenders all of its other rights and remedies under this Credit Agreement, the other Credit Documents and applicable law, and (c) the Administrative Agent shall have the right to hire, at the expense of the Credit Parties, one or more consultants and the Credit Parties agree to cooperate with such consultants. Except as expressly provided above in this Section 7.2, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Credit Parties. ARTICLE VIII THE ADMINISTRATIVE AGENT SECTION 8.1 APPOINTMENT. ----------- Each Lender hereby irrevocably designates and appoints First Union as the Administrative Agent of such Lender under this Credit Agreement, and each such Lender irrevocably authorizes First Union, as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Credit Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Credit Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or otherwise exist against the Administrative Agent. SECTION 8.2 DELEGATION OF DUTIES. -------------------- The Administrative Agent may execute any of its duties under this Credit Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Without limiting the foregoing, the Administrative Agent may appoint one of its affiliates as its agent to perform the functions of the Administrative Agent hereunder relating to the advancing of funds to the Borrower and distribution of funds to the Lenders and to perform such other related functions of the Administrative Agent hereunder as are reasonably incidental to such functions. SECTION 8.3 EXCULPATORY PROVISIONS. ---------------------- Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Credit Agreement (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Credit Party or any officer thereof contained in this Credit Agreement or in any certificate, 92 report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Credit Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of any of the Credit Documents or for any failure of any Credit Party to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance by any Credit Party of any of the agreements contained in, or conditions of, this Credit Agreement, or to inspect the properties, books or records of any Credit Party. SECTION 8.4 RELIANCE BY ADMINISTRATIVE AGENT. -------------------------------- The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Credit Parties), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless an executed Commitment Transfer Supplement has been filed with the Administrative Agent pursuant to Section 9.6(c) with respect to the Loans evidenced by such Note. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Credit Documents in accordance with a request of the Required Lenders or all of the Lenders, as may be required under this Credit Agreement, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes. SECTION 8.5 NOTICE OF DEFAULT. ----------------- The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Credit Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided, however, that unless and until the -------- ------- Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders except to the extent that this Credit Agreement expressly requires that such action be taken, or not taken, only with the consent or upon the authorization of the Required Lenders, or all of the Lenders, as the case may be. 93 SECTION 8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER ---------------------------------------------- LENDERS. ------- Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representation or warranty to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of any Credit Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower or any other Credit Party and made its own decision to make its Loans hereunder and enter into this Credit Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower and the other Credit Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower or any other Credit Party which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. SECTION 8.7 INDEMNIFICATION. --------------- The Lenders agree to indemnify the Agent in its capacity hereunder (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought under this Section, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes or any Reimbursement Obligation) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of any Credit Document or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided, however, that no Lender shall be liable for the payment of -------- ------- any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from the Agent's gross negligence or willful misconduct, as determined by a court of competent jurisdiction. The agreements in this Section 8.7 shall survive the termination of this Credit Agreement and payment of the Notes, any Reimbursement Obligation and all other amounts payable hereunder. 94 SECTION 8.8 THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. --------------------------------------------------- The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower and the other Credit Parties as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made or renewed by it and any Note issued to it, the Administrative Agent shall have the same rights and powers under this Credit Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. SECTION 8.9 SUCCESSOR ADMINISTRATIVE AGENT. ------------------------------ The Administrative Agent may resign as Administrative Agent upon 30 days' prior written notice to the Borrower and the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Credit Agreement and the other Credit Documents, then the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders, which successor agent shall be approved by the Borrower (such approval not to be unreasonably withheld) so long as no Default or Event of Default has occurred and is continuing, whereupon such successor administrative agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor administrative agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Credit Agreement or any holders of the Notes. If no successor Administrative Agent has accepted appointment as Administrative Agent within thirty (30) days after the retiring Administrative Agent's giving notice of resignation, the retiring Administrative Agent shall have the right, on behalf of the Lenders, to appoint a successor administrative agent, which successor shall be approved by the Borrower (such approval not to be unreasonably withheld) so long as no Default or Event of Default has occurred and is continuing, provided that such successor administrative agent has minimum capital and surplus of at least $500,000,000. If no successor administrative agent has accepted appointment as Administrative Agent within sixty (60) days after the retiring Administrative Agent's giving notice of resignation, the retiring Administrative Agent's resignation shall nevertheless become effective and the Lenders shall perform all duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor administrative agent as provided for above. After any retiring Administrative Agent's resignation as Administrative Agent, the indemnification provisions of this Credit Agreement and the other Credit Documents and the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Credit Agreement. SECTION 8.10 OTHER AGENTS. ------------ Each of the Co-Syndication Agents and the Documentation Agent shall have no duties or obligations, and thus no liabilities, in its capacity as a Co-Syndication Agent or the 95 Documentation Agent, as applicable, under this Credit Agreement and the other Credit Documents. ARTICLE IX MISCELLANEOUS SECTION 9.1 AMENDMENTS, WAIVERS AND RELEASE OF COLLATERAL. --------------------------------------------- Neither this Credit Agreement, nor any of the Notes, nor any of the other Credit Documents, nor any terms hereof or thereof may be amended, supplemented, waived or modified except in accordance with the provisions of this Section nor may the Borrower or any Guarantor be released except in accordance with the provisions of this Section 9.1. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower or any other Credit Party written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Credit Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Borrower or any other Credit Party hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders may specify in such instrument, any of the requirements of this Credit Agreement or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, waiver, - -------- ------- supplement, modification or release shall: (i) reduce the amount or extend the scheduled date of maturity of any Loan or Note or any installment thereon, or reduce the stated rate of any interest or fee payable hereunder (other than any decision to charge or not charge any default rate of interest pursuant to Section 2.10) or extend the scheduled date of any payment thereof or increase the amount or extend the expiration date of any Lender's Commitment, in each case without the written consent of each Lender directly affected thereby, or (ii) amend, modify or waive any provision of this Section 9.1 or reduce the percentage specified in the definition of Required Lenders, without the written consent of all the Lenders, or (iii) amend, modify or waive any right or duty of the Administrative Agent (including, without limitation, any provision of Article VIII) or the Issuing Lender under any Credit Document without the written consent of the then Administrative Agent or the Issuing Lenders, as applicable, or (iv) release the Borrower or any material Guarantor from their obligations hereunder or under the Guaranty, without the written consent of all of the Lenders, or 96 (v) release any material portion of the Collateral without the written consent of all of the Lenders, or (vi) subordinate the Loans to any other Indebtedness without the written consent of all of the Lenders; or (vii) permit the Borrower to assign or transfer any of its rights or obligations under this Credit Agreement or other Credit Documents. Any such waiver, any such amendment, supplement or modification and any such release shall apply equally to each of the Lenders and shall be binding upon the Borrower, the other Credit Parties, the Lenders, the Administrative Agent and all future holders of the Notes. In the case of any waiver, the Borrower, the other Credit Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the outstanding Loans and Notes and other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Notwithstanding any of the foregoing to the contrary, the consent of the Borrower shall not be required for any amendment, modification or waiver of the provisions of Article VIII (other than the provisions of Section 8.9); provided, however, that the Administrative Agent will provide written notice to - -------- ------- the Borrower of any such amendment, modification or waiver. In addition, the Borrower and the Lenders hereby authorize the Administrative Agent to modify this Credit Agreement by unilaterally amending or supplementing Schedule 2.1(a) --------------- from time to time in the manner requested by the Borrower, the Administrative Agent or any Lender in order to reflect any assignments or transfers of the Loans as provided for hereunder; provided, however, that the Administrative -------- ------- Agent shall promptly deliver a copy of any such modification to the Borrower and each Lender. Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding. SECTION 9.2 NOTICES. ------- Except as otherwise provided in Article II, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) when delivered by hand, (b) when transmitted via telecopy (or other facsimile device) to the number set out herein, (c) the day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in 97 each case, addressed as follows in the case of the Borrower, the other Credit Parties and the Administrative Agent, and as set forth on Schedule 9.2 in the ------------ case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Borrower and the other Credit Parties: Fisher Broadcasting Company 600 University Street, Suite 1525 Seattle, Washington 98101-3185 Attention: David D. Hillard Assistant Secretary Telecopier: 206-404-6769 Telephone: 206-404-6780 with a copy to: Graham & Dunn PC 1420 Fifth Avenue, 33(rd) Floor Seattle, Washington 98101 Attention: Mark A. Finkelstein Telecopier: 206-340-9599 Telephone: 206-340-9611 The Administrative Agent: First Union National Bank 201 South College Street NC0680/CP23 Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Telecopier: 704-383-0288 Telephone: 704-374-2698 with a copy to: First Union National Bank One First Union Center, DC-5 Charlotte, North Carolina 28288-0760 Attention: Larry Sullivan Telecopier: 704-374-4793 Telephone: 704-715-1794 provided, that notices given by the Borrower pursuant to Section 2.1 or Section - -------- 2.11 hereof shall be effective only upon receipt thereof by the Administrative Agent. 98 SECTION 9.3 NO WAIVER; CUMULATIVE REMEDIES. ------------------------------ No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. SECTION 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. ------------------------------------------ All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Credit Agreement and the Notes and the making of the Loans, provided that all such representations and -------- warranties shall terminate on the date upon which the Commitments have been terminated and all amounts owing hereunder and under any Notes have been paid in full. SECTION 9.5 PAYMENT OF EXPENSES AND TAXES. ----------------------------- The Borrower agrees (a) to pay or reimburse each of the Administrative Agent, Bank of America and the Arrangers for all reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation, negotiation, printing and execution of, and any amendment, supplement or modification to, this Credit Agreement and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, together with the reasonable fees and disbursements of counsel to each of the Administrative Agent, Bank of America and the Arrangers, (b) to pay or reimburse each of the Lenders and the Administrative Agent for all its reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Credit Agreement, the Notes and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent and to the Lenders (including reasonable allocated costs of in-house legal counsel) and the reasonable fees and disbursements of any consultant hired by the Administrative Agent pursuant to Section 7.2(c), and (c) on demand, to pay, indemnify, and hold each of the Lenders, the Administrative Agent and the Arrangers harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, the Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender, the Administrative Agent, the Arrangers and their respective Affiliates harmless from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of the Credit Documents and any such other 99 documents and the use, or proposed use, of proceeds of the Loans (all of the foregoing, collectively, the "indemnified liabilities"); provided, however, that ----------------------- -------- ------- the Borrower shall not have any obligation hereunder to a Lender, the Administrative Agent, an Arranger, or any of their respective Affiliates to the extent such indemnified liabilities arise from the gross negligence or willful misconduct of such Lender, the Administrative Agent, such Arranger or such Affiliate, as applicable, as determined by a court of competent jurisdiction pursuant to a final non-appealable judgment. The agreements in this Section 9.5 shall survive repayment of the Loans, Notes and all other amounts payable hereunder. SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING -------------------------------------------------- LENDERS. ------- (a) This Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders of the Notes and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Credit Agreement or the other Credit Documents without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") ------------ participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender, or any other interest of such Lender hereunder, in each case in minimum amounts of $1,000,000 (or, if less, the entire amount of such Lender's Obligations, Commitments or other interests). In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Credit Agreement to the other parties to this Credit Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Credit Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement. No Lender shall transfer or grant any participation under which the Participant shall have rights to approve any amendment to or waiver of this Credit Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the scheduled maturity of any Loan or Note or any installment thereon in which such Participant is participating, or reduce the stated rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of interest at the increased post-default rate) or reduce the principal amount thereof, or increase the amount of the Participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without consent of a Participant if such Participant's participation is not increased as a result thereof), (ii) release any material Guarantor from its obligations under the Guaranty, (iii) release any material portion of the Collateral, or (iv) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Credit Agreement. In the case of any such participation, the Participant shall not have any rights under this Credit 100 Agreement or any of the other Credit Documents (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided that each Participant shall be entitled -------- to the benefits of Sections 2.17, 2.18, 2.19, 2.20 and 9.5 with respect to its participation in the Commitments and the Loans outstanding from time to time; provided, that the Participants of any -------- Lender, in the aggregate, shall not be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time, sell or assign to any Lender or any affiliate thereof and with the consent of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower (in each case, which consent shall not be unreasonably withheld), to one or more additional banks, insurance companies or other financial institutions or any funds investing in bank loans ("Purchasing Lenders"), all or any part of its rights and obligations ------------------ under this Credit Agreement and the Notes in minimum amounts of $1,000,000 (or, if less, the entire amount of such Lender's Obligations), pursuant to a Commitment Transfer Supplement, executed by such Purchasing Lender and such transferor Lender (and, in the case of a Purchasing Lender that is not then a Lender or an affiliate thereof, the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower), and delivered to the Administrative Agent for its acceptance and recording in the Register; provided, however, that any sale or assignment to an -------- ------- existing Lender, an Affiliate of an existing Lender or an Approved Fund shall not require the consent of the Administrative Agent or the Borrower nor shall any such sale or assignment be subject to the minimum assignment amounts specified herein. Upon such execution, delivery, acceptance and recording, from and after the Transfer Effective Date specified in such Commitment Transfer Supplement, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Commitment Transfer Supplement, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the transferor Lender thereunder shall, to the extent provided in such Commitment Transfer Supplement, be released from its obligations under this Credit Agreement (and, in the case of a Commitment Transfer Supplement covering all or the remaining portion of a transferor Lender's rights and obligations under this Credit Agreement, such transferor Lender shall cease to be a party hereto). Such Commitment Transfer Supplement shall be deemed to amend this Credit Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such transferor Lender under this Credit Agreement and the Notes. On or prior to the Transfer Effective Date specified in such Commitment Transfer Supplement, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the Notes delivered to 101 the Administrative Agent pursuant to such Commitment Transfer Supplement new Notes to the order of such Purchasing Lender in an amount equal to the Commitment assumed by it pursuant to such Commitment Transfer Supplement and, unless the transferor Lender has not retained a Commitment hereunder, new Notes to the order of the transferor Lender in an amount equal to the Commitment retained by it hereunder. Such new Notes shall be dated the Closing Date and shall otherwise be in the form of the Notes replaced thereby. The Notes surrendered by the transferor Lender shall be returned by the Administrative Agent to the Borrower marked "canceled". (d) The Administrative Agent shall maintain at its address referred to in Section 9.2 a copy of each Commitment Transfer Supplement delivered to it and a register (the "Register") for the -------- recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly executed Commitment Transfer Supplement, together with payment to the Administrative Agent by the transferor Lender or the Purchasing Lender (except for any assignment by a Lender to an Affiliate of such Lender), as agreed between them, of a registration and processing fee of $3,500 for each Purchasing Lender listed in such Commitment Transfer Supplement and the Notes subject to such Commitment Transfer Supplement, the Administrative Agent shall (i) accept such Commitment Transfer Supplement and (ii) record the information contained therein in the Register. (f) Each Credit Party authorizes each Lender to disclose to any Participant or Purchasing Lender (each, a "Transferee") and any ---------- prospective Transferee any and all financial information in such Lender's possession concerning the Credit Parties and their Affiliates which has been delivered to such Lender by or on behalf of a Credit Party pursuant to this Credit Agreement or which has been delivered to such Lender by or on behalf of a Credit Party in connection with such Lender's credit evaluation of the Credit Parties and their Affiliates prior to becoming a party to this Credit Agreement, in each case subject to Section 9.15. (g) At the time of each assignment pursuant to this Section 9.6 to a Person which is not already a Lender hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for federal income tax purposes, the respective assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a 2.19 Certificate) described in Section 2.19. 102 (h) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Credit Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section 9.6 shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security -------- interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. SECTION 9.7 ADJUSTMENTS; SET-OFF. -------------------- (a) Each Lender agrees that if any Lender (a "benefited --------- Lender") shall at any time receive any payment of all or part of its ------ Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7.1(f), or otherwise) in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion -------- ------- of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Loans may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law (including, without limitation, other rights of set-off), each Lender shall have the right, without prior notice to any Credit Party, any such notice being expressly waived by the Credit Parties to the extent permitted by applicable law, upon the occurrence of any Event of Default, to setoff and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held by or owing by or to such Lender or any branch or agency thereof to or for the credit or the account of the Borrower or any other Credit Party, or any part thereof in such amounts as such Lender may elect, against and on account of the Loans and other Credit Party Obligations of the Borrower and the other Credit Parties to such Lender hereunder and claims of every nature and description of such Lender against the Borrower and the other Credit Parties, in any currency, whether arising hereunder, under any other Credit Document or any Hedging Agreement provided by such Lender pursuant to the terms of this Agreement, as such Lender may elect, whether or not such Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The aforesaid right of set-off may be exercised by such Lender against the Borrower, any other Credit Party or 103 against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of the Borrower or any other Credit Party, or against anyone else claiming through or against the Borrower, any other Credit Party or any such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by such Lender prior to the occurrence of any Event of Default. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided, -------- however, that the failure to give such notice shall not affect the ------- validity of such set-off and application. SECTION 9.8 TABLE OF CONTENTS AND SECTION HEADINGS. -------------------------------------- The table of contents and the Section and subsection headings herein are intended for convenience only and shall be ignored in construing this Credit Agreement. SECTION 9.9 COUNTERPARTS. ------------ This Credit Agreement may be executed by one or more of the parties to this Credit Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Credit Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. SECTION 9.10 EFFECTIVENESS. ------------- This Credit Agreement shall become effective on the date on which all of the parties have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent pursuant to Section 9.2 or, in the case of the Lenders, shall have given to the Administrative Agent written, telecopied or telex notice (actually received) at such office that the same has been signed and mailed to it. SECTION 9.11 SEVERABILITY. ------------ Any provision of this Credit Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 9.12 INTEGRATION. ----------- This Credit Agreement and the Notes represent the agreement of the Borrower, the other Credit Parties, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the 104 Administrative Agent, the Borrower, the other Credit Parties or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the Notes. SECTION 9.13 GOVERNING LAW. ------------- This Credit Agreement and the Notes and the rights and obligations of the parties under this Credit Agreement and the Notes shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. SECTION 9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ---------------------------------------------- All judicial proceedings brought against the Borrower and/or any other Credit Party with respect to this Credit Agreement, any Note or any of the other Credit Documents may be brought in any state or federal court of competent jurisdiction in the State of New York, and, by execution and delivery of this Credit Agreement, each of the Borrower and the other Credit Parties accepts, for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any final judgment rendered thereby in connection with this Credit Agreement from which no appeal has been taken or is available. Each of the Borrower and the other Credit Parties irrevocably agrees that all service of process in any such proceedings in any such court may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to it at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto, such service being hereby acknowledged by the each of the Borrower and the other Credit Parties to be effective and binding service in every respect. Each of the Borrower, the other Credit Parties, the Administrative Agent and the Lenders irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any Lender to bring proceedings against the Borrower or the other Credit Parties in the court of any other jurisdiction. SECTION 9.15 CONFIDENTIALITY. --------------- The Administrative Agent and each of the Lenders agrees that it will use its best efforts not to disclose without the prior written consent of the Borrower any information with respect to the Credit Parties which is furnished pursuant to this Credit Agreement, any other Credit Document or any documents contemplated by or referred to herein or therein and which is designated by the Borrower to the Lenders in writing as confidential or as to which it is otherwise reasonably clear such information is not public, except that any Lender may disclose any such information (a) to its employees, Affiliates, auditors and counsel or to another Lender, (b) as has become generally available to the public other than by a breach of this Section 9.15, (c) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or the OCC or the NAIC or 105 similar organizations (whether in the United States or elsewhere) or their successors, (d) as may be required or appropriate in response to any summons or subpoena or any law, order, regulation or ruling applicable to such Lender, (e) to any prospective Participant or assignee in connection with any contemplated transfer pursuant to Section 9.6, provided that such prospective transferee -------- shall have been made aware of this Section 9.15 and shall have agreed to be bound by its provisions as if it were a party to this Credit Agreement or (f) to Gold Sheets and other similar bank trade publications; such information to - ----------- consist of deal terms and other information regarding the credit facilities evidenced by this Credit Agreement customarily found in such publications. SECTION 9.16 ACKNOWLEDGMENTS. --------------- The Borrower and the other Credit Parties each hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of each Credit Document; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower or any other Credit Party arising out of or in connection with this Credit Agreement and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower and the other Credit Parties, on the other hand, in connection herewith is solely that of debtor and creditor; and (c) no joint venture exists among the Lenders or among the Borrower or the other Credit Parties and the Lenders. SECTION 9.17 WAIVERS OF JURY TRIAL. --------------------- THE BORROWER, THE OTHER CREDIT PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. ARTICLE X GUARANTY SECTION 10.1 THE GUARANTY. ------------ In order to induce the Lenders to enter into this Credit Agreement and to extend credit hereunder and in recognition of the direct benefits to be received by the Guarantors from the Extensions of Credit hereunder, each of the Guarantors hereby agrees with the Administrative Agent and the Lenders as follows: the Guarantor hereby unconditionally and irrevocably jointly 106 and severally guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, by acceleration or otherwise, of any and all indebtedness of the Borrower to the Administrative Agent and the Lenders (or any Affiliate of a Lender that provides a Hedging Agreement permitted by Section 6.1(d)). If any or all of the indebtedness of the Borrower to the Administrative Agent and the Lenders (or any Affiliate of a Lender that provides a Hedging Agreement permitted by Section 6.1(d)) becomes due and payable hereunder or any Hedging Agreement permitted by Section 6.1(d), each Guarantor unconditionally promises to pay such indebtedness to the Administrative Agent and the Lenders (or such Affiliate of a Lender, as applicable), or order, on demand, together with any and all reasonable expenses which may be incurred by the Administrative Agent or the Lenders in collecting any of the indebtedness. The word "indebtedness" is used in this Article X in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of the Borrower, including specifically all Credit Party Obligations, arising in connection with this Credit Agreement, the other Credit Documents or any Hedging Agreement executed in connection herewith, in each case, heretofore, now, or hereafter made, incurred or created, whether voluntarily or involuntarily, absolute or contingent, liquidated or unliquidated, determined or undetermined, whether or not such indebtedness is from time to time reduced, or extinguished and thereafter increased or incurred, whether the Borrower may be liable individually or jointly with others, whether or not recovery upon such indebtedness may be or hereafter become barred by any statute of limitations, and whether or not such indebtedness may be or hereafter become otherwise unenforceable. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents, to the extent the obligations of a Guarantor shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of each such Guarantor hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including, without limitation, the Bankruptcy Code). SECTION 10.2 BANKRUPTCY. ---------- Additionally, each of the Guarantors unconditionally and irrevocably guarantees jointly and severally the payment of any and all indebtedness of the Borrower to the Lenders whether or not due or payable by the Borrower upon the occurrence of any of the events specified in Section 7.1(f), and unconditionally promises to pay such indebtedness to the Administrative Agent for the account of the Lenders, or order, on demand, in lawful money of the United States. Each of the Guarantors further agrees that to the extent that the Borrower or a Guarantor shall make a payment or a transfer of an interest in any property to the Administrative Agent or any Lender, which payment or transfer or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, or otherwise is avoided, and/or required to be repaid to the Borrower or a Guarantor, the estate of the Borrower or a Guarantor, a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such avoidance or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made. 107 SECTION 10.3 NATURE OF LIABILITY. ------------------- The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the indebtedness of the Borrower whether executed by any such Guarantor, any other guarantor or by any other party, and no Guarantor's liability hereunder shall be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the indebtedness of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to the Administrative Agent or the Lenders on the indebtedness which the Administrative Agent or such Lenders repay the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each of the Guarantors waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. SECTION 10.4 INDEPENDENT OBLIGATION. ---------------------- The obligations of each Guarantor hereunder are independent of the obligations of any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other guarantor or the Borrower and whether or not any other Guarantor or the Borrower is joined in any such action or actions. SECTION 10.5 AUTHORIZATION. ------------- Each of the Guarantors authorizes the Administrative Agent and each Lender without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to (a) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof in accordance with this Credit Agreement, including any increase or decrease of the rate of interest thereon, (b) take and hold security from any Guarantor, the Borrower or any other party for the payment of this Guaranty or the other Credit Party Obligations and exchange, enforce, waive and/or release any such security, (c) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Lenders in their discretion may determine and (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors. SECTION 10.6 RELIANCE. -------- It is not necessary for the Administrative Agent or the Lenders to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 108 SECTION 10.7 WAIVER. ------ (a) Each of the Guarantors waives any right (except as shall be required by applicable statute and/or cannot be waived as a matter of law) to require the Administrative Agent or any Lender to (i) proceed against the Borrower, any other Guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other Guarantor or any other party, or (iii) pursue any other remedy in the Administrative Agent's or any Lender's power whatsoever. Each of the Guarantors waives any defense based on or arising out of any defense of the Borrower, any other Guarantor or any other party other than payment in full of the indebtedness, including without limitation any defense based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the unenforceability of the indebtedness or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the indebtedness; provided, -------- however, that this provision shall not constitute a waiver of any ------- defense based on the gross negligence or willful misconduct of the Lenders (or any one of them) or the Administrative Agent. The Administrative Agent or any of the Lenders may, at their election, foreclose on any security held by the Administrative Agent or a Lender by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Administrative Agent and any Lender may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the indebtedness has been paid. Each of the Guarantors waives any defense arising out of any such election by the Administrative Agent and each of the Lenders, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Guarantors against the Borrower or any other party or any security. (b) Each of the Guarantors waives all presentments, demands for performance, protests and notices, including without limitation notices of nonperformance, notice of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the indebtedness and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that neither the Administrative Agent nor any Lender shall have any duty to advise such Guarantor of information known to it regarding such circumstances or risks. (c) Each of the Guarantors hereby agrees it will not exercise any rights of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the U.S. Bankruptcy Code, or otherwise) to the claims of the Lenders against the Borrower or any other guarantor of the indebtedness of the Borrower owing to the Lenders (collectively, the "Other Parties") and all contractual, statutory or common law rights ------------- of reimbursement, contribution or indemnity from any 109 Other Party which it may at any time otherwise have as a result of this Guaranty until such time as the Loans hereunder shall have been paid and the Commitments have been terminated. Each of the Guarantors hereby further agrees not to exercise any right to enforce any other remedy which the Administrative Agent and the Lenders now have or may hereafter have against any Other Party, any endorser or any other guarantor of all or any part of the indebtedness of the Borrower and any benefit of, and any right to participate in, any security or collateral given to or for the benefit of the Lenders to secure payment of the indebtedness of the Borrower until such time as the Loans hereunder shall have been paid and the Commitments have been terminated. SECTION 10.8 LIMITATION ON ENFORCEMENT. ------------------------- The Lenders agree that this Guaranty may be enforced only by the action of the Administrative Agent acting upon the instructions of the Required Lenders and that no Lender shall have any right individually to seek to enforce or to enforce this Guaranty, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent for the benefit of the Lenders under the terms of this Credit Agreement. The Lenders further agree that this Guaranty may not be enforced against any director, officer, employee or stockholder of the Guarantors. SECTION 10.9 CONFIRMATION OF PAYMENT. ----------------------- The Administrative Agent and the Lenders will, upon request after payment of the indebtedness and obligations which are the subject of this Guaranty and termination of the Commitments relating thereto, confirm to the Borrower, the Guarantors or any other Person that such indebtedness and obligations have been paid and the Commitments relating thereto terminated, subject to the provisions of Section 10.2. 110 IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed and delivered by its proper and duly authorized officers as of the day and year first above written. BORROWER: FISHER BROADCASTING COMPANY - -------- By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary GUARANTORS: FISHER RADIO REGIONAL GROUP INC. - ---------- By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-PORTLAND RADIO, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-SEATTLE RADIO, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-PORTLAND TV, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-SEATTLE TV, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-S.E. IDAHO TV, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-IDAHO TV, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-GEORGIA TV, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-OREGON TV, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary FISHER BROADCASTING-WASHINGTON TV, L.L.C. By: /s/ David D. Hillard -------------------------------- Name: David D. Hillard Title: Assistant Secretary ADMINISTRATIVE AGENT - ------------------- AND LENDERS: FIRST UNION NATIONAL BANK, - ------------ as Administrative Agent and as a Lender By: /s/ Jeffrey M. Graci -------------------------------- Name: Jeffrey M. Graci Title: Director BANK OF AMERICA, N.A., as a Co-Syndication Agent and as a Lender By: /s/ Mark Crawford -------------------------------- Name: Mark Crawford Title: Senior Vice President THE BANK OF NEW YORK, as a Co-Syndication Agent and as a Lender By: /s/ Stephen M. Nettler -------------------------------- Name: Stephen M. Nettler Title: Vice President NATIONAL CITY BANK, as Documentation Agent and as a Lender By: /s/ Timothy J. Ambrose -------------------------------- Name: Timothy J. Ambrose Title: Vice President EX-10.23 9 dex1023.txt LOAN AGREEMENT DATED MARCH 21, 2002 Exhibit 10.23 ================================================================================ LOAN AGREEMENT Dated as of March 21, 2002 among FISHER MEDIA SERVICES COMPANY, as the Borrower, BANK OF AMERICA, N.A., as the Agent, and BANK OF AMERICA, N.A., U.S. BANK NATIONAL ASSOCIATION, as the Lenders Bank of America. [LOGO APPEARS HERE] ================================================================================ TABLE OF CONTENTS
Section Page - ------- ---- SECTION 1. DEFINITIONS AND ACCOUNTING TERMS........................................................1 1.01 Defined Terms..........................................................................1 1.02 Other Interpretive Provisions.........................................................16 1.03 Accounting Terms......................................................................17 1.04 Rounding..............................................................................17 1.05 References to Agreements and Laws.....................................................17 SECTION 2. THE LOANS..............................................................................17 2.01 The Loans.............................................................................17 2.02 Conversions and Continuations of Loans................................................18 2.03 Optional Prepayments..................................................................19 2.04 Mandatory Prepayments.................................................................19 2.05 Repayment of Loans....................................................................20 2.06 Interest..............................................................................20 2.07 Upfront Fee; Arrangement and Agency Fees..............................................20 2.08 Computation of Interest and Fees......................................................21 2.09 Evidence of Loans.....................................................................21 2.10 Payments Generally....................................................................21 2.11 Application of Payments...............................................................23 2.12 Sharing of Payments...................................................................24 SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY.................................................24 3.01 Taxes.................................................................................24 3.02 Illegality............................................................................25 3.03 Inability to Determine Rates..........................................................26 3.04 Increased Cost and Reduced Return; Capital Adequacy...................................26 3.05 Funding Losses........................................................................27 3.06 Matters Applicable to all Requests for Compensation...................................27 3.07 Survival..............................................................................27 SECTION 4. CONDITIONS PRECEDENT TO BORROWING......................................................27 4.01 Conditions of Borrowing...............................................................27 4.02 Conditions to all Conversions and Continuations.......................................31 SECTION 5. REPRESENTATIONS AND WARRANTIES.........................................................31 5.01 Existence, Qualification and Power; Compliance with Laws..............................31 5.02 Authorization; No Contravention.......................................................31 5.03 Governmental Authorization............................................................32 5.04 Binding Effect........................................................................32 5.05 Financial Statements; No Material Adverse Effect......................................32 5.06 Litigation............................................................................32 5.07 No Default............................................................................32 5.08 Ownership of Property; Liens..........................................................32 5.09 Tenants...............................................................................33 5.10 Environmental Compliance..............................................................33 5.11 Insurance.............................................................................34 5.12 Taxes.................................................................................34
i 5.13 ERISA Compliance......................................................................34 5.14 Subsidiaries..........................................................................34 5.15 Margin Regulations; Investment Company Act; Public Utility Holding Company Act........35 5.16 Intellectual Property; Licenses, Etc..................................................35 5.17 Solvency..............................................................................35 5.18 Matters Concerning Collateral.........................................................35 5.19 Disclosure............................................................................36 SECTION 6. AFFIRMATIVE COVENANTS..................................................................36 6.01 Financial Statements..................................................................36 6.02 Certificates; Other Information.......................................................37 6.03 Notices...............................................................................37 6.04 Payment of Obligations................................................................38 6.05 Preservation of Existence, Etc........................................................38 6.06 Completion of Fisher Plaza............................................................38 6.07 Maintenance of Properties.............................................................39 6.08 Maintenance of Insurance..............................................................39 6.09 Compliance with Laws..................................................................39 6.10 Environmental Laws....................................................................39 6.11 Books and Records.....................................................................39 6.12 Inspection Rights.....................................................................40 6.13 Compliance with ERISA.................................................................40 6.14 Use of Proceeds.......................................................................40 6.15 Further Assurances....................................................................40 SECTION 7. NEGATIVE COVENANTS.....................................................................41 7.01 Liens.................................................................................41 7.02 Investments...........................................................................42 7.03 Indebtedness..........................................................................42 7.04 Fundamental Changes...................................................................43 7.05 Dispositions..........................................................................43 7.06 Lease Obligations.....................................................................44 7.07 Restricted Payments...................................................................44 7.08 ERISA.................................................................................44 7.09 Change in Nature of Business..........................................................44 7.10 Transactions with Affiliates..........................................................45 7.11 Capital Expenditures..................................................................45 7.12 Burdensome Agreements.................................................................46 7.13 Use of Proceeds.......................................................................46 SECTION 8. EVENTS OF DEFAULT AND REMEDIES.........................................................46 8.01 Events of Default.....................................................................46 8.02 Remedies Upon Event of Default........................................................48 SECTION 9. THE AGENT..............................................................................49 9.01 Appointment and Authorization of Agent................................................49 9.02 Delegation of Duties..................................................................49 9.03 Liability of Agent....................................................................49 9.04 Reliance by Agent.....................................................................50 9.05 Notice of Default.....................................................................50 9.06 Credit Decision; Disclosure of Information by Agent...................................50
ii 9.07 Indemnification of Agent..............................................................51 9.08 Agent in its Individual Capacity......................................................51 9.09 Successor Agent.......................................................................52 9.10 Collateral Matters....................................................................52 SECTION 10. MISCELLANEOUS.........................................................................52 10.01 Amendments, Etc.......................................................................52 10.02 Notices and Other Communications; Facsimile Copies....................................53 10.03 No Waiver; Cumulative Remedies........................................................54 10.04 Attorney Costs, Expenses and Taxes....................................................54 10.05 Indemnification by the Borrower.......................................................55 10.06 Payments Set Aside....................................................................55 10.07 Successors and Assigns................................................................56 10.08 Confidentiality.......................................................................58 10.09 Set-off...............................................................................59 10.10 Interest Rate Limitation..............................................................59 10.11 Master Services Agreements with Affiliates............................................59 10.12 Tax Deferred Exchange Transactions....................................................59 10.13 Counterparts..........................................................................60 10.14 Integration...........................................................................60 10.15 Survival of Representations and Warranties............................................60 10.16 Severability..........................................................................61 10.17 Tax Forms.............................................................................61 10.18 Governing Law.........................................................................62 10.19 Waiver of Right to Trial by Jury......................................................62 10.20 Time of the Essence...................................................................62 10.21 Mandatory Arbitration.................................................................62 10.22 Oral Agreements.......................................................................63
iii SCHEDULES 2.01 Commitments and Pro Rata Shares 5.06 Litigation 5.09 Existing Tenants 5.14 Subsidiaries and Other Equity Investments 7.01 Existing Liens 7.02 Existing Investments 7.03 Existing Indebtedness 7.06 Existing Leases 10.02 Eurodollar and Domestic Lending Offices, Addresses for Notices EXHIBITS Form of A Loan Notice B Promissory Note C Compliance Certificate D Assignment and Assumption E-1 Guaranty (Fisher Communications) E-2 Guaranty (other Guarantors) F Deed of Trust G Certificate and Indemnity Agreement H Subordination Agreement I Opinion of Counsel iv LOAN AGREEMENT This LOAN AGREEMENT ("Agreement") is entered into as of March 21, 2002, --------- among FISHER MEDIA SERVICES COMPANY, a Washington corporation (the "Borrower"), -------- BANK OF AMERICA, N.A., a national banking association, U.S. BANK NATIONAL ASSOCIATION, a national banking association (collectively, the "Lenders" and ------- individually, a "Lender"), and BANK OF AMERICA, N.A., a national banking ------ association, as agent (the "Agent"). ----- The Borrower has requested that the Lenders provide a term loan facility, and the Lenders are willing to do so on the terms and conditions set forth herein. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: SECTION 1. DEFINITIONS AND ACCOUNTING TERMS 1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: "Agent" means Bank of America in its capacity as administrative agent ----- under any of the Loan Documents, or any successor administrative agent. "Agent's Office" means the Agent's address and, as appropriate, account -------------- as set forth on Schedule 10.02, or such other address or account as the Agent -------------- may from time to time notify to the Borrower and the Lenders. "Affiliate" means, with respect to any Person, another Person that --------- directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Control" ------- means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and ----------- "Controlled" have meanings correlative thereto. A Person shall be deemed to be ---------- Controlled by another Person if such other Person possesses, directly or indirectly, power to vote 10% or more of the securities having ordinary voting power for the election of directors or managing general partners. "Agent-Related Persons" means the Agent (including any successor --------------------- administrative agent), together with its Affiliates (including, in the case of Bank of America in its capacity as the Agent, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Agreement" means this Loan Agreement. --------- "Applicable Rate" means, from time to time, the following percentages --------------- per annum as set forth below: 1 Applicable Rate Eurodollar Period Rate Base Rate - ----------------------------------------------------------------------------- Closing Date through February 28, 2003 3.50% 2.25% March 1, 2003 through February 28, 2004 4.00% 2.75% March 1, 2004 and thereafter 4.50% 3.25% "Arranger" means Banc of America Securities LLC, in its capacity as -------- sole lead arranger and sole book manager. "Assignment and Assumption" means an Assignment and Assumption ------------------------- substantially in the form of Exhibit D. --------- "As-Completed Appraisal" means a real estate appraisal conducted in ---------------------- accordance with the Uniform Standards of Professional Appraisal Practice (as promulgated by the Appraisal Standards Board of the Appraisal Foundation), the requirements of all Laws applicable to the Lenders, and applicable internal policies of the Agent, undertaken by Shorett KMS Valuation Advisory Group or other qualified independent commercial real estate appraisal firm selected by the Borrower and acceptable to the Lenders, setting forth a fair market value of Fisher Plaza as completed. "Attorney Costs" means and includes all fees and disbursements of any -------------- law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel. "Attributable Indebtedness" means, on any date, (a) in respect of any ------------------------- capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease. "Bank of America" means Bank of America, N.A., a national banking --------------- association. "Base Rate" means for any day a fluctuating rate per annum equal to the --------- higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest ---- in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." Such rate is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan that bears interest based on the Base -------------- Rate. "Borrower" has the meaning set forth in the introductory paragraph -------- hereto. 2 "Borrowing" means a borrowing consisting of simultaneous Loans of the --------- same Type and having the same Interest Period made by each of the Lenders pursuant to Section 2.01. ------------ "Business Day" means any day other than a Saturday, Sunday or other day ------------ on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Agent's Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market. "Certificate and Indemnity Agreement" means that certain Certificate ----------------------------------- and Indemnity Agreement Regarding Building Laws and Hazardous Substances of even date herewith executed by the Borrower in favor of the Agent and the Lenders, substantially in the form of Exhibit G. --------- "Change of Control" means, with respect to any Loan Party, an event or ----------------- series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option ------ right"), whether such right is exercisable immediately or only after ----- the passage of time), other than the Current Stockholders, directly or indirectly, of (i) in the case of the Borrower, any percentage or (ii) in the case of any Loan Party other than the Borrower, 33% or more, of the equity securities of such Loan Party entitled to vote for members of the board of directors or equivalent governing body of such Loan Party on a fully-diluted basis (i.e., taking into account all such --- securities that such person or group has the right to acquire pursuant to any option right); or (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Loan Party cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body. "Civia" means Civia, Inc., a Delaware corporation. ----- "Closing Date" means the first date all the conditions precedent in ------------ Section 4.01 are satisfied or waived in accordance with Section 4.01 (or, in the - ------------ ------------ case of Section 4.01(j), waived by the Person entitled to receive the applicable --------------- payment). 3 "Code" means the Internal Revenue Code of 1986. ---- "Collateral" means, collectively the property in which the Security ---------- Documents create or purport to create a security interest or other lien in favor of the Agent. "Compliance Certificate" means a certificate substantially in the form ---------------------- of Exhibit C. --------- "Contractual Obligation" means, as to any Person, any provision of any ---------------------- security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Current Stockholders" means, with respect to any Loan Party, all -------------------- Persons that, as of the date of this Agreement, are a "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of the outstanding equity securities of such Loan Party entitled to vote for members of the board of directors or equivalent governing body of such Loan Party on a partially-diluted basis. "Debtor Relief Laws" means the Bankruptcy Code of the United States of ------------------ America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally. "Default" means any event that, with the giving of any notice, the ------- passage of time, or both, would be an Event of Default. "Deed of Trust" means that certain Deed of Trust, Security Agreement ------------- and Fixture Filing with Assignment of Leases and Rents of even date herewith executed by the Borrower, as grantor, in favor of PRLAP, Inc., as trustee, for the benefit of the Agent and the Lenders, substantially in the form of Exhibit F. - -------- "Default Rate" means an interest rate equal to (a) the Base Rate plus ------------ (b) the Applicable Rate, if any, applicable to Base Rate Loans plus (c) 2% per ---- annum; provided, however, that with respect to a Eurodollar Rate Loan, the -------- ------- Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum, in each ---- case to the fullest extent permitted by applicable Laws. "Disposition" or "Dispose" means the sale, transfer, license or other ----------- ------- disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of (a) any notes or accounts receivable or any rights and claims associated therewith or (b) any equity securities issued by any Subsidiary held by the transferor Person, but excluding (i) any transfer of property made by any wholly-owned Subsidiary of Fisher Mills to Fisher Mills or any other wholly-owned Subsidiary of Fisher Mills as part of a liquidating distribution and (ii) any transfer of property made by any Loan Party or any Subsidiary of any Loan Party to the Borrower. 4 "Dollar" and "$" means lawful money of the United States of America. ------ - "Eligible Assignee" has the meaning specified in Section 10.07(g). ----------------- ---------------- "Environmental Laws" means all Laws relating to environmental, health, ------------------ safety and land use matters applicable to any property. "Environmental Liability" means any liability, contingent or otherwise ----------------------- (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any other Loan Party directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Environmental Reports" means, together, (a) the report titled --------------------- "Voluntary Cleanup Report, Fisher Plaza Project-Phase 1, Seattle, Washington," dated December 1998 and prepared by Shannon & Wilson, Inc. and (b) the report titled "Additional Excavation Grid D2 Area, Fisher Plaza Phase II Construction, Seattle, Washington," dated January 2001 and prepared by Shannon & Wilson, Inc. "ERISA" means the Employee Retirement Income Security Act of 1974 and ----- any regulations issued pursuant thereto. "ERISA Affiliate" means any trade or business (whether or not --------------- incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension ----------- Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate. "Eurodollar Rate" means for any Interest Period with respect to any --------------- Eurodollar Rate Loan: 5 (a) the rate per annum equal to the rate determined by the Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) if the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c) if the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Agent as the rate of interest at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period. "Eurodollar Rate Loan" means a Loan that bears interest at a rate based -------------------- on the Eurodollar Rate. "Event of Default" means any of the events or circumstances specified ---------------- in Section 8.01. ------------ "Event of Loss" means, with respect to any property, any of the ------------- following: (a) any loss, destruction or damage of such property; (b) any pending or threatened institution of any proceedings for the condemnation or seizure of such property or for the exercise of any right of eminent domain; or (c) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property, or confiscation of such property or the requisition of the use of such property. "Existing Credit Facilities" means the following credit agreements and -------------------------- promissory notes: (a) that certain Credit Agreement dated as of May 26, 1998, among Fisher Communications, as borrower, the Lenders, as lenders, and Bank of America, as agent, as amended, restated, extended, supplemented or otherwise modified in writing from time to time; (b) that certain Alternate Rate Options Promissory Note (Prime Rate, LIBOR) dated September 1, 2000 made by Fisher Communications in favor of U.S. Bank National Association in the original principal amount of $10,000,000, as amended, restated, extended, supplemented or otherwise modified in writing from time to time; 6 (c) that certain Revolving Note dated January 31, 2002 made by Fisher Communications in favor of Bank of America in the original principal amount of $5,000,000, as amended, restated, extended, supplemented or otherwise modified in writing from time to time; and (d) that certain Credit Agreement dated as of June 24, 1999, among Fisher Communications, as borrower, a syndicate of lenders a party thereto, as lenders, and Bank of America, as agent, as amended, restated, extended, supplemented or otherwise modified in writing from time to time. "Fair Market Rental Rate" means a rental rate that would be obtained in ----------------------- an arms'-length transaction between an informed and willing lessee and an informed and willing lessor, in each case under no compulsion to enter into such lease transaction. "Federal Funds Rate" means, for any day, the rate per annum equal to ------------------ the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the -------- Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by the Agent. "Fee Letter" has the meaning specified in Section 2.07. ---------- ------------ "Financial Transaction Contract" means, with respect to any Person, any ------------------------------ agreement (including all schedules thereto, confirmations of transactions thereunder, and documents, definitions, and agreements incorporated therein by reference or relating thereto) between such Person and Bank of America or an Affiliate of Bank of America, whether or not in writing, pursuant to which Bank of America or an Affiliate of Bank of America has agreed to (a) permit daylight overdrafts to occur on accounts maintained by such Person with Bank of America or such Affiliate of Bank of America, (b) provide remote disbursement services for such Person, (c) process automated clearing house (ACH) transactions for the account of such Person or (d) extend credit to such Person, in the form of credit card accounts and merchant card accounts, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "Fisher Broadcasting" means Fisher Broadcasting Company, a Washington ------------------- corporation. "Fisher Broadcasting Credit Documents" means, collectively, (a) that ------------------------------------ certain Credit Agreement dated as of March 21, 2002 (the "Credit Agreement"), ---------------- among Fisher Broadcasting, as borrower, the Subsidiaries of Fisher Broadcasting named therein, as guarantors, the lenders named therein, as lenders, First Union National Bank, as administrative agent, and Bank of America and The Bank of New York, as co-syndication agents, and (b) all promissory notes, deeds of trust, mortgages, security agreements, assignments, certificates, indemnity agreements and other credit, security or other documents executed or to be executed by Fisher Broadcasting 7 or any of its Subsidiaries in connection with the Credit Agreement, as any thereof may be amended, restated, extended, supplemented or otherwise modified in writing from time to time. "Fisher Communications" means Fisher Communications, Inc., a --------------------- Washington corporation. "Fisher Communications Forward Sale Documents" means, collectively, (a) -------------------------------------------- that certain Variable Forward ("Prepaid Forward") on Common Shares of SAFECO Corporation, Indicative Terms dated as of March 21, 2002, between Fisher Communications and Merrill Lynch International, (b) that certain ISDA Master Agreement dated as of March 21, 2002, between Fisher Communications and Merrill Lynch International and the Schedule attached thereto and (c) that certain Confirmation of OTC Variable Forward Sale Transaction dated as of March 21, 2002, between Fisher Communications and Merrill Lynch International, as any thereof may be amended, restated, extended, supplemented or otherwise modified in writing from time to time. "Fisher Communications Margin Loan Agreement" means The Investor ------------------------------------------- CreditLine/TM/ Service Client Agreement dated February 20, 2002 made by Fisher Communications for the benefit of Merrill Lynch, Pierce, Fenner & Smith Incorporated, as amended, restated, extended, supplemented or otherwise modified in writing from time to time. "Fisher Entertainment" means Fisher Entertainment, L.L.C., a Delaware -------------------- limited liability company. "Fisher Mills" means Fisher Mills Inc., a Washington corporation. ------------ "Fisher Pathways" means Fisher Pathways, Inc., a Washington --------------- corporation. "Fisher Plaza" means the real property, improvements and equipment ------------ located or to be located on the real property legally described on Schedule -------- 1.01, commonly known as Fisher Plaza, Phases I and II. - ---- "Fisher Properties" means Fisher Properties Inc., a Washington ----------------- corporation. "Flood Hazard Property" has the meaning specified in Section 4.01(b). --------------------- --------------- "Foreign Lender" has the meaning specified in Section 10.17(a). -------------- ---------------- "FRB" means the Board of Governors of the Federal Reserve System of the --- United States of America. "GAAP" means generally accepted accounting principles set forth in the ---- opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied. 8 "Governmental Authority" means any nation or government, any state or ---------------------- other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guarantors" means, collectively, Fisher Communications, Fisher ---------- Properties, Fisher Pathways and Fisher Entertainment. "Guaranties" means, together, (i) the Guaranty Agreement made by Fisher ---------- Communications in favor of the Agent on behalf of the Lenders, substantially in the form of Exhibit E-1 and (ii) the Guaranty Agreement made by the Guarantors ----------- other than Fisher Communications in favor of the Agent on behalf of the Lenders, substantially in the form of Exhibit E-2. ----------- "Guaranty Obligation" means, as to any Person, any (a) any obligation, ------------------- contingent or otherwise, of such Person guarantying or having the economic effect of guarantying any Indebtedness or other obligation payable or performable by another Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guaranty Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guarantying Person in good faith. "Hazardous Materials" means all explosive or radioactive substances or ------------------- wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Indebtedness" means, as to any Person at a particular time, all of the ------------ following, whether or not included as indebtedness or liabilities in accordance with GAAP: 9 (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments; (c) net obligations under any Swap Contract in an amount equal to the Swap Termination Value thereof; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business); (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (f) capital leases and Synthetic Lease Obligations; and (g) all Guaranty Obligations of such Person in respect of any of the foregoing. For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person (subject only to customary exceptions acceptable to the Required Lenders). The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. "Indemnified Liabilities" has the meaning set forth in Section 10.05. ----------------------- ------------- "Indemnitees" has the meaning set forth in Section 10.05. ----------- ------------- "Intangible Assets" means assets that are considered to be intangible ----------------- assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trade marks, patents, unamortized deferred charges, unamortized debt discount and capitalized research and development costs. "Interest Payment Date" means, (a) as to any Loan other than a Base --------------------- Rate Loan, the last day of each Interest Period applicable to such Loan; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and December and the Maturity Date. "Interest Period" means the period commencing on the date such --------------- Eurodollar Rate Loan is disbursed or (in the case of any Eurodollar Rate Loan) converted to or continued as a Eurodollar 10 Rate Loan and ending on the date one, two or three months thereafter, as selected by the Borrower in its Loan Notice; provided that: -------- (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Loan, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (ii) any Interest Period pertaining to a Eurodollar Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period shall extend beyond the scheduled Maturity Date. "Investment" means, as to any Person, any acquisition or investment by ---------- such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, guaranty of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment. "IP Rights" has the meaning set forth in Section 5.17. --------- ------------ "IRS" means the United States Internal Revenue Service. --- "Laws" means, collectively, all international, foreign, Federal, state ---- and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. "Lender" has the meaning specified in the introductory paragraph ------ hereto. "Lending Office" means, as to any Lender, the office or offices of such -------------- Lender described as such on Schedule 10.02, or such other office or offices as a -------------- Lender may from time to time notify the Borrower and the Agent. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit ---- arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform 11 Commercial Code or comparable Laws of any jurisdiction), including the interest of a purchaser of accounts receivable. "Loan" has the meaning specified in Section 2.01. ---- ------------ "Loan Documents" means this Agreement, each Note, each Fee Letter, each -------------- Loan Notice, each Compliance Certificate, the Certificate and Indemnity Agreement, each Security Document and the Guaranties, as any thereof may be amended, restated, extended, supplemented or otherwise modified in writing from time to time. "Loan Notice" means a notice of (a) a conversion of Loans from one Type ----------- to the other, or (b) a continuation of Loans as the same Type, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of - --------------- Exhibit A. - --------- "Loan Parties" means, collectively, the Borrower and each Guarantor. ------------ "Master Services Agreement" means that certain Master Services ------------------------- Agreement dated as of February 22, 2002, between the Borrower, as property owner, and Seattle TV, as customer, as amended, restated, extended, supplemented or otherwise modified in writing from time to time. "Material Adverse Effect" means (a) a material adverse change in, or a ----------------------- material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party. "Maturity Date" means (a) February 28, 2005, or (b) such earlier date ------------- upon which the Aggregate Commitments may be terminated in accordance with the terms hereof. "Multiemployer Plan" means any employee benefit plan of the type ------------------ described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated to make contributions. "Net Issuance Proceeds" means, as to any issuance of debt or equity by --------------------- any Person, cash proceeds and non-cash proceeds received or receivable by such Person in connection therewith, net of reasonable out-of-pocket costs and expenses paid or incurred in connection therewith in favor of any Person not an Affiliate of such Person. "Net Proceeds" means, as to any Disposition by a Person, proceeds in ------------ cash, checks or other cash equivalent financial instruments as and when received by such Person, net of: (a) the direct costs relating to such Disposition, excluding amounts payable to such Person or any Affiliate of such Person, (b) sale, use or other transaction taxes paid or payable by such Person as a direct result thereof, (c) income taxes paid or payable by such Person as a direct result of gains recognized on such Disposition, (d) amounts required to be applied to repay principal, interest, and prepayment premiums and penalties on Indebtedness secured by a Lien on the asset which is the subject of such Disposition and (e) amounts required to be reinvested by such Person or 12 applied to repay principal, interest, prepayment premiums and penalties and other amounts due in respect of Indebtedness arising under the Fisher Broadcasting Credit Documents, if and to the extent that (1) the asset which is the subject of such Disposition is property of Fisher Broadcasting or a Subsidiary of Fisher Broadcasting and (2) the terms of the Fisher Broadcasting Credit Documents expressly require that such amounts be reinvested or applied to such Indebtedness. "Net Proceeds" shall also include proceeds paid on ------------ account of any Event of Loss, net of (i) all money actually applied to repair or reconstruct the damaged property or property affected by the condemnation or taking, (ii) all of the costs and expenses reasonably incurred in connection with the collection of such proceeds, award or other payments, (iii) any amounts retained by or paid to parties having superior rights to such proceeds, awards or other payments and (iv) any amounts required to be reinvested or applied to repay principal, interest, prepayment premiums and penalties and other amounts due in respect of Indebtedness arising under the Fisher Broadcasting Credit Documents, if and to the extent that (A) the asset which is the subject of the Event of Loss is property of Fisher Broadcasting or a Subsidiary of Fisher Broadcasting and (B) the terms of the Fisher Broadcasting Credit Documents expressly require that such amounts be reinvested or applied to such Indebtedness. "Non-Broadcasting Subsidiaries" means the Subsidiaries of Fisher ----------------------------- Communications other than Fisher Broadcasting and the Subsidiaries of Fisher Broadcasting. "Notes" means, collectively, the promissory notes made by the Borrower ----- in favor of each Lender evidencing Loans made by such Lender, substantially in the form of Exhibit B. --------- "Obligations" means all advances to, and debts, liabilities, ----------- obligations, covenants and duties of, any Loan Party arising under any Loan Document, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest that accrues after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding. "Organization Documents" means, (a) with respect to any corporation, ---------------------- the certificate or articles of incorporation and the bylaws; and (b) with respect to any limited liability company, the articles of formation and operating agreement, in each case as any thereof may be amended from time to time. "Outstanding Amount" means on any date, the aggregate outstanding ------------------ principal amount of the Loans after giving effect to any prepayments or repayments of the Loans occurring on such date. "Participant" has the meaning specified in Section 10.07(d). ----------- ---------------- "PBGC" means the Pension Benefit Guaranty Corporation. ---- "Pension Plan" means any "employee pension benefit plan" (as such term ------------ is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of 13 a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years. "Person" means any natural person, corporation, limited liability ------ company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any "employee benefit plan" (as such term is defined in ---- Section 3(3) of ERISA) established by the Borrower or any ERISA Affiliate. "Register" has the meaning set forth in Section 10.07(c). -------- ---------------- "Reportable Event" means any of the events set forth in Section 4043(c) ---------------- of ERISA, other than events for which the 30 day notice period has been waived. "Required Lenders" means, as of any date of determination, at least two ---------------- Lenders whose Voting Percentages aggregate 66-2/3% or more. "Responsible Officer" means, (a) with respect to any Loan Party that is ------------------- a corporation, the sole director, the president, the secretary or the assistant secretary of such Loan Party and (b) with respect to any Loan Party that is a limited liability company, any manager, the president, the secretary or the assistant secretary of such Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, company and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. "Restricted Payment" means any dividend or other distribution (whether ------------------ in cash, securities or other property) with respect to any capital stock of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or of any option, warrant or other right to acquire any such capital stock. "Seattle Radio" means Fisher Broadcasting - Seattle Radio, L.L.C., a ------------- Delaware limited liability company. "Seattle TV" means Fisher Broadcasting - Seattle TV, L.L.C., a Delaware ---------- limited liability company. "Security Documents" means, collectively, the Deed of Trust and any ------------------ Uniform Commercial Code financing statements, as any thereof may be amended, restated, extended, supplemented or otherwise modified in writing from time to time. "Solvent" means, with respect to any Person, that as of the date of ------- determination both (i) (a) the then fair saleable value of the property of such Person is (1) greater than the total amount of liabilities (including contingent liabilities) of such person and (2) not less than the amount that will be required to pay the probable liabilities on such Person's then-existing debts as they become absolute and matured considering all financing alternatives and potential asset 14 sales reasonably available to such Person; (b) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (c) such Person does not intend to incur, or believe) nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (ii) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Subsidiary" of a Person means a corporation, partnership, joint ---------- venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subordination Agreement" means a Subordination, Nondisturbance and ----------------------- Attornment Agreement, substantially in the form of Exhibit H. --------- "Swap Contract" means (a) any and all rate swap transactions, basis ------------- swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including ---------------- any such obligations or liabilities under any Master Agreement. "Swap Termination Value" means, in respect of any one or more Swap ---------------------- Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Lender). 15 "Synthetic Lease Obligation" means the monetary obligation of a Person -------------------------- under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment). "Threshold Amount" means $1,000,000. ---------------- "Type" means, with respect to a Loan, its character as a Base Rate Loan ---- or a Eurodollar Rate Loan. "Unfunded Pension Liability" means the excess of a Pension Plan's -------------------------- benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "U.S. Bank" means U.S. Bank National Association, a national banking --------- association. "Voting Percentage" means, as to any Lender, the percentage (carried ----------------- out to the ninth decimal place) which (a) the Outstanding Amount of such Lender's Loans, then comprises of (b) the Outstanding Amount of all Loans. 1.02 OTHER INTERPRETIVE PROVISIONS. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) (i) The words "herein" and "hereunder" and words of ------ --------- similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof. (ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears. (iii) The term "including" is by way of example and not --------- limitation. (iv) The term "documents" includes any and all instruments, --------- documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form. (c) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including;" the ---- ------------------ words "to" and "until" each mean "to but excluding;" and the word "through" -- ----- ---------------- ------- means "to and including." ---------------- 16 (d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. 1.03 Accounting Terms. (a) All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the audited consolidated financial statements of Fisher Communications and its Subsidiaries for the fiscal year ended December 31, 2000, except as otherwise ------ specifically prescribed herein. (b) If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided -------- that, until so amended, (i) such ratio or requirement shall continue to be - ---- computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. 1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). 1.05 References to Agreements and Laws. Unless otherwise expressly provided herein, (a) references to agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law. SECTION 2. THE LOANS 2.01 The Loans. Subject to the terms and conditions set forth herein, each Lender severally agrees to make a single loan (each such loan, a "Loan") to the Borrower on the Closing Date in the amount set forth opposite ---- such Lender's name below: 17 Lender Amount - ------------------------------------------------------------------------ Bank of America, N.A. $30,000,000 U.S. Bank National Association $30,000,000 ----------- Total $60,000,000 Loans which are repaid or prepaid by the Borrower may not be reborrowed. 2.02 CONVERSIONS AND CONTINUATIONS OF LOANS. (a) Each conversion of Loans from one Type to the other, and each continuation of Loans as the same Type shall be made upon the Borrower's irrevocable notice to the Agent, which may be given by telephone. Each such notice must be received by the Agent not later than 11:00 a.m., Seattle time, three Business Days prior to the requested date of any conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans. Each such telephonic notice must be confirmed promptly by delivery to the Agent of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Each conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each conversion to Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a conversion of Loans from one Type to the other or a continuation of Loans as the same Type, (ii) the requested date of the conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be converted or continued, (iv) the Type of Loans to which existing Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Loan in a Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Loans shall be continued as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the Borrower requests a conversion to, or continuation of Eurodollar Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. (b) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of the Interest Period for such Eurodollar Rate Loan. During the existence of a Default or Event of Default, no Loans may be converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders, and the Required Lenders may demand that any or all of the then outstanding Eurodollar Rate Loans be converted immediately to Base Rate Loans. (c) The Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Eurodollar Rate Loan upon determination of such interest rate. The determination of the Eurodollar Rate by the Agent shall be conclusive in the absence of manifest error. The Agent shall notify the Borrower and the Lenders of any change in Bank of America's prime rate used in determining the Base Rate promptly following the public announcement of such change. 18 (d) After giving effect to all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than five Interest Periods in effect with respect to Loans. 2.03 Optional Prepayments. The Borrower may, upon notice to the Agent, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty; provided that (i) such notice must be received -------- by the Agent not later than 11:00 a.m., Seattle time, (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans, and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. The Agent will promptly notify each Lender of its receipt of each such notice, and of such Lender's Pro Rata Share of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. Each such prepayment ------------ shall be applied to the Loans of the Lenders in accordance with Section 2.11. ------------ 2.04 MANDATORY PREPAYMENTS. (a) If, as of the date of the Agent's receipt of the As-Completed Appraisal, the Outstanding Amount of all Loans exceeds 65% of the fair market value of Fisher Plaza based solely on the income valuation method of appraisal as set forth in the As-Completed Appraisal, then the Borrower shall promptly, and in no event later than 15 days after the Agent's receipt of the As-Completed Appraisal, prepay Loans in an aggregate amount equal to such excess. (b) If any Loan Party, Fisher Mills or Fisher Broadcasting shall at any time or from time to time make or agree to make a Disposition, or shall suffer an Event of Loss, in each case, other than in respect of Fisher Plaza, then (i) the Borrower shall promptly notify the Agent of such proposed Disposition or Event of Loss (including the amount of the estimated Net Proceeds to be received by the such Loan Party in respect thereof) and (ii) promptly upon, and in no event later than 30 days after, receipt by such Loan Party of the Net Proceeds of such Disposition or Event of Loss, the Borrower shall prepay Loans in an aggregate amount equal to the amount of such Net Proceeds; provided, however, that so long as no Default or Event of Default -------- ------- exists or would result therefrom, the Borrower may accept from and retain 50% of the first $16,000,000 of the Net Proceeds of Dispositions and Events of Loss received by any of the Loan Parties, and use such Net Proceeds to make capital expenditures related to the completion of Fisher Plaza. (c) If any Loan Party shall issue new debt (other than a borrowing under the Fisher Communications Margin Loan Agreement or the Fisher Communications Forward Sale Documents) or equity (including equity issued in connection with the exercise of options rights), the Borrower shall promptly notify the Agent of the estimated Net Issuance Proceeds of such issuance to be received by such Loan Party in respect thereof. Promptly upon, and in no event later than 30 days after, receipt by such Loan Party of Net Issuance Proceeds of such issuance, 19 the Borrower shall prepay the Loans in an aggregate amount equal to the amount of such Net Issuance Proceeds; provided, however, that in the case of Net -------- ------- Issuance Proceeds of equity issued in connection with the exercise of stock options, the Borrower shall prepay the Loans in an aggregate amount equal to such Net Issuance Proceeds in arrears on the last Business Day of each March, June, September and December. (d) Any prepayments pursuant to this Section 2.04 shall be applied first to any ------------ Base Rate Loans then outstanding and then to Eurodollar Rate Loans with the shortest Interest Periods remaining. The Borrower shall pay, together with each prepayment under this Section 2.04, accrued interest on the amount prepaid ------------ together with any additional amounts required pursuant to Section 3.05. Each ------------ such prepayment shall be applied to the Loans of the Lenders in accordance with Section 2.11. - ------------ 2.05 Repayment of Loans. The Borrower shall repay to the Lenders from the Net Proceeds of Dispositions and Events of Loss received from the Loan Parties pursuant to Section 2.04(b), Loans in an aggregate amount of not less --------------- than $6,000,000 on or before December 31, 2002; provided, however, that if the -------- ------- Borrower fails to perform or observe any term, covenant or agreement contained in Section 6.02(d), the aggregate amount of Loans to be repaid to the Lenders --------------- pursuant to this Section on or before December 31, 2002 shall be not less than $7,000,000. The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of Loans outstanding on such date. 2.06 INTEREST. (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; and (ii) each Base Rate ---- Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the ---- Applicable Rate. (b) While any Event of Default exists or after acceleration, the Borrower shall pay interest on the principal amount of all outstanding Obligations at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Law. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand. (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law. 2.07 Upfront Fee; Arrangement and Agency Fees. The Borrower shall pay (a) an upfront fee to the Agent, for the account of the Lenders, (b) an arrangement fee to the Arranger for the Arranger's own account, and (c) an agency fee to the Agent for the Agent's own account, in the amounts and at the times specified in the letter agreement, dated February 15, 2002 (the 20 "Fee Letter"), between the Borrower, the Arranger and the Agent. Such fees shall ---------- be fully earned when paid and shall be nonrefundable for any reason whatsoever. 2.08 Computation of Interest and Fees. Interest on Base Rate Loans shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed. Computation of all other types of interest and all fees shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to the payee thereof than a method based on a year of 365 or 366 days. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which -------- it is made shall bear interest for one day. 2.09 Evidence of Loans. The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Agent in the ordinary course of business. The accounts or records maintained by the Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Loans. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Agent in respect of such matters, the accounts and records of the Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Agent, such Lender's Loans may be evidenced by a Note, in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of the applicable Loans and payments with respect thereto. 2.10 PAYMENTS GENERALLY. (a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Agent, for the account of the respective Lenders to which such payment is owed, at the Agent's Office in Dollars and in immediately available funds not later than 12:00 noon, Seattle time, on the date specified herein. The Agent will promptly distribute to each Lender its applicable share as provided herein of such payment in like funds as received by wire transfer to such Lender's Lending Office. All payments received by the Agent after 12:00 noon, Seattle time, shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. (b) Subject to the definition of "Interest Period," if any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be (c) On each date when the payment of any principal, interest or fees are due hereunder or under any Note, the Borrower agrees to maintain on deposit in an ordinary checking account maintained by the Borrower with Bank of America (as such account shall be designated 21 by the Borrower in a written notice to the Agent from time to time, the "Borrower Account") an amount sufficient to pay such principal, interest or ---------------- fees in full. The Borrower hereby authorizes the Agent (i) to deduct automatically all principal, interest or fees when due hereunder or under the Notes from the Borrower Account, and (ii) if and to the extent any payment under this Agreement or any other Loan Document is not made when due, to deduct automatically any such amount from any or all of the accounts of the Borrower maintained with Bank of America. The Agent agrees to provide timely notice to the Borrower of any automatic deduction made pursuant to this subsection (c). (d) Unless the Borrower or any Lender has notified the Agent prior to the date any payment is required to be made by it to the Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Agent in immediately available funds, then: (i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Agent the portion of such assumed payment that was made available to such Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Agent to such Lender to the date such amount is repaid to the Agent in immediately available funds, at the Federal Funds Rate from time to time in effect; and (ii) if any Lender ailed to make such payment, such Lender shall forthwith on demand pay to the Agent the amount thereof in immediately available funds, together with interest thereon for the period from the date such amount was made available by the Agent to the Borrower to the date such amount is recovered by the Agent (the "Compensation Period") at a rate per annum equal to the ------------------- Federal Funds Rate from time to time in effect. If such Lender pays such amount to the Agent, then such amount shall constitute such Lender's Loan, as the case may be, included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Agent's demand therefor, the Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder. A notice of the Agent to any Lender with respect to any amount owing under this subsection (d) shall be conclusive, absent manifest error. (e) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 22 2.11 APPLICATION OF PAYMENTS. (a) Each payment under this Agreement or any Note shall be applied (a) first, toward reasonable costs and expenses (including Attorney Costs and ----- amounts payable under Section 3) incurred by the Agent and each Lender, (b) --------- second, toward repayment of interest and fees then due hereunder, ratably among - ------ the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, (c) third, if the aggregate outstanding ----- principal amount of the Loan of U.S. Bank exceeds $20,000,000, then toward repayment of principal of U.S. Bank's Loan until the aggregate outstanding principal amount of U.S. Bank's Loan equals $20,000,000, and (d) fourth, toward ------ repayment of principal of the Loans, 60% of such payment to the principal of Bank of America's Loan and 40% of such payment to the principal of U.S. Bank's Loan. (b) Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent or any Lender on account of the Obligations or any other amounts outstanding under any of the Loan Documents or in respect of the Collateral shall be paid over or delivered as follows: (i) FIRST, to the payment of all reasonable costs and expenses (including Attorney Costs and amounts payable under Section 3) --------- incurred by the Agent in connection with enforcing the rights of the Lenders under the Loan Documents and any protective advances made by the Agent with respect to the Collateral under or pursuant to the terms of the Security Documents; (ii) SECOND, to payment of any fees owed to the Agent; (iii) THIRD, to the payment of all reasonable costs and expenses (including Attorney Costs and amounts payable under Section 3) --------- incurred by the Agent each of the Lenders in connection with enforcing its rights under the Loan Documents or otherwise with respect to the Obligations owing to such Lender; (iv) FOURTH, to payment of interest and fees then due under this Agreement, ratably among the Lenders in accordance with the amounts of interest and fees then due to each Lender; (v) FIFTH, if the aggregate outstanding principal amount of the Loan of U.S. Bank exceeds $20,000,000, to payment of principal of U.S. Bank's Loan until the aggregate outstanding principal amount of U.S. Bank's Loan equals $20,000,000; (vi) SIXTH, ratably to payment of principal of the Loans, 60% of such amount to the principal of Bank of America's Loan and 40% of such amount to the principal of U.S. Bank's Loan; (vii) SEVENTH, to payment of any amounts payable by any Loan Party under any Financial Transaction Contract; 23 (viii) EIGHTH, to all other Obligations and other obligations which shall have become due and payable under the Loan Documents or otherwise and not repaid pursuant to clauses "FIRST" through "SEVENTH" above; and (ix) NINTH, to the payment of the surplus, if any, to whomever may be lawfully entitled to receive such surplus. In carrying out the foregoing, amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category. 2.12 Sharing of Payments. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans pro rata with each of them; provided, however, that if all or any portion of such excess payment is -------- ------- thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.09 with respect to ------------- such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments. Each Lender that purchases a participation pursuant to this Section shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased. SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 TAXES. (a) Any and all payments by the Borrower to or for the account of the Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of the Agent and --------- each Lender, taxes imposed on or measured by its net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which the Agent or such Lender, as the case may be, is organized or 24 maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be ----- required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to the Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, the Borrower shall furnish to the Agent (which shall forward the same to such Lender) the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as "Other Taxes"). ----------- (c) If the Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Agent or any Lender, the Borrower shall also pay to the Agent (for the account of such Lender) or to such Lender, at the time interest is paid, such additional amount that such Lender specifies is necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) such Lender would have received if such Taxes or Other Taxes had not been imposed. (d) The Borrower agrees to indemnify the Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by the Agent and such Lender, (ii) amounts payable under Section 3.01(c) and (iii) any liability (including penalties, interest and - -------------- expenses) arising therefrom or with respect thereto, in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Payment under this subsection (d) shall be made within 30 days after the date the Lender or the Agent makes a demand therefor. 3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar Rate, then, on notice thereof by such Lender to the Borrower through the Agent, any obligation of such Lender to continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period thereof, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such 25 prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender. 3.03 Inability to Determine Rates. If the Agent determines in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for such Eurodollar Rate Loan, or (c) the Eurodollar Rate for such Eurodollar Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Eurodollar Rate Loan, the Agent will promptly notify the Borrower and all Lenders. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Agent revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a conversion or continuation of Eurodollar Rate Loans. 3.04 INCREASED COST AND REDUCED RETURN; CAPITAL ADEQUACY. (a) If any Lender determines that as a result of the introduction of or any change in or in the interpretation of any Law, or such Lender's compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Loans or (as the case may be), or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this subsection (a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes ------------ in the basis of taxation of overall net income or overall gross income by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or has its Lending Office, and (iii) reserve requirements contemplated by Section 3.04(c), --------------- then from time to time upon demand of such Lender (with a copy of such demand to the Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, or compliance by such Lender (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender's desired return on capital), then from time to time upon demand of such Lender (with a copy of such demand to the Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction. (c) The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which 26 determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have -------- received at least 15 days' prior notice (with a copy to the Agent) of such additional interest from such Lender. If a Lender fails to give notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 15 days from receipt of such notice. 3.05 Funding Losses. Upon demand of any Lender (with a copy to the Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: (a) any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or (b) any failure by the Borrower to prepay, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar ------------ Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded. 3.06 Matters Applicable to all Requests for Compensation. A certificate of the Agent or any Lender claiming compensation under this Section 3 and setting forth the additional amount or amounts to be paid to it - --------- hereunder shall be conclusive in the absence of manifest error. In determining such amount, the Agent or such Lender may use any reasonable averaging and attribution methods. 3.07 Survival. All of the Borrower's obligations under this Section 3 shall survive termination of the Aggregate Commitments and - --------- repayment of all other Obligations. SECTION 4. CONDITIONS PRECEDENT TO BORROWING 4.01 Conditions of Borrowing. The obligation of each Lender to make its Loan hereunder is subject to satisfaction of the following conditions precedent: (a) Unless waived by all the Lenders (or by the Agent with respect to immaterial matters or items specified in clause (iv) or (v) below with respect to which the Borrower has given assurances satisfactory to the Agent that such items shall be delivered promptly following the Closing Date), the Agent's receipt of the following, each of which shall be originals or, except as otherwise specified, facsimiles (followed promptly by originals), each properly 27 executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Agent and its legal counsel: (i) executed counterparts of this Agreement, sufficient in number for distribution to the Agent, each Lender and the Borrower; (ii) original Notes executed by the Borrower in favor of each Lender requesting such a Note, each in a principal amount equal to such Lender's Commitment; (iii) original executed counterparts of each Guaranty, sufficient in number for distribution to the Agent, each Lender and the Borrower; (iv) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Agent may require to establish the identities of and verify the authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; (v) such evidence as the Agent may reasonably require to verify that each Loan Party is duly organized or formed, validly existing, in good standing and qualified to engage in business in each jurisdiction in which it is required to be qualified to engage in business, including certified copies of each Loan Party's Organization Documents, certificates of good standing and/or qualification to engage in business and tax clearance certificates; (vi) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, and (B) that there has ---------------- --- been no event or circumstance since December 31, 2001 which has or could be reasonably expected to have a Material Adverse Effect; (vii) an opinion of counsel to each Loan Party substantially in the form of Exhibit I; --------- (viii) such other assurances, certificates, documents, consents or opinions as the Agent or the Required Lenders reasonably may require. (b) Unless waived by all the Lenders, the Agent's receipt of the following, each of which shall be originals or, except as otherwise specified, facsimiles (followed promptly by originals), each properly executed by a Responsible Officer of the Borrower, each dated the Closing Date and each in form and substance satisfactory to the Agent and its legal counsel: (i) executed and notarized original Deed of Trust in proper form for recording in King County, Washington, encumbering Fisher Plaza; (ii) (A) ALTA extended coverage lender's title insurance policy (1970 form with 1984 amendments) or unconditional commitment therefor (the "Title Policy") issued by Chicago Title ------------ Insurance Company (the "Title Company"), in an amount not less than -------------- 28 the Aggregate Commitments, insuring fee simple title to Fisher Plaza vested in the Borrower and assuring the Agent that the Deed of Trust creates a valid and enforceable Lien on Fisher Plaza as security for the Secured Obligations (as defined in the Deed of Trust) prior and superior in right to any other Person, subject only to a standard survey exception and other exceptions approved by the Lenders in writing, which Title Policy (1) shall include an endorsement for mechanics' liens, for future advances under this Agreement and for any other matters reasonably requested by the Agent or any Lender and (2) shall provide for affirmative insurance and such reinsurance as the Agent or any Lender may reasonably request, all of the foregoing in form and substance reasonably satisfactory to the Agent and the Lenders; and (B) evidence satisfactory to the Agent that the Borrower has (1) delivered to the Title Company all certificates and affidavits required by the Title Company in connection with the issuance of the Title Policy and (2) paid to the Title Company or to the appropriate Governmental Authorities all expenses and premiums of the Title Company in connection with the issuance of the Title Policy and all recording and stamp taxes payable in connection with recording the Deed of Trust in the King County, Washington real estate records; (iii) copies of all recorded documents listed as exceptions to title or otherwise referred to in the Title Policy; (iv) (A) evidence, which may be in the form of a letter from an insurance broker or a municipal engineer, as to whether (1) Fisher Plaza is located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards (a "Flood Hazard Property") and (2) the community in which ---------------------- Fisher Plaza is located is participating in the National Flood Insurance Program, (B) if Fisher Plaza is a Flood Hazard Property, the Borrower's written acknowledgement of receipt of written notification from the Agent (1) as to whether Fisher Plaza is a Flood Hazard Property and (2) as to whether the community in which Fisher Plaza is located is participating in the National Flood Insurance Program, and (C) in the event Fisher Plaza is a Flood Hazard Property and the community in which it is located participates in the National Flood Insurance Program, evidence that the Borrower has obtained flood insurance in respect of Fisher Plaza to the extent required under the applicable regulations of the FRB; (v) executed original Certificate and Indemnity, sufficient in number for distribution to the Agent, each Lender and the Borrower; (vi) copies of the Environmental Reports and each other environmental site assessment prepared by or for the Borrower with respect to Fisher Plaza, stating that, except as disclosed in the Environmental Reports, Fisher Plaza is free from Hazardous Materials and that operations conducted thereon are in compliance with all Environmental Laws; (vii) originals of Subordination Agreements executed by Seattle TV, Civia, Fisher Communications, Fisher Properties, Fisher Entertainment and Fisher Pathways with respect to the leases or other agreements entered by such Persons with respect to space occupied by such Persons in Fisher Plaza; and 29 (viii) evidence that all other actions necessary or, in the opinion of the Agent or any Lender, desirable to perfect and protect the first priority Lien created by the Security Documents, and to enhance the Agent's ability to preserve and protect its interests in and access to the Collateral, have been taken. (c) The Agent's receipt of a construction budget indicating that the cost to complete Fisher Plaza from its state of completion as of the Closing Date is not more than the amount of capital expenditures permitted under Section ------- 7.11, certified by a Responsible Officer of the Borrower as being the Borrower's - ---- best estimate and prepared in good faith. (d) The Agent's receipt of evidence that the Master Services Agreement is (i) in full force and effect, (ii) obligates Seattle TV to lease not less than 85,000 square feet of space at a Fair Market Rental Rate for a period commencing not later than January 1, 2005 and ending not earlier than January 1, 2012 and (iii) is in form and substance reasonably acceptable to the Lenders. (e) The Agent's receipt of evidence that all of the condition precedent to the making of the initial loans under the Fisher Broadcasting Credit Documents have been satisfied or waived. (f) The Agent's receipt of evidence that (i) all of the conditions precedent to the making of the initial loans under the Fisher Communications Margin Loan Agreement have been satisfied or waived (ii) all of the conditions precedent to the transactions contemplated by the Fisher Communications Forward Sale Documents have been satisfied or waived and (iii) Fisher Communications shall have received the proceeds of the initial loans made under the Fisher Communications Margin Loan Agreement in an amount not less than $40,000,000 and applied such proceeds to the loans made under the agreement described in clause (a) of the definition of Existing Credit Facilities. (g) The Agent's receipt of evidence that each of the Existing Credit Facilities has been or concurrently with the Closing Date is being terminated and all Liens securing obligations under the Existing Credit Facilities have been or concurrently with the Closing Date are being released. (h) The Agent's receipt of a certificate from the Borrower's insurance broker or other evidence satisfactory to the Agent that all insurance required to be maintained pursuant to Article 4 of the Deed of Trust is in full force and effect and that the Agent on behalf of itself and the Lenders has been named as additional insured and/or loss payee thereunder to the extent required under Article 4 of the Deed of Trust. (i) Any fees required to be paid on or before the Closing Date shall have been paid. (j) Unless waived by the Agent, the Borrower shall have paid all Attorney Costs of the Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute its ---- reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Agent). 30 4.02 Conditions to all Conversions and Continuations. The obligation of each Lender to convert Loans to the other Type, or a continue Loans as the same Type is subject to the following conditions precedent: (a) The representations and warranties of the Borrower contained Section 5, or which are contained in any document furnished at any time under - --------- in or in connection herewith, shall be true and correct on and as of the date of such proposed conversion or continuation, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date. (b) No Default or Event of Default shall exist, or would result from such proposed conversion or continuation. (c) The Agent shall have received a Loan Notice in accordance with the requirements hereof. (d) The Agent shall have received, in form and substance satisfactory to it, such other assurances, certificates, documents or consents related to the foregoing as the Agent or the Required Lenders reasonably may require. Each Loan Notice submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) ---------------- and (b) have been satisfied on and as of the date of the applicable conversion --- or continuation. SECTION 5. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Agent and the Lenders that: 5.01 Existence, Qualification and Power; Compliance with Laws. Each Loan Party (a) is a corporation or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, and (d) is in compliance with all Laws, except in each case referred to in clause (c) or this clause (d), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. 5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject; or (c) violate any Law. 31 5.03 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority (except for recordings in connection with the Liens granted to the Agent under the Security Documents) is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document. 5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms. 5.05 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT. (a) The unaudited consolidated and consolidating balance sheet of the Fisher Communications and the Non-Broadcasting Subsidiaries as at December 31, 2001 and the related consolidated and consolidating statements of income or operations, shareholders' equity and cash flows for the year then ended (the "Financial Statements") (i) were prepared in accordance with GAAP consistently -------------------- applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Fisher Communications and the Non-Broadcasting Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of Fisher Communications and the Non-Broadcasting Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness. (b) Since the date of the Financial Statements, there has been no event or circumstance that has had or could reasonably be expected to have a Material Adverse Effect. 5.06 Litigation. Except as specifically disclosed in Schedule 5.06, ------------- there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) if determined adversely, could reasonably be expected to have a Material Adverse Effect. 5.07 No Default. Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that could be reasonably expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document. 5.08 Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could 32 not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. As of the Closing Date, the property of the Borrower and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01. - ------------ 5.09 Tenants. A complete list of the tenants of Fisher Plaza as of the Closing Date is set forth in Schedule 5.09, and such list accurately sets ------------- forth for each such tenant (a) the number of square feet leased by such tenant, (b) the term of such tenant's lease and extension terms, if any and (c) the premises fees payable by such tenant, including rental payments and common area maintenance fees. 5.10 ENVIRONMENTAL COMPLIANCE. (a) Except as described in the Environmental Reports, Fisher Plaza does not contain any Hazardous Materials in amounts or concentrations which (i) constitute a violation of, or (ii) could give rise to liability under, any Environmental Law. (b) Fisher Plaza and all operations of the Borrower and its Subsidiaries at Fisher Plaza are in compliance, and, to the best of the Borrower's knowledge, except as described in the Environmental Reports, have in the last five years been in compliance, in all material respects with all applicable Environmental Laws, and, to the best of the Borrower's knowledge, except as described in the Environmental Reports, there is no contamination at, under or about Fisher Plaza or violation of any Environmental Law with respect to Fisher Plaza or the business operated by the Borrower and its Subsidiaries (the "Business"). -------- (c) Neither the Borrower or any of its Subsidiaries has received any written or actual notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of Fisher Plaza or the Business, nor does the Borrower or any of its Subsidiaries have knowledge of any such threatened notice. (d) To the best of the Borrower's knowledge, Hazardous Materials have not been transported or disposed of from Fisher Plaza in violation of, or in a manner or to a location which could give rise to liability under any Environmental Law, nor have any Hazardous Materials been generated, treated, stored or disposed of at, on or under Fisher Plaza in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the best of the Borrower's knowledge, threatened, under any Environmental Law to which the Borrower or any of its Subsidiaries is or will be named as a party with respect to Fisher Plaza or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to Fisher Plaza or the Business. (f) To the best of the Borrower's knowledge, there has been no release or threat of release of Hazardous Materials at or from Fisher Plaza, or arising from or related to the operations of any of the Borrower or any of its Subsidiaries in connection with Fisher Plaza or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. 33 5.11 Insurance. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are commercially reasonable. 5.12 Taxes. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. 5.13 ERISA COMPLIANCE. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. Except as specifically disclosed in Part (a) of Schedule 5.13, the Borrower and each ERISA Affiliate have made all ------------- required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could be reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) Except as specifically disclosed in Part (c) of Schedule 5.13, ------------- (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA. 5.14 Subsidiaries. The Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.14 and has no equity ------------- investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.14. ------------- 34 5.15 MARGIN REGULATIONS; INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. (a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. (b) None of the Borrower, any Person controlling the Borrower, or any Subsidiary (i) is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 5.16 Intellectual Property; Licenses, Etc. The Borrower and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, "IP Rights") that are --------- reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any Subsidiary infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Borrower, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 5.17 Solvency. Each Loan Party (other than Fisher Entertainment) is and, upon the consummation of the transactions contemplated hereby and the incurrence of all Obligations incurred or guaranteed by such Loan Party on any date on which this representation is made, will be, Solvent. 5.18 matters concerning collateral. (a) The execution and delivery of the Deed of Trust by the Borrower, together with the actions taken on or prior to the date hereof pursuant to Section 4.01(b), are effective to create and do create in favor of --------------- the Agent for the benefit of the Lenders, as security for the Obligations (as defined in the applicable Security Document in respect of any Collateral), a valid, perfected and enforceable Lien on the Collateral, prior and superior in right to any other Person, and all filings and other actions necessary or desirable to perfect and maintain the perfection and first priority status of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any Uniform Commercial Code financing statements and the periodic filing of Uniform Commercial Code continuation statements in respect of Uniform Commercial Code financing statements filed by or on behalf of the Agent. (b) No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required for either (i) the grant by the 35 Borrower of the Liens purported to be created in favor of the Agent pursuant to any of the Security Documents or (ii) the exercise by the Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created pursuant to any of the Security Documents or created or provided for by applicable law), except for filings or recordings contemplated by subsection (a) above. (c) Except as such as may have been filed in favor of the Agent as contemplated by subsection (a) above and in respect of Liens permitted under Section 7.01, no effective Uniform Commercial Code financing statement, fixture - ------------ filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office. (d) All representations and warranties of the Borrower contained in the Security Documents and in the Certificate and Indemnity Agreement are true and correct, and all information supplied to the Agent by or on behalf of any Loan Party with respect to the Collateral is accurate and complete in all material respects. 5.19 Disclosure. No statement, information, report, representation, or warranty made by any Loan Party in any Loan Document or furnished to the Agent or any Lender by or on behalf of any Loan Party in connection with any Loan Document contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. SECTION 6. AFFIRMATIVE COVENANTS So long as any Loan or other Obligation shall remain unpaid or unsatisfied the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.12) cause each Subsidiary to: ------------- ---- ---- ---- 6.01 Financial Statements. Deliver to the Agent with sufficient copies for the Agent and each Lender, in form and detail satisfactory to the Agent and the Required Lenders: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of Fisher Communications, an unaudited consolidated and consolidating balance sheet of Fisher Communications and the Non-Broadcasting Subsidiaries as at the end of such fiscal year, and the related unaudited consolidated and consolidating statements of income or operations, shareholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of Fisher Communications as fairly presenting the financial condition, results of operations and cash flows of Fisher Communications and the Non-Broadcasting Subsidiaries in accordance with GAAP, subject only to the absence of footnotes; and (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of Fisher Communications, an unaudited consolidated and consolidating balance sheet of Fisher Communications and the Non-Broadcasting Subsidiaries as at the end of such fiscal quarter, and the related unaudited consolidated and consolidating statements of income or operations, shareholders' equity and cash flows for such fiscal quarter and for the portion of Fisher Communications' fiscal year then 36 ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of Fisher Communications as fairly presenting the financial condition, results of operations and cash flows of Fisher Communications and the Non-Broadcasting Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes. 6.02 Certificates; Other Information. Deliver to the Agent with sufficient copies for the Agent and each Lender, in form and detail satisfactory to the Agent and the Required Lenders: (a) concurrently with the delivery of the financial statements referred to in Section 6.01, a duly completed Compliance Certificate signed ------------ by a Responsible Officer of Fisher Communications; (b) as soon as available, but in any event within 45 days after the end of each fiscal quarter of the Borrower, a complete list of the tenants of Fisher Plaza as at the end of such fiscal quarter, certified by a Responsible Officer of the Borrower and setting forth in reasonable detail for each such tenant (i) the number of square feet leased by such tenant, (ii) the term of such tenant's lease and extension terms, if any and (iii) the premises fees payable by such tenant, including rental payments and common area maintenance fees; (c) as soon as available, but in any event within 60 days after the Closing Date, evidence satisfactory to the Lenders that the maximum amount available to Fisher Communications for borrowing under the Fisher Communications Forward Sale Documents is not less than $70,000,000; (d) as soon as available, but in any event within 90 days after the Closing Date, originals of Subordination Agreements executed by Internap Network Services, Staubach Global Services, Terabeam Corporation and Verizon Northwest, Inc. with respect to the leases or other agreements entered into by such Persons with respect to space occupied by such Persons in Fisher Plaza; (e) as soon as available, but in any event not later than June 30, 2003, a certificate of substantial completion issued by the Fisher Plaza project architect and certificate of occupancy issued by the City of Seattle for the shell and core (i.e., the building exclusive of tenant spaces ---- requiring tenant improvement build out) for Fisher Plaza; (f) as soon as available, but in any event not later than June 30, 2003, a discussion draft of the As-Completed Appraisal, and as soon as available, but in any event not later than August 31, 2003, the final version of the As-Completed Appraisal; and (g) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower, or any Subsidiary as the Agent, at the request of any Lender, may from time to time reasonably request. 6.03 Notices. Promptly notify the Agent and each Lender: 37 (a) of the occurrence of any Default or Event of Default; (b) of any matter that has resulted or may result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws; (c) of any litigation, investigation or proceeding affecting any Loan Party in which the amount involved exceeds the Threshold Amount, or in which injunctive relief or similar relief is sought, which relief, if granted, could reasonably be expected to have a Material Adverse Effect; (d) of the occurrence of any ERISA Event; and (e) of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of - --------------- this Agreement or other Loan Document that have been breached. 6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 6.05 Preservation of Existence, Etc. Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization; take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except in a transaction permitted by Section 7.04 or 7.05; and preserve or renew all of its registered patents, - ------------ ---- trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect; provided, however, -------- ------- that the Borrower may permit Civia to terminate its legal existence and fail to maintain its rights, privileges, permits, licenses and franchises in connection with any voluntary or involuntary liquidation of Civia. 6.06 Completion of Fisher Plaza. Complete the construction of Fisher Plaza not later than June 30, 2003, substantially in accordance with the description of Fisher Plaza set forth in the section titled "Description of Improvements" of the appraisal titled "Complete Appraisal Presented in a Self Contained Format of Fisher Plaza" dated as of December 1, 2001, prepared 38 for Bank of America by Shorett KMS Valuation Advisory Group. For purposes of this Section, Fisher Plaza shall be deemed completed when the project architect has issued a certificate of substantial completion to the Agent as to all of the project except for tenant spaces requiring tenant improvement build out, and the City of Seattle has issued a certificate of occupancy for the shell and core (i.e., the building exclusive of tenant spaces requiring tenant ---- improvement build out). 6.07 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities. 6.08 Maintenance of Insurance. Maintain with financially sound and reputable insurance companies not Affiliates of the Borrower (other than Safeco Corporation and its Affiliates), insurance with respect to its properties (including its tangible Collateral) and business against at least such risks and in at least such amounts as are commercially reasonable (including business interruption insurance) and furnish to the Agent, upon written request, full information as to the insurance carried. Without limiting the generality of the foregoing, the Borrower shall maintain or cause to be maintained all insurance required under the terms of any Security Document. Each such policy of insurance shall (i) name the Agent for the benefit of the Lenders as an additional insured thereunder as its interests may appear and (ii) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to the Agent that names the Agent for the benefit of the Lenders as the loss payee thereunder and provides for at least 30 days prior written notice to the Agent of any modification or cancellation of such policy. 6.09 Compliance with Laws. Comply in all material respects with the requirements of all Laws applicable to it or to its business or property, except in such instances in which (i) such requirement of Law is being contested in good faith or a bona fide dispute exists with respect thereto; or (ii) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. 6.10 Environmental Laws. (a) Comply with, and use reasonable efforts to require compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and use reasonable efforts to require that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except, in each case, to the extent that failure to do so could not be reasonably expected to have a Material Adverse Effect and (b) comply with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings diligently pursued or could not reasonably be expected to have a Material Adverse Effect. 6.11 Books and Records. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all 39 financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be. 6.12 Inspection Rights. Permit representatives and independent contractors of the Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when an Event of -------- ------- Default exists the Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice. Notwithstanding the foregoing, Agent and each Lender acknowledge and agree that their respective rights to visit and inspect Fisher Plaza shall, with respect to any space leased to a Person not an Affiliate of the Borrower, be subject to the terms of any written lease agreement with such Person with respect to such leased space. 6.13 Compliance with ERISA. Do, and cause each of its ERISA Affiliates to do, each of the following: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 6.14 Use of Proceeds. Use the proceeds of the Loans to make distributions to Fisher Communications to repay amounts owing under the Existing Credit Facilities. 6.15 Further Assurances. Promptly upon request by the Agent or the Majority Lenders, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all such further acts, deeds, conveyances, security agreements, deeds of trust, mortgages, assignments, estoppel certificates, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments the Agent or such Lenders, as the case may be, may reasonably require from time to time in order (a) to carry out more effectively the purposes of this Agreement or any other Loan Document, (b) to subject to the Liens created by any of the Security Documents any of the properties, rights or interests covered by any of the Security Documents, (c) to perfect and maintain the validity, effectiveness and priority of any of the Security Documents and the Liens intended to be created thereby, and (d) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Agent and Lenders the rights granted or now or hereafter intended to be granted to the Lenders under any Loan Document or under any other document executed in connection therewith. 40 SECTION 7. NEGATIVE COVENANTS So long as any Loan or other Obligation shall remain unpaid or unsatisfied the Borrower shall not, nor shall it permit any Subsidiary (other than Civia) to, directly or indirectly: 7.01 Liens. Create, incur, assume or suffer to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following: (a) Liens pursuant to any Loan Document; (b) Liens (other than Liens on the Collateral) existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, ------------- provided that the property covered thereby is not increased and any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(b); - -------------- (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person; (e) pledges or deposits in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA; (f) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; (h) Liens (other than Liens on the Collateral) securing judgments for the payment of money in an aggregate amount not in excess of the Threshold Amount (except to the extent covered by independent third-party insurance as to which the insurer has acknowledged in writing its obligation to cover), unless any such judgment remains undischarged for a period of more than 30 consecutive days during which execution is not effectively stayed; and (i) Liens (other than Liens on the Collateral) securing Indebtedness permitted under Section 7.03(d); provided that (i) such Liens do -------------- -------- not at any time encumber any property other than the property financed by such Indebtedness and (ii) the Indebtedness secured thereby does 41 not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition. 7.02 INVESTMENTS. MAKE ANY INVESTMENTS, EXCEPT: (a) Investments other than those permitted by subsections (b) through (h) that are existing on the date hereof and listed on Schedule 7.02; ------------- (b) Investments held by the Borrower or such Subsidiary in the form of cash equivalents or short-term marketable securities; (c) advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $100,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes; (d) Investments of any Subsidiary in the Borrower or another Subsidiary; (e) Investments made by the Borrower not exceeding, in the aggregate during each fiscal year set forth below, the amount set forth opposite such fiscal year: Fiscal Year Amount - ------------------------------------------------------------------ 2002 $1,000,000 2003 $1,000,000 2004 $1,250,000; (f) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss; (g) Guaranty Obligations permitted by Section 7.03; and ------------ (h) Investments permitted by Section 7.04. ------------ 7.03 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness under the Loan Documents; (b) Indebtedness outstanding on the date hereof and listed on Schedule 7.03 and any refinancings, refundings, renewals or extensions thereof; - ------------- provided that the amount of such Indebtedness is not increased at the time of - -------- such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder; (c) Guaranty Obligations of the Borrower or any Subsidiary in respect of Indebtedness otherwise permitted hereunder of the Borrower or any wholly-owned Subsidiary; 42 (d) Indebtedness in respect of capital leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(i); provided, however, that the -------------- -------- ------- aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $250,000; and (e) Unsecured Indebtedness in an aggregate principal amount not to exceed $250,000 at any time outstanding. 7.04 Fundamental Changes. Merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default or Event of Default exists or would result therefrom: (a) any Subsidiary may merge with (i) the Borrower, provided that -------- the Borrower shall be the continuing or surviving Person, or (ii) any one or more Subsidiaries, provided that when any wholly-owned Subsidiary is merging -------- with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person; and (b) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to the Borrower or to another Subsidiary; provided that if the seller in such a transaction is a wholly-owned -------- Subsidiary, then the purchaser must also be a wholly-owned Subsidiary. 7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except: (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business; (b) Dispositions of inventory and other property (other than the Collateral) in the ordinary course of business; (c) Dispositions of equipment or real property (other than the Collateral) to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property, (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property or (iii) the board of directors or senior management of the Borrower or such Subsidiary has determined in good faith that the failure to replace such property will not be detrimental to the business of the Borrower or such Subsidiary; (d) Dispositions of property (other than the Collateral) by any Subsidiary to the Borrower or to a wholly-owned Subsidiary; (e) Dispositions permitted by Section 7.04; ------------ (f) non-exclusive licenses of IP Rights in the ordinary course of business and substantially consistent with past practice for terms not exceeding five years; 43 provided, however, that any Disposition pursuant to clauses (a) through (f) - -------- ------- shall be for fair market value. 7.06 Lease Obligations. Create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, except: (a) leases in existence on the date hereof and, if any such lease is in respect of property valued at $25,000 or more, listed on Schedule 7.06, ------------- and any renewal, extension or refinancing thereof; (b) operating leases (other than those constituting Synthetic Lease Obligations) entered into or assumed by the Borrower or any Subsidiary after the date hereof in the ordinary course of business; and (c) capital leases and Synthetic Lease Obligations to the extent permitted by Section 7.03. ------------ 7.07 Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that: (a) the Borrower may declare and make a dividend payment on the Closing Date to Fisher Communications in the amount of $60,000,000 to repay amounts owing under the Existing Credit Facilities; (b) each Subsidiary may make Restricted Payments to the Borrower and to wholly-owned Subsidiaries (and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to the Borrower and any Subsidiary and to each other owner of capital stock of such Subsidiary on a pro rata basis based on their relative ownership interests); (c) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock of such Person; and (d) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire shares of its common stock or warrants or options to acquire any such shares with the proceeds received from the substantially concurrent issue of new shares of its common stock. 7.08 ERISA. At any time engage in a transaction which could be subject to Section 4069 or 4212(c) of ERISA, or permit any Plan to (a) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable Laws; or (c) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), which, with respect to each event listed above, could reasonably be expected to have a Material Adverse Effect. 7.09 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof. 44 7.10 Transactions with Affiliates. Enter into or suffer to exist any transaction of any kind with any Affiliate of the Borrower, other than arm's-length transactions with Affiliates, except: (a) the Borrower may lease office space in Fisher Plaza to Fisher Communications or any of its Subsidiaries under terms that the Borrower deems reasonable under the circumstances; and (b) the Borrower may obtain reasonable services from Fisher Communications and its Subsidiaries under terms that the Borrower deems reasonable under the circumstances; provided that the aggregate difference -------- between (i) the actual compensation paid by the Borrower and its Subsidiaries in such transactions and (ii) the compensation that they would pay in comparable arm's-length transactions with a Person not an Affiliate of the Borrower shall not exceed $10,000 any fiscal year. 7.11 Capital Expenditures. Make or become legally obligated to make any expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations), except: (a) capital expenditures made by the Borrower related to the completion of, or tenant improvements in or maintenance of Fisher Plaza not exceeding, in the aggregate during each fiscal year set forth below, the amount set forth opposite such fiscal year for each such category: Tenant Improvements and Maintenance Fiscal Year Completion Costs - ------------------------------------------------------------------------------- 2002 $ 31,500,000 $ 2,650,000 2003 $ 4,000,000 $ 3,050,000 2004 $ 0 $ 1,250,000; provided, however, that so long as no Default or Event of Default has occurred - -------- ------- and is continuing or would result from such expenditure, any portion of the capital expenditures related to the completion of Fisher Plaza, if not expended in the fiscal year for which it is permitted above, may be carried over for expenditure in the next following fiscal year; (b) capital expenditures in the ordinary course of business made by the Subsidiaries not exceeding, in the aggregate during each fiscal year set forth below, the amount set forth opposite such fiscal year: 45 Fiscal Year Amount - ----------------------------------------------------------------- 2002 $1,000,000 2003 $1,000,000 2004 $1,250,000; and 7.12 Burdensome Agreements. Enter into any Contractual Obligation that limits the ability (a) of any Subsidiary to make Restricted Payments to the Borrower or to otherwise transfer property to the Borrower or (b) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person. 7.13 Use of Proceeds. Use the proceeds of any Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose. SECTION 8. EVENTS OF DEFAULT AND REMEDIES 8.01 Events of Default. Any of the following shall constitute an Event of Default: (a) Non-Payment. The Borrower fails to pay (i) when and as ----------- required to be paid herein, any amount of principal of any Loan, or (ii) within three Business Days after the same becomes due, any interest on any Loan or any fee due hereunder, or (iii) within five Business Days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or (b) Specific Covenants. The Borrower fails to perform or observe ------------------ any term, covenant or agreement contained in any of Section 6.02(c), 6.02(f), -------------- ------ 6.03, 6.05, 6.12 or 6.14 or Section 7; or - ---- ---- ---- ---- --------- (c) Deed of Trust. (i) The Borrower fails to perform or observe ------------- any term, covenant or agreement contained in Article 4 of the Deed of Trust or (ii) an Accelerating Transfer (as defined in the Deed of Trust) shall occur without the Lenders' prior written consent; or (d) Other Defaults. Any Loan Party fails to perform or observe any -------------- other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or (e) Representations and Warranties. Any representation or ------------------------------ warranty made or deemed made by the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith proves to have been incorrect when made or deemed made; or (f) Cross-Default. Any Loan Party or any of its Subsidiaries (i) ------------- fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guaranty Obligation (other than Indebtedness 46 hereunder and Indebtedness and Guaranty Obligations arising under the Fisher Broadcasting Credit Documents) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (ii) fails to observe or perform any other agreement or condition relating to any Indebtedness described in clause (i) or Guaranty Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guaranty Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise) prior to its stated maturity, or such Guaranty Obligation to become payable or cash collateral in respect thereof to be demanded; or (g) Insolvency Proceedings, Etc. Any Loan Party or any of its ---------------------- Subsidiaries (other than Civia) institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or (h) Inability to Pay Debts; Attachment. (i)(A) Any Loan Party or ---------------------------------- Fisher Mills becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (B) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy, or (ii) Fisher Broadcasting and its Subsidiaries on a consolidated basis becomes unable or admits in writing its inability or fails generally to pay its debts as they become due; provided, however, that the occurrence and continuation of the -------- ------- events described in clause (ii) shall not constitute an Event of Default hereunder unless and until (A) 60 days has elapsed from date of the occurrence of such events or (B) the lenders (or the administrative agent for such lenders) that are a party to the Fisher Broadcasting Credit Documents exercise or elect to exercise any remedy under the Fisher Broadcasting Credit Documents in respect of the occurrence of such events, whichever occurs earlier; or (i) Judgments. (i) There is entered against any Loan Party or --------- Fisher Mills (A) a final judgment or order for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (B) any non-monetary final judgment that has, or could reasonably be expected to have, a Material Adverse Effect and, in either case, (1) enforcement proceedings are commenced by any creditor upon such judgment or order, or (2) there is a period of 10 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect, or (ii) there is entered against Fisher Broadcasting or any of 47 its Subsidiaries a final judgment or order for the payment of money in an aggregate amount exceeding the $500,000 (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) and a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect within 30 days from the entry thereof; provided, however, that the occurrence and continuation of the event described - -------- ------- in clause (ii) shall not constitute an Event of Default hereunder unless and until (A) 60 days has elapsed from date of the occurrence of such event or (B) the lenders (or the administrative agent for such lenders) that are a party to the Fisher Broadcasting Credit Documents exercise or elect to exercise any remedy under the Fisher Broadcasting Credit Documents in respect of the occurrence of such event, whichever occurs earlier; or (j) ERISA. (i) An ERISA Event occurs with respect to a Pension ----- Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or (k) Invalidity of Loan Documents. Any Loan Document, at any time ---------------------------- after its execution and delivery and for any reason other than the agreement of all the Lenders or satisfaction in full of all the Obligations, ceases to be in full force and effect, or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document or, without limiting the generality of the foregoing, the Deed of Trust ceases to create a valid and enforceable Lien on Fisher Plaza as security for the Secured Obligations (as defined in the Deed of Trust) prior and superior in right to any other Person, subject only to a standard survey exception and other exceptions approved by the Lenders in writing, (l) Change of Control. There occurs any Change of Control with ----------------- respect to any Loan Party; or (m) Material Adverse Effect. There occurs any event or ----------------------- circumstance that has a Material Adverse Effect. 8.02 Remedies Upon Event of Default. If any Event of Default occurs, the Agent shall, at the request of, or may, with the consent of, the Required Lenders, (a) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; and (b) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; 48 provided, however, that upon the occurrence of any event specified in subsection - -------- ------- (g) of Section 8.01, the unpaid principal amount of all outstanding Loans and ------------ all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent or any Lender. SECTION 9. THE AGENT 9.01 Appointment and Authorization of Agent. Each Lender hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. 9.02 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 9.03 Liability of Agent. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or for the value of or title to any Collateral, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof. 49 9.04 RELIANCE BY AGENT. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders or all the Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and participants. Where this Agreement expressly permits or prohibits an action unless the Required Lenders otherwise determine, the Agent shall, and in all other instances, the Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has signed this Agreement shall be ------------ deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender. 9.05 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be directed by the Required Lenders in accordance with Section 8.02; provided, however, that ------------ -------- ------- unless and until the Agent has received any such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. 9.06 Credit Decision; Disclosure of Information by Agent. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, 50 property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, the value of and title to any Collateral, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent herein, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person. 9.07 Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall -------- ------- be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Person's own gross negligence or willful misconduct; provided, however, that no -------- ------- action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation of the Agent. 9.08 Agent in its Individual Capacity. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Bank of America were not the Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any 51 other Lender and may exercise such rights and powers as though it were not the Agent, and the terms "Lender" and "Lenders" include Bank of America in its individual capacity. 9.09 Successor Agent. The Agent may resign as Agent upon 30 days' notice to the Lenders. If the Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders which successor administrative agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, the Person acting as such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor administrative agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 9 and Sections 10.04 and 10.05 shall inure to its --------- -------------- ----- benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor administrative agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 9.10 Collateral Matters. The Agent is authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral or the Security Documents which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Security Documents. The Lenders irrevocably authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any Collateral upon payment in full of all Loans and all other Obligations known to the Agent and payable under this Agreement or any other Loan Document. SECTION 10. MISCELLANEOUS 10.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, -------- ------- waiver or consent shall, unless in writing and signed by each of the Lenders directly affected thereby and by the Borrower, and acknowledged by the Agent, do any of the following: (a) postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document; 52 (b) reduce the principal of, or the rate of interest specified herein on, any Loan, or (subject to clause (ii) of the proviso below) any fees or other amounts payable hereunder or under any other Loan Document; provided, -------- however, that only the consent of the Required Lenders shall be necessary to - ------- amend the definition of "Default Rate" or to waive any obligation of the Borrower to pay interest at the Default Rate; (c) change the percentage of the aggregate unpaid principal amount of the Loans which is required for the Lenders or any of them to take any action hereunder; (d) change the Voting Percentage of any Lender; (e) amend this Section, or Section 2.10, or any provision herein ------------ providing for consent or other action by all the Lenders; or (f) release any Guarantor from any Guaranty; (g) release all or substantially all of the Collateral; and, provided further, that (i) no amendment, waiver or consent shall, unless -------- ------- in writing and signed by the Agent in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of the Agent under this Agreement or any other Loan Document; and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the respective parties thereto. Notwithstanding anything to the contrary herein, any Lender that has a Voting Percentage of zero shall not have any right to approve or disapprove any amendment, waiver or consent hereunder. 10.02 NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES. (a) General. Unless otherwise expressly provided herein, all ------- notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 10.02; or, in the case of the -------------- Borrower or the Agent, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to the Borrower and the Agent. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient and (ii) (A) if delivered by hand or by courier, when signed for by the intended recipient; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that -------- ------- notices and other communications to the Agent pursuant to Section 2 shall not --------- be effective until actually received by the Agent. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule 10.02, it being understood and -------------- agreed that a voicemail message shall in no event be effective as a notice, communication or confirmation hereunder. 53 (b) Effectiveness of Facsimile Documents and Signatures. Loan --------------------------------------------------- Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually-signed originals and shall be binding on all Loan Parties, the Agent and the Lenders. The Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. (c) Limited Use of Electronic Mail. Electronic mail and internet ------------------------------ and intranet websites may be used only to distribute routine communications, such as financial statements and other information, and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose. (d) Reliance by Agent and Lenders. The Agent and the Lenders ----------------------------- shall be entitled to rely and act upon any notices (including telephonic Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other communications with the Agent may be recorded by the Agent, and each of the parties hereto hereby consents to such recording. 10.03 No Waiver; Cumulative Remedies. No failure by any Lender or the Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein or therein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.04 Attorney Costs, Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Agent for all costs and expenses incurred in connection with the development, preparation, negotiation and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs, and (b) to pay or reimburse the Agent and each Lender for all costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any "workout" or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs. The foregoing costs and expenses shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Agent and the cost of independent public accountants and other outside 54 experts retained by the Agent or any Lender. The agreements in this Section shall survive the repayment of all other Obligations. 10.05 Indemnification by the Borrower. Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold harmless each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the "Indemnitees") from and against any and all ----------- liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Loan or the use or proposed use of the proceeds therefrom, or (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Borrower or any other Loan Party, or any Environmental Liability related in any way to the Borrower or any other Loan Party, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"), in all cases, ----------------------- whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any -------- Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. The agreements in this Section shall survive the resignation of the Agent, the replacement of any Lender and the repayment, satisfaction or discharge of all the other Obligations. All amount due under this Section 10.05 shall be payable within ten Business Days after ------------- demand therefor. 10.06 Payments Set Aside. To the extent that the Borrower makes a payment to the Agent or any Lender, or the Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Agent upon demand its applicable share of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. 55 10.07 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loans at the time owing to it); provided -------- that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loans assigned, and (iii) the parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500. Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05 and 10.05 with respect to facts and ------------- ---- ---- ----- circumstances occurring prior to the effective date of such assignment). Upon request, the Borrower (at its expense) shall execute and deliver new or replacement Notes to the assigning Lender and the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section. (c) The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Agent's Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). -------- 56 The entries in the Register shall be conclusive, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Any Lender may at any time, without the consent of, or notice to, the Borrower or the Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such Lender's ----------- rights and/or obligations under this Agreement (including all or a portion of the Loans owing to it); provided that (i) such Lender's obligations under this -------- Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such -------- agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification that would (i) postpone any date upon which any payment of money is scheduled to be paid to such Participant, (ii) reduce the principal, interest, fees or other amounts payable to such Participant, (iii) release any Guarantor from any Guaranty, or (iv) release all or substantially all of the Collateral. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and ------------- ---- 3.05 to the same extent as if it were a Lender and had acquired its interest by - ---- assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section ------- 10.09 as though it were a Lender, provided such Participant agrees to be - ----- subject to Section 2.10 as though it were a Lender. ------------ (e) A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been ------------ ---- entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 ------------ unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 10.17 as though it were a Lender. - ------------- (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (g) As used herein, the following terms have the following meanings: 57 "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a ----------------- Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Agent, and (ii) unless (A) such Person is taking delivery of an assignment in connection with physical settlement of a credit derivative transaction or (B) an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrower or any of the Borrower's Affiliates or Subsidiaries. "Fund" means any Person (other than a natural person) that is ---- (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "Approved Fund" means any Fund that is administered or managed ------------- by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. 10.08 Confidentiality. Each of the Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty's or prospective counterparty's professional advisor) to any credit derivative transaction relating to obligations of the Borrower; (g) with the consent of the Borrower; (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Agent or any Lender on a nonconfidential basis from a source other than the Borrower; or (i) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating agency that requires access to information about a Lender's or its Affiliates' investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates. In addition, the Agent and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Agent and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, and the Loans. For the purposes of this Section, "Information" means all information received from the Borrower ----------- relating to the Borrower or its business, other than any such information that is available to the Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received -------- from the Borrower after the date hereof, such information is clearly identified in writing at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in 58 this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 10.09 Set-off. In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender is authorized at any time and from time to time, without prior notice to the Borrower or any other Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party) to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Borrower and the Agent after any such set-off and application made by such Lender; provided, -------- however, that the failure to give such notice shall not affect the validity of - ------- such set-off and application. 10.10 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the "Maximum Rate"). If the Agent or any ------------ Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations. 10.11 Master Services Agreements with Affiliates. The Lenders agree to consent and authorize and instruct the Agent to consent to the Borrower amending the Master Services Agreement to reduce the obligation of Seattle TV to lease space in Fisher Plaza by 12,500 square feet to not less than 72,500 square feet; provided that at the time such consent is requested and given (a) -------- no Default or Event of Default has occurred and is continuing, (b) the Borrower and Seattle Radio shall have entered into a lease with respect to Fisher Plaza, which lease shall (i) shall be substantially in the form of the Master Services Agreement, (ii) obligate Seattle Radio to lease not less than 12,500 square feet of space at a Fair Market Rental Rate for a period commencing not later than January 1, 2005 and ending not earlier than January 1, 2012 and (iii) be otherwise be in form and substance reasonably acceptable to the Lenders and (c) the Agent shall have received such consents, estoppels, subordination agreements executed by Seattle Radio with respect to such lease as may be requested by the Agent or any Lender. 10.12 Tax Deferred Exchange Transactions. The Borrower may, in connection with any Disposition made by any Loan Party, Fisher Mills or Fisher Broadcasting, request that the Lenders consent to the transfer of the asset which is the subject of such Disposition, or the agreement pursuant to which such Disposition is being made, to a qualified intermediary, as part 59 of a tax free exchange transaction pursuant to Section 1031 of the Code (each such transaction, a "Tax Deferred Exchange Transaction"). The Borrower shall --------------------------------- provide to the Agent with sufficient copies for each Lender (a) a written description of the Tax Deferred Exchange Transaction for which consent is being requested, (b) a copy of each material document, agreement and instrument (i.e. purchase, sale, exchange and escrow agreements) executed or to be executed in connection with such transaction and (c) such other information and copies of such other documents pertaining to such transaction as the Agent or any Lender may reasonably request. Each Lender shall timely provide the Borrower and the Agent with written notice of its consent or refusal to consent to any Tax Deferred Exchange Transaction. No Lender shall have any obligation to consent to any Tax Deferred Exchange Transaction, and any consent given by a Lender may be conditioned upon such terms and conditions as such Lender may in its reasonable judgment require. If the Required Lenders provide the Agent with written notice of their consent to any Tax Deferred Exchange Transaction, consent to such Tax Deferred Exchange Transaction shall be deemed given by all Lenders. The Borrower agrees to pay or reimburse the Agent for all costs and expenses (including Attorney Costs) incurred by the Agent in connection with documenting any consent given to any Tax Deferred Exchange Transaction (whether or not the Tax Deferred Exchange Transaction is consummated) and the consummation and administration of the transactions contemplated by any such consent, including all Attorney Costs. 10.13 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.14 Integration. This Agreement, together with the other Loan Documents, comprises the complete, final and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. This Agreement and the other Loan Documents may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties, and there are no unwritten oral agreements among the parties. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of -------- supplemental rights or remedies in favor of the Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 10.15 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Agent and each Lender, regardless of any investigation made by the Agent or any Lender or on their behalf and notwithstanding that the Agent or any Lender may have had notice or knowledge of any Default or Event of Default at the time of any Borrowing, and shall continue in full force and effect as long as any Loan or any other Obligation shall remain unpaid or unsatisfied. 60 10.16 Severability. Any provision of this Agreement and the other Loan Documents to which the Borrower is a party that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.17 Tax Forms. (a) Each Lender that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code (a "Foreign Lender") -------------- shall deliver to the Agent, prior to receipt of any payment subject to withholding under the Code (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Person and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Person by the Borrower pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Person by the Borrower pursuant to this Agreement) or such other evidence satisfactory to the Borrower and the Agent that such Person is entitled to an exemption from, or reduction of, U.S. withholding tax. Thereafter and from time to time, each such Person shall (i) promptly submit to the Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Borrower and the Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such Person by the Borrower pursuant to this Agreement, (ii) promptly notify the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws that the Borrower make any deduction or withholding for taxes from amounts payable to such Person. If such Person fails to deliver the above forms or other documentation, then the Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (b) Upon the request of the Agent, each Lender that is a "United States person" within the meaning of Section 7701(a)(30) of the Code shall deliver to the Agent two duly signed completed copies of IRS Form W-9. If such Lender fails to deliver such forms, then the Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable back-up withholding tax imposed by the Code, without reduction. (c) If any Governmental Authority asserts that the Agent did not properly withhold or backup withhold, as the case may be, any tax or other amount from payments made to or for the account of any Lender, such Lender shall indemnify the Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, and costs and expenses (including Attorney Costs) of the Agent. The obligation of the Lenders under this Section shall survive the repayment of all Obligations and the resignation of the Agent. 61 10.18 GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF WASHINGTON APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE AGENT AND EACH LENDER -------- SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF WASHINGTON SITTING IN KING COUNTY OR OF THE UNITED STATES FOR THE WESTERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, THE AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE BORROWER, THE AGENT AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. 10.19 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT, SUBJECT TO SECTION 10.21, ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE - ------------- DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 10.20 Time of the Essence. Time is of the essence of the Loan Documents. 10.21 MANDATORY ARBITRATION. (a) This Section concerns the resolution of any controversies or claims among or between the Borrower, the Lenders and the Agent, whether arising in contract, tort or by statute, that arise out of or relate to this Agreement and the other Loan Documents (collectively a 62 "Claim"). At the request of the Borrower, any Lender or the Agent, any Claim ----- shall be resolved by arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the "Act"). The Act will apply even though this Agreement --- provides that it is governed by the Laws of the state of Washington. (b) Arbitration proceedings will be determined in accordance with the Act, the rules and procedures for the arbitration of financial services disputes of JAMS/Endispute, LLC, a Delaware limited liability company or any successor thereof ("JAMS"), and the terms of this Section. In the event of any ---- inconsistency, the terms of this Section shall control. The arbitration shall be administered by JAMS and conducted in Seattle, Washington. All Claims shall be determined by one arbitrator; provided, however, that if Claims exceed -------- ------- $5,000,000, upon the request of any party, the Claims shall be decided by three arbitrators. All arbitration hearings shall commence within 90 days of the demand for arbitration and close within 90 days of commencement and the award of the arbitrator(s) shall be issued within 30 days of the close of the hearing; provided, however, that the arbitrator(s), upon a showing of good -------- ------- cause, may extend the commencement of the hearing for up to an additional 60 days. The arbitrator(s) shall provide a concise written statement of reasons for the award. The arbitration award may be submitted to any court having jurisdiction to be confirmed and enforced. The arbitrator(s) will have the authority to decide whether any Claim is barred by the statute of limitations and, if so, to dismiss the arbitration on that basis. For purposes of the application of the statute of limitations, the service on JAMS under applicable JAMS rules of a notice of Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall be determined by the arbitrator(s). The arbitrator(s) shall have the power to award legal fees pursuant to the terms of this Agreement. (c) This Section does not limit the right of the Borrower, any Lender or the Agent to: (i) exercise self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or nonjudicial foreclosure against any real or personal property collateral; (iii) exercise any judicial or power of sale rights; or (iv) act in a court of law to obtain an interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies. The filing of a court action is not intended to constitute a waiver of the right of the Borrower, any Lender or the Agent, including the suing party, thereafter to require submittal of the Claim to arbitration. 10.22 Oral Agreements. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, -------------------------------------------------- EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT - ---------------------------------------------------------------------- ENFORCEABLE UNDER WASHINGTON LAW. - --------------------------------- 63 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. FISHER MEDIA SERVICES COMPANY By: /S/ David D. Hillard ------------------------------------- Name: David D. Hillard --------------------------------- Title: Assistant Secretary --------------------------------- BANK OF AMERICA, N.A., as Agent By: /s/ Dora A. Brown ------------------------------------- Name: Dora A. Brown --------------------------------- Title: Vice President --------------------------------- BANK OF AMERICA, N.A., as a Lender By: /s/ Mark N. Crawford ------------------------------------- Name: Mark N. Crawford --------------------------------- Title: Senior Vice President --------------------------------- U.S. BANK NATIONAL ASSOCIATION, as a Lender By: /s/ Thomas G. Gunder -------------------------------------- Name: Thomas G. Gunder ---------------------------------- Title: Vice President ---------------------------------- 64 EXHIBIT A FORM OF LOAN NOTICE Date: ___________, _____ To: Bank of America, N.A., as Agent Ladies and Gentlemen: Reference is made to that certain Loan Agreement, dated as of March 21, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used --------- herein as therein defined), among Fisher Media Services Company, a Washington corporation (the "Borrower"), the Lenders from time to time party thereto, and -------- Bank of America, N.A., as Agent. The undersigned hereby requests a conversion or continuation of Loans. 1. On___________________________________________________ (a Business Day). 2. In the amount of $___________________________________. 3. Comprised of_________________________________________. [Type of Loan requested] 4. For Eurodollar Rate Loans: with an Interest Period of ________ months. The Borrowing requested herein complies with the proviso to the first sentence of Section 2.01 of the Agreement. ------------ FISHER MEDIA SERVICES COMPANY By: ________________________________ Name: ______________________________ Title: ____________________________ A - 1 Form of Loan Notice EXHIBIT B FORM OF PROMISSORY NOTE $ March ___, 2002 ----------------------------------- Seattle, Washington FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises -------- to pay to the order of ______________________, a national banking association (the "Lender"), on the Maturity Date (as defined in the Loan Agreement referred ------ to below) the principal amount of __________________Dollars ($____________), or such lesser principal amount of Loans (as defined in such Loan Agreement) due and payable by the Borrower to the Lender on the Maturity Date under that certain Loan Agreement, dated as of March 21, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), --------- among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Agent. The Borrower promises to pay interest on the unpaid principal amount of each Loan from the date of such Loan until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Agent for the account of the Lender in Dollars in immediately available funds at the Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranties and is secured by the Collateral. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON. FISHER MEDIA SERVICES COMPANY By: ________________________________ Name: ______________________________ Title: ____________________________ B - 1 Form of Promissory Note LOANS AND PAYMENTS WITH RESPECT THERETO
Amount of Principal Outstanding Type of Amount of End of or Interest Principal Loan Loan Interest Paid This Balance Notation Date Made Made Period Date This Date Made By - ------------------------------------------------------------------------------------------------------ ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
B - 2 Form of Promissory Note EXHIBIT C FORM OF COMPLIANCE CERTIFICATE Financial Statement Date: ___________, _____ To: Bank of America, N.A., as Agent Ladies and Gentlemen: Reference is made to that certain Loan Agreement, dated as of March 21, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used --------- herein as therein defined), among Fisher Media Services Company, a Washington corporation (the "Borrower"), the Lenders from time to time party thereto, and -------- Bank of America, N.A., as Agent. The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the _________________________________________ of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Agent on the behalf of the Borrower, and that: 1. Attached hereto as Schedule 1 are the unaudited financial statements ---------- required by Section 6.01 of the Agreement for the fiscal quarter of the Borrower ------------ ended as of the above date. Such financial statements fairly present the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes. 2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements. 3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and [select one:] [to the best knowledge of the undersigned during such fiscal period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it.] --or-- [the following covenants or conditions have not been performed or observed and the following is a list of each such Default or Event of Default and its nature and status:] C - 1 Form of Compliance Certificate 4. The financial covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date of this - ---------- Certificate. IN WITNESS WHEREOF, the undersigned has executed this Certificate as of ____________, 20____. FISHER MEDIA SERVICES COMPANY By: --------------------------------- Name: ------------------------------- Title: ------------------------------- C - 2 Form of Promissory Note For the Quarter/Year ended ___________________("Statement Date") SCHEDULE 2 to the Compliance Certificate ($ in 000's) I. Section 7.02(e) -- Investments. A. Investments made during fiscal year to date: $ --------------------- B. Maximum permitted Investments: $ --------------------- C. Excess (deficient) for covenant compliance (Line IB - I.A): $ --------------------- II. Section 7.11(a) -- Capital Expenditures (Borrower). Completion Costs: ---------------- A. Capital expenditures for completion costs made during fiscal year to date: $ --------------------- B. Capital expenditures that could have made during prior fiscal year but which were not made: $ --------------------- C. Maximum permitted capital expenditures ($_____________ + Line II.B.): $ --------------------- D. Excess (deficient) for covenant compliance (Line I.I.C - II.A): $ --------------------- Tenant Improvements and Maintenance: ----------------------------------- A. Capital expenditures for tenant improvements and maintenance made during fiscal year to date: $ --------------------- B. Maximum permitted capital expenditures: $ --------------------- C. Excess (deficient) for covenant compliance (Line II.B - II.A): $ --------------------- III. Section 7.11(b) -- Capital Expenditures (Subsidiaries). A. Capital expenditures made during fiscal year to date: $ --------------------- B. Maximum permitted capital expenditures: $ --------------------- C. Excess (deficient) for covenant compliance (Line III.B - III.A): $ ---------------------
C - 3 Form of Compliance Certificate EXHIBIT D ASSIGNMENT AND ASSUMPTION This ASSIGNMENT AND ASSUMPTION (this "Assignment and Assumption") is ------------------------- dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] -------- (the "Assignee"). Capitalized terms used but not defined herein shall have the -------- meanings given to them in the Loan Agreement identified below (the "Loan ---- Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee. - --------- The Standard Terms and Conditions set forth in Annex 1 attached hereto are ------- hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Loan Agreement, as of the Effective Date inserted by the Agent as contemplated below, the interest in and to all of the Assignor's rights and obligations under the Loan Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignor's outstanding rights and obligations under the respective facilities identified below (including, to the extent permitted to be assigned under applicable law, all claims (including, without limitation, contract claims, tort claims, malpractice claims and all other claims at law or in equity, including claims under any law governing the purchase and sale of securities or governing indentures pursuant to which securities are issued), suits, causes of action and any other right of the Assignor against any other Person) (the "Assigned Interest"). Such sale and ----------------- assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor. 1. Assignor: ______________________________ 2. Assignee: ______________________________ [and is an Affiliate/Approved Fund of [identify Lender] 3. Borrower(s): ______________________________ 4. Agent: ______________________, as the administrative agent under the Loan Agreement 5. Loan Agreement: The Loan Agreement, dated as of March ___, 2002, among Fisher Media Services Company, the Lenders parties thereto, and Bank of America, N.A., as Agent D - 1 Form of Assignment and Assumption 6. Assigned Interest:
- ------------------------------------------------------------------------------------------ Aggregate Amount of Amount of Percentage Commitment/Loans Commitment/Loans Assigned of Facility Assigned for all Lenders Assigned Commitment/Loans ----------------- --------------- -------- ----------------- - ------------------------------------------------------------------------------------------ _____________ $________________ $________________ _______________% - ------------------------------------------------------------------------------------------ _____________ $________________ $________________ _______________% - ------------------------------------------------------------------------------------------ _____________ $________________ $________________ _______________% - ------------------------------------------------------------------------------------------
7. Trade Date: __________________ Effective Date: __________________, 20__ [TO BE INSERTED BY THE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] The terms set forth in this Assignment and Assumption are hereby agreed to: ASSIGNOR [NAME OF ASSIGNOR] By: ____________________________ Name: __________________________ Title: _________________________ ASSIGNEE [NAME OF ASSIGNEE] By: ____________________________ Name: __________________________ Title: _________________________ D - 2 Form of Assignment and Assumption Consented to and Accepted: BANK OF AMERICA, N.A., as Agent By: _________________________________________________ Name: ______________________________________________ Title: _____________________________________________ Consented: FISHER MEDIA SERVICES COMPANY By: ------------------------------------------------ Name: ---------------------------------------------- Title: --------------------------------------------- D - 3 Form of Assignment and Assumption ANNEX 1 TO ASSIGNMENT AND ASSUMPTION Loan Agreement dated as of March 21, 2002 among Fisher Media Services Company, the Lenders a party thereto, and Bank of America, N.A., as Agent. STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. ------------------------------ 1.1. Assignor. The Assignor (a) represents and warrants that -------- (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Loan Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document. 1.2. Assignee. The Assignee (a) represents and warrants that -------- (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Loan Agreement, (ii) it meets all requirements of an Eligible Assignee under the Loan Agreement (subject to receipt of such consents as may be required under the Loan Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Loan Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Loan Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as ------------ applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Agent or any other Lender, and (v) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Loan Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. D - 4 Form of Assignment and Assumption 1.3 Assignee's Address for Notices, etc. Attached hereto as ----------------------------------- Schedule 1 is all contact information, address, account and other administrative - ---------- information relating to the Assignee. 2. Payments. From and after the Effective Date, the Agent shall make -------- all payments in respect of the Assigned interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to or on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 3. General Provisions. This Assignment and Assumption shall be binding ------------------ upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of Washington. D - 5 Form of Assignment and Assumption SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION ADMINISTRATIVE DETAILS (Assignee to list names of credit contacts, addresses, phone and facsimile numbers, electronic mail addresses and account and payment information) D - 6 Form of Assignment and Assumption EXHIBIT E-1 FORM OF GUARANTY (Fisher Communications) E-1 - 1 Form of Guaranty EXHIBIT E-2 FORM OF GUARANTY (other Guarantors) E-2 - 1 Form of Guaranty EXHIBIT F FORM OF DEED OF TRUST F - 1 Form of Deed of Trust EXHIBIT G FORM OF CERTIFICATE AND INDEMNITY AGREEMENT F - 1 Form of Deed of Trust EXHIBIT H FORM OF SUBORDINATION AGREEMENT H - 1 Form of Subordination Agreement EXHIBIT I FORM OF OPINION OF COUNSEL I - 1 Form of Opinion of Counsel EX-21.1 10 dex211.txt FISHER COMMUNICATIONS SUBSIDIARIES Exhibit No. 21.1 Fisher Communications, Inc. Subsidiaries
Subsidiary Jurisdiction in Which Organized Fisher Broadcasting Company Washington Fisher Mills Inc. Washington Fisher Properties Inc. Washington Fisher Media Services Company Washington Fisher Pathways, Inc. /(1)/ Washington Fisher Radio Regional Group Inc. /(2)/ Washington Valley Milling Company /(3)/ Washington Fisher Broadcasting - Georgia, L.L.C. /(2)/ Delaware Fisher Broadcasting - Seattle TV, L.L.C. /(2)/ Delaware Fisher Broadcasting - Seattle Radio, L.L.C. /(2)/ Delaware Fisher Broadcasting - Portland TV, L.L.C. /(2)/ Delaware Fisher Broadcasting - Portland Radio, L.L.C. /(2)/ Delaware Fisher Broadcasting - Oregon TV, L.L.C. /(2)/ Delaware Fisher Broadcasting - Washington TV, L.L.C. /(2)/ Delaware Fisher Broadcasting - Idaho TV, L.L.C. /(2)/ Delaware Fisher Broadcasting - S.E. Idaho TV, L.L.C. /(2)/ Delaware Fisher Entertainment, L.L.C. /(1)/ Delaware
(1) Wholly owned by Fisher Media Services Company (2) Wholly owned by Fisher Broadcasting Company (3) Wholly owned by Fisher Mills Inc. EX-23.1 11 dex231.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.1 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-32103) of Fisher Communications, Inc. (formerly Fisher Companies Inc.) of our report dated March21, 2002 appearing in this Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Seattle, Washington March 27, 2002 EX-24.1 12 dex241.txt POWER OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY The undersigned, ______________________________, hereby authorizes and appoints William W. Krippaehne, Jr., Warren J. Spector and David D. Hillard, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his true and lawful attorney-in-fact and agent to act in his name, place and stead and to execute in the name and on behalf of him, individually and in each capacity stated below, and to file, the Annual Report of Fisher Communications, Inc. on Form 10-K for the fiscal year ended December 31, 2001 (the "Annual Report"), any and all amendments to the Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Date: March __, 2002 ----------------------------------------- Signature -----END PRIVACY-ENHANCED MESSAGE-----