-----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, TkO7z76N7v6oW990bZITuF3ttge3j9jrO04zL+ZX6gb4tCz8kHsa1c3n8L3yetFW RNmxrO4KXSDt5rOkvMUBqQ== 0000950130-97-001419.txt : 19970401 0000950130-97-001419.hdr.sgml : 19970401 ACCESSION NUMBER: 0000950130-97-001419 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: YOUNG BROADCASTING INC /DE/ CENTRAL INDEX KEY: 0000929144 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 133339681 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-25042 FILM NUMBER: 97569758 BUSINESS ADDRESS: STREET 1: 599 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127547070 MAIL ADDRESS: STREET 1: 599 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10022 10-K405 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-K --------------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NUMBER: 0-25042 YOUNG BROADCASTING INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3339681 (State or other jurisdiction of (I.R.S. employer identification no.) incorporation or organization) 599 LEXINGTON AVENUE 10022 NEW YORK, NEW YORK (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (212) 754-7070 ____________________ Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: CLASS A COMMON STOCK, $.001 PAR VALUE (Title of class) ____________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) The aggregate market value of the voting stock of registrant held by nonaffiliates of the registrant as of March 3, 1997 was approximately $361,488,515. ____________________ Number of shares of Common Stock outstanding as of March 3, 1997: 12,241,608 shares of Class A Common Stock and 2,017,230 shares of Class B Common Stock. ____________________ DOCUMENTS INCORPORATED BY REFERENCE LOCATION IN FORM 10-K DOCUMENT IN WHICH INCORPORATED -------- --------------------- Registrant's Proxy Statement relating to Part III the 1997 Annual Meeting of Stockholders ================================================================================ YOUNG BROADCASTING INC. FORM 10-K TABLE OF CONTENTS Page ---- PART I Item 1. Business................................................. 1 Item 2. Properties............................................... 31 Item 3. Legal Proceedings........................................ 33 Item 4. Submission of Matters to a Vote of Security Holders...................................... 34 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......................... 36 Item 6. Selected Financial Data.................................. 37 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................ 39 Item 8. Financial Statements and Supplementary Data.............. 49 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................... 70 PART III Item 10. Directors and Executive Officers of the Registrant........................................ 70 Item 11. Executive Compensation................................... 70 Item 12. Security Ownership of Certain Beneficial Owners and Management......................... 70 Item 13. Certain Relationships and Related Transactions............................................. 70 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................... 70 SIGNATURES ......................................................... 75 -i- FORWARD-LOOKING STATEMENTS THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT, CONCERNING, AMONG OTHER THINGS, INCREASES IN NET REVENUES AND BROADCAST CASH FLOW (AS DEFINED) AND REDUCTIONS IN OPERATING EXPENSES, INVOLVE RISKS AND UNCERTAINTIES, AND ARE SUBJECT TO CHANGE BASED ON VARIOUS IMPORTANT FACTORS, INCLUDING THE IMPACT OF CHANGES IN NATIONAL AND REGIONAL ECONOMIES, SUCCESSFUL INTEGRATION OF ACQUIRED TELEVISION STATIONS (INCLUDING ACHIEVEMENT OF SYNERGIES AND COST REDUCTIONS), PRICING FLUCTUATIONS IN LOCAL AND NATIONAL ADVERTISING AND VOLATILITY IN PROGRAMMING COSTS. PART I ITEM 1. BUSINESS. All market rank, rank in market, station audience rating and share, and television household data in this report are from the Nielsen Station Index Viewers and Profile dated February 1997, as prepared by A.C. Nielsen Company ("Nielsen"). Nielsen data provided herein refers solely to the United States television markets. As used herein, the "Company" means Young Broadcasting Inc. and, where the context requires, its subsidiaries (the "Subsidiaries"). GENERAL The Company owns and operates twelve television stations in geographically diverse markets. Six of the stations are affiliated with American Broadcasting Companies, Inc. ("ABC"), four are affiliated with CBS Inc. ("CBS"), one is affiliated with National Broadcasting Company, Inc. ("NBC"), and one is an independent station. Each of the Company's stations is owned and operated by a direct or indirect Subsidiary. The Company is presently the seventh largest ABC network affiliate group in terms of households reached and owns more ABC stations than any single operator other than ABC. The Company's sole independent television station, KCAL, Los Angeles, California ("KCAL"), is the only independent VHF television station operating in the Los Angeles market, which is ranked as the second-largest television market in terms of population and the largest in terms of estimated television revenue. The Company was founded in 1986 by Vincent Young and his father, Adam Young. Vincent Young, the Company's Chairman, has over 25 years of experience in the television broadcast industry, and Adam Young has over 50 years of experience in the industry. Ronald Kwasnick, the Company's President, has over 25 years of experience in the industry. The Company is a Delaware corporation that was formed in 1986. The Company's principal offices are located at 599 Lexington Avenue, New York, New York 10022, and its telephone number is (212) 754-7070. 1 RECENT DEVELOPMENTS KCAL Acquisition. On November 22, 1996, the Company acquired (the "KCAL Acquisition") the assets of KCAL from KCAL Broadcasting, Inc., a subsidiary of The Walt Disney Company ("Disney"), for $368.0 million, plus approximately $19.5 million for net working capital included as part of the purchased assets. For the twelve months ended December 31, 1996, KCAL generated aggregate net revenues of approximately $118.7 million and broadcast cash flow of approximately $19.7 million, resulting in a broadcast cash flow margin of approximately 16.6%. Based upon its review of current operating budgets and expenses and 1995 operating results of KCAL, the Company has identified, on a line item basis for the twelve months ended December 31, 1996, annualized expense reductions of approximately $21.9 million for personnel and other costs and $5.7 million of net programming cost savings associated with seven sitcom programs, the liabilities for which were not assumed by the Company in connection with the KCAL Acquisition. The Company has also identified other areas for improvements consistent with its operating strategy which are expected to enhance the operating performance of KCAL and result in further increases in broadcast cash flow margins. See "Forward--Looking Statements." For the year ended December 31, 1996, after giving pro forma effect to the KCAL Acquisition and to the Quad Cities and KELO Acquisitions (as hereinafter defined), including annualized net expense reductions, as if such transactions had occurred on January 1, 1996, the Company would have had net revenues and broadcast cash flow of $261.5 million and $124.8 million, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of "broadcast cash flow." 1996 Public Offering and ABC Repurchase. On October 4, 1996, the Company and selling stockholders of the Company completed a public offering (the "Offering") of 7,361,398 shares of the Company's Class A Common Stock, generating proceeds to the Company of approximately $162.0 million (net of underwriting discounts and commissions and the expenses of the Offering). Concurrently with the closing of the Offering, the Company repurchased (the "ABC Repurchase") from Capital Cities/ABC, Inc., a subsidiary of Disney, 1,500,000 shares of the Company's non-voting Class C Common Stock and warrants of the Company to purchase an additional 750,000 shares of such Common Stock for an aggregate cash purchase price of approximately $54.8 million. See "Certain Relationships and Related Transactions." In addition, the Company used $20.0 million of such proceeds to repay in full its then outstanding indebtedness, including interest, under its Senior Credit Facility (as defined below). Amended and Restated Senior Credit Facility. To enable the Company to finance the KCAL Acquisition, on November 15, 1996, the Company amended and restated its then existing $200.0 million senior credit facility to provide for a $500.0 million senior credit facility (the "Senior Credit Facility"). See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." The Company used the remaining net proceeds of the Offering, approximately $305.0 million of borrowings under the Senior Credit Facility and $6.0 million of its existing cash balances to finance the KCAL Acquisition and to pay approximately $10.7 million of related fees and expenses. KELO Acquisition. On May 31, 1996, the Company acquired (the "KELO Acquisition") from a subsidiary of Midcontinent Media, Inc. for $50.0 million all of the assets of television station KELO 2 ("KELO"). KELO is the CBS affiliate in Sioux Falls, South Dakota and Rapid City, South Dakota. The Company also purchased approximately $2.0 million of accounts receivable at a 3% discount. For the twelve months ended December 31, 1996, KELO generated aggregate net revenues of approximately $11.9 million and broadcast cash flow of approximately $5.7 million, resulting in a broadcast cash flow margin of 47.9%. Based upon its review of current operating budgets and 1995 operating results for KELO, the Company identified, on a line item basis, approximately $1.4 million of annualized expense reductions that the Company is implementing at KELO. See "Forward-Looking Statements." Such reductions are in the area of personnel and benefits savings, programming costs and purchased services. Quad Cities Acquisition. On April 15, 1996, the Company acquired (the "Quad Cities Acquisition") from Broad Street Television, L.P. for $55.0 million all of the assets of television station KWQC (Quad Cities), an NBC network affiliate (the "Quad Cities Station"). The acquired assets included approximately $2.1 million of accounts receivable, which were purchased at a 5% discount. Upon consummation of the Quad Cities Acquisition, the seller deposited approximately $2.0 million in escrow for the purpose of securing the Company's rights to indemnification from the seller. For the twelve months ended December 31, 1996, the Quad Cities Station generated aggregate net revenues and broadcast cash flow of approximately $13.6 million and $6.9 million, respectively, resulting in a broadcast cash flow margin of 50.7%. Based upon its review of current operating budgets and 1995 operating results for the Quad Cities Station, the Company has identified, on a line item basis, approximately $1.3 million of annualized expense reductions that the Company is implementing at the Quad Cities Station. See "Forward-Looking Statements." Such reductions are in the area of personnel and benefit savings, programming costs and purchased services. Stock Repurchase. On December 15, 1995, the Company agreed to repurchase 423,259 shares of the Company's Common Stock from J.P. Morgan Capital Corp., an affiliate of J.P. Morgan Securities Inc., for approximately $11.1 million. The Company repurchased 26,625 of such shares in December 1995 and repurchased the balance in January 1996. January 1996 Notes Offering. On January 16, 1996, the Company completed the offering (the "January 1996 Notes Offering") of $125.0 million principal amount of its 9% Senior Subordinated Notes due 2006. The Company used approximately $50.0 million of the net proceeds of the January 1996 Notes Offering (approximately $121.9 million) to repay all of its then outstanding indebtedness, including accrued interest, under the Senior Credit Facility. Of the remaining approximately $71.9 million of net proceeds, the Company used approximately $56.0 million to finance the Quad Cities Acquisition, and used the remaining net proceeds and borrowings under the Senior Credit Facility to finance the KELO Acquisition. OPERATING STRATEGY The Company continually seeks to increase its revenues and broadcast cash flow. The Company's operating strategy focuses on increasing the cash flow of its stations through advertising revenue growth and strict control of programming and operating costs. The components of this strategy include the following: 3 Targeted Marketing. The Company seeks to increase its revenues and broadcast cash flow by expanding existing relationships with local and national advertisers and attracting new advertisers through targeted marketing techniques and carefully tailored programming. The Company works closely with advertisers to develop campaigns that match specifically targeted audience segments with the advertisers' overall marketing strategies. With this information, the Company regularly refines its programming mix among network, syndicated and locally-produced shows in a focused effort to attract audiences with demographic characteristics desirable to advertisers. The Company's success in increasing local advertising revenues is also attributable, in part, to the upgrading of its local sales staff, performance-based compensation arrangements and the implementation of systems of performance accountability. Each station also benefits from the ongoing exchange of ideas and experiences with the other stations. As a result of this marketing effort, during the year ended December 31, 1996, the Company's stations recorded new business sales of approximately $16.9 million. The Company's stations utilize a variety of marketing techniques to increase advertising revenues, including the following: . Vendor Marketing. The Company's "vendor marketing" program has experienced a great deal of success in the Company's markets. Under this program, a station will contact the vendors of a particular store chain and arrange for the vendors to purchase advertising for the store chain in exchange for the store's commitment to purchase additional products from the vendors. The result is that both the vendors' products and the store chain are advertised, with the vendors collectively bearing the cost of the advertisement. . Live Remotes. Stations obtain premium advertising dollars by utilizing live remotes on location at the offices or facilities of an advertiser. The station will use its own staff and broadcasting equipment and, as a result, the expense to the station is relatively low. Live advertisements are broadcast continually over the course of a period of the day and tend to show immediate results with viewers being attracted to the live television event taking place within their community. . Research. Each station designates personnel to research the amount of advertising dollars expended in other media (such as radio, newspapers and magazines) by advertisers within its market. The station will then target individual advertisers seeking the same demographic groups sought by the station for particular dayparts and will illustrate to the advertisers the advantages of television advertising over other media which do not target specific demographic groups. An important element in determining advertising rates is the station's rating and share among a particular demographic group which the advertiser may be targeting. The Company believes that its success is attributable to its ability to reach desirable demographic groups with the programs it broadcasts. Strong Local Presence. Each station seeks to achieve a distinct local identity principally through the quality of its local news programming and by targeting specific audience groups with special programs and marketing events. Each station's local news franchise is the foundation of the Company's strategy to strengthen audience loyalty and increase revenues and broadcast cash flow for each station. Strong local news generates high viewership and results in higher ratings both for programs preceding and following the news. 4 Strong local news product helps differentiate local broadcast stations from cable system competitors, which generally do not provide this service. The cost of producing local news programming generally is lower than other sources of programming and the amount of local news programming can be increased for very modest incremental increases in cost. Moreover, such programming can be increased or decreased on very short notice, providing the Company with greater programming flexibility. In each of its markets, the Company develops additional information-oriented programming designed to expand the Company's hours of commercially valuable local news and other news programming with relatively small increases in operating expenses. In addition to local news, each station utilizes special programming and marketing events, such as prime time programming of local interest or sponsored community events, to strengthen community relations and increase advertising revenues. The Company places a special emphasis on developing and training its local sales staff to promote involvement in community affairs and stimulate the growth of local advertising sales. Programming. The Company continually reviews its existing programming inventory and seeks to purchase the most profitable and cost-effective syndicated programs available for each time period. In developing its selection of syndicated programming, management balances the cost of available syndicated programs, their potential to increase advertising revenue and the risk of reduced popularity during the term of the program contract. The Company seeks to purchase only those programs with contractual periods that permit programming flexibility and which complement a station's overall programming strategy and counter competitive programming. Programs that can perform successfully in more than one time period are more attractive due to the long lead time and multi-year commitments inherent in program purchasing. Cost Controls. Each station emphasizes strict control of its programming and operating costs as an essential factor in increasing broadcast cash flow. The Company relies primarily on its in-house production capabilities and seeks to minimize its use of outside firms and consultants. The Company's size benefits each station in negotiating favorable terms with programming suppliers and other vendors. In addition, each station reduces its corporate overhead costs by utilizing the group benefits provided by the Company for all of the stations, such as insurance and other employee group benefit plans. Through its strategic planning and annual budget processes, the Company continually seeks to identify and implement cost savings opportunities at each of its stations. The Company closely monitors the expenses incurred by each of the stations and continually reviews the performance and productivity of station personnel. The Company has been successful in controlling its costs without sacrificing revenues through efficient use of its available resources. ACQUISITION STRATEGY The Company believes that its ability to manage costs effectively while enhancing the quality provided to station viewers gives the Company an important advantage in acquiring and operating new stations. In assessing acquisitions, the Company targets stations for which it has identified line item expense reductions that can be implemented upon acquisition. The Company emphasizes strict controls over operating expenses as it expands a station's revenue base with the goal of improving a station's broadcast cash flow. Typical cost savings arise from reducing staffing levels, substituting more cost-effective employee benefit programs, reducing dependence on outside consultants and research firms and 5 reducing travel and other non-essential expenses. The Company also develops specific proposals for revenue enhancement utilizing management's significant experience in local and national advertising. The Company plans to pursue favorable acquisition opportunities as they become available. The Company is regularly presented with opportunities to acquire television stations which it evaluates on the basis of its acquisition strategy. The Company does not presently have any agreements to acquire or sell any television stations. As of December 31, 1996, the Company had the ability, subject to certain limitations, to borrow up to $183.0 million under the Senior Credit Facility for the purpose of financing acquisitions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." THE STATIONS The Company's stations are geographically diverse, which minimizes the impact of regional economic downturns. One station is located in the west region (KCAL-Los Angeles, California), six stations are located in the midwest region (WBAY-Green Bay, Wisconsin, KWQC-Quad Cities, KELO-Sioux Falls, South Dakota, WLNS-Lansing, Michigan, WKBT-La Crosse-Eau Claire, Wisconsin, and WTVO-Rockford, Illinois), four stations are in the southeast region (WKRN-Nashville, Tennessee, WRIC-Richmond, Virginia, WATE-Knoxville, Tennessee, and KLFY-Lafayette, Louisiana), and one station is in the northeast region (WTEN-Albany, New York). Six of the Company's twelve stations are affiliated with ABC, four are affiliated with CBS and one is affiliated with NBC. The Company believes that this network diversity reduces the potential impact of a ratings decline experienced by a particular network. KCAL is the only independent VHF television station operating in the Los Angeles market. The following table sets forth general information for each of the Company's stations:
Commercial Station Market Television Network Stations Rank In In-Market Year Rank(1) Households(2) Channel Affiliation in DMA(3) Market(4) Share(5) Acquired ------- ------------- ------- ----------- ---------- --------- --------- -------- KCAL (Los Angeles, CA) 2 4,942,440 9 IND 13 6 7 1996 WKRN (Nashville, TN) 33 782,940 2 ABC 6 3 20 1989 WTEN (Albany, NY) 52 506,850 10(6) ABC 4 3 28 1989 WRIC (Richmond, VA) 59 460,890 8 ABC 5 3 29 1994 WATE (Knoxville, TN) 60 456,260 6 ABC 4 2 28 1994 WBAY (Green Bay, WI) 70 376,380 2 ABC 5 2 31 1994 KWQC (Quad Cities) 88 303,810 6 NBC 4 1 43 1996 WLNS (Lansing, MI) 106 231,060 6 CBS 4 1 43 1986 KELO (Sioux Falls, SD) 107 229,310 11(7) CBS 4 1 52 1996 KLFY (Lafayette, LA) 121 203,880 10 CBS 4 1 58 1988 WKBT (La Crosse- Eau Claire, WI) 130 177,490 8 CBS 4 2 26 1986 WTVO (Rockford, IL) 135 166,090 17 ABC 4 3 28 1988
- ------------------------- (1) Refers to the size of the television market or Designated Market Area ("DMA") as used by Nielsen. (2) Refers to the number of television households in the DMA as estimated by Nielsen. 6 (3) Represents the number of television stations ("reportable stations") designated by Nielsen as "local" to the DMA, excluding public television stations and stations which do not meet minimum Nielsen reporting standards (weekly cumulative audience of less than 2.5%) for reporting in the Sunday through Saturday, 7:00 a.m. to 1:00 a.m. period ("sign-on to sign-off"). Does not include national cable channels. The number of reportable stations may change for each reporting period. "Weekly cumulative audience" measures the total number of different households tuned to a station at a particular time during the week. "Share" references used elsewhere herein measure the total daily households tuned to a station at a particular time during the week. (4) Station's rank relative to other reportable stations, based upon the DMA rating as reported by Nielsen sign-on to sign-off during February 1997. (5) Represents an estimate of the share of DMA households viewing television received by a local commercial station in comparison to other local commercial stations in the market ("in-market share"), as measured sign-on to sign-off. (6) WTEN has a satellite station, WCDC (Adams, Massachusetts), Channel 19, operating under a separate license from the FCC. (7) KELO has three satellite stations, KDLO (Florence, South Dakota), Channel 3, KPLO (Reliance, South Dakota), Channel 6, and KCLO (Rapid City, South Dakota), Channel 15, each of which operates under a separate license from the FCC. KCLO operates in a separate DMA from that of KELO and the other two satellites, wherein it ranks 173. The following is a description of each of the Company's stations: KCAL, Los Angeles, California. The Company acquired KCAL from a subsidiary of Disney on November 22, 1996. KCAL has the distinction of being one of the first commercial stations in the country. KCAL's first broadcast was on December 23, 1931. It is now the only independent VHF station in the Los Angeles market. Los Angeles is the second largest DMA with an estimated 4,942,440 television households and the country's largest television market in terms of estimated advertising dollars spent on the medium. There are thirteen reportable stations in the DMA. For the February 1997 ratings period, KCAL was ranked sixth after the local ABC, NBC, CBS, WB and Fox affiliates, with an overall sign-on to sign-off in-market share of 7%. KCAL ranked fifth in in-market revenue share in the fourth quarter of 1996. KCAL is a prominent news provider in the market, presenting 27 hours of such programming each week and up to 25 special one hour reports each year. In 1995, the station won the prestigious Edward R. Murrow Award as the "Best Local Newscast in the Country." In 1996, KCAL was honored with nine Golden Mikes, including Best 30 Minute Newscast and Best Daytime Newscast, ten Emmys, five Radio Television News Directors awards, ten New York Film Festival Awards, 17 Associated Press Awards and 31 Los Angeles Press Club Awards. Since 1991, KCAL has been the most honored local station in Los Angeles for news. KCAL is also the broadcast station of choice for premier local sports franchises with over 130 major televised sporting events each year. KCAL currently has long term agreements with the Los Angeles Lakers (4 years remaining), Anaheim Angels (5 years remaining), Mighty Ducks of Anaheim (2 years remaining), Los Angeles Clippers (5 years remaining) and Los Angeles Kings (3 years remaining). The station also has agreements to broadcast PAC 10 Football and certain boxing events. These contracts enable KCAL to offer advertisers year-round sports packages aimed at very attractive audience categories. As the largest market in the country's largest state, Los Angeles enjoys a diverse industry makeup ranging from entertainment and manufacturing to international trade and financial services. In addition to Los Angeles County, KCAL reaches Orange, Santa Barbara and other counties in Southern California. Orange County alone has ranked fifth, nationally, in both population and population growth over the last five years. According to Investing in Television Market Report '96 (4th Edition), published by BIA Publications, Inc. (the "BIA Guide"), the average household income in the Los Angeles market in 1994 was $52,378, with an effective buying income projected to grow at an annual rate of 2.5% through 1999. Historically, there has been a close correlation between retail sales and expenditures on broadcast 7 television advertising in a given market. According to the BIA Guide, retail sales growth for the Los Angeles market is projected to average 0.5% annually through 1999. WKRN, Nashville, Tennessee. WKRN, acquired by the Company from Knight-Ridder Broadcasting, Inc. in June 1989, began operations in 1953 and is affiliated with ABC. The Nashville market is the 33rd largest DMA, with an estimated 782,940 television households. There are six reportable stations in the DMA. For the February 1997 ratings period, WKRN was rated third after the CBS and NBC affiliates, with an overall sign-on to sign-off in-market share of 20%. The station's syndicated programs include The Cosby Show, Roseanne, Coach, Full House, Jenny Jones, Entertainment Tonight, Live With Regis and Kathie Lee, Family Matters, Step by Step, Extra and Rosie. The quality of the station's newscasts has been regularly recognized by its broadcasting peers, highlighted by its winning of the prestigious Peabody Award for investigative journalism. During the last three years, the station won a combined 33 regional Emmy Awards. The Tennessee Associated Press awarded the station first place for Investigative, Feature and Spot News reporting. The station also has won a number of regional awards from the Radio and Television News Directors Association, including 1994 awards for Best Feature, Best News Operation and Best Investigative Reporting. Nashville is the capital of Tennessee and the center of local, state and federal government with three of its five largest employers being government related. Prominent corporations located in the area include Bridgestone-Firestone, Nissan, Saturn, Columbia/HCA, Shoney's, Service Merchandise, First American National Bank, Northern Telecom, Aladdin Industries and Willis Corroon plc. Nashville is the home of several universities, including Vanderbilt and Tennessee State. According to the BIA Guide, the average household income in the Nashville market in 1994 was $41,613, with effective buying income projected to grow at an annual rate of 5.6% through 1999. Historically, there has been a close correlation between retail sales and expenditures on broadcast television advertising in a given market. According to the BIA Guide, retail sales growth for the Nashville market is projected to average 5.8% annually through 1999. WKRN is a prime example of the Company's strategy to achieve a strong local presence. Its community activities range from raising food for the hungry of Middle Tennessee to focusing on the issues and concerns of children through its "Kids 2 Kids" campaign and "Schools Now" half million dollar fund raising effort. ABC affiliates in Bowling Green, Kentucky and Jackson, Tennessee have overlapping signals with WKRN on the north and west edges of the DMA, resulting in some loss of viewers in those areas. The Company believes this overlap is responsible for the lower station share compared to the NBC and CBS affiliates. WTEN, Albany, New York. WTEN, acquired by the Company from Knight-Ridder Broadcasting, Inc. in October 1989, began operations in 1953 and is affiliated with ABC. WTEN added a satellite station, WCDC-TV Channel 19, in Adams, Massachusetts in 1963 to serve more adequately the eastern edge of the market. WCDC-TV was acquired concurrently with WTEN. (All references to WTEN include WCDC-TV.) The Albany market (which includes Schenectady and Troy) is the 52nd largest DMA, with an estimated 506,850 television households. There are four reportable stations in the DMA, three of which broadcast in the VHF spectrum. During the February 1997 ratings period, WTEN was third in the ratings, with a sign-on to sign-off in-market share of 28%, compared to 32% for WNYT, the NBC affiliate, and 8 32% for WRGB, the CBS affiliate. The station's syndicated programs include Wheel of Fortune, Jeopardy, Day & Date, Coach and Rosie. WTEN has won numerous awards in recent years for both local news and public affairs programming. Albany is the capital of New York. The largest employers are the New York State government, the State University of New York and the General Electric Company. Other prominent corporations located in the area include Lockheed Martin, Fleet Financial Group, State Farm Insurance, Metropolitan Life Insurance and Quad Graphics. These employers, which are dependent upon a well-educated and skilled labor force to remain competitive in their industries, are able to draw upon the nation's largest concentration per capita of professionals with doctoral and post-doctoral degrees. According to the BIA Guide, the average household income in the Albany market in 1994 was $45,705, with effective buying income projected to grow at an annual rate of 3.5% through 1999. Retail sales growth in this market is also projected by the BIA Guide to average 3.6% annually during the same period. The station has focused on its local newscasts, selective syndicated program acquisition and client marketing programs to maximize revenues. Selective use of client incentive programs has generated over $1 million of incremental revenue in the past 14 months. WRIC, Richmond, Virginia. WRIC, acquired by the Company in November 1994 from Nationwide, began operations in 1955 and is affiliated with ABC. The Richmond market (which also includes Petersburg, Virginia) is the 59th largest DMA, with an estimated 460,890 television households. There are five reportable commercial television stations in the DMA, three of which are VHF stations. For the February 1997 ratings period, WRIC was in third place in the ratings, two points behind WTVR and WWBT, the CBS and NBC affiliates. In actual audience share, WRIC was slightly behind WTVR and WWBT, with a sign-on to sign-off in-market share of 29%, compared to 31% for WTVR and WWBT. The station's syndicated programming includes Wheel of Fortune, Jeopardy, Montel Williams, Ricki Lake and Jerry Springer. WRIC has won numerous awards in recent years from state journalism organizations for its news operations. Richmond is the capital of Virginia and home to numerous colleges and universities, including the University of Richmond, Virginia Commonwealth University (VCU) and the VCU Medical College of Virginia. Philip Morris is the largest employer in the market, employing approximately 11,000 area residents. According to the BIA Guide, the average household income in the Richmond market in 1994 was $43,317, with effective buying income projected to grow at an annual rate of 3.7% through 1999. Retail sales growth is also projected by the BIA Guide to average 5.6% annually during the same period. WATE, Knoxville, Tennessee. WATE, also acquired by the Company in November 1994 from Nationwide, began operations in 1953 and is also affiliated with ABC. The Knoxville, Tennessee market is the 60th largest DMA, with an estimated 456,260 television households. There are four reportable stations in the DMA, three of which are VHF stations. During the February 1997 ratings period, WATE ranked second, with a sign-on to sign-off in-market share of 28%. The station's syndicated programming includes Home Improvement, Jenny Jones, Coach, Matlock and Rosie. WATE has won numerous awards in recent years from state journalism organizations for its news operations. It also recently received its second Emmy Award for sports programming. According to the BIA Guide, the average household income in the Knoxville market in 1994 was $37,005 with effective buying income projected to grow at an annual rate of 5.2% through 1999. Retail sales growth is also projected by the BIA Guide to average 5.2% annually during the same period. 9 WBAY, Green Bay, Wisconsin. WBAY, the third station acquired by the Company in November 1994 from Nationwide, began operations in 1953 and is also affiliated with ABC. The Green Bay market (which also includes Appleton, Wisconsin) is the 70th largest DMA, with an estimated 376,380 television households. There are five reportable stations in the DMA, three of which are VHF stations. For the February 1997 ratings period, WBAY was second in the ratings behind WFRV, the CBS affiliate. In audience share, WFRV led WBAY in the May 1996 ratings period, with a sign-on to sign-off in-market share of 34%, compared to 31% for WBAY. The station's syndicated programming includes Home Improvement, Seinfeld, Roseanne, Inside Edition, Ricki Lake, Hard Copy and Jenny Jones. WBAY has won numerous awards in recent years from state journalism organizations for its news operations. According to the BIA Guide, the average household income in the Green Bay market in 1994 was $42,159, with effective buying income projected to grow at an annual rate of 4.6% through 1999. Retail sales growth is also projected by the BIA Guide to average 5.6% annually during the same period. KWQC, Quad Cities. The Company acquired KWQC from Broad Street Television, L.P. on April 15, 1996. The station began operations in 1949 and is affiliated with NBC. The Davenport market, referred to as the Quad Cities Market, is the 88th largest DMA serving an estimated 303,810 television households in eastern Iowa and western Illinois. There are four reportable stations in the DMA, three of which are VHF. During the February 1997 ratings period, KWQC retained its number one position in the market with a sign-on to sign-off in-market share of 43%. The station has retained the number one position for over twelve years and continues to expand news programming and increase market share. The station's syndicated programming includes Oprah, Jeopardy, Wheel of Fortune, Montel Williams, American Journal and Cheers. KWQC places a strong emphasis on local news and community related events and broadcasts. The station annually produces several news specials in addition to providing 21 hours of local news and information programming per week. KWQC is involved in a variety of community events including Race For The Cure, Toys For Tots, Festival of Trees, The Student Hunger Drive, the United Way Drive, Bix 7 Race and Women's Lifestyle Fair. John Deere Corporation and Eagle Country Markets are both headquartered in the Quad Cities. Other major employers include the Rock Island Arsenal, Alcoa, Trinity Medical Center, Oscar Mayer, J.I. Case and Modern Woodman. Riverboat gambling has brought three boats to the market that have increased the tourism business. The market has also experienced an increase in convention business. According to the BIA Guide, the average household income in the Quad Cities market in 1994 was $40,086, with effective buying income projected to grow at an annual rate of 3.0% through 1999. Retail sales growth is also projected by the BIA Guide to average 4.8% annually during the same period. WLNS, Lansing, Michigan. WLNS, acquired by the Company from Backe Communications, Inc. in September 1986, began operations in 1950 and is affiliated with CBS. The Lansing market is the 106th largest DMA, with an estimated 231,060 television households. WLNS is one of only two VHF network affiliates in the DMA. During the February 1997 ratings period, WLNS was the highest-rated station out of four reportable stations in its DMA, with a sign-on to sign-off in-market share of 43%. The station has consistently held the highest rating for several ratings periods. The station's syndicated programming includes Rosie, Entertainment Tonight, Hard Copy, The Maury Povich Show and Montel Williams. 10 The station attributes its success to the experience of its local sales staff, which focuses on developing strong relationships with local advertisers. WLNS is also recognized as the dominant news station in the Lansing market. The station consistently wins by wide margins against competitors in its noon and 6:00 p.m. newscasts. For the February 1997 ratings period, WLNS's newscasts finished ahead of its closest competitor by 28 share points at noon and 19 share points at 6:00 p.m. The station also won at 11:00 p.m. by 10 share points. WLNS launched the market's first 5:30 p.m. newscast in 1989, which has since developed a solid audience share and has consistently held the greatest share in its time period. The station recognizes local news programming as the key to its success and produces 18 to 20 special news programs each year, including live town hall meetings in prime time on community topics such as youth violence and political debates in major election years. The quality of the news broadcasts at WLNS has resulted in numerous state journalism and public service awards. The economy of Lansing is dominated by three employers, the State of Michigan, General Motor's Buick-Oldsmobile-Cadillac Division ("B.O.C.") and Michigan State University, giving Lansing an advantage over other Michigan cities whose economies rely more heavily on, and are more prone to the cyclical nature of, the domestic automobile industry. Lansing is the capital of Michigan and its various government agencies employ an aggregate of approximately 14,000 people. B.O.C. has approximately 17,000 employees. Michigan State University has over 12,000 employees with a student enrollment of over 42,000. Other significant industry sectors in the area are plastics, non-electrical machinery, fabricated metal products, food processing and printing. Companies represented in these groups include Owens-Brockway, John Henry Co. and Dart Container. According to the BIA Guide, the average household income in the Lansing market in 1994 was $46,143, with effective buying income projected to grow at an annual rate of 3.8% through 1999. Retail sales growth in this market is also projected by the BIA Guide to average 5.6% annually during the same period. KELO, Sioux Falls, South Dakota. On May 31, 1996, the Company acquired KELO from a subsidiary of Midcontinent Media, Inc. The station began operations in 1953 and is affiliated with CBS. KELO added satellite station KDLO, Channel 3, in Florence, South Dakota in 1955 to serve the northern South Dakota area, and added satellite station KPLO, Channel 6, in Reliance, South Dakota in 1957 to serve the central South Dakota area. In 1988, KCLO, Channel 15, then operating as a translator facility, was added as a satellite station of KELO in Rapid City, South Dakota. KELO fully serves two DMAs, as Rapid City is a separate contiguous DMA. (All references to KELO include KDLO and KPLO. The following information pertains only to the Sioux Falls DMA.) The Sioux Falls market is the 107th largest DMA serving an estimated 229,310 television households encompassing counties in Minnesota, Iowa and Nebraska, as well as 52 counties within South Dakota. There are four reportable stations in the DMA, three of which are VHF. During the February 1997 ratings period, KELO was first in the market with a sign-on to sign-off in-market share of 52%, significantly ahead of the ABC, NBC and FOX/UPN affiliates, who had 28%, 15% and 7%, respectively. KELO's newscast finished ahead of each of the competing stations for every weekday newscast time period. Recognizing the importance of local news, the station presents live newscasts five times daily, with notable ratings and sales success. The station's syndicated programming includes Entertainment Tonight, The Maury Povich Show, FX: The Series, Geraldo and Matlock. The largest employers in the market are Citibank and John Morrell. Sioux Falls is the largest city in South Dakota, with a population of 112,000. According to the BIA Guide, the average household income in the Sioux Falls market in 1994 was $42,726, with effective buying income projected to grow 11 at an annual rate of 4.9% through 1999. Retail sales growth is also projected by the BIA Guide to average 6.9% annually during the same period. KLFY, Lafayette, Louisiana. KLFY, acquired by the Company from Texoma Broadcasters, Inc. in May 1988, began operations in 1955 as the market's first television station and is affiliated with CBS. KLFY is one of only two network-affiliated VHF stations serving the Lafayette market. The third commercial station in the market is a Fox affiliate operating on a UHF channel and a fourth Station, KLAF, is a lower power station affiliated with the Warner Brothers Network. The market is dominated by KLFY and the local ABC affiliate. The signals from the NBC affiliates in Lake Charles, Baton Rouge and Alexandria, Louisiana are available to households in the DMA. Currently the NBC affiliate in Lake Charles is selling advertising in the Lafayette market with minimal success. The Lafayette market is the 121st largest DMA, with an estimated 203,880 television households. KLFY ranks first in the February 1997 ratings period with an overall sign-on to sign-off in-market share of 58%, and has ranked first in those viewership measurements consistently for prior ratings periods. KLFY leads its competition in audience share in 28 of 30 major Nielsen dayparts. KLFY is ranked number one during prime-time (7:00 p.m.-10:00 p.m., Monday-Saturday and 6:00 p.m.-10:00 p.m., Sunday), the most sought after advertiser demographic time period, with a sign-on to in-market share of 52%. The station's syndicated programs include The Maury Povich Show, Home Improvement, Cosby, Coach, Rosie, Maureen O'Boyle, Hercules and Zena. Historically, KLFY has placed a strong emphasis on local news and community-related broadcasts. Each weekday begins with a 90-minute live production of "Passe Partout," a family-oriented program offering early morning news, weather, sports and interviews on subjects relevant to local residents. For the February 1997 ratings period, this program received a 6:00 - 7:00 a.m. in-market share of 62%. The first 30 minutes of "Passe Partout" are broadcast in French for the large French-speaking Cajun population in the area; the balance is in English. KLFY also has won numerous awards in recent years from state journalism organizations, including the 1995 "Station of the Year" award from the Louisiana Broadcasters Association. KLFY has made community involvement an important part of its operations. The 12:00 noon news show is called "Meet Your Neighbor" and, in addition to an emphasis on local news reporting, is a platform for community service segments. In addition to ongoing commitments to blood drives, food and clothing drives, a big brother/big sister program and animal adoptions, the station has been the motivating force behind some unusual projects. "Wednesday's Child" is a nationally recognized weekly segment featuring a child in need of adoption, and the effort has had a significant success rate in placing children. The station has over the past ten years raised over a thousand tons of food for the hungry with its annual "Food for Families" all-day live remote from 17 locations in the DMA. It has an annual "Coats for Kids" campaign to clothe needy children and has raised over $7.5 million for the Muscular Dystrophy Association's ("MDA") annual telethon. For its efforts, the station has received awards from state and national service organizations, including the MDA's special recognition award and Media of the Year awards from the Louisiana Special Olympics and the Black Advisory Adoption Committee. According to the BIA Guide, the average household income in the Lafayette market in 1994 was $35,050, with effective buying income projected to grow at an annual rate of 4.8% through 1999. Retail sales growth in this market is also projected by the BIA Guide to average 6.9% annually during the same period. 12 WKBT, La Crosse, Wisconsin. WKBT, acquired (together with WLNS) by the Company from Backe Communications Inc. in September 1986, began operations in 1954 and is affiliated with CBS. Although 90 miles apart, the cities of La Crosse and Eau Claire are considered a single market by Nielsen, and WKBT's signal covers both cities, reaching an eleven-county area that includes two Minnesota counties and most of western Wisconsin. There are four reportable stations in the DMA, but WKBT is one of only two local VHF stations. The La Crosse-Eau Claire market is the 130th largest DMA, with an estimated 177,490 television households. The highest-rated local stations in the DMA are WKBT and WEAU, the NBC affiliate. For the February 1997 ratings period, WKBT had a sign-on to sign-off in-market share of 26%, which places WKBT second to WEAU, which had a 42% share. The station's syndicated programming includes Entertainment Tonight, Roseanne, Married with Children, The Cosby Show, Sally Jessy Raphael, Baywatch, The Simpsons and Fresh Prince of Bel-Air. In recent years, the station hired an award-winning local anchor team to host the station's news programs. The station's newscasts, collectively broadcast as NewsChannel 8, focuses on local coverage of news, weather and sports events. Over the past several years, WKBT has won awards for news coverage from state journalism organizations. Currently, WKBT is the only station in its market to provide closed-captioning of its local newscasts for its hearing impaired viewers. The station is also an active sponsor of many other local community events and programs, including Toys for Tots, Crimestoppers, Salvation Army Operation Food Basket, Red Cross Disaster Relief, Weatherschool and Friday's Child. WKBT regularly contributes public service announcements and hundreds of hours of volunteer labor to the community throughout the year. The economy in the La Crosse-Eau Claire region is centered on skilled industry, medical services, agriculture and education. Prominent corporations located in the area include The Trane Company, the area's largest employer with approximately 2,600 employees, Fleming Foods, G. Heileman Brewing Company and La Crosse Footwear. Lutheran Hospital, Franciscan Health Systems and Gunderson Clinic have made La Crosse a health care hub for the entire western Wisconsin region and, combined, employ approximately 4,400 area residents. Local educational institutions draw a large student base to the market and include branches of the University of Wisconsin in La Crosse and Eau Claire, as well as Viterbo College and Western Wisconsin Technical College. According to the BIA Guide, the average household income in the La Crosse-Eau Claire market in 1994 was $37,934, with effective buying income projected to grow at an annual rate of 4.2% through 1999. Retail sales growth in this market is also projected by the BIA Guide to average 5.4% annually during the same period. WTVO, Rockford, Illinois. WTVO, the ABC affiliate in Rockford, Illinois began operations in 1953 under the ownership of Winnebago Television Corporation. The Company purchased Winnebago Television Corporation in September 1988. WTVO switched its affiliation from NBC to ABC, effective as of August 14, 1995. The Rockford market is the 135th largest DMA, with an estimated 166,090 television households. There are four reportable stations in the DMA, of which one is a VHF station and the others, including WTVO, are UHF stations. In the February 1997 ratings period, WTVO was number three in the market, with a sign-on to sign-off in-market share of 28%, compared to 29% and 32% for the CBS and NBC affiliates, respectively. The stations's syndicated programs include Sally Jessy Raphael, Jenny Jones, 13 Rosie, Hard Copy, Entertainment Tonight and The Simpsons. The station produces local interest programs such as Spotlight 17 and Page 17. Each year, the Northern Illinois Council of Advertising recognizes the production creativity of local advertising agencies and television stations by awarding "Raddys." Since 1990, WTVO has been the recipient of 18 Raddy awards which span the categories of broadcast division, original footage, and promotional (news) campaign. WTVO has won more Raddys than any other station in the Rockford market. WTVO's DMA encompasses a five-county area of northern Illinois, northwest of Chicago. Rockford is the second largest city in Illinois. Over 1,000 manufacturing firms employ a total of over 50,000 persons in the Rockford area, specializing in machine tool, automotive, aerospace, and consumer product industries. Prominent manufacturers in the area include Sundstrand Corporation, the area's largest employer, Ingersoll Milling Machine Company and Chrysler Corporation's new Neon subcompact facility. UPS has constructed a new $60.0 million midwestern freight hub at Rockford, and Motorola has begun construction on a cellular phone plant in nearby Harvard, Illinois. According to the BIA Guide, the average household income in the Rockford market in 1994 was $45,671, with effective buying income projected to grow at an annual rate of 4.1% through 1999. Retail sales growth in this market is also projected by the BIA Guide to average 3.4% annually during the same period. INDUSTRY BACKGROUND General. Commercial television broadcasting began in the United States on a regular basis in the 1940s. Currently there are a limited number of channels available for broadcasting in any one geographic area. Television stations can be distinguished by the frequency on which they broadcast. Television stations broadcast over the very high frequency ("VHF") band (channels 2-13) of the spectrum generally have some competitive advantage over television stations which broadcast over the ultra-high frequency ("UHF") band (channels above 13) of the spectrum because the former usually have better signal coverage and operate at a lower transmission cost. However, the improvement of UHF transmitters and receivers, the complete elimination from the marketplace of VHF-only receivers and the expansion of cable television systems have reduced the VHF signal advantage. The Market for Television Programming. Television station revenues are primarily derived from local, regional and national advertising and, to a lesser extent, from network compensation and revenues from studio rental and commercial production activities. Advertising rates are based upon a variety of factors, including a program's popularity among the viewers an advertiser wishes to attract, the number of advertisers competing for the available time, the size and demographic makeup of the market served by the station, and the availability of alternative advertising media in the market area. Rates are also determined by a station's overall ratings and share in its market, as well as the station's ratings and share among particular demographic groups which an advertiser may be targeting. Because broadcast television stations rely on advertising revenues, declines in advertising budgets, particularly in recessionary periods, adversely affect the broadcast industry, and as a result may contribute to a decrease in the revenues of broadcast television stations. All television stations in the country are grouped by Nielsen, a national audience measuring service, into approximately 210 generally recognized television markets that are ranked in size according to various formulae based upon actual or potential audience. Each DMA is determined as an exclusive geographic area consisting of all counties in which the home-market commercial stations receive the greatest 14 percentage of total viewing hours. Nielsen periodically publishes data on estimated audiences for the television stations in the various television markets throughout the country. The estimates are expressed in terms of the percentage of the total potential audience in the market viewing a station (the station's "rating") and of the percentage of the audience actually watching television (the station's "share"). Nielsen provides such data on the basis of total television households and selected demographic groupings in the market. Nielsen uses two methods of determining a station's ability to attract viewers. In larger geographic markets, ratings are determined by a combination of meters connected directly to selected television sets and weekly diaries of television viewing, while in smaller markets only weekly diaries are completed. None of the Company's markets are metered. Whether or not a station is affiliated with one of the three major networks (NBC, ABC or CBS) has a significant impact on the composition of the station's revenues, expenses and operations. A typical network affiliate receives the majority of its programming each day from the network. This programming, along with cash payments ("network compensation"), is provided to the affiliate by the network in exchange for a substantial majority of the advertising time during network programs. The network then sells this advertising time and retains the revenues. The affiliate retains the revenues from time sold during breaks in and between network programs and programs the affiliate produces or purchases from non-network sources. The Fox Broadcasting Company ("Fox") has established a network of independent stations whose operating characteristics are similar to the major network affiliate stations although the number of hours of network programming for Fox affiliates is less than that of the three major networks. In recent years, Fox has effectively evolved into the fourth network. A fully independent station such as KCAL purchases or produces all of the programming which it broadcasts, resulting in generally higher programming costs than those of major-network affiliates in the same market. However, under increasingly popular barter arrangements, a national program distributor may receive advertising time in exchange for programming it supplies, with the station paying a reduced fee or no cash fee at all for such programming. Because the major networks regularly provide first-run programming during prime time viewing hours, their affiliates generally (but do not always) achieve higher audience shares, but have substantially less inventory of advertising time to sell during those hours than independent stations, since the major networks use almost all of their affiliates' prime time inventory for network shows. The independent station is, in theory, able to retain its entire inventory of advertising and all of the revenue obtained therefrom. The independent stations' smaller audiences and greater inventory during prime time hours generally result in lower advertising rates charged and more advertising time sold during those hours, as compared with major affiliates' larger audiences and limited inventory, which generally allow the major-network affiliates to charge higher advertising rates for prime time programming. By selling more advertising time, the independent station typically achieves a share of advertising revenues in its market greater than its audience ratings. Broadcast television stations compete for advertising revenues primarily with other broadcast television stations, and to a lesser extent, with radio stations and cable system operators serving the same market. Traditional network programming, and recently Fox programming, generally achieve higher audience levels than syndicated programs aired by independent stations. However, since greater amounts of advertising time are available for sale by independent stations and Fox affiliates, they typically achieve a share of the television market advertising revenues greater than their share of the market's audience. Public broadcasting outlets in most communities compete with commercial broadcasters for viewers. Developments in the Television Market. Through the 1970s, network television broadcasting enjoyed virtual dominance in viewership and television advertising revenue, because network-affiliated stations 15 competed only with each other in most local markets. Beginning in the 1980s, however, this level of dominance began to change as more local stations were authorized by the FCC and marketplace choices expanded with the growth of independent stations and cable television services. See "-Federal Regulation of Television Broadcasting" below. Cable television systems, which grew at a rapid rate beginning in the early 1970s, were initially used to retransmit broadcast television programming to paying subscribers in areas with poor broadcast signal reception. In the aggregate, cable-originated programming has emerged as a significant competitor for viewers of broadcast television programming, although no single cable programming network regularly attains audience levels amounting to more than a small fraction of any single major broadcast network. With the increase in cable penetration in the 1980s, the advertising share of cable networks has increased. Notwithstanding such increases in cable viewership and advertising, over-the-air broadcasting remains the dominant distribution system for mass market television advertising. Basic cable penetration (the percentage of television households which are connected to a cable system) in the Company's television markets ranges from 54% to 67%. In acquiring programming to supplement network programming, network affiliates compete with independent stations and Fox affiliates in their markets. Cable systems generally do not compete with local stations for programming. Although various national cable networks from time to time have acquired programs that would have otherwise been offered to local television stations, such programs would not likely have been acquired by such stations in any event. In the past, the cost of programming increased dramatically, primarily because of an increase in the number of new independent stations and a shortage of desirable programming. Recently, however, program prices have stabilized as a result of increases in the supply of programming. COMPETITION Competition in the television industry takes place on several levels: competition for audience, competition for programming (including news) and competition for advertisers. Additional factors that are material to a television station's competitive position include signal coverage and assigned frequency. The broadcasting industry is continually faced with technological change and innovation, the possible rise in popularity of competing entertainment and communications media, and governmental restrictions or actions of federal regulatory bodies, including the FCC and the Federal Trade Commission, any of which could have a material effect on the Company's operations. Audience. Stations compete for audience on the basis of program popularity, which has a direct effect on advertising rates. A majority of the daily programming on the Company's stations is supplied by the network with which each station is affiliated. In those periods, the stations are totally dependent upon the performance of the network programs in attracting viewers. There can be no assurance that such programming will achieve or maintain satisfactory viewership levels in the future. Non-network time periods are programmed by the station with a combination of self-produced news, public affairs and other entertainment programming, including news and syndicated programs purchased for cash, cash and barter, or barter only. Independent stations, whose number has increased significantly over the past decade, have also emerged as viable competitors for television viewership share. Each of Time Warner, Inc. and Paramount Communications, Inc. has recently launched a new television network and have entered into affiliation agreements with certain independent commercial television stations. The programming made available by 16 these new networks is presently limited. The Company is unable to predict the effect, if any, that such networks will have on the future results of the Company's operations. In addition, the development of methods of television transmission of video programming other than over-the-air broadcasting, and in particular the growth of cable television, has significantly altered competition for audience in the television industry. These other transmission methods can increase competition for a broadcasting station by bringing into its market distant broadcasting signals not otherwise available to the station's audience and also by serving as a distribution system for non-broadcast programming originated on the cable system. Through the 1970s, network television broadcasting enjoyed virtual dominance in viewership and television advertising revenues because network-affiliated stations competed only with each other in most local markets. Although cable television systems were initially used to retransmit broadcast television programming to paid subscribers in areas with poor broadcast signal reception, significant increases in cable television penetration occurred throughout the 1970s and 1980s in areas that did not have signal reception problems. As the technology of satellite program delivery to cable systems advanced in the late 1970s, development of programming for cable television accelerated dramatically, resulting in the emergence of multiple, national-scale program alternatives and the rapid expansion of cable television and higher subscriber growth rates. Historically, cable operators have not sought to compete with broadcast stations for a share of the local news audience. Recently, however, certain cable operators have elected to compete for such audiences, and the increased competition could have an adverse effect on the Company's advertising revenues. Other sources of competition include home entertainment systems (including video cassette recorder and playback systems, videodiscs and television game devices), "wireless cable" service, satellite master antenna television systems, low power television stations, television translator stations and, most recently, direct broadcast satellite video distribution services which transmit programming directly to homes equipped with special receiving antennas. Further advances in technology may increase competition for household audiences and advertisers. Video compression techniques, now under development for use with current cable channels or direct broadcast satellites, are expected to reduce the bandwidth required for television signal transmission. These compression techniques, as well as other technological developments, are applicable to all video delivery systems, including over-the-air broadcasting, and have the potential to provide vastly expanded programming to highly targeted audiences. Reduction in the cost of creating additional channel capacity could lower entry barriers for new channels and encourage the development of increasingly specialized "niche" programming. This ability to reach very narrowly defined audiences is expected to alter the competitive dynamics for advertising expenditures. The Company is unable to predict the effect that these or other technological changes will have on the broadcast television industry or the future results of the Company's operations. Programming. Competition for programming involves negotiating with national program distributors or syndicators which sell first-run and rerun packages of programming. The stations compete against in-market broadcast station competitors for exclusive access to off-network reruns (such as Roseanne) and first-run product (such as Entertainment Tonight) in their respective markets. Cable systems generally do not compete with local stations for programming, although various national cable networks from time to time have acquired programs that would have otherwise been offered to local television stations. Competition for exclusive news stories and features is also endemic in the television industry. 17 Time Warner, Inc. and Paramount Communications, Inc., each of which has recently launched a new television network, also own or control a major production studio. Outside production studios are the primary source of programming for the networks. It is uncertain whether in the future such programming, which is generally subject to short-term agreements between the studios and the networks, will be moved to the new networks. Advertising. Advertising rates are based upon the size of the market in which the station operates, a program's popularity among the viewers that an advertiser wishes to attract, the number of advertisers competing for the available time, the demographic makeup of the market served by the station, the availability of alternative advertising media in the market area, aggressive and knowledgeable sales forces, and development of projects, features and programs that tie advertiser messages to programming. In addition to competing with other media outlets for audience share, the Company's stations also compete for advertising revenues, which comprise the primary source of revenues for the Subsidiaries. The Company's stations compete for such advertising revenues with other television stations in their respective markets, as well as with other advertising media, such as newspapers, radio stations, magazines, outdoor advertising, transit advertising, yellow page directories, direct mail and local cable systems. Competition for advertising dollars in the broadcasting industry occurs primarily within individual markets. Generally, a television broadcasting station in the market does not compete with stations in other market areas. The Company's television stations are located in highly competitive markets. NETWORK AFFILIATION AGREEMENTS Each of the Company's network-affiliated stations is affiliated with its network pursuant to an affiliation agreement (an "Affiliation Agreement"). WKRN, WTEN, WRIC, WATE, WBAY and WTVO are affiliated with ABC. KELO, WLNS, KLFY and WKBT are affiliated with CBS. The Quad Cities Station (KWQC) is affiliated with NBC. In October 1994, the Company and ABC entered into new Affiliation Agreements for five of the Company's ABC-affiliated stations. Effective August 14, 1995, the Company switched the affiliation of its then sole NBC affiliate to ABC. In addition, in October 1994, the Company and CBS entered into new Affiliation Agreements for three of the Company's CBS-affiliated stations. Such Affiliation Agreements with ABC and CBS provide for contract terms of ten years. The Affiliation Agreement for the Quad Cities Station provides for a ten-year term, with an expiration date of November 1, 2004. On April 3, 1996, the Company and CBS entered into new affiliation agreements for KELO and each of its satellite stations which expire on October 2, 2000. Each Affiliation Agreement is automatically renewed for successive terms subject to either party's right to terminate at the end of any term after giving proper notice thereof. Under the Affiliation Agreements, the networks also possess, under certain circumstances (such as a transfer of control or adverse changes in signal, operating hours or other mode of operation), the right to terminate the Affiliation Agreement on prior written notice ranging between 15 and 45 days depending on the Affiliation Agreement. In addition, ABC has the right upon 60 days prior notice to terminate the Affiliation Agreement with respect to an ABC- affiliated station in a particular market if it acquires a different station within such market. Each Affiliation Agreement provides the affiliated station with the right to broadcast all programs transmitted by the network with which it is affiliated. In exchange, the network has the right to sell a substantial majority of the advertising time during such broadcasts. In addition, for each hour that the station elects to broadcast network programming, the network pays the station a fee, specified in each Affiliation Agreement, which varies with the time of day. Typically, "prime-time" programming (Monday 18 through Saturday from 8:00 p.m.-11:00 p.m., Eastern time, and Sunday from 7:00 p.m.-11:00 p.m., Eastern time) generates the highest hourly rates. Management believes that programming costs are generally lower for network affiliates than for independent television stations and prime-time network programs generally achieve higher ratings than non-network programs. Management believes that the Company's relationship with the networks is excellent and that all of its stations are highly valued affiliates. As an independent station, KCAL purchases all of its programming, resulting in proportionally higher programming costs for the station. In this regard, KCAL retains its entire inventory of advertising and all of the revenue obtained therefrom. Furthermore, KCAL enters into barter arrangements whereby program distributors may receive advertising time in exchange for the programming they provide. FEDERAL REGULATION OF TELEVISION BROADCASTING Existing Regulation. Television broadcasting is subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the "Communications Act"). The Communications Act prohibits the operation of television broadcasting stations except under a license issued by the FCC and empowers the FCC, among other things, to issue, revoke and modify broadcasting licenses, determine the locations of stations, regulate the equipment used by stations, adopt regulations to carry out the provisions of the Communications Act and impose penalties for violation of such regulations. The Communications Act also prohibits the assignment of a license or the transfer of control of a licensee without prior approval of the FCC. On February 8, 1996, the Telecommunications Act of 1996 (the "1996 Act") was signed into law, the most comprehensive overhaul of the nation's basic communications law since 1934. Provisions of the new law which directly affect broadcasting are highlighted in the following descriptions. License Grant and Renewal. In recent years, television broadcasting licenses have generally been granted or renewed for a maximum period of five years although the FCC has authority to renew for a shorter period upon a finding that the "public interest, convenience and necessity" would be served thereby. The 1996 Act lengthens the normal term for television broadcast licenses from five to eight years. Accordingly, on January 24, 1997, the FCC issued an order amending its applicable rules so that, henceforth, broadcast stations (both radio and TV) will ordinarily be granted renewal for a term of eight years. The 1996 Act also streamlines the license renewal process by prohibiting the FCC, upon expiration of an incumbent station's license, from considering competing applications for such licenses unless the FCC first decides that the incumbent licensee does not meet the following statutory requirements for renewal: (1) the station has served the public interest, convenience and necessity; (2) there have been no serious violations of either the Communications Act or the FCC's rules and regulations by the licensee; and (3) there have been no other violations of either the Communications Act or FCC Rules by the licensee which taken together would constitute a pattern of abuse. In making this determination, the FCC cannot consider whether the public interest would be better served by a person other than the renewal applicant. The FCC, on April 12, 1996, issued an order eliminating comparative renewal hearings for broadcast applications filed after May 1, 1995 and implementing a new renewal procedure in accordance with these statutory renewal standards. At the time application is made for renewal of a television license, parties in interest may file petitions to deny, and such parties as well as members of the public may comment upon the service the station has provided during the preceding license term and urge denial of the application. In a vast majority of cases, broadcast licenses are renewed by the FCC even when petitions to deny are filed against broadcast license renewal applications. The main station licenses for the Company's stations expire on the following dates: WRIC, October 1, 2004; KLFY, June 1, 1997 (an 19 application for renewal of the KLFY license is now pending before the FCC; pursuant to Section 307(c)(3) of the Communications Act, the station's license shall continue in effect pending final action on the renewal application by the FCC); WKRN, August 1, 1997; WATE, August 1, 1997; WLNS, October 1, 1997; WBAY, December 1, 1997; WKBT, December 1, 1997; WTVO, December 1, 1997; KWQC, February 1, 1998; KCLO, April 1, 1998; KELO, April 1, 1998; KDLO and KPLO (satellites of KELO), April 1, 1998; WTEN, June 1, 1999; and WCDC, WTEN's satellite station, April 1, 1999. The Company is not aware of any facts or circumstances that would prevent the renewal of the licenses for the stations at the end of the respective license terms. A license renewal application was granted to KCAL by the FCC on June 6, 1996, several months prior to its acquisition by the Company. The decision imposed certain reporting conditions regarding the station's equal employment opportunity (EEO) records; conditions which now must be met by the Company, as the new licensee. On July 5, 1996, the National Hispanic Media Coalition ("NHMC"), which had opposed the KCAL renewal application on EEO grounds before the FCC, appealed the FCC's decision to renew KCAL's license to the U.S. Court of Appeals for the District of Columbia Circuit. Both Disney, the former licensee of KCAL, and the Company have intervened in this proceeding in support of the FCC. The matter remains pending. In the meantime, KCAL's main station license is now set to expire on December 1, 1998, along with all other California television stations. Multiple Ownership Restrictions. FCC regulations and the 1996 Act govern the multiple ownership of radio and television broadcast stations and certain other media. These rules or statutory standards include limits on the number of radio and television stations that may be owned both on a national and local basis. The 1996 Act eliminates the FCC's national ownership limits in the form of caps on the number of television and radio broadcast stations that may be commonly owned. Additionally, it raises the national audience coverage restriction on television station ownership from 25% to 35% of the national audience. On March 8, 1996, the FCC released an order modifying its national ownership rules to conform to the 1996 Act in these respects. On a local basis, FCC rules currently allow an entity to have an attributable interest (as defined below) in only one television station in a market (the so-called TV "duopoly" rule). In addition, FCC rules generally prohibit an individual or entity from having an attributable interest in a television station and a radio station, daily newspaper or cable television system that is located in the same local market area served by the television station. The 1996 Act leaves the television duopoly ban in place but directs the FCC to conduct a rulemaking to determine whether the restriction should be retained, modified, or eliminated. Accompanying legislative report language suggests that the FCC should permit VHF-VHF station combinations only in the most compelling circumstances. The 1996 Act also directed the FCC to modify its waiver policy with respect to the TV/radio cross-ownership restriction (the so-called "one-to-a-market" rule) by extending it to radio-television combinations in the top 50 markets. Among the other multiple ownership issues addressed by the 1996 Act are the following: 1. It directs the FCC to revise the dual network rule to permit broadcast stations to affiliate with an entity that maintains two or more networks, unless the combination is composed of (a) two of the four existing networks (ABC, CBS, NBC, Fox) or (b) any of the four existing networks and one of the two emerging networks (WBTN, UPN). The accompanying explanatory language clarifies that Congress does not intend these limits to apply if such networks are not operated simultaneously or if there is no substantial overlap of the territory served by the group of stations comprising each network. 20 2. It eliminates the network/cable cross-ownership restriction contained in FCC rules, but allows the Commission to adopt further regulations if necessary to ensure carriage, channel positioning, and nondiscriminatory treatment of nonaffiliated television stations. 3. It grandfathers certain television Local Marketing Agreements ("LMAs") which were in existence upon enactment and are in compliance with FCC regulations. It is anticipated that the overall status of television LMAs will be further clarified in future FCC ownership proceedings. 4. It removes the statutory prohibition on broadcast/cable cross-ownership, but leaves the FCC regulatory restriction in place. The explanatory language indicates, however, that repeal of the statutory ban should not be considered by the FCC in any future review of the rule. 5. It requires the FCC to review its ownership rules biennially as part of its regulatory reform obligations to determine if such rules are necessary in the public interest as a result of competition. As noted, the FCC must issue administrative orders or conduct new or additional rulemaking proceedings to implement and/or carry out the foregoing directives of Congress in the 1996 Act. Thus, on November 7, 1996, the FCC released a "Second Further Notice of Proposed Rulemaking" that seeks additional comments on a number of local television ownership issues, including (i) whether to extend the presumptive waiver of the one-to-a-market rule from the top 25 to the top 50 markets; (ii) whether to modify the television duopoly rule to allow common ownership of two television stations in separate DMAs as long as the stations do not have overlapping Grade A contours; and (iii) whether to permit some exceptions to the duopoly rule in given markets and given circumstances involving combinations of UHF/UHF and UHF/VHF stations. In that same proceeding, the FCC also has invited public comment on whether to grandfather existing LMAs if such agreements are deemed attributable in a companion proceeding seeking comment on revisions to the FCC's attribution rules. The Company is unable to predict the nature or the timing of any such changes. Expansion of the Company's broadcast operations in particular areas and nationwide will continue to be subject to the FCC's ownership rules and any changes the agency or Congress may adopt. At the same time, any further relaxation of the FCC's ownership rules may increase the level of competition in one or more of the markets in which the Company's stations are located, particularly to the extent that the Company's competitors may have greater resources and thereby be in a better position to capitalize on any such changes. Under the FCC's ownership rules, if a purchaser of the Company's Common Stock acquires an "attributable" interest in the Company and has an attributable interest in other broadcast stations, a cable television system or a daily newspaper, a violation of the Communications Act or FCC regulations could result depending on the number and location of the other broadcast stations, cable television operations, or daily newspaper attributable to such purchaser. In the case of corporations, ownership of television stations generally is "attributable" to all officers and directors of a licensee, as well as shareholders who own 5% or more of the outstanding voting stock of a licensee, except that certain institutional investors who exert no control or influence over a licensee may own up to 10% of such outstanding voting stock before attribution results. Under current FCC regulations, debt instruments, non-voting stock and certain limited partnership interests (provided the licensee certifies that the limited partners are not "materially involved" in the management or operation of the subject media property) and voting stock held by minority shareholders in cases where there is a single majority shareholder are not generally subject to attribution. In addition, the FCC's cross-interest policy, which precludes an individual or entity from having an 21 attributable interest in one media property and a "meaningful" (but not attributable) interest in a broadcast, cable or newspaper property in the same area, may be invoked in certain circumstances to reach interests not expressly covered by the multiple ownership rules. On January 12, 1995, the FCC released a "Notice of Proposed Rulemaking" designed to permit a "thorough review of [its] broadcast media attribution rules." Among other things, the FCC solicited comment on whether it should raise its percentage benchmarks for attribution, tighten its policies as to nonvoting stock and adopt rules for limited liability companies and other new forms of business. The FCC also solicited comment on whether, in given circumstances, multiple "cross interests" or other significant business relationships raise any issues or concerns with respect to diversity and competition. On November 7, 1996, the FCC released a "Further Notice of Proposed Rulemaking" in that proceeding, seeking additional comment on the foregoing and certain related issues, including (i) the circumstances, if any, in which an LMA should be attributed to an entity holding the right to program more than 15% of the time of a television station; and (ii) whether a combination of debt and equity exceeding a certain threshold should be considered to be an attributable interest. Alien Ownership Restrictions. The Communications Act restricts the ability of foreign entities to own or hold interests in broadcast licenses. Foreign governments, representatives of foreign governments, non-citizens, representatives of non-citizens, and corporations or partnerships organized under the laws of a foreign nation are barred from holding broadcast licenses. Non-citizens, collectively, may directly or indirectly own up to 20% of the capital stock of a licensee. The 1996 Act, however, eliminates the former complete ban on non-citizens serving as officers or directors of such licensee. In addition, a broadcast license may not be granted to or held by any corporation that is controlled, directly or indirectly, by any other corporation if more than one-fourth of the capital stock of that other corporation is owned or voted by non-citizens or their representatives, by foreign governments or their representatives, or by non-U.S. corporations, if the FCC finds that the public interest will be served by the refusal or revocation of such license. The 1996 Act also eliminates the former restrictions in the Communications Act on non-citizens serving as officers or on the board of such holding or parent companies. The Company, which serves as a holding company for the Subsidiaries, therefore, may be restricted from having more than one-fourth of its capital stock owned directly or indirectly by non-citizens, foreign governments or foreign corporations. Recently, proposals have been initiated by the FCC and advanced by certain members of Congress that would relax the foreign ownership restrictions in certain additional respects. In a Report and Order released on November 28, 1995, the FCC modified its public interest standard for considering applications of foreign common carriers to enter the U.S. market to provide international services, but took no similar action with respect to easing the restrictions on alien ownership of broadcast licenses. Recent Developments, Proposed Legislation and Regulation. The FCC eliminated the prime time access rule ("PTAR"), effective August 30, 1996. PTAR restricted a television station's ability to broadcast network programming (including syndicated programming previously broadcast over a network) during prime time hours. The elimination of PTAR could increase the amount of network programming broadcast over a station affiliated with ABC, NBC or CBS. Such elimination also could result in (i) an increase in the compensation paid by the network to a station (due to the additional prime time during which network programming could be aired by a network-affiliated station) and (ii) increased competition for syndicated network programming that previously was unavailable for broadcast by network affiliates during prime time. The FCC also recently eliminated its remaining financial interest and syndication ("fin-syn") rules. The fin-syn rules restricted the ability of ABC, CBS and NBC to obtain financial interests in, or participate in syndication of, prime-time entertainment programming created by independent producers for airing 22 during the networks' evening schedules. (The FCC previously had lifted the financial interest rules and restraints on foreign syndication). In an order adopted August 8, 1996, the FCC established new regulations for television broadcasters under the Children's Television Act of 1990 ("CTA"). The Children's Programming Order sets a new benchmark for TV licensees as to both the amount and the type of "educational and informational" programming that stations must broadcast for children aged 16 and younger. Beginning September 1, 1997, the FCC will institute a new "processing guideline" for considering license renewals which will have the effect of requiring television broadcasters to air at least three hours of qualifying children's programming each week. In addition to satisfying certain scheduling, duration and other criteria, programs will qualify as "educational and informational" only if (i) education is a "significant purpose" of the material and (ii) the educational objective and target audience age range is identified in writing. The FCC also will require commercial TV broadcasters to satisfy more detailed record-keeping requirements and provide greater information to the public regarding a station's qualifying programming. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters which could, directly or indirectly, affect the operation and ownership of the Company's broadcast properties. In addition to the matters noted above, such pending or potential subject areas include, for example, the license renewal process, particularly the criteria to be applied in implementing the new renewal standard and procedure adopted in the 1996 Act, spectrum use fees, political advertising rates (including proposals for free time to some political candidates), potential restrictions on certain products (such as beer and wine), the rules and policies to be applied in enforcing the FCC's equal employment opportunity regulations, possible changes in the deductibility of advertising expenses, and violent and indecent programming. With respect to the latter, the 1996 Act requires the FCC to prescribe (1) on the basis of recommendations by a nonpartisan advisory committee comprised of parents, programmers, broadcasters and cable operators, guidelines and procedures for the identification and rating of video programming that contains "sexual, violent, or other indecent material" (excluding content of a political or religious nature); and (2) rules requiring distributors of rated programming to transmit such rating to permit parents to block the display of inappropriate programming. The advisory committee would be required to submit a report of its recommendation within one year after appointment. Significantly, these requirements were set to take effect one year after enactment of the 1996 Act (or February 1, 1997) only if the FCC determined, in consultation with appropriate public interest groups and interested individuals, that distributors of video programming have not by such date (1) established voluntary rating rules and (2) agreed voluntarily to broadcast such ratings. Prompted by these provisions in the 1996 Act, television industry representatives developed an age-based TV ratings system (modeled on the movie industry system) that was voluntarily implemented at the beginning of this year (i.e., prior to the aforementioned one-year anniversary date). This new system, however, remains subject to controversy and could be modified. In the meantime, the FCC has initiated a public proceeding inviting comments on the industry's new rating system. The FCC has also announced that it intends to hold hearings on the industry's proposal. Related to the foregoing program ratings or identification scheme, the 1996 Act requires that any TV set that is either shipped in interstate commerce or manufactured domestically, and has a picture screen of 13 inches or greater, be equipped with a feature designed to enable viewers to block all programs with a common rating or label (the so-called "v-chip"). The FCC, after consulting with the TV manufacturing industry, is required to specify the effective date when the v-chip must be included, which may not be less than two years after enactment. 23 Although the 1996 Act provides for expedited judicial review to challenge the constitutionality of these provisions, the broadcast industry has not yet undertaken any court appeal. Indeed, as noted, efforts have been undertaken and remain ongoing to establish and implement a voluntary, industry-initiated program ratings or labeling scheme that could be used with the v-chip technology. Separately, in response to a further mandate in the 1996 Act, the FCC now requires all applicants for renewal of a TV station license to submit an exhibit summarizing all written comments and suggestions received from the public and maintained by the licensee that comment on the licensee's programming characterized as violent. The Company is unable to predict the outcome of these developments or the impact they might eventually have, if any, on the operation of its stations. In addition, on June 15, 1995, the FCC initiated a review and update of certain long-standing rules governing the programming practices of broadcast television networks and their affiliates. Specifically, the FCC will consider whether to modify, repeal or retain the following programming-related rules: (1) the right to reject rule which ensures that a network affiliate retains the right to reject network programming; (2) the time option rule that currently prohibits a network from holding an option to use specified amounts of an affiliate's broadcast time; (3) the exclusive affiliation rule that forbids a network from preventing an affiliate from broadcasting the programming of another network; (4) the dual network rule that prevents a single entity from owning more than one broadcast television network (separately, the FCC has revised the dual network rule pursuant to the 1996 Act); and (5) the network territorial exclusivity rule that prohibits an agreement between a network and an affiliate that would prevent another station in the same community from broadcasting a network program not taken by the affiliate, and prohibits an agreement that would prevent another station located in a different community from broadcasting any of the network's programs. Moreover, in a separate but related proceeding initiated on June 14, 1995, the FCC is considering whether to modify or repeal rules that currently forbid a network from influencing an affiliate's advertising rates during non-network broadcast time, and whether to modify or repeal a rule forbidding a network from acting as an advertising representative for the sale of non-network time. Other matters which could affect the Company's broadcast properties include technological innovations and developments generally affecting competition in the mass communications industry, such as the recent initiation and future expansion of direct broadcast satellite service, the continued establishment of wireless cable systems and low power television stations, and the potentially expanded role of telephone companies in the distribution of video services. Distribution of Video Services by Telephone Companies. Recent actions by Congress, the FCC and the courts all presage potentially significant future involvement in the provision of video services by telephone companies. In particular, the 1996 Act completely revises the law governing cable and telephone company competition and cross-ownership by eliminating the former cable/telco cross-ownership ban and all of the FCC's current video dialtone rules. The 1996 Act does, however, retain (in modified form) prohibitions on certain cable/telco buy-outs. Prior to passage of the 1996 Act, the Cable Act of 1984 generally prohibited a local exchange carrier ("LEC") from owning a cable television system or offering video programming directly to subscribers in the LEC's local telephone service area. In recent years, the FCC has permitted LECs to provide video programming under its "video dialtone" ("VDT") common carrier regulatory scheme. The FCC's original VDT policy permitted in-service-area delivery of video programming by LECs and exempted them from the 1984 Cable Act's franchising requirements so long as the facilities of the LEC were used for transmission of video programming on a common carrier basis, a policy that had been challenged in court by both cable and telephone interests. The 1996 Act, however, explicitly nullifies these regulatory efforts. 24 Instead, the 1996 Act provides telephone companies with four options for entering into the video services market, all four of which are subject to the buy-out provisions: (1) wireless entry (which is not subject to cable regulation); (2) common carrier entry (which is subject to Title II common carrier regulation, but not subject to cable regulation); (3) cable system entry (which is subject to cable regulation); and (4) "open video system" entry, which is a new mode of entry established by the 1996 Act that allows a common carrier to program 33% of its video distribution system, while making the rest of its capacity available to unaffiliated program providers. The hybrid common carrier/cable rules governing open video systems will entirely replace the FCC's former VDT rules. The open video system rules generally subject open video system operators to reduced regulation. For example, such operators are not required to obtain a local franchise, nor are they subject to rate regulation. The 1996 Act also limits fees that open video operators may have to pay to local franchising entities and clarifies that such operators are not subject to Title II common carrier requirements. Open video system operators are required, however, to comply with certain cable regulations, including the must-carry/retransmission consent requirements and the rules governing carriage of public educational and governmental channels. Under recently adopted FCC rules, a cable company will be permitted to operate open video systems outside of its cable franchise areas, and within its cable franchise area if it is subject to "effective competition" as defined in the Act. On June 3, 1996, the FCC released a Second Report and Order adopting new rules regarding open video systems under the 1996 Act. These rules, inter alia, (1) restrict the amount of capacity that a carrier or its affiliates may use to provide programming directly to subscribers; (2) prohibit an operator from discriminating among video programming providers with regard to carriage; (3) permit an operator to carry on only one channel any video programming service that is offered by more than one programming provider; and (4) prohibit an operator from unreasonably discriminating in favor of itself and its affiliates with regard to material or information provided for the purpose of selecting programming or presenting information to subscribers. On August 8, 1996, the FCC released a third Report and Order and Second Order on Reconsideration generally reaffirming its rules for open video systems. Although telephone companies may now provide video programming to their telephone subscribers, the 1996 Act maintains the general prohibition on cable/telco buy-outs. Neither a LEC nor any affiliate thereof may acquire more than a 10% financial interest, or any management interest, in a cable operator serving the LEC's telephone service area. Similarly, a cable operator may not acquire a 10% financial interest, or any management interest, in a LEC providing telephone exchange service within the cable operator's franchise area. Joint ventures between LECs and cable operators to provide video or telecommunications in the same market are also prohibited. The Act does provide for a number of limited exceptions to the buy-out and joint venture prohibitions. The 1992 Cable Act. On October 5, 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"). Some of its provisions such as signal carriage, retransmission consent and equal employment opportunity requirements, have a direct effect on television broadcasting. Other provisions, some of which have been changed or substantially modified by the 1996 Act, are focused exclusively on the regulation of cable television but can still have an indirect effect on the Company because of the competition between over-the-air television stations and cable systems. The signal carriage, or "must carry", provisions of the 1992 Cable Act and FCC rules require cable operators to carry the signals of local commercial and non-commercial television stations and certain low 25 power television stations. Systems with twelve or fewer usable activated channels and more than 300 subscribers must carry the signals of at least three local commercial television stations. A cable system with more than 12 usable activated channels, regardless of the number of subscribers, must carry the signals of all local commercial television stations, up to one-third of the aggregate number of usable activated channels of such system. The 1992 Cable Act also includes a retransmission consent provision that prohibits cable operators and other multichannel video programming providers from carrying broadcast stations without obtaining their consent in certain circumstances. The must carry and retransmission consent provisions are related in that television broadcasters, on a cable system-by-system basis, must make a choice once every three years whether or not to proceed under the must carry rules or to waive that right to mandatory but uncompensated carriage and negotiate a grant of retransmission consent to permit the cable system to carry the stations' signal, in most cases in exchange for some form of consideration from the cable operator. Under rules adopted to implement these must carry and retransmission consent provisions, local television stations were required to make their initial elections of must carry or retransmission consent by June 17, 1993. On or before June 17, 1993, the Company elected to obtain "must carry" status on certain cable systems in each of its DMAs. This entitled the Company to carriage on those systems until December 31, 1996. In certain other situations, the Company entered into non-compensation "retransmission consent" agreements with cable systems located outside its designated market areas in order to reaffirm or add carriage in such extended areas. Finally, with respect to most cable systems located at the core of its local markets, the Company elected to pursue retransmission consent agreements whereby the cable system would compensate its stations for carriage. In several instances, agreements were reached in which the cable operator agreed to commit to purchase specific levels of advertising (or production services) in exchange for the Company granting retransmission consent (i.e., carriage), generally for a period of three years. In most of these core market situations, however, the local cable operator either refused to negotiate or failed to offer any reasonable form of compensation. In order to permit cable operators to continue to carry the Company's signals in such situations, the Company offered temporary retransmission consent agreements under which, upon 60 days notice, the Company can withdraw its consent. Many of these agreements remain in place. Elections for the new three year period commencing January 1, 1997 and ending December 31, 1999 were made on or before October 1, 1996. During the first three-year cycle, the Company reached an agreement with the Home and Garden Network ("HGN") under which HGN is, on the Company's behalf, authorized to attempt to conclude more definitive retransmission agreements with certain cable operators in exchange for agreeing to carry the HGN channel. A number of such agreements have been completed and others are still being negotiated. The Company is unable to predict how many such agreements will be effectuated and on what terms. On April 8, 1993, a special three-judge panel of the U.S. District Court for the District of Columbia upheld the constitutionality of the must carry provisions of the 1992 Act. However, on June 27, 1994, the U.S. Supreme Court, in a 5-4 decision, vacated the lower court's judgment and remanded the case to the District Court for further proceedings. Although the Supreme Court found the must carry rules to be content-neutral and supported by legitimate governmental interests under appropriate constitutional tests, it also found that genuine issues of material fact still remained that must be resolved on a more detailed evidentiary record. On December 12, 1995, the same three-judge panel of the District Court again upheld the constitutionality of the must carry rules. The case was again appealed to the Supreme Court and a further decision is expected sometime during the first half of 1997. In the meantime, however, the FCC's new must carry regulations implementing the 1992 Cable Act remain in effect. 26 The 1992 Cable Act also codified the FCC's basic equal employment opportunity ("EEO") rule and the use of certain EEO reporting forms currently filed by television broadcast stations. In addition, pursuant to the 1992 Cable Act's requirements, the FCC has adopted new rules providing for a review of the EEO performance of each television station at the mid-point in its license term (in addition to renewal time). Such a review gives the FCC an opportunity to evaluate whether the licensee is in compliance with the FCC's processing criteria and to notify the licensee of any deficiencies in its employment profile. The 1992 Cable Act was amended in several important respects by the 1996 Act. Most notably, as discussed above, the 1996 Act repeals the cross-ownership ban between cable and telephone entities and the FCC's current video dialtone rules. These provisions, among others, foreshadow significant future involvement in the provision of video services by telephone companies. The Company cannot predict the impact that telco entry into video programming will have upon the broadcasting industry. The 1996 Act also repeals or curtails several cable-related ownership and cross-ownership restrictions. For example, as noted above, the 1996 Act eliminates the broadcast network/cable cross-ownership limitations and the statutory prohibition on TV/cable cross-ownership. Advanced Digital Television Service. The FCC has proposed the adoption of rules for implementing advanced digital television ("DTV") service in the United States. Implementation of DTV will improve the technical quality of television signals receivable by viewers, and, if implemented as anticipated, will enable television broadcasters the flexibility to provide new services, including high-definition television ("HDTV"), simultaneous multiple programs of standard definition television ("SDTV"), and data broadcasting. In mid-May, 1996, WRC-TV, the NBC owned and operated station in Washington, D.C., was chosen to create a fully operational model HDTV station as part of a joint project sponsored by the Consumer Electronics Manufacturers Association and the Association for Maximum Service Television. The station is being operated pursuant to an experimental HDTV license obtained from the FCC. Other stations have initiated similar experimental authorizations. The FCC must, however, adopt special service rules before regular broadcasting with the new DTV technology can begin. The FCC began an advanced TV rulemaking proceeding in 1987 and, by late 1992, decided to assign to each existing broadcaster a second channel for the purpose of transitioning to DTV service. Under the transition plan, which would commence upon FCC adoption of the DTV transmission standard and allotment plan, broadcasters would have six years to begin DTV broadcasting on their second channel, and fifteen years to continue current "NTSC" broadcasts on their original channel. For most of this period, "simulcasting" would be required--i.e., broadcasters would be required to transmit the same programs on both the DTV and NTSC channels. Although the 1996 Act generally does not address this transition plan, it does direct the FCC--if the FCC issues additional licenses for DTV--to limit eligibility for such licenses to existing television broadcast licensees and to adopt regulations to permit future licensees to offer ancillary or supplementary services on designated frequencies. Such regulations, however, must preserve DTV technology and quality and cover any ancillary or supplementary service regulations applicable to analogous services (except that no ancillary or supplemental service shall have "must-carry" rights). Moreover, if a DTV licensee is directly or indirectly compensated for the provision of ancillary or supplementary services, the FCC is directed to collect an annual fee (or some other method of payment) that (1) recovers an amount that would have been recovered had such services been licensed pursuant to a spectrum auction and (2) avoids unjust enrichment. With respect to the 1992 transition plan, the 1996 Act states that if broadcasters are 27 issued a transition channel, either the original or additional license held by the broadcaster must be surrendered to the FCC for reallocation, reassignment, or both. Proposals have been advanced in Congress and within the current Administration to auction the returned channels for other uses. Other recent developments may alter the FCC's 1992 transition plan. In a 1995 further notice of proposed rulemaking, the FCC formally has questioned all of its earlier advanced television decisions except for its prior determination to award second channels to existing broadcasters. For example, the agency is considering a shorter (e.g., ten year) transition period, and likely will adopt modified simulcasting rules. In the meantime, on May 9, 1996, the FCC initiated a formal proceeding looking toward final adoption of new technical standards that would govern DTV service. On August 15, 1996, the FCC issued a separate proposal for establishing a DTV channel allotment and assignment plan. The allotment proposal calls for assigning most TV broadcasters a transitional channel between channels 7-59, to be followed at the end of the transition with a "repacking" of all TV stations between channels 7-51. This allotment plan is designed to allow for reallocation of spectrum at the low and high ends of the current broadcast band for other uses. The proposal would require some broadcasters to change channels twice before they obtain their permanent DTV channel. A decision adopting a technical standard for the transmission of digital television was released by the FCC on December 27, 1996. Decisions on the DTV channel allotment plan, as well as on the rules and policies (including possible buildout timetables) that will govern digital television are expected shortly (perhaps as early as April 3, 1997). A further new development centers on whether the award of new DTV channels to all television broadcasters should be accompanied by certain newly-defined public interest responsibilities. Indeed, on March 11, 1997, President Clinton issued an executive order establishing a special advisory panel to make recommendations concerning specific public interest obligations that might be imposed on television licensees in exchange for the awarding of digital television licenses. Although the nature and extent of any such obligations is obviously unsettled at the moment, the Clinton Administration has already suggested that broadcasters might provide some free time to federal political candidates as part of their enhanced public interests responsibilities in the digital era. During the extended debate on these issues in Congress over the past two years, some members proposed authorizing the FCC to auction DTV channels, which would require existing broadcasters to bid against other potential users of the spectrum. Such authority could be contained in budget legislation or a stand-alone spectrum law. The more recent focus, however, has been on proposals to auction the analog channels once they have been returned by television broadcasters. Even if DTV channels are awarded without auction to existing broadcasters, the implementation of DTV will impose some near-term financial burdens on stations providing the service. At the same time, there is potential for increased revenues from new DTV services (although, as noted, subscription services will be subject to FCC fees). While the Company believes the FCC will authorize DTV, the Company cannot predict precisely when or under what conditions such an authorization will occur, when NTSC operations must cease, or the overall effect the transition to DTV might have on the Company's business. Direct Broadcast Satellite Systems. The FCC has authorized the provision of video programming directly to home subscribers through high-powered direct broadcast satellites ("DBS"). DBS systems currently are capable of broadcasting over 175 channels of digital television service directly to subscribers equipped with 18-inch receive dishes and decoders. Generally, the signal of local broadcast stations are not carried on DBS systems. The U.S. Copyright Office recently initiated an informal inquiry to review a host of issues surrounding copyright licensing for the transmission of broadcast signals, and in particular the cable and satellite carrier compulsory licenses. However, without further legislation or new federal 28 court rulings, the issue of whether DBS companies may retransmit local TV station signals within the TV stations' own market may remain in doubt. The Telecommunications Act of 1996 ("Act") gives the FCC exclusive jurisdiction over high power DBS service. The Act also preempts local (but not state) governments from imposing taxes or fees on direct-to-home ("DTH") services, including DBS, and directs the FCC to promulgate regulations prohibiting local (including state) governments from maintaining zoning regulations that restrict the use of DBS receive-only dishes in residential areas. The FCC has adopted rules to implement the statutory requirement regarding zoning issues. Hughes Communications Galaxy ("Hughes"), an affiliate of General Motors Company, successfully launched its first satellite in December 1993, its second satellite in August 1994 and a third satellite in June 1995 as an in-orbit spare. The third satellite might also be used to provide additional capacity. DIRECTV, Inc. ("DIRECTV"), an affiliate of Hughes, operates 27 transponders on these satellites, enabling it to offer over 175 channels of digital programming. United States Satellite Broadcasting Company owns and operates five transponders on Hughes' first satellite and offers a programming service separate from DIRECTV's service. EchoStar Satellite Corporation ("EchoStar") controls 21 transponders at 119 degrees W.L., which can service the entire continental United States ("CONUS"), and has been providing DBS service since March 1996. EchoStar also controls 11 transponders at 61.5 degrees W.L., which can serve the eastern half of the U.S. In 1996, EchoStar paid to the U.S. treasury $52.3 million for the right to operate a 24 transponder system at 148 degrees W.L., which can serve the western half of the U.S. In 1996, MCI Telecommunications Corporation ("MCI") paid to the U.S. treasury $682.5 million for the right to operate a 28-transponder DBS system located at 110 degrees W.L., which is capable of providing CONUS service. Thereafter, MCI entered into a joint venture called ASkyB with News Corporation Ltd. (an entity controlled by Rupert Murdoch) to provide DBS service from MCI's satellite. Recently, ASkyB announced a proposal to acquire 50% of EchoStar. Press reports indicate that ASkyB will contribute $500 million in cash, and assets, which will include satellites, an uplink facility, and MCI's authorization for 28 transponders at 110 degrees W.L. According to reports, ASkyB and EchoStar believe the combined assets would provide enough satellite capacity to offer 500 channels of television service, including local broadcast station signals to a majority of the United States. In a separate proceeding, British Telecommunications, plc, a United Kingdom company, has proposed to acquire control of MCI. Regulatory approval of these transactions will be necessary, but the outcome cannot be predicted. The rules by which EchoStar and MCI acquired their respective DBS interests at 148 degrees W.L. and 110 degrees W.L. pursuant to auction are subject to an ongoing appeal at the U.S. Court of Appeals for the District of Columbia Circuit. The outcome of this litigation, and its potential impact on the delivery of DBS service from 110 degrees W.L. and 148 degrees W.L., cannot be predicted. In March 1997, TEMPO Satellite, Inc. launched a new satellite into 119 degrees W.L. from which it will provide full-CONUS DBS service from 11 transponders. Other parties have authorizations to provide DBS service, but have not yet launched their satellites. Certain parties also have applications pending before the FCC in which they propose to provide DBS service to U.S. consumers. In addition, entities such a PRIMESTAR Partners, L.P., and Alpha Star, Inc. provide up to 150 channels of programming direct-to-home via medium power fixed satellite services ("FSS"). Subscribers to FSS generally must use 36 inch satellite receive dishes. 29 In 1996, the United States entered into a bilateral agreement with Mexico which would allow, subject to certain conditions, the use of satellites licensed in Mexico to provide DBS service to U.S. consumers. According to press reports, Mexico is expected to begin licensing procedures for its DBS satellites later this year. The Company is unable to predict the effect of existing and future DBS services upon its operations. As part of the 1996 Act, Congress recently required the FCC to promulgate regulations to prohibit restrictions that impair a viewer's ability to receive video programming services through over-the-air reception devices, multi-point distribution service, or direct broadcast satellite services. The legislation also awards the FCC exclusive jurisdiction to regulate the provision of direct-to-home satellite services, and limits the authority of local jurisdictions to tax direct-to-home satellite service providers. The Satellite Home Viewer Act ("SHVA") currently prohibits the retransmission by a satellite carrier of a television broadcast signal of a network television station to households that receive an adequate quality over-the-air-signal of a television broadcast station affiliated with such network and to households that receive (or within the past 90 days had received) through a cable system the signal of a television station affiliated with such network. The major television networks and certain of their affiliates have commenced legal action against certain satellite carriers under the SHVA alleging unlawful carriage of distant network signals. The Company cannot predict the impact of this litigation upon its operations. The foregoing does not purport to be a complete summary of all the provisions of the Communications Act, the 1996 Act, or the 1992 Cable Act, nor of the regulations and policies of the FCC thereunder. Proposals for additional or revised regulations and requirements are pending before and are being considered by Congress and federal regulatory agencies from time to time. Also, various of the foregoing matters are now, or may become, the subject of court litigation, and the company cannot predict the outcome of any such litigation or the impact on its broadcast business. EMPLOYEES As of March 3, 1997, the Company employed approximately 1,295 persons. At WTEN (Albany, New York), approximately 35 employees are represented by Local 166, International Brotherhood of Electrical Workers ("IBEW"). The current union contract with IBEW Local 166 continues until June 30, 1998. At WTVO (Rockford, Illinois), approximately 13 employees are represented by IBEW Local 1220 under a contract which continues until August 31, 1999. At KWQC (Quad Cities), approximately 35 employees are represented by IBEW Local 825. The Company and IBEW Local 825 are in the process of bargaining an initial contract. At KCAL (Los Angeles, California), approximately 26 employees are represented by the American Federation of Television and Radio Artists under a current union contract which continues until January 31, 1998; approximately 11 employees are represented by the International Alliance of Theatrical Stage Employees and Moving Picture Machine Operators under a current union contract which continues until April 30, 1999; approximately 76 employees are represented by IBEW Local 45 under a current union contract which continues until October 31, 1998; and approximately 6 employees are represented by the Directors Guild of America under a contract which continues until April 30, 1999. No other employees of the Company are represented by unions. The Company believes its relations with its employees are satisfactory. 30 ITEM 2. PROPERTIES. The Company's principal executive offices are located at 599 Lexington Avenue, New York, New York 10022. The Company leases approximately 9,546 square feet of space in New York (the "Master Lease"). The Master Lease expires in the year 2000 with respect to 7,600 square feet and in 2002 with respect to 1,946 square feet. Approximately 7,846 square feet of the Company's leasehold has been sublet to Adam Young Inc., an affiliate of the Company, for the balance of the term under the Master Lease. Vincent J. Young, the Company's Chairman, and Adam Young, the Company's Treasurer, collectively beneficially own all of the outstanding capital stock of Adam Young Inc. The terms of the lease were negotiated on an arms-length basis. The Company believes that the rent under the lease is at rates comparable to other subleases for office space in New York City at such location. See "Certain Relationships and Related Transactions. "
Metropolitan Area Owned or and use Leased Approximate Size ----------------------- ---------- ---------------- KCAL................ Los Angeles, California ----------------------- Office and studio Owned 30,000 sq. ft. Office and studio Leased 18,000 sq. ft. Transmission tower site Leased 60,000 sq. ft. WKRN................ Nashville, Tennessee -------------------- Office and studio Owned 43,100 sq. ft. Transmission tower site Owned 49 acres WTEN................ Albany, NY ---------- Office and studio Owned 40,000 sq. ft. New Scotland, NY ---------------- Transmission tower site Owned 2,800 sq. ft. WRIC................ Richmond, VA ------------ Office and studio Owned 44,000 sq. ft. Land Owned 4 acres Petersburg, VA -------------- Transmission site Lease of space -- on tower Chesterfield Co., VA(1) ----------------------- Transmission tower and building Owned WATE................ Knoxville, TN ------------- Office and studio Owned 34,666 sq. ft. Land Owned 2.65 acres Knox County, TN --------------- Transmitter building Owned 3,532 sq. ft. Land Owned 9.5 acres House Mountain, TN ------------------ Prospective tower site Owned 5 acres
31
Metropolitan Area Owned or and use Leased Approximate Size ----------------------- ---------- ---------------- WBAY................ Green Bay, WI ------------- Office and studio Owned 90,000 sq. ft. Land Owned 1.77 acres DePere, WI ---------- Transmission tower site Owned 3.51 acres KWQC................ Davenport, Iowa --------------- Office and Studio Owned 59,786 sq. ft. Garage Owned 1,350 sq. ft land Owned 86,978 sq. ft. Alternate Satellite Dish Site Leased 900 sq. ft. Bettendorf, Iowa ---------------- Building Owned 5,520 sq. ft. Transmission Tower Site Owned 68.688 acres (2 parcels) Auxiliary Transmitter Site Leased 200 sq. ft. (plus easement for tower anchors and guy wires for tower located on adjacent owned property) KELO................ Sioux Falls, South Dakota ------------------------- Land, office, studio and Owned 23,700 sq. ft. transmission tower Reliance, South Dakota ---------------------- Transmission tower Owned 8.83 acres Rapid City, South Dakota ------------------------ Office and studio Leased 3,555 sq. ft. Transmission tower Owned 1 acre Philip, South Dakota -------------------- Transmission tower Leased 8.23 acres Wall, South Dakota ------------------ Transmission tower Leased 4 acres Beresford, South Dakota ----------------------- Transmission tower Leased 2.1 acres DeSmet Township, South Dakota ----------------------------- Transmission tower Owned 24,000 sq. ft. Garden City, South Dakota ------------------------- Transmission tower Owned 1 acre Auxiliary transmission tower Owned 1 acre Farmer, South Dakota -------------------- Transmission tower Owned 1 acre Mt. Vernon, South Dakota ------------------------ Transmission tower Owned 1 acre White Lake, South Dakota ---------------------------- Transmission tower Owned 1 acre New Underwood, South Dakota --------------------------- Transmission tower Leased 200 sq. ft.
32
Metropolitan Area Owned or and use Leased Approximate Size ----------------------- ---------- ---------------- WLNS................ Lansing, Michigan ----------------- Office and studio Owned 19,000 sq. ft. Land Owned 5 acres Meridian, Michigan ------------------ Transmission tower site Owned 40 acres KLFY................ Lafayette, Louisiana -------------------- Office and studio Owned 25,000 sq. ft. Land Owned 3 acres Maxie, Louisiana ---------------- Transmission tower site Leased 22,500 sq. ft. WKBT................ La Crosse, Wisconsin -------------------- Office and studio Owned 12,600 sq. ft. Gailesville, Wisconsin ---------------------- Transmission tower site Owned 133,600 sq. ft. WTVO................ Rockford, Illinois ------------------ Office and studio Owned 15,200 sq. ft. Land Owned 14 acres
ITEM 3. LEGAL PROCEEDINGS. The Company currently and from time-to-time is involved in litigation incidental to the conduct of its business. There are no pending legal proceedings to which the Company or any of the Subsidiaries is a party, or to which any of their respective properties is subject, which, in the opinion of Company management, is likely to have a material adverse effect on the Company's business or financial condition. 33 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. None. EXECUTIVE OFFICERS OF THE REGISTRANT. The executive officers of the Company are as follows: Name Age Position ---- --- -------- Vincent J. Young 49 Chairman and Director Adam Young 83 Treasurer and Director Ronald J. Kwasnick 50 President and Director James A. Morgan 48 Executive Vice President and Secretary Deborah A. McDermott 42 Executive Vice President-Operations Vincent J. Young has been the Chairman and a director of the Company since its inception in 1986. Mr. Young is also a member of the Compensation and Audit Committees of the Company. Mr. Young co-founded the Company with Adam Young. Vincent Young is also a director and the President of each of the corporate Subsidiaries. Currently, he is also the Chairman and a director of Adam Young Inc., a national television representation firm, a position he has held since 1980. Prior to becoming the Chairman of the Company, he worked at Adam Young Inc. for ten years in various marketing and representative capacities, including Vice-President, General Sales Manager, Eastern Sales Manager and Manager of the Chicago office. Vincent Young is the son of Adam Young. Adam Young has been the Treasurer and a director of the Company since its inception. Mr. Young is also a director and an executive officer of each of the corporate Subsidiaries. Mr. Young founded Adam Young Inc. in 1944 and has been active in television station representation since that time. Mr. Young is currently the Treasurer and a director of Adam Young Inc. Prior to the formation of the Company, Mr. Young owned minority interests in two radio stations, and a 30% interest in a television station in Youngstown, Ohio. Mr. Young served on the Board of Directors of the Television Advertising Bureau from 1977 to 1979 and has twice been President of the Station Representative Association, initially from 1955 through 1957, then from 1978 through 1980. Ronald J. Kwasnick has been the President of the Company since its inception and became a director in December 1994. From 1986 to 1989, Mr. Kwasnick was also the General Manager of WLNS, the Company's station in the Lansing, Michigan market. Mr. Kwasnick joined the Company in 1986, after working as Executive Vice President/Television for Adams Communications since 1984, where he served as General Manager of a group of network-affiliated television stations. Previously, since 1980, he had been the General Manager and President of WILX in Lansing, Michigan. Prior to that, he spent ten years working in various television sales management positions. 34 James A. Morgan joined the Company as its Executive Vice President in March 1993 and became the Secretary of the Company in September 1994. Mr. Morgan is also the Executive Vice President and Secretary of each of the corporate Subsidiaries. From 1984 until he joined the Company, he was a director and Senior Investment Officer at J.P. Morgan Capital Corporation involved in investing the firm's own capital in various leveraged and early growth stage companies. Deborah A. McDermott became the Executive Vice President-Operations of the Company in May 1996, and has been General Manager of WKRN, the Company's ABC network affiliate serving the Nashville, Tennessee market, since 1990. From 1986 to 1989, when WKRN was acquired by the Company, and thereafter through February 1990, she was Station Manager of that station. All executive officers serve at the discretion of the Board of Directors. 35 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Class A Common Stock is traded on the Nasdaq National Market ("Nasdaq") under the symbol YBTVA. The following table sets forth for the periods indicated the range of the high and low sales prices of the Class A Common Stock, as reported by Nasdaq. Quarters Ended High Low -------------- ---- --- March 31, 1995 $22.00 $17.50 June 30, 1995 27.00 20.75 September 30, 1995 35.25 25.00 December 31, 1995 30.50 24.00 March 31, 1996 32.25 25.00 June 30, 1996 38.25 27.75 September 30, 1996 41.50 29.00 December 31, 1996 36.00 26.25 At March 3, 1997, there were approximately 41 and 21 stockholders of record of the Company's Class A and Class B Common Stock, respectively. Such number does not include beneficial owners holding shares through nominee names. RECENT SALE OF UNREGISTERED SECURITIES On January 16, 1996, the Company completed the January 1996 Notes Offering of $125.0 million principal amount of its 9% Senior Subordinated Notes due 2006 (the "January 1996 Notes"). The January 1996 Notes were sold by the Company to Merrill Lynch & Co. and J.P. Morgan Securities Inc. (the "Initial Purchasers") pursuant to a Purchase Agreement dated January 9, 1996 in a transaction not registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption under Section 4(2) of the Securities Act as a transaction not involving a public offering. The Initial Purchasers subsequently resold the January 1996 Notes to qualified institutional buyers in reliance upon Rule 144A under the Securities Act. Pursuant to the terms of a Registration Rights Agreement entered into concurrently with the closing of the January 1996 Notes Offering, on May 30, 1996, the Company exchanged all of the originally issued notes with substantially identical notes, except that the new notes have been registered under the Securities Act. The Company used approximately $50.0 million of the proceeds of the January 1996 Notes Offering (approximately $121.9 million, net of the Initial Purchaser's discount) to repay all of its then outstanding indebtedness, including accrued interest, under the Senior Credit Facility. Of the remaining approximately $71.9 million of net proceeds, the Company used approximately $56.0 million to finance the Quad Cities Acquisition, and used the remaining net proceeds and borrowings under the Senior Credit Facility to finance the KELO Acquisition. 36 DIVIDEND POLICY The Company has never paid a dividend on its Common Stock and does not expect to pay dividends on its Common Stock in the foreseeable future. The terms of the Senior Credit Facility and the Indentures relating to the Company's outstanding Senior Subordinated Notes (the "Indentures") restrict the Company's ability to pay cash dividends on its Common Stock. Under the Senior Credit Facility, the Company is not permitted to pay any dividends on its Common Stock unless the total debt/operating cash flow ratio is less than 5.5x and the aggregate amount of all dividends does not exceed $20.0 million. Under the Indentures, the Company is not permitted to pay any dividends on its Common Stock unless the Company would continue to have the ability to incur indebtedness. In addition, under the Indentures, dividends may not exceed an amount equal to the Company's cash flow less a multiple of the Company's interest expense, plus the net proceeds of the sale by the Company of additional capital stock. ITEM 6. SELECTED FINANCIAL DATA. The following table presents selected consolidated financial data of the Company for the five years ended December 31, 1996, which have been derived from the Company's audited consolidated financial statements. The information in the following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and the notes thereto included elsewhere herein. The Company has not paid dividends on its capital stock during any of the periods presented below. 37
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 1992 1993 1994 1995 1996 ----------- ----------- ----------- ------------ ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Net revenues (1).................................. $ 59,799 $ 61,792 $ 78,788 $ 122,530 $ 154,343 Operating expenses, including selling, general and administrative expenses.............. 28,066 28,460 33,800 51,614 64,689 Amortization of program license rights............ 3,516 3,969 4,400 6,418 11,034 Depreciation and amortization..................... 18,790 13,859 15,280 24,572 30,946 Corporate overhead................................ 1,325 1,350 2,052 3,348 4,344 Non-cash compensation paid in common stock (2) - - 6,497 1,167 848 ---------- ---------- ---------- ----------- ----------- Operating income.................................. 8,102 14,154 16,759 35,411 42,482 Interest expense, net............................. 29,476 17,778 19,105 32,644 42,838 Other expenses (income)........................... 75 141 3 233 (1,261) ---------- ---------- ---------- ----------- ----------- Income (loss) before extraordinary item and cumulative effect of change in accounting principle........................................ (21,449) (3,765) (2,349) 2,534 905 Extraordinary loss on extinguishment of debt (3) (7,452) - (6,027) (9,125) - Cumulative effect of change in accounting principle (4).................................... - (1,520) - - - ---------- ---------- ---------- ----------- ----------- Net income (loss)................................. $ (28,901) $ (5,285) $ (8,376) $ (6,591) $ 905 ========== ========== ========== =========== =========== Income (loss) per common share before extraordinary item and cumulative effect of change in accounting principle................ $(9.60) $(3.82) $(3.62) $0.23 $0.08 Net income (loss) per common share (5)............ (12.93) (4.50) (5.42) (0.61) $0.08 Weighted average shares outstanding............... 2,234,370 2,234,370 3,339,794 11,071,154 11,783,122 OTHER FINANCIAL DATA: Cash flow provided by operating activities........ $ 13,449 $ 13,562 $ 12,697 $ 28,978 $ 35,092 Payments for program license liabilities.......... 4,710 4,003 4,170 6,747 10,385 Broadcast cash flow (6)........................... 27,023 29,329 40,818 64,169 79,269 Broadcast cash flow margin........................ 45.2% 47.5% 51.8% 52.4% 51.4% Operating cash flow (7)........................... $ 25,698 $ 27,979 $ 38,766 $ 60,821 $ 74,926 Capital expenditures.............................. 572 686 1,206 4,484 4,992 BALANCE SHEET DATA (AS OF END OF PERIOD): Total assets...................................... $ 167,327 $ 158,231 $ 316,827 $ 296,098 $ 893,151 Long-term debt (including current portion)........ 200,397 196,156 305,050 297,993 677,536 Stockholders' (deficit) equity.................... $ (46,401) $ (51,686) $ (11,654) $ (25,544) $ 80,504 (footnotes appear on following page)
38 - ---------------------------------- (1) Net revenues are total revenues net of agency and national representation commissions. (2) Represents non-cash charges for the issuance to key employees in 1994 and 1996 of shares of Common Stock and in 1995 of shares of Common Stock and below-market options to purchase shares of Common Stock. (3) Extraordinary loss for the years ended December 31, 1992, 1994 and 1995 resulted from the early extinguishment of debt. See Note 5 to Notes to Consolidated Financial Statements. (4) Cumulative effect of change in accounting principle for the year ended December 31, 1993 resulted from a change in accounting principle for amortization of program license rights. See Note 2 to Notes to Consolidated Financial Statements. (5) The computation of earnings per common share and common share equivalent is based upon the weighted number of common shares outstanding during the period plus (in periods in which they have a dilutive effect) the net effect of common shares contingently issuable, primarily from stock options and exercise of warrants. (6) "Broadcast cash flow" is defined as operating income before income taxes and interest expense, plus depreciation and amortization (including amortization of program license rights), non-cash compensation and corporate overhead, less payments for program license liabilities. The Company has included broadcast cash flow data because such data are commonly used as a measure of performance for broadcast companies and are also used by investors to measure a company's ability to service debt. Broadcast cash flow is not, and should not be used as, an indicator or alternative to operating income, net income or cash flow as reflected in the Consolidated Financial Statements, is not intended to represent funds available for debt service, dividends, reinvestment or other discretionary uses, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (7) "Operating cash flow" is defined as operating income before income taxes and interest expense, plus depreciation and amortization (including amortization of program license rights) and non-cash compensation, less payments for program license liabilities. The Company has included operating cash flow data because such data are used by investors to measure a company's ability to service debt and are used in calculating the amount of additional indebtedness that the Company may incur in the future under the Indentures. Operating cash flow does not purport to represent cash provided by operating activities as reflected in the Consolidated Financial Statements, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. INTRODUCTION The operating revenues of the Company's stations are derived primarily from advertising revenues and, to a much lesser extent, from compensation paid by the networks to the stations for broadcasting network programming. The stations' primary operating expenses are for employee compensation, news gathering, production, programming and promotion costs. A high proportion of the operating expenses of the stations are fixed. Advertising is sold for placement within and adjoining a station's network and locally originated programming. Advertising is sold in time increments and is priced primarily on the basis of a program's popularity among the specific audience an advertiser desires to reach, as measured principally by periodic audience surveys. In addition, advertising rates are affected by the number of advertisers competing for 39 the available time, the size and demographic makeup of the market served by the station and the availability of alternative advertising media in the market area. Rates are highest during the most desirable viewing hours, with corresponding reductions during other hours. The ratings of a local station affiliated with a national television network can be affected by ratings of network programming. Most advertising contracts are short-term, and generally run only for a few weeks. The Company estimates that approximately 54% of the annual gross revenue of the Company's stations is currently generated from local advertising, which is sold by a station's sales staff directly to local accounts, and the remainder of the advertising revenue primarily represents national advertising, which is sold by a national advertising sales representative. See "Certain Relationships and Related Transactions." The stations generally pay commissions to advertising agencies on local, regional and national advertising, and, on national advertising, the stations also pay commissions to the national sales representative. The advertising revenues of the Company's stations are generally highest in the second and fourth quarters of each year, due in part to increases in consumer advertising in the spring and retail advertising in the period leading up to and including the holiday season. In addition, advertising revenues are generally higher during even numbered election years due to spending by political candidates, which spending typically is heaviest during the fourth quarter. "Broadcast cash flow" is defined as operating income before income taxes and interest expense, plus depreciation and amortization (including amortization of program license rights), non-cash compensation and corporate overhead, less payments for program license liabilities. The Company has included broadcast cash flow data because such data are commonly used as a measure of performance for broadcast companies and are also used by investors to measure a company's ability to service debt. Broadcast cash flow is not, and should not be used as, an indicator or alternative to operating income, net income or cash flow as reflected in the Consolidated Financial Statements, is not intended to represent funds available for debt service, dividends, reinvestment or other discretionary uses, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. The following table sets forth certain operating data for the years ended December 31, 1994, 1995 and 1996.
Year Ended December 31, ----------------------------- 1994 1995 1996 -------- -------- --------- (in thousands) Operating income.............................. $16,759 $35,411 $ 42,482 Add: Amortization of program license rights...... 4,400 6,418 11,034 Depreciation and amortization............... 15,280 24,572 30,946 Corporate overhead.......................... 2,052 3,348 4,344 Non-cash compensation paid in common stock.. 6,497 1,167 848 Less: Payments for program license liabilities.... (4,170) (6,747) (10,385) ------- ------- -------- Broadcast cash flow........................... $40,818 $64,169 $ 79,269 ======= ======= ========
40 TELEVISION REVENUES Set forth below are the principal types of television revenues received by the Company's stations for the periods indicated and the percentage contribution of each to the Company's total revenues, as well as agency and national sales representative commissions:
Year Ended December 31, ------------------------------------------------------- 1994 1995 1996 ----------------- ----------------- ----------------- Amount % Amount % Amount % --------- ------ --------- ------ --------- ------ (dollars in thousands) Revenues Local.......................... $ 50,063 54.1% $ 77,980 54.3% $ 99,684 55.1% National....................... 32,327 35.0 51,546 35.9 57,298 31.6 Network compensation........... 4,564 4.9 9,873 6.9 11,335 6.3 Political...................... 4,546 4.9 1,835 1.3 9,791 5.4 Production and other........... 981 1.1 2,321 1.6 2,849 1.6 -------- ----- -------- ----- -------- ----- Total....................... 92,481 100.0 143,555 100.0 180,957 100.0 Agency and sales representative commissions.................... (13,693) (14.8) (21,025) (14.6) (26,614) (14.7) -------- ----- -------- ----- -------- ----- Net revenues..................... $ 78,788 85.2% $122,530 85.4% $154,343 85.3% ======== ===== ======== ===== ======== =====
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995 Actual ------ The following historical financial information include the results of KWQC, KELO and KCAL beginning on April 15, 1996, May 31, 1996 and November 25, 1996, respectively, the periods commencing upon their respective acquisitions by the Company. Net revenues for the year ended December 31, 1996 were $154.3 million, an increase of $31.8 million, or 26.0%, compared to $122.5 million for the year ended December 31, 1995, with the acquired stations accounting for $29.4 million of such increase. Political revenue for the year ended December 31, 1996 was $9.8 million, compared to $1.8 million for the year ended December 31, 1995, an increase of $8.0 million. The increase was attributable to 1996 being a national election year with more state and local elections, while 1995 had only limited state and local elections. Network compensation in 1996 increased $1.5 million, or 14.8%, with $1.1 million attributable to the acquired stations. Operating expenses, including selling, general and administrative expenses, for the year ended December 31, 1996 were $64.7 million, compared to $51.6 million for the year ended December 31, 1995, an increase of $13.1 million, or 25.4%. The acquired stations accounted for $12.9 million of the increase and the remaining increase is primarily attributable to higher local sales commissions resulting from higher sales volume. 41 Amortization of program license rights for the year ended December 31, 1996 was $11.0 million, compared to $6.4 million for the year ended December 31, 1995, an increase of $4.6 million, or 71.9%, with the acquired stations accounting for $3.9 million of such increase. Depreciation of property and equipment and amortization of intangible assets was $30.9 million for the year ended December 31, 1996, compared with $24.6 million for the comparable period in 1995, an increase of $6.3 million, or 25.6%. The increase results from depreciation and amortization at the acquired stations of $5.6 million, and the remaining increase being primarily attributable to increased capital expenditures in 1996. The Company made payments for program license liabilities of $10.4 million during the year ended December 31, 1996, compared to $6.7 million for the year ended December 31, 1995, an increase of $3.7 million, or 55.2%. Payments associated with the acquired stations were $3.5 million. Corporate overhead for the year ended December 31, 1996 was $4.3 million, compared to $3.3 million for the comparable period in 1995, an increase of $1.0 million, or 30.3%. This was the result of additional personnel and administrative costs. Non-cash compensation paid in Common Stock for the year ended December 31, 1996 was $848,000, compared to $1.2 million for the year ended December 31, 1995. Net interest expense for the year ended December 31, 1996 was $42.8 million, compared with $32.6 million for the comparable period in 1995, an increase of $10.2 million, or 31.3%. The increase is primarily attributable to the Company's higher debt level following the January 1996 Notes Offering and the debt associated with the acquisition of three stations. The Company held a $25 million interest rate swap agreement which expired on April 18, 1996. The interest expense resulting from this swap agreement amounted to $315,000 in 1996 and $952,000 in 1995. On June 12, 1995, the Company completed an offering (the "June 1995 Notes Offering") of $125 million principal amount of its 10-1/8% Senior Subordinated Notes due 2005. The Company used the net proceeds of the June 1995 Notes Offering (approximately $120.8 million) to repay certain of its then outstanding indebtedness under the Senior Credit Facility. Concurrently with the closing of the June 1995 Notes Offering, the Company entered into an amendment to its Senior Credit Facility. Net deferred charges of $9.1 million relating to such partial prepayment and amendment were written off as part of an extraordinary loss on early extinguishment of debt. As a result of the factors discussed above, the net income for the Company was $905,000 for the year ended December 31, 1996, compared with a net loss of $6.6 million for the same period in 1995, an increase in net income of $7.5 million. The 1995 net loss includes the extraordinary non-recurring loss of $9.1 million discussed above. Broadcast cash flow for the year ended December 31, 1996 was $79.3 million, compared with $64.2 million for the year ended December 31, 1995, an increase of $15.1 million, or 23.5%. Broadcast cash flow margins (broadcast cash flow divided by net revenues) for the year ended December 31, 1996 decreased to 51.4% from 52.4% for the same period in 1995. The increase in broadcast cash flow was a direct result of the three newly acquired stations and continued expense controls. The decrease in 42 broadcast cash flow margins is attributable to the purchase KCAL, an independent station. Independent stations generally operate at lower margins then those associated with networks. Approximately $13.0 million of the increased broadcast cash flow in 1996 is attributable to the acquired stations. Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Actual ------ The following historical financial information include the results of the three stations acquired (the "Nationwide Acquisition") from Nationwide Communications Inc. ("Nationwide") for the last 47 days of 1994, the period of 1994 following the Nationwide Acquisition, and for the entire year of 1995. Net revenues for the year ended December 31, 1995 were $122.5 million, an increase of $43.7 million, or 55.5%, compared to $78.8 million for the year ended December 31, 1994, with the acquired stations accounting for $39.1 million of such increase. Improvement in both the national and various local market economies led to an increase in the Company's national and local revenue of 7.2% and 7.5%, respectively, for the stations owned prior to the Nationwide Acquisition. Political revenue for the year ended December 31, 1995 was $1.8 million, compared to $4.5 million for the year ended December 31, 1994, a decrease of $2.7 million. The decrease was due to the fact that 1995 was not a congressional election year and in 1994 the stations benefitted from several governor and local legislative elections. Network compensation in 1995 increased $5.3 million, or 116.3%, with $3.0 million attributable to the acquired stations and $2.3 million due to the new network compensation arrangements (including a new affiliation agreement for WTVO), at the stations owned prior to the Nationwide Acquisition. Operating expenses, including selling, general and administrative expenses, for the year ended December 31, 1995 were $51.6 million, compared to $33.8 million for the year ended December 31, 1994, an increase of $17.8 million, or 52.7%. Operating expenses at the acquired stations were $16.8 million, and the remaining increase was primarily attributable to higher local sales commissions resulting from higher sales volume. Amortization of program license rights for the year ended December 31, 1995 was $6.4 million, compared to $4.4 million for the year ended December 31, 1994, an increase of $2.0 million, or 45.5%, with the acquired stations accounting for principally all of such increase. Depreciation of property and equipment and amortization of intangible assets was $24.6 million for the year ended December 31, 1995, compared with $15.3 million for the comparable period in 1994, an increase of $9.3 million, or 60.8%. The increase results from depreciation and amortization at the acquired stations of $8.5 million, and the remaining increase was primarily attributable to increased capital expenditures in 1995. The Company made payments for program license liabilities of $6.7 million during the year ended December 31, 1995, compared to $4.2 million for the year ended December 31, 1994, an increase of $2.5 million, or 59.5%. Payments associated with the acquired stations were $2.6 million. Corporate overhead for the year ended December 31, 1995 was $3.3 million, compared to $2.1 million for the comparable period in 1994, an increase of $1.2 million, or 57.1%. This was the result of additional personnel and administrative costs associated with being a public company. 43 Non-cash compensation paid in Common Stock for the year ended December 31, 1995 was $1.2 million consisting of below-market options and a contribution to the 401(k) plan, compared to $6.5 million for the year ended December 31, 1994 consisting of stock grants and a contribution to the 401(k) plan. Net interest expense for the year ended December 31, 1995 was $32.6 million, compared with $19.1 million for the comparable period in 1994, an increase of $13.5 million, or 70.7%. The increase is primarily attributable to the Company's higher debt level following the June 1995 Notes Offering. At December 31, 1995, the Company held a $25.0 million interest rate swap agreement which expired on April 18, 1996. The interest expense resulting from this swap agreement amounted to $952,000 in 1995, and the interest expense resulting from this and other swap agreements amounted to $1.9 million in 1994. This interest rate swap agreement was the only derivative instrument held by the Company at December 31, 1995. The Senior Credit Facility no longer requires the Company to enter into interest rate swap agreements for the purpose of interest rate protection. At December 31, 1995, fixed rate debt and interest rate swap agreements comprised $270.0 million, or 90.6%, of the Company's total debt. In June 1995, the Company incurred an approximately $9.1 million extraordinary loss on the extinguishment of debt. This loss was related to the partial repayment and the amendment of the Senior Credit Facility in connection with the June 1995 Notes Offering. As a result of the factors discussed above, including the non-recurring extraordinary loss referred to above, the net loss for the Company was $6.6 million for the year ended December 31, 1995, compared with a net loss of $8.4 million for the year ended December 31, 1994, a decrease of $1.8 million. Broadcast cash flow was $64.2 million for the year ended December 31, 1995, compared to $40.8 million for the year ended December 31, 1994, an increase of $23.4 million, or 57.4%. Broadcast cash flow margins (broadcast cash flow divided by net revenues) improved to 52.4% for the year ended December 31, 1995, compared to 51.8% for the same period in 1994. The increase in broadcast cash flow was a direct result of revenue growth and continued expense controls. Approximately $20.1 million of the increase is attributable to the acquired stations. Pro Forma Financial Data The following unaudited pro forma information give effect to the acquisitions of KWQC, KELO and KCAL (including annualized net expense reductions) and a new affiliation agreement for WTVO as if they had been effected on January 1, 1995 and 1996. The pro forma information does not purport to represent what the Company's results of operations would have been if such transactions had been effected at such dates and do not purport to project results of operations of the Company in any future period. 44
Year Ended ---------- December 31, 1995/(1)/ 1996/(1)/ ----------- ----------- (in thousands) Net revenues (2)........................ $ 245,788 $ 261,542 Operating expenses, including selling, general and administrative expenses.... 102,762 103,941 Amortization of program license rights.. 30,457 32,924 Depreciation and amortization (3)....... 50,492 50,931 Corporate overhead...................... 3,648 4,643 Non-cash compensation paid in common stock................................. 1,167 848 ---------- ---------- Operating income........................ $ 57,262 $ 68,255 ========== ========== Broadcast cash flow (4)................. $ 113,059 $ 124,830 Broadcast cash flow margin.............. 46.0% 47.7% Operating cash flow (5)................. $ 109,411 $ 120,187 Capital expenditures.................... 10,019 10,424 - -----------------------------
(1) Pro Forma adjustments to net revenues include additional annualized network compensation payable to the Company under the new WTVO and KELO affiliation agreements and a programming change at KWQC in the aggregate amount of $665,000 and $179,000, respectively, for the years ended December 31, 1995 and 1996. Pro forma adjustments to net revenues also include a decrease of $2.7 million and $803,000 for the years ended December 31, 1995 and 1996, respectively, relating to seven sitcoms not purchased in connection with the KCAL Acquisition. Pro forma adjustments include expense reductions relating to the KWQC, KELO and KCAL acquisitions of approximately $22.5 million and $22.8 million, respectively, for the years ended December 31, 1995 and 1996. (2) Net revenues are total revenues net of agency and national representation commissions. (3) Pro forma adjustments for 1995 represent the elimination of deferred financing costs in connection with the Senior Credit Facility as amended and restated in connection with the Offering, the additional amortization resulting from the January 1996 Notes Offering, the June 1995 Notes Offering and the Senior Credit Facility, and the depreciation of the fixed assets and amortization of the intangible assets acquired in 1996. (4) "Broadcast cash flow" is defined as operating income before income taxes and interest expense, plus depreciation and amortization (including amortization of program license rights), non-cash compensation and corporate overhead, less payments for program license liabilities. The Company has included broadcast cash flow data because such data are commonly used as a measure of performance for broadcast companies and are also used by investors to measure a company's ability to service debt. Broadcast cash flow is not, and should not be used as, an indicator or alternative to operating income, net income or cash flow as reflected in the Consolidated Financial Statements, is not intended to represent funds available for debt service, dividends, reinvestment or other discretionary uses, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (5) "Operating cash flow" is defined as operating income before income taxes and interest expense, plus depreciation and amortization (including amortization of program license rights) and non-cash 45 compensation, less payments for program license liabilities. The Company has included operating cash flow data because such data are used by investors to measure a company's ability to service debt and are used in calculating the amount of additional indebtedness that the Company may incur in the future under the Indentures. Operating cash flow does not purport to represent cash provided by operating activities as reflected in the Consolidated Financial Statements, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are cash flow from operations and funds available under the Senior Credit Facility. On November 15, 1996, the Senior Credit Facility was amended and restated to provide the Company with the ability to borrow up to $500.0 million in the form of (i) a seven year reducing revolving credit facility in the amount of $200.0 million (the "Revolver Facility") and (ii) a seven year amortizing term loan facility in the amount of $300.0 million (the "Term Facility"). The Company used approximately $54.8 million of the net proceeds of the Offering ($162.0 million) to effect the ABC Repurchase and used $20.0 million of such proceeds to repay in full all of its then outstanding indebtedness, including interest, under the Senior Credit Facility. The Company used $300.0 million of availability under the Term Facility, $5 million of availability under the Revolver Facility, the remaining net proceeds of the Offering ($87.2 million) and $6.0 million of its existing cash balances to finance the KCAL Acquisition (having a purchase price of $368.0 million, plus approximately $19.5 million for working capital) and to pay approximately $10.7 million of related fees and expenses. The Revolver Facility has a $185.0 million sublimit (the "Sublimit") for borrowings in connection with the acquisition of additional television stations (and businesses, if any, incidental thereto) pursuant to transactions which meet the following criteria: (i) each of the acquired stations will become a wholly- owned subsidiary of the Company and will become a part of the lenders' security package under the Senior Credit Facility, and (ii) the Company can demonstrate that after giving pro forma effect to each such acquisition (based upon assumptions, including identified cost savings, that the agents for the lenders find reasonable), the Company will be in compliance with all of the terms and conditions of the Senior Credit Facility and have a total debt/operating cash flow ratio of less than 6.0x. As of December 31, 1996, there was 302.0 million outstanding under the Senior Credit Facility, with $183.0 million available, subject to certain conditions, for borrowing for the purpose of financing acquisitions. Pursuant to the Senior Credit Facility, the Company is prohibited from making investments or advances to third parties exceeding $7.5 million in the aggregate unless the third party becomes a guarantor of the Company's obligations. However, the Company may utilize up to $20.0 million of its borrowing availability under the Sublimit for the purpose of repurchasing shares of Common Stock and for paying dividends, subject to the limitations set forth in the Indentures, provided that the total debt/operating cash flow ratio is less than 5.5x. In addition, the Company may utilize the undrawn amounts under the Sublimit to retire or prepay subordinated debt, subject to the limitations set forth in the Indentures, provided that the total debt/operating cash flow ratio is less than 5.0x, or 4.5x after June 30, 2000; if the ratio exceeds such amounts, the Company will be permitted to utilize only up to $20.0 million 46 of availability under the Sublimit. Undrawn amounts under the Revolver Facility are available to the Company for working capital requirements and general corporate purposes. Interest under the Senior Credit Facility is payable at the LIBOR rate, "CD Rate" or "Base Rate." In addition to the index rates, the Company pays a floating percentage tied to the Company's ratio of total debt to operating cash flow; ranging, in the case of LIBOR rate loans, from 0.25% based upon a ratio under 4:1 to 2.625% based upon a 6.5:1 or greater ratio. Each of the Subsidiaries has guaranteed the Company's obligations under the Senior Credit Facility. The Senior Credit Facility is secured by the pledge of all the stock of the Subsidiaries and a first priority lien on all of the assets of the Company and its Subsidiaries. The Senior Credit Facility imposes restrictions on the Company's ability to incur additional indebtedness. The Company will be permitted to incur, subject to the terms of the Indentures and satisfaction of the financial covenants of the Senior Credit Facility, unsecured subordinated debt, provided that the subordination and mandatory redemption provisions and the maturity of such indebtedness are comparable to the Company's existing Senior Subordinated Notes and that the proceeds are used to repay the outstanding balance of the Term Facility until the Company's debt to operating cash flow ratio is less than 4.5x. The Company is also restricted as to the amount of its capital lease obligations and guarantees. The Senior Credit Facility also restricts the ability of the Company to amend material terms of the Indentures. The Senior Credit Facility requires the Company to maintain certain financial ratios. The Company is required to maintain a total debt/operating cash flow ratio ranging from 6.25x presently to 4.50x during the year 2000 and thereafter. The Company is also required to maintain a senior debt/operating cash flow ratio ranging from 3.25x presently to 2.25x during the year 2000 and thereafter. Additionally, the Company is required to maintain an operating cash flow/total interest expense ratio ranging from 1.50x presently to 2.25x during the year 2000 and thereafter. The Company is also be required to maintain an operating cash flow minus capital expenditures to pro forma debt service ratio of no less than 1.10x at any time. Such ratios must be maintained as of the last day of the quarter for each of the periods. The Senior Credit Facility requires the Company to apply on April 30 of each year 50% or 75% (depending upon the level of the Company's total debt to operating cash flow ratio at the end of such year) of its "Excess Cash Flow" for the preceding completed fiscal year to reduce outstanding debt under the Term Facility. In addition, the Company is required to apply from the proceeds of any permitted equity issuance and certain subordinated debt issuances an amount sufficient to reduce the Company's debt ratio to specified levels. The Senior Credit Facility also contains a number of customary covenants including, among others, limitations on investments and advances, mergers and sales of assets, liens on assets, affiliate transactions and changes in business. The Company may, subject to the financial covenants of the Senior Credit Facility, sell assets constituting less than 15% of its operating cash flow. The Company from time to time investigates alternatives for replacing or refinancing its existing Senior Credit Facility. Any such replacement or refinancing may or may not have terms and conditions, including restrictive covenants and maintenance tests, similar to those in the Senior Credit Facility. Interest on the January 1996 Notes is payable semi-annually on January 15 and July 15, interest on the June 1995 Notes is payable semi-annually on February 15 and August 15, and interest on the Company's 11-3/4% Senior Subordinated Notes due 2004 (the "November 1994 Notes") is payable 47 semi-annually on May 15 and November 15. The Indentures impose certain limitations on the ability of the Company and certain of its Subsidiaries to, among other things, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, incur indebtedness that is subordinate in right of payment to any Senior Debt and senior in right of payment to the Notes, incur liens, impose restrictions on the ability of a Subsidiary to pay dividends or make certain payments to the Company, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. A $5.0 million portion of the purchase price in connection with the November 1994 acquisitions has been deferred (having a net present value as of December 31, 1996, discounted at 11.9%, of $3.3 million) and is payable over the remaining three-year period, without interest, in equal annual installments, with the first such installment having been paid on November 14, 1995. The Company paid a $3.0 million portion of the purchase price in connection with the KELO Acquisition by delivery of a promissory note, the principal amount of which will be payable in full on May 31, 1998, and which requires quarterly payments of interest accrui ng at the prime rate. The Company regularly enters into program contracts for the right to broadcast television programs produced by others and program commitments for the right to broadcast programs in the future. Such programming commitments are generally made to replace expiring or canceled program rights. Payments under such contracts are made in cash or the concession of advertising spots to the program provider to resell, or a combination of both. The Company anticipates that its operating cash flow, together with the amounts available under the Senior Credit Facility, will be sufficient to finance the operating requirements of its stations, debt service requirements and anticipated capital expenditures. The Company is regularly presented with opportunities to acquire television stations which it evaluates on the basis of its acquisition strategy. The Company does not presently have any agreements to acquire any television stations. See "Business-Acquisition Strategy." INCOME TAXES The Company and its Subsidiaries file a consolidated federal income tax return and such state or local tax returns as are required. The Company has $148.0 million of net operating loss ("NOL") carryforwards which are subject to Section 382 limitations. See Note 9 to Notes to Consolidated Financial Statements. The Company does not currently anticipate using these losses in the foreseeable future. Therefore, the NOL has not been recognized. 48 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index to Consolidated Financial Statements ------------------------------------------
Page - -------------------------------------------------------------------------------------------- Report of Independent Auditors 50 Consolidated Balance Sheets as of December 31, 1995 and 1996 51 Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996 53 Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 1994, 1995 and 1996 54 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996 55 Notes to Consolidated Financial Statements 56 Schedule II -- Valuation and Qualifying Accounts 69
49 Report of Independent Auditors Board of Directors and Stockholders Young Broadcasting Inc. We have audited the accompanying consolidated balance sheets of Young Broadcasting Inc. and subsidiaries as of December 31, 1995 and 1996, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Young Broadcasting Inc. and subsidiaries at December 31, 1995 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP New York, New York February 14, 1997 50 Young Broadcasting Inc. and Subsidiaries Consolidated Balance Sheets
December 31, 1995 1996 --------------------------------- ASSETS Current assets: Cash and cash equivalents (Note 2) 3,425,633 7,004,744 Trade accounts receivable, less allowance for doubtful accounts of $785,000 in 1995 and $2,210,000 in 1996 27,431,914 60,152,494 Current portion of loans receivable - officers (Note 12) 808,783 391,862 Current portion of program license rights (Notes 2 and 4) 6,426,198 21,678,077 Prepaid expenses 956,052 1,852,728 --------------------------------- Total current assets 39,048,580 91,079,905 --------------------------------- Property and equipment (Notes 2 and 11): Land and land improvements 5,165,489 6,168,847 Buildings and building improvements 23,094,346 34,405,906 Broadcast equipment 87,023,341 174,107,936 Office furniture, fixtures and other equipment 5,306,416 8,174,769 Vehicles 1,385,790 3,942,307 --------------------------------- 121,975,382 226,799,765 Less accumulated depreciation and amortization 62,844,245 79,497,810 --------------------------------- Net property and equipment 59,131,137 147,301,955 Program license rights, excluding current portion (Notes 2 and 4) 3,180,397 2,436,121 Deposits and other assets 1,545,285 457,354 Loans receivable - officers, excluding current portion (Note 12) 1,194,175 1,040,445 Broadcasting licenses and other intangibles, less accumulated amortization of $63,852,304 in 1995 and $73,462,193 in 1996 (Note 2) 180,722,385 624,074,518 Deferred charges less accumulated amortization of $1,536,057 in 1995 and $4,338,888 in 1996 (Notes 2, 3 and 5) 11,275,993 26,760,865 ================================= Total assets $ 296,097,952 $ 893,151,163 =================================
See accompanying notes to consolidated financial statements. 51
December 31, 1995 1996 --------------------------------- LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Trade accounts payable $ 4,482,852 $ 23,392,064 Accrued expenses and other liabilities: Interest (Notes 6 and 7) 6,920,874 13,359,133 Other 3,391,684 5,802,974 --------------------------------- Total accrued expenses 10,312,558 19,162,107 Current installments of program license liability (Notes 2 and 4) 5,817,936 17,312,771 Current installments of long-term debt (Note 6) 907,834 11,913,237 Current installments of obligations under capital leases (Note 11) 48,335 802,851 --------------------------------- Total current liabilities 21,569,515 72,583,030 Program license liability, excluding current installments (Notes 2 and 4) 3,035,951 2,403,121 Long-term debt, excluding current installments (Note 6) 51,949,014 295,535,960 11.75% Senior Subordinated Notes (Note 7) 120,000,000 120,000,000 10.125% Senior Subordinated Notes (Note 7) 125,000,000 125,000,000 9% Senior Subordinated Notes (Note 7) - 125,000,000 Deferred tax liability (Note 9) - 71,450,273 Obligations under capital leases, excluding current installments (Note 11) 87,589 674,556 --------------------------------- Total liabilities 321,642,069 812,646,940 --------------------------------- Stockholders' (deficit) equity (Note 8): Class A Common Stock, $.001 par value. Authorized 20,000,000 shares; issued and outstanding 4,955,088 shares at 1995 and 4,955 12,209 12,208,127 shares at 1996 Class B Common Stock, $.001 par value. Authorized 20,000,000 shares; issued and outstanding 2,029,620 shares at 1995 and 2,029 2,022 2,022,230 shares at 1996 Class C Common Stock, $.001 par value; Authorized 20,000,000 shares; issued and outstanding 3,563,473 shares at 1995 and 0 3,564 - at 1996 Additional paid-in capital 128,051,024 233,190,382 Accumulated deficit (153,605,689) (152,700,390) --------------------------------- Total stockholders' (deficit) equity (25,544,117) 80,504,223 --------------------------------- ================================= Total liabilities and stockholders' (deficit) equity $ 296,097,952 $ 893,151,163 =================================
See accompanying notes to consolidated financial statements. 52 Young Broadcasting Inc. and Subsidiaries Consolidated Statements of Operations
YEAR ENDED DECEMBER 31, 1994 1995 1996 ----------------------------------------------- Net operating revenue $ 78,788,183 $122,529,927 $154,342,931 ----------------------------------------------- Operating expenses 17,650,963 28,033,649 35,614,209 Amortization of program license rights 4,399,915 6,418,181 11,033,812 Selling, general and administrative expenses 16,149,417 23,580,352 29,074,947 Depreciation and amortization 15,280,392 24,572,388 30,945,622 Corporate overhead 2,051,891 3,347,931 4,343,449 Non-cash compensation (Notes 8 and 10) 6,497,480 1,166,651 848,469 ----------------------------------------------- Operating income 16,758,125 35,410,775 42,482,423 ----------------------------------------------- Interest income 175,551 378,380 2,098,939 Interest expense (19,104,468) (32,644,274) (42,837,629) Other expenses, net (179,043) (611,138) (838,434) ----------------------------------------------- (19,107,960) (32,877,032) (41,577,124) ----------------------------------------------- (Loss) income before extraordinary item (2,349,835) 2,533,743 905,299 Extraordinary loss on extinguishment of debt (Note 5) (6,026,668) (9,125,000 - ----------------------------------------------- Net (loss) income (8,376,503) (6,591,257) 905,299 Preferred dividends (9,712,397) - - =============================================== Net (loss) income applicable to common stockholders $(18,088,900) $ (6,591,257) $ 905,299 =============================================== (Loss) income per common share: (Loss) income before extraordinary item $ (3.62) $ .23 $ .08 Extraordinary loss on extinguishment of debt (1.80) (.84) - ----------------------------------------------- Net (loss) income $ (5.42) $ (.61) $ .08 =============================================== Weighted average shares 3,339,794 11,071,154 11,783,122 ===============================================
See accompanying notes to consolidated financial statements. 53 Young Broadcasting Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity (Deficit)
Preferred Stock ------------------------------------------------------------------------ Series A Series B Series C Series D Series E Series F --------- --------- --------- --------- ------------ ----------------- Balance at January 1, 1994.............. $190 $30 $200 $123 $186 $24 Issuance of management shares....... - - - - - - Issuance of incentive stock grants............................ - - - - - - Issuance of Class A Common Stock...................... - - - - - - Issuance of Class C Common Stock...................... - - - - - - Conversion of Series A, B and C Preferred Stock................. (190) (30) (200) - - - Repurchase of Series D, E and F Preferred Stock................. - - - (123) (186) (24) Net (loss) for 1994................. - - - - - - Balance at December 31, 1994.................................. - - - - - - Contribution of shares into Company's defined contribution plan......... - - - - - - Issuance of stock options below market value................ - - - - - - Exercise of stock options........... - - - - - - Conversion of Class B and C Common Stock to Class A Common Stock..... - - - - - - Repurchase and retirement of Class A and C Common Stock................ - - - - - - Net (loss) for 1995................. - - - - - - Balance at December 31, 1995............ $- $- $- $- $- $- Repurchase and retirement of Class A Common Stock...................... - - - - - - Contribution of shares into Company's defined contribution plan......... - - - - - - Exercise of stock options........... - - - - - - Issuance of stock options below market value................ - - - - - - Conversion of Class C Common Stock to Class A Common Stock..... - - - - - - Issuance of Class A Common Stock...................... - - - - - - Repurchase of Class C Common Stock.. - - - - - - Conversion of Class B Common Stock to Class A Common Stock..... - - - - - - Net income for 1996................. - - - - - - Balance at December 31, 1996............ $- $- $- $- $- $- ======== ======== ======== ======== ======== ======== Common Stock Additional Total --------------------------- Paid-In Accumulated Stockholders' Class A Class B Class C Capital Deficit Equity (Deficit) --------------------------------------------------------------------------------- Balance at January 1, 1994........................ $1,647 $267 - $86,949,181 ($138,637,929) ($51,686,081) Issuance of management shares................. - 214 - 4,046,786 - 4,047,000 Issuance of incentive stock grants...................................... - 108 - 2,050,372 - 2,050,480 Issuance of Class A Common Stock................................ 3,672 - - 65,065,301 - 65,068,973 Issuance of Class C Common Stock................................ - - 1,500 24,998,500 - 25,000,000 Conversion of Series A, B and C Preferred Stock........................... (494) 1,450 2,455 (2,991) - - Repurchase of Series D, E and F Preferred Stock........................... - - - (47,757,633) - (47,757,633) Net (loss) for 1994........................... - - - - (8,376,503) (8,376,503) Balance at December 31, 1994............................................ 4,825 2,039 3,955 135,349,516 (147,014,432) (11,653,764) Contribution of shares into Company's defined contribution plan................... 22 - - 471,866 - 471,888 Issuance of stock options below market value.......................... - - - 366,094 - 366,094 Exercise of stock options..................... 19 - - 49,981 - 50,000 Conversion of Class B and C Common Stock to Class A Common Stock............... 116 (10) (106) - - - Repurchase and retirement of Class A and C Common Stock.......................... (27) - (285) (8,186,433) - (8,186,745) Net (loss) for 1995........................... - - - - (6,591,257) (6,591,257) Balance at December 31, 1995...................... 4,955 2,029 3,564 128,051,024 (153,605,689) (25,543,784) Repurchase and retirement of Class A Common Stock................................ (111) - - (2,923,693) - (2,923,804) Contribution of shares into Company's defined contribution plan................... 28 - - 728,641 - 728,669 Exercise of stock options..................... 16 - - 313,495 - 313,511 Issuance of stock options below market value.......................... - - - 15,400 - 15,400 Conversion of Class C Common Stock to Class A Common Stock............... 2,064 - (2,064) - - - Issuance of Class A Common Stock................................ 5,250 - - 161,772,765 - 161,778,015 Repurchase of Class C Common Stock............ - - (1,500) (54,767,250) - (54,768,750) Conversion of Class B Common Stock to Class A Common Stock............... 7 (7) - - - - Net income for 1996........................... - - - - 905,299 905,299 Balance at December 31, 1996...................... $12,209 $2,022 $0 $233,190,382 ($152,700,390) $80,504,556 ======== ======== ======== ============== ================ =============
See accompanying notes to consolidated financial statements. Young Broadcasting Inc. and Subsidiaries Consolidated Statements of Cash Flows
Year ended December 31, 1994 1995 1996 ------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $(8,376,503) $(6,591,257) $ 905,299 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization of property and equipment 7,108,170 13,640,551 16,832,919 Amortization of program license rights 4,399,915 6,418,181 11,033,812 Amortization of broadcasting licenses, other intangibles and deferred charges 8,172,222 10,931,837 14,112,703 Non-cash compensation paid in Common Stock 6,497,480 1,166,651 848,469 Non-cash interest expense on outstanding indebtedness 57,338 420,712 357,147 Loss on disposal of fixed assets - - 106,601 Extraordinary loss on extinguishment of debt 6,026,668 9,125,000 - Deferred acquisition and debt refinancing costs incurred (10,900,000) (3,437,500) (13,125,000) Increase in trade accounts receivable (4,730,606) (3,111,102) (4,367,243) Increase in prepaid expenses (530,296) (197,842) (703,641) Increase (decrease) in trade accounts payable 1,198,745 (713,168) 6,067,699 Increase in accrued expenses 3,773,863 1,326,436 3,023,127 ------------------------------------------------- Net cash provided by operating activities 12,696,996 28,978,499 35,091,892 ------------------------------------------------- INVESTING ACTIVITIES Purchase of Nationwide stations (145,000,000) - - Purchase of KCAL-TV - - (387,508,018) Purchase of KWQC-TV - - (57,173,000) Purchase of KELO-TV - - (48,281,308) Capital expenditures (1,205,858) (4,484,478) (4,991,766) (Increase) decrease in deposits and other assets (22,983) (1,315,839) 1,113,231 ------------------------------------------------- Net cash used in investing activities (146,228,841) (5,800,317) (496,840,861) ------------------------------------------------- FINANCING ACTIVITIES Proceeds from issuance of long-term debt 185,000,000 - 305,000,000 Proceeds from issuance of public subordinated debt 120,000,000 125,000,000 125,000,000 Borrowings from working capital facility - 17,000,000 25,400,000 Principal payments on old long-term debt (165,400,774) - - Principal payments on new long-term debt (4,000,000) (149,235,202) (79,164,798) Principal payments on old subordinated debt (29,440,773) - - Payment of call premium on old subordinated debt (3,319,381) - - Deferred acquisition and debt refinancing costs incurred (5,235,043) (3,694,868) (4,872,776) Net proceeds from issuance of Class A Common Stock 65,068,972 - 161,778,015 Repurchase of D, E & F Preferred Stock (47,757,966) - - Repurchase of Class A and C Common Stock - (8,186,745) (57,692,555) Proceeds from issuance of Class C Common Stock 25,000,000 - - Proceeds from exercise of options - 50,000 313,511 Principal payments under capital lease obligations (402,177) (243,108) (48,335) Payments on programming license liabilities (4,169,673) (6,747,028) (10,384,982) ------------------------------------------------- Net cash provided by (used in) financing activities 135,343,185 (26,056,951) 465,328,080 ------------------------------------------------- Net increase (decrease) in cash 1,811,340 (2,878,769) 3,579,111 Cash and cash equivalents at beginning of year 4,493,062 6,304,402 3,425,633 ================================================= Cash and cash equivalents at end of year $ 6,304,402 $ 3,425,633 $ 7,004,744 ================================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $17,265,826 $29,199,781 $35,980,944 Income taxes paid $ - $ - $ -
See accompanying notes to consolidated financial statements. 55 Young Broadcasting Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. OPERATIONS OF THE COMPANY The business operations of Young Broadcasting Inc. and subsidiaries (the "Company") consist of eleven network affiliated (four with CBS, six with ABC, and one with NBC), and one independent commercial television broadcasting stations in the states of Michigan, Wisconsin, Louisiana, Illinois, Tennessee, New York, Virginia, Iowa, South Dakota and California. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the financial statements of Young Broadcasting Inc., its wholly-owned subsidiaries and three limited partnerships. Significant intercompany accounts and transactions have been eliminated in consolidation. CONCENTRATION OF CREDIT RISK The Company provides advertising air time to national, regional and local advertisers within the geographic areas in which the Company operates. Credit is extended based on an evaluation of the customer's financial condition, and advance payment is not generally required. Credit losses are provided for in the financial statements and have consistently been within management's expectations. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The principal areas of judgment relate to the allowance for doubtful accounts and the realizability of program license rights. Actual results could differ from those estimates. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's Senior Debt at December 31, 1996 of $302.0 million approximates its fair value as its interest rate floats with market conditions. At December 31, 1996, the Company's $120.0 million (11 3/4%), $125.0 million (10 1/8%), and $125.0 million (9%) senior subordinated notes were trading in the public market with ask prices of 107, 98.5 and 97.3, respectively. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. PROGRAM LICENSE RIGHTS Program license rights are stated at cost, less accumulated amortization. Program license rights acquired as part of a station acquisition are recorded at their appraised value. Program rights with lives greater than one year, and when the Company has the right to multiple showings, are amortized using an accelerated method. Program rights expected to be amortized in the succeeding year and amounts payable within one year are classified as current assets and liabilities, respectively. Program rights with lives of one year or less, where the Company is entitled to air each episode one time, are amortized on a straight-line basis. 56 PROPERTY AND EQUIPMENT Property and equipment are stated on the basis of cost, less accumulated depreciation. Equipment under capital leases is stated at the present value of the future minimum lease payments at the inception of the lease, less accumulated depreciation. Major renewals and improvements are charged to the property and equipment accounts. Maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently. Depreciation and amortization of property and equipment are calculated on the straight-line basis over the estimated useful lives of the assets. Equipment held under capital leases is generally amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset. The estimated useful lives of depreciable assets are as follows: ESTIMATED CLASSIFICATION USEFUL LIVES - ------------------------------------------------------------------------- Land improvements 5-19 years Buildings and building improvements 5-40 years Broadcast equipment 3-10 years Office furniture, fixtures and other equipment 5-8 years Vehicles 3-5 years BROADCASTING LICENSES AND OTHER INTANGIBLES Intangible assets, which include broadcasting licenses, network affiliation agreements, and other intangibles are carried on the basis of cost, less accumulated amortization. Cost is based upon appraisals. Intangible assets are amortized over varying periods, not exceeding 40 years. DEFERRED CHARGES Deferred charges incurred during 1994 consisted primarily of debt issuance costs incurred in connection with the Company's refinancing. As a result of the refinancing, approximately $6 million of net deferred charges incurred prior to 1994 were expensed in 1994 and included as part of the extraordinary item in the accompanying statements of operations (see Note 5). Deferred charges incurred during 1995 consisted primarily of debt issuance costs incurred in connection with the Company's 10 1/8% Senior Subordinated Notes issued on June 12, 1995 (see Note 7), concurrent with an amendment to its Senior Credit Facility (see Note 6). As a result of the amendment, approximately $9.1 million of net deferred charges incurred in 1994 were expensed in 1995 and included as part of the extraordinary item in the accompanying statements of operations (see Note 5). Deferred charges incurred during 1996 consisted primarily of debt issuance costs incurred in connection with the Company's 9% Senior Subordinated Notes issued on January 16, 1996 (see Note 7) and an amendment to and restatement of its Senior Credit Facility on November 15, 1996 (see Note 6). REVENUE The Company's primary source of revenue is the sale of television time to advertisers. Revenue is recorded when the advertisements are broadcast. 57 BARTER ARRANGEMENTS The Company, in the ordinary course of business, provides advertising air time to certain customers in exchange for products or services. Barter transactions are recorded on the basis of the estimated fair market value of the products or services received. Revenue is recognized as the related advertising is broadcast and expenses are recognized when the merchandise or services are consumed or utilized. Barter revenue transactions related to the purchase of equipment amounted to approximately $67,000, $22,000 and $36,000 in 1994, 1995 and 1996, respectively, and are depreciated in accordance with Company policy as stated above. The Company has entered into barter agreements with program syndicators for television programs with an estimated fair market value, recorded as assets and liabilities at December 31, 1995 and 1996, of $1.1 million and $5.0 million, respectively. INCOME TAXES The Company and its subsidiaries file a consolidated federal income tax return and separate state tax returns. In addition, partnership returns are filed for its three limited partnerships. Since the partners are all participants in the consolidation, all partnership income or losses are ultimately included in the consolidated federal income tax return. The future utilization of a significant portion of the Company's net operating losses for federal income tax purposes is subject to an annual limitation (see Note 9). EARNINGS PER SHARE Net (loss) income per common share is computed by dividing net (loss) income less the amount applicable to preferred stock dividends, by the weighted average common shares outstanding during the year. When dilutive, common stock equivalents are included as stock equivalents using the treasury stock method. RECLASSIFICATION OF ACCOUNTS Certain prior year amounts have been reclassified to conform to current year's presentation. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The Company adopted Statement No. 121 in the first quarter of 1996. The effect of the adoption had no impact on the Company's results of operations. 3. ACQUISITION OF STATIONS On November 14, 1994, the Company acquired from Nationwide Communications Inc. ("Nationwide") all of the assets of three network affiliated television stations (WRIC-TV, WATE-TV and WBAY-TV or "Nationwide Stations") for $150,000,000 ("Acquisition") plus outstanding receivables of the stations. Of the purchase price, $5,000,000 was in the form of a note and will be paid over a five year period, without interest, in equal annual installments. The net present value of such note, discounted at 11.9%, was $3,092,000 and $2,449,000 at December 31, 1995 and 1996, respectively. The Acquisition was accounted for as a purchase. Based on the Company's allocation of the purchase price, intangible assets amounted to $94,017,000 and will be amortized over their estimated lives which will not exceed 40 years. The operating results of the Nationwide Stations are included in the Company's consolidated results of operations for the entire year in 1995 and 1996. On April 15, 1996, the Company acquired from Broad Street Television, L.P. the assets of KWQC-TV ("KWQC"), Channel 6, in Davenport, Iowa, for approximately $55 million plus outstanding receivables of 58 the station. The acquisition was accounted for as a purchase. Based on the Company's allocation of the purchase price, intangible assets amounted to $44.3 million and will be amortized over their estimated lives which will not exceed 40 years. The KWQC acquisition was financed with approximately $56.2 million of net proceeds from the January 1996 $125 million 9% Senior Subordinated Notes Offering ("the January 1996 Notes") due 2006 (see Note 7). The operating results of KWQC are included in the Company's consolidated results of operations from the date of acquisition. On May 31, 1996, the Company acquired from Midcontinent Television of South Dakota, a wholly owned subsidiary of Midcontinent Media, Inc., the assets of KELO-TV ("KELO"), Channel 11, in Sioux Falls, South Dakota and its satellite stations for $50 million plus outstanding receivables of the stations. This acquisition was accounted for as a purchase. Based on the Company's allocation of the purchase price, intangible assets amounted to $25.0 million and will be amortized over their estimated lives which will not exceed 40 years. The KELO acquisition was financed with approximately $15.7 million of net proceeds from the January 1996 Notes, $25.4 million under the Senior Credit Facility, a $3.0 million promissory note and the remaining balance from cash balances of the Company. The operating results of KELO are included in the Company's consolidated results of operations from the date of acquisition. On November 23, 1996, the Company acquired from a subsidiary of the Walt Disney Company ("Disney") the assets of KCAL-TV ("KCAL"), Channel 9, in Los Angeles, California, for $368 million plus working capital of approximately $19.5 million of the station. The acquisition was accounted for as a purchase. Based on the Company's preliminary allocation of the purchase price, intangible assets amounted to approximately $314.1 million and will be amortized over their estimated lives which will not exceed 40 years. The KCAL acquisition was financed with approximately $305.0 million under the Senior Credit Facility and the remaining from an equity offering in 1996 (see Note 8). The operating results of KCAL are included in the Company's consolidated results of operations from the date of acquisition. The following unaudited proforma information for 1994 gives effect to the Nationwide Stations Acquisition (including expense reductions) as if it had been effected on January 1, 1994. In addition, the following unaudited pro forma information for 1995 and 1996 gives effect to the acquisitions of KWQC, KELO and KCAL (including expense reductions) and the WTVO affiliation agreement as if they had been effected on January 1, 1995 and 1996. The pro forma information for the years ended December 31, 1994, 1995 and 1996 does not purport to represent what the Company's results of operations would have been if such transactions had been effected at such dates and do not purport to project results of operations of the Company in any future period. Year Ended December 31, ----------------------- (unaudited) 1994 (1) 1995 (2) 1996 (2) ------------------------------------- (in thousands, except per share amounts) Net Operating Revenue (3) $117,140 $ 245,788 $ 261,542 Operating Income 31,588 57,262 68,255 Income before extraordinary item 7,243 (6,674) 3,512 Net (loss) income 1,216 (15,799) 3,512 Net (loss) income applicable to common shareholders $ (8,496) $ (15,799) $ 3,512 Net (loss) income per common share $ (1.08) $ (1.43) $ 0.30 (1) Pro forma adjustments to net revenues include additional annualized network compensation payable to the Company under the Nationwide Stations affiliation agreements of $3.4 million in 1994. Pro forma adjustments relating to the Nationwide Stations include annualized expense reductions of approximately $4.1 million and additional corporate overhead of approximately $550,000 in 1994. (2) Pro forma adjustments to net revenues include additional annualized network compensation payable to the Company under the WTVO and KELO affiliation agreements and a programming change at 59 KWQC in the aggregate amount of $665,000 and $179,000, respectively, for the years ended December 31, 1995 and 1996. Proforma adjustments to net revenues also include a decrease of $2.7 million and $803,000, for the years ended December 31, 1995 and 1996, relating to seven sitcoms not being purchased in connection with the KCAL acquisition. Pro forma adjustments include expense reductions relating to the KWQC, KELO and KCAL acquisitions of approximately $22.5 million and $22.8 million, respectively, for the years ended December 31, 1995 and 1996. (3) Net operating revenue is total revenue net of agency and national representation commissions. 4. PROGRAM LICENSE RIGHTS AND LIABILITY The Company entered into agreements for program license rights which became available in 1995 and 1996 of approximately $6.8 million and $7.4 million, respectively. The unpaid program license liability, which is reflected in the December 31, 1996 balance sheet, is payable during each of the years subsequent to 1996 as follows: 1997, $17.3 million; 1998, $2.1 million and 1999, $312,000. The obligation for programming that has been contracted for but not recorded in the accompanying balance sheets because the program rights were not currently available for airing aggregated approximately $9.8 million and $12.8 million at December 31, 1995 and 1996, respectively. 5. REFINANCING AND EXTRAORDINARY ITEMS In connection with the financing plan implemented on November 14, 1994 ("1994 Refinancing"), deferred financing costs, arising from a 1992 restructuring of the Company's debt, with a net carrying value of $2.7 million were charged to earnings as part of an extraordinary item in 1994. In addition, a call premium amounting to $3.3 million was paid to the Subordinated Debt Holders in connection with the early extinguishment of that debt. This amount was also included in the 1994 extraordinary item. Deferred financing costs, arising from the 1994 Refinancing, with a net carrying value of $9.1 million were charged to 1995 earnings as part of an extraordinary item in connection with the Company's completion of a financing plan on June 12, 1995 ("June 1995 Refinancing"). 6. LONG -TERM DEBT Long-term debt (excluding Senior Subordinated Notes) at December 31, 1995 and 1996 consisted of the following: 1995 1996 -------------------- (in thousands) Senior Credit Facility $49,765 $302,000 Nationwide Seller Note 3,092 2,449 Midcontinent Seller Note - 3,000 -------------------- Total long-term debt 52,857 307,449 Less: Scheduled current maturities 908 908 Additional payments of excess cash required - 11,005 -------------------- Long-term debt excluding all current installments $51,949 $295,536 ==================== On November 14, 1994, the Company established a senior credit facility ("Senior Credit Facility"). 60 On November 15, 1996, the Company amended and restated its Senior Credit Facility ("Amendment"). The Amendment provides for borrowings of up to an aggregate amount of $500.0 million consisting of a seven year amortizing term loan facility ("Term Loan") in the amount of $300.0 million and a seven year reducing revolving credit facility ("Revolver") in the amount of $200.0 million. At December 31, 1996, the Company had outstanding borrowings of $300.0 million under the Term Loan, and $2.0 million under the Revolver. The aggregate fixed maturities under the Term Loan for each year subsequent to December 31, 1996 are as follows: 1997, $11.0 million; 1998, $21.7 million; 1999, $35.7 million; 2000, $40.9 million; 2001, $55.4 million; and $135.3 million thereafter. In addition to scheduled principal payments, the Senior Credit Facility requires the Company to compute at the end of each fiscal year its excess cash flow, as defined, and to pay 50% or 75% of such (depending upon the level of the Company's total debt to operating cash flow ratio at the end of such year) amount to the lenders before April 30 of the subsequent year. Payments pursuant to this requirement permanently reduce outstanding debt under Facility A. For the year ended December 31, 1996, an excess cash flow payment of $11.0 million will be paid to the lenders before April 30, 1997. The Senior Credit Facility provides, at the option of the Company, that borrowed funds bear interest based upon the bank's base rate, London Interbank Offered Rate (LIBOR), the customary "CD Rate" or "Base Rate." In addition to the index rate, the Company pays a floating percentage on borrowings under Facility A tied to the interest rate option and the Company's ratio of total debt to operating cash flow, ranging from 0.25% based upon a ratio under 4:1 to 2.75% based upon a 6.5:1 or greater ratio. For the year ended December 31, 1996, this floating percentage was 2.0%. For the year ended December 31, 1996, the effective interest rate for amounts outstanding under the Senior Credit Facility was 7.83%. The Senior Credit Facility contains, among other things, limitations on dividends and investments, and requires the Company to maintain certain financial ratios. At December 31, 1996, the Company was in compliance with all such covenants. The Senior Credit Facility is secured by a pledge of all the stock of the Company's subsidiaries and a first priority lien on substantially all of the assets of the Company. Each of the Company's subsidiaries guarantee the obligations under the Senior Credit Facility. The Company had outstanding swap agreements in 1994, 1995 and 1996 with a commercial bank who was also a lender under the Senior Credit Facility. The last of such swaps expired on April 18, 1996. The Company paid a fixed interest rate of 9.81% and the Company receives interest, from the commercial bank, based upon a three month LIBOR. The net interest rate differential paid and received was recognized as an adjustment to interest expense and amounted to approximately $1.9 million, $1.0 million, and $315,000 for the years ended December 31, 1994, 1995, and 1996, respectively. At December 31, 1996, the Company did not hold any derivative instruments. The Midcontinent Seller Note bears interest at 8.25%, payable quarterly and matures in full on May 31, 1998. The aggregate fixed maturities, including accreted non-cash interest, under the Nationwide Seller Note for each year subsequent to December 31, 1996 are as follows: 1997, $1.0 million; 1998, $1.0 million, and $1.0 million in 1999. 7. SENIOR SUBORDINATED NOTES On November 14, 1994, the Company issued 11 3/4% Senior Subordinated Notes due 2004 with an aggregate principal amount of $120.0 million (the "November 1994 Notes"). Interest on the November 1994 Notes is payable semi-annually on May 15 and November 15, commencing May 15, 1995. The November 1994 Notes are redeemable, in whole or in part, at the option of the Company on or after November 15, 1999, at the redemption prices set forth in the Senior Subordinated Note Indenture ("Indenture") pursuant to which the November 1994 Notes were issued plus accrued interest to the date of redemption. In addition, at any time before November 15, 1997, the Company, at its option, may redeem 61 up to $40 million of the November 1994 Notes, with the net proceeds of one or more public equity offerings, at a redemption price equal to 111-3/4% of the principal amount thereof, plus accrued interest to the date of redemption. On June 12, 1995, the Company issued 10 1/8% Senior Subordinated Notes due 2005 with an aggregate principal amount of $125.0 million (the "June 1995 Notes"). Interest on the June 1995 Notes is payable semi-annually on February 15 and August 15, commencing August 15, 1995. The June 1995 Notes are redeemable, in whole or in part, at the option of the Company on or after February 15, 2000, at the redemption prices set forth in the Indenture pursuant to which the June 1995 Notes were issued plus accrued interest to the date of redemption. In addition, at any time before February 15, 1998, the Company, at its option, may redeem up to $42 million of the June 1995 Notes, with the net proceeds of one or more public equity offerings, at a redemption price equal to 110% of the principal amount thereof, plus accrued interest to the date of redemption. On January 16, 1996, the Company issued 9% Senior Subordinated Notes due 2006 with an aggregate principal amount of $125.0 million. Interest on the January 1996 Notes is payable semi-annually on January 15 and July 15, commencing July 15, 1996. The January 1996 Notes are redeemable, in whole or in part, at the option of the Company on or after January 15, 2001, at the redemption prices set forth in the Indenture, pursuant to which the January 1996 Notes were issued, plus accrued interest to the date of redemption. In addition, at anytime before January 15, 1999, the Company, at its option, may redeem up to $42 million of the January 1996 Notes, with the net proceeds of one or more public equity offerings, at a redemption price equal to 109% of the principal amount thereof, plus accrued interest to the date of redemption. The Company's November 1994 Notes, June 1995 Notes, and January 1996 Notes (collectively the "Notes") are general unsecured obligations of the Company and subordinated in right of payment to all senior debt, including all indebtedness of the Company under the Senior Credit Facility. The Notes are guaranteed, jointly and severally, on a senior subordinated unsecured basis by all of the Company's subsidiaries. Upon a change of control, each holder of the Notes will have the right to require the Company to repurchase such holder's Notes at a price equal to 101% of their principal amount plus accrued interest to the date of repurchase. In addition, the Company will be obligated to offer to repurchase Notes at 100% of their principal amount plus accrued interest to the date of repurchase in the event of certain asset sales. 8. STOCKHOLDERS' EQUITY COMMON STOCK ------------- The Company's stockholders' equity consists of three classes of common stock designated Class A, Class B and Class C which are substantially identical except for voting rights. The holders of Class A Common Stock are entitled to one vote per share. Holders of Class B Common Stock are entitled to ten votes per share. Holders of Class C Common Stock are not entitled to vote. Holders of all classes of Common Stock entitled to vote will vote together as a single class. Holders of Class C Common Stock may at any time convert their shares into the same number of shares of Class A Common Stock. Ownership of Class B Common Stock is restricted to members of management and by, or in trust for family members of management ("Management Group"). In the event any shares of Class B Common Stock held by a member of the Management Group are transferred outside of the Management Group, such shares will automatically be converted into shares of Class A Common Stock. In addition, if the total number of shares of Common Stock held by members of the Management Group falls below 10% of the total number of shares of Common Stock outstanding, all of the outstanding shares of Class B Common Stock automatically will be reclassified as Class A Common Stock. 62 In any merger, consolidation or business combination, the consideration to be received per share by holders of Class A and Class C Common Stock must be identical to that received by holders of Class B Common Stock. On November 14, 1994, ABC invested $25.0 million in the Company, receiving 1.5 million shares of the Company's non-voting Class C Common Stock ("ABC Stock") and warrants to purchase 750,000 shares of Class C Common Stock ("ABC Warrants"). The ABC Stock and ABC Warrants were repurchased on October 4, 1996 (see Stock Repurchases below). On December 30, 1992, the Company instituted an Incentive Stock Grant Program ("Program"). In August 1994, the Company granted 106,500 shares for 1993 awards and charged $2.0 million to operations in the third quarter of 1994 based on the initial public offering price for the Company's Class A Common Stock. The Company issued another 106,500 shares for 1994 awards concurrent with the closing of the offering and charged $2.0 million to operations in the fourth quarter of 1994 based on the initial public offering price. In addition to the Program discussed above, in March 1994, the Company issued 107,920 shares of Class B Common Stock to two officers in connection with their employment arrangements. The Company charged $2.1 million to operations in the first quarter of 1994 based on the initial public offering price for the Company's Class A Common Stock. On May 22, 1995, the Company adopted the Young Broadcasting Inc. 1995 Stock Option Plan ("1995 Stock Option Plan") and terminated the Program. On October 4, 1996, the Company completed an additional public offering of its Class A Common Stock, (the "Offering"). The Offering included 5,250,000 shares sold by the Company and 2,111,398 shares sold by selling stockholders of the Company. The net proceeds to the Company of $162.9 million were used to pay down $20.0 million under the Senior Credit Facility, repurchase the ABC Stock and ABC Warrants for $54.8 million (see paragraph below), and $1.1 million of other related expenses. The Company used the remaining net proceeds, approximately $87.0 million, to partially finance the KCAL-TV acquisition. The terms of the Senior Credit Facility and the Indentures relating to the Company's outstanding Senior Subordinated Notes (the "Indentures") restrict the Company's ability to pay cash dividends on its Common Stock. Under the Senior Credit Facility, the Company is not permitted to pay any dividends on its Common Stock unless the total debt/operating cash flow ratio is less than 5.5x and the aggregate amount of all dividends does not exceed $20.0 million. Under the Indentures, the Company is not permitted to pay any dividends on its Common Stock unless the Company would continue to have the ability to incur indebtedness. In addition, under the Indentures, dividends may not exceed an amount equal to the Company's cash flow less a multiple of the Company's interest expense, plus the net proceed of the sale by the Company of additional capital stock. At December 31, 1996, under the terms of the Senior Credit Facility, the Company could not have paid any dividend. STOCK OPTION PLANS - ------------------ At December 31, 1996, the Company has reserved 13,600 shares of its Class A Common Stock and 1,244,526 shares of Class B Common Stock in connection with stock options. The Company established a Directors Option Plan for its non-employee directors as part of their compensation. Under this plan, each of the current directors received an option to acquire 1,000 shares of Class A Common Stock on or before December 1, 1999 at a purchase price of $20.70 per share (such price being 120% of the closing price of the Company's stock on December 1, 1994, the initial grant date for these options). 63 The 1995 Stock Option Plan was adopted to provide incentives for independent directors, officers and employees. It may be administered by either the entire Board of Directors of the Company or a committee consisting of two or more members of the Board, each of whom is a disinterested person. The Board of Directors or committee, as the case may be, is to determine, among other things, the recipients of grants, whether a grant will consist of incentive stock options ("ISOs"), non-qualified stock options or stock appreciation rights ("SARs") (in tandem with an option or free-standing) or a combination thereof, and the number of shares to be subject to such options. ISOs may be granted only to officers and key employees of the Company and its subsidiaries. Non-qualified stock options and SARs may be granted to such officers and employees as well as to agents and directors of and consultants to the Company, whether or not otherwise employees of the Company. The 1995 Stock Option Plan provides for the granting of ISOs to purchase the Company's Common Stock at not less than the fair market value on the date of the option grant and the granting of non-qualified options and SARs with any exercise price. SARs granted in tandem with an option have the same exercise price as the related option. Subject to stockholder approval at the 1997 Annual Meeting of Stockholders, the total number of shares with respect to which options and SARs may be granted under the 1995 Stock Option Plan is currently 1,254,126. As of December 31, 1996, non-qualified and incentive stock options for an aggregate of 1,106,188 shares at various prices from $19.75 to 30.75 have been granted to various individuals, including various executive officers. Operating results for 1995 were charged $366,094 in connection with the non-qualified options. The 1995 Stock Option Plan contains certain limitations applicable only to ISOs granted thereunder. To the extent that the aggregate fair market value, as of the date of grant, of the shares to which ISOs become exercisable for the first time by an optionee during the calendar year exceed $100,000, the option will be treated as a non-qualified option. In addition, if an optionee owns more than 10% of the total voting power of all classes of the Company's stock at the time the individual is granted an ISO, the option price per share cannot be less than 110% of the fair market value per share and the term of the ISO cannot exceed five years. No option or SAR may be granted under the Stock Option Plan after February 5, 2005, and no option may be outstanding for more than ten years after its grant. The Company regularly contributed Class A Common Stock into its defined contribution plan (see Note 10) for the years ended 1994, 1995 and 1996. Those directors who are not also employees of the Company receive as an annual retainer five-year options, having a fair market value exercise price, to purchase 1,200 shares of Class A Common Stock, and also receive reimbursement of out-of-pocket expenses incurred for each Board or committee meeting attended. Nonemployee directors also receive, upon becoming a director, a five-year option to purchase up to 1,000 shares of Class A Common Stock at an exercise price equal to 120% of the quoted price on the date of grant. No other directors are compensated for services as a director. Under the Company's stock option plans, independent directors, officers and employees may be granted options to purchase the Company's stock at no less than the fair market value on the date of the option grant. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No.123, ("SFAS No. 123") "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Company's stock option plan been determined based on the fair market value at the grant date for awards in 1995 and 1996, consistent with the provisions of SFAS No. 123, the Company's net income (loss) and income (loss) per share would have been reduced to the pro forma amounts indicated below: 1995 1996 ---- ---- (in thousands, except per share amounts) Net (loss) income - as reported $(6,591) $905 Net (loss) income - pro forma $(9,057) $(1,274) Net (loss) income per common share-as reported $(0.61) $0.08 64 Net (loss) income per common share-pro forma $(0.82) $(0.11) These pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years. The fair value for these options was estimated at the date of grant using the Black-Scholes model with the following assumptions: Expected dividend yield 0 Expected stock price volatility 25% Risk-free interest rate: 1995 7.45% 1996 5.92% Expected life of options 5 years The weighted average fair value of options granted during 1995 and 1996 was $6.98 and $10.41, respectively. Changes during 1995 and 1996 in stock options are summarized as follows: Stock Options Weighted Average Outstanding Exercise Average ----------- ---------------- Outstanding at December 31, 1994 - $ - Granted 668,825 19.80 ------- Outstanding at December 31, 1995 668,825 19.80 Granted 475,400 30.67 Exercised (15,874) 19.75 Forfeited (12,563) 19.75 -------- Outstanding at December 31, 1996 1,115,788 $ 24.45 ========= Options for 93,137 shares and 446,937 shares were exercisable at December 31, 1995 and 1996, respectively. Exercise prices for options outstanding at December 31, 1996 range from a minimum of approximately $19.75 per share to a maximum of approximately $34.00 per share. The average remaining maximum term of options outstanding is approximately ten years. STOCK REPURCHASES ----------------- On December 15, 1995, the Company reached an agreement with J.P. Morgan Capital Corporation to repurchase 138,008 shares and 285,251 shares of the Company's Class A and C Common Stock, respectively for approximately $11.1 million. On December 31, 1995, the Company repurchased 26,625 shares of Class A and 285,251 shares of Class C Common Stock for an aggregate price of $8.2 million. The remaining 111,383 shares of Class A Common Stock were repurchased on January 3, 1996 for an aggregate purchase price of $2.9 million. The Company repurchased 1.5 million shares of the Company's Class C Common Stock (the "ABC Stock") and warrants to purchase 750,000 shares of such Class C Common Stock (the "ABC Warrants") from 65 Capital Cities/ABC, Inc., a wholly owned subsidiary of Disney, concurrently with the closing of the Offering. The Company repurchased the ABC Stock at a per share price equal to the difference between the public offering price per share ($32.50) of the Class A Common Stock, less the underwriting discount per share. The Company repurchased the ABC Warrants at a per share price equal to the difference between the public offering price per share of the Class A Common Stock and the per share exercise price of the ABC Warrants ($22.80), plus $2, less one-half of the underwriting discount per share. 9. INCOME TAXES At December 31, 1996, the Company had net operating loss ("NOL") carryforwards for tax purposes of approximately $148.0 million expiring at various dates through 2011. The availability of NOL carryforwards to offset future income is subject to limitations imposed by Internal Revenue Code Section 382 as a result of an ownership change which occurred on November 14, 1994. Under these limitations, the Company may utilize up to $8.9 million per year of the pre-ownership change NOLs to offset future taxable income. Approximately $20.0 million of the $148.0 million NOL is not subject to the Section 382 limitation since it was generated after the ownership change. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1995 and 1996 are as follows: 1995 1996 -------------- --------------- Deferred tax assets: Fixed Assets $ 13,070 $ - Accounts Receivable 314,000 884,000 Intangibles 4,694,298 - Other 82,759 221,591 NOL Carryforwards 56,908,668 59,295,496 Less: Valuation allowance (61,861,391) (60,401,087) -------------- --------------- Total deferred tax assets $ 151,404 - -------------- --------------- Deferred tax liabilities: Fixed Assets $ - $ 410,113 Intangibles - 71,268,168 Other 151,404 49,580 -------------- --------------- Total deferred tax liabilities $151,404 71,727,861 -------------- --------------- -------------- --------------- Net deferred tax liabilities $ - $(71,727,861) ============== =============== Based upon the standards set forth in Statement No. 109, the benefit of $60.4 million for the above deferred tax asset has been offset by a valuation allowance. 10. EMPLOYEE BENEFIT PLANS The Company sponsors defined contribution plans ("Plan") which provide retirement benefits for all eligible employees. Adam Young Inc. employees also participate in this Plan (see Note 12). The Plan participants may make pretax contributions from their salaries up to the maximum allowed by the Internal Revenue Code. For the year ended December 31, 1994, the Company accrued a non-matching stock contribution (21,696 shares of Class A Common Stock) equal to 3% of eligible employee compensation amounting to $472,000. The Company effected such contributions by issuing the shares on March 14, 1995. For the year ended December 31, 1995, the Company accrued a non-matching contribution (27,685 shares of Class A Common Stock) equal to 3% of eligible employee compensation amounting to $729,000. The Company effected such contributions by issuing the shares on January 5, 1996. 66 For the year ended December 31, 1996, the Company accrued a non-matching contribution (28,481 shares of Class A Common Stock) equal to 3% of eligible employee compensation amounting to approximately $833,000. The Company effected such contributions by issuing the shares on January 10, 1997. On January 1, 1997, the Company adopted and established a matching stock plan ("Matching Plan"). According to the Matching Plan, the Company will contribute one-half of every dollar a participant contributes, up to the first 3% of the participant's pay. 11. COMMITMENTS AND CONTINGENCIES The Company is obligated under various capital leases for certain broadcast equipment, office furniture, fixtures and other equipment that expire at various dates during the next three years. At December 31, 1995 and 1996, the net amount of property and equipment recorded under capital leases was $167,000 and $1,488,000 respectively. Amortization of assets held under capital leases is included with depreciation and amortization of property and equipment. The Company also has certain non-cancelable operating leases, primarily for administrative offices, broadcast equipment and vehicles that expire over the next six years. These leases generally contain renewal options for periods up to five years and require the Company to pay all costs such as maintenance and insurance. Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) and the present value of future minimum capital lease payments as of December 31, 1996 are as follows: CAPITAL LEASES OPERATING LEASES --------------------------------------- (in thousands) Year ending December 31: 1997 $ 803 $ 2,144 1998 514 1,745 1999 160 691 2000 - 600 2001 - 616 Thereafter - 428 -------------------------------------- Total minimum lease payments $ 1,477 $ 6,224 ====================================== See Note 12 regarding sublease income from a related party. 12. RELATED PARTY TRANSACTIONS The Company has entered into agreements with Adam Young Inc. (a company owned by certain stockholders of the Company) whereby Adam Young Inc. will provide national sales representation for the Company's television stations. In return, Adam Young Inc. is paid a commission which approximated $2.6 million, $3.8 million, and $4.3 million for 1994, 1995, and 1996, respectively. The Company believes that the commissions they pay Adam Young Inc. are equal to rates that they would have paid to other third party national sales representatives. At December 31, 1995 and 1996, the Company had accrued commissions payable of $266,000 and $718,000, respectively, to Adam Young Inc. During 1990, the Company began subleasing to Adam Young Inc. certain office space together with furnishings and equipment under an agreement which expires in the year 2000. The lease is accounted for under the operating method. The Company pays real estate taxes and maintenance while insurance is paid for by Adam Young Inc. The cost of the leasehold improvements, furnishings, and equipment subject to 67 the sublease approximated $1.2 million, and related accumulated depreciation and amortization approximated $923,000 and $979,000 at December 31, 1995 and 1996, respectively. The rent charged to Adam Young Inc. exceeds the Company's cost of such facilities and improvements. The Company received lease income payments in connection with the aforementioned sublease arrangement of $551,000, $537,000, and $554,000 during 1994, 1995 and 1996, respectively. The approximate minimum noncancelable lease payments to be received for each of the years subsequent to December 31, 1996 if the Company does not recapture any of the subleased space and improvements as permitted under the sublease are as follows: 1997, $612,000; 1998, $632,000; 1999, $632,000; 2000, $448,000; 2001 $78,000 and thereafter $39,000. During 1994 and 1995, the Company made loans to certain executive officers and other employees of the Company to satisfy the federal tax withholding requirements related to non-cash compensation paid in the form of shares of the Company's Class B Common Stock. Such shares include shares issued pursuant to the Program in August 1994 and November 1994 and shares issued in March 1994 as part of the compensation under employment arrangements (see Note 8). The aggregate amount of such loans outstanding, including accrued interest at December 31, 1996 was approximately $1.7 million. The principal amount of the loans will bear interest, payable annually, at the rate of 7.21%. The loans are secured by each employee's shares of common stock and the principal is payable in five equal annual installments between 1995 and 1999. On November 8, 1995, the Board of Directors approved a loan forgiveness program (the "Loan Forgiveness Program") for the payment that was due in 1995 and in subsequent years. Under this program, participants that chose to participate will have their annual installments forgiven over the year following the scheduled payment date at the rate of one twelfth per month, as long as the employee continues to be employed by the Company. 13. QUARTERLY FINANCIAL DATA (UNAUDITED) The following summarizes the Company's results of operations for each quarter of 1996 and 1995 (in thousands, except per share amounts). The (loss) income per common share computation for each quarter and the year are separate calculations. Accordingly, the sum of the quarterly (loss) income per common share amounts may not equal the (loss) income per common share for the year.
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- (in thousands, except per share amounts) 1996 Net revenues $ 27,699 $ 36,060 $ 35,387 $ 55,197 Operating income 5,462 11,977 9,403 15,640 Net (loss) income before extraordinary item (3,338) 1,877 (1,043) 3,409 Net (loss) income (3,338) 1,877 (1,043) 3,409 Net (loss) income per common share $ (0.32) $ 0.17 $ (0.10) $ 0.24 1995 Net revenues $ 26,973 $ 32,371 $ 29,593 $ 33,593 Operating income 5,288 10,941 8,615 10,567 Net (loss) income before extraordinary item (2,665) 2,949 251 1,999 Net (loss) income (2,665) (6,176) 251 1,999 Net (loss) income per common share $ (0.25) $ (0.57) $ 0.02 $ 0.18
The results for the second quarter of 1995 include an extraordinary loss of approximately $9.1 million ($0.84 per share) related to the early extinguishment of debt (See Note 5). 68 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS YOUNG BROADCASTING INC.
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E -------- -------- -------- -------- --------------------------------------------- ADDITIONS --------------------------------------------- BAL. AT BEGINNING CHARGED TO CHARGED TO BAL. AT END DESCRIPTION OF PERIOD COSTS AND EXPENSES OTHER ACCOUNTS (1) DEDUCTIONS (2) OF PERIOD ----------- --------- ------------------ ------------------ -------------- --------- Year ended December 31, 1994: Deducted from asset accounts: Allowance for doubtful accounts............... $373,000 249,000 216,000 173,000 $665,000 Year ended December 31, 1995 Deducted from asset accounts: Allowance for doubtful accounts................ $665,000 751,000 - 631,000 $785,000 Year ended December 31, 1996 Deducted from asset accounts: Allowance for doubtful accounts............... $785,000 492,000 1,429,000 496,000 $2,210,000
- ------- (1) Amount relates to Acquired Stations (2) Write-off of uncollectible accounts 69 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information called for by Item 10 is set forth under the heading "Executive Officers of the Registrant" in Part I hereof and in "Election of Directors" in the Company's Proxy Statement relating to the 1997 Annual Meeting of Stockholders (the "1996 Proxy Statement"), which is incorporated herein by this reference. ITEM 11. EXECUTIVE COMPENSATION. Information called for by Item 11 is set forth under the heading "Executive Compensation" in the 1996 Proxy Statement, which is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information called for by Item 12 is set forth under the heading "Security Ownership of Certain Beneficial Owners and Management" in the 1996 Proxy Statement, which is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information called for by Item 13 is set forth under the heading "Election of Directors--Certain Transactions" in the 1996 Proxy Statement, which is incorporated herein by this reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) Financial statements and the schedule filed as a part of this report are listed on the "Index to Consolidated Financial Statements" at page 49 herein. All other schedules are omitted because either (i) they are not required under the instructions, (ii) they are inapplicable, or (iii) the information is included in the Consolidated Financial Statements. (b) The Company filed the following report on Form 8-K during the fourth quarter of the year ended December 31, 1996: Current Report on Form 8-K dated October 4, 1996 reporting the completion of the Offering. 70 EXHIBITS Exhibit Number Exhibit Description - ------ ------------------- 3.1(a) Restated Certificate of Incorporation of the Company* 3.1(b) Certificate of Amendment to Restated Certificate of Incorporation of the Company** 3.2 Second Amended and Restated By-laws of the Company* 3.3 Certificate of Incorporation of Young Broadcasting of La Crosse, Inc.* 3.4 By-laws of Young Broadcasting of La Crosse, Inc.* 3.5 Certificate of Incorporation of Young Broadcasting of Lansing, Inc.* 3.6 By-laws of Young Broadcasting of Lansing, Inc.* 3.7 Certificate of Incorporation of Young Broadcasting of Albany, Inc.* 3.8 By-laws of Young Broadcasting of Albany, Inc.* 3.9 Certificate of Incorporation of Winnebago Television Corporation* 3.10 By-laws of Winnebago Television Corporation* 3.11 Certificate of Incorporation of Young Broadcasting of Nashville, Inc.* 3.12 By-laws of Young Broadcasting of Nashville, Inc.* 3.13 Certificate of Incorporation of YBT, Inc.* 3.14 By-laws of YBT, Inc.* 3.15 Certificate of Limited Partnership of WKRN, L.P.* 3.16 Agreement of Limited Partnership of WKRN, L.P.* 3.17 Certificate of Incorporation of Young Broadcasting of Louisiana, Inc.* 3.18 By-laws of Young Broadcasting of Louisiana, Inc.* 3.19 Certificate of Incorporation of LAT, Inc.* 3.20 By-laws of LAT, Inc.* 3.21 Certificate of Limited Partnership of KLFY, L.P.* 3.22 Agreement of Limited Partnership of KLFY, L.P.* 3.23 Certificate of Incorporation of Young Broadcasting of Knoxville, Inc.* 3.24 By-laws of Young Broadcasting of Knoxville, Inc.* 3.25 Certificate of Incorporation of YBK, Inc.* 3.26 By-laws of YBK, Inc.* 3.27 Certificate of Limited Partnership of WATE, L.P.* 3.28 Agreement of Limited Partnership of WATE, L.P.* 3.29 Certificate of Incorporation of Young Broadcasting of Richmond, Inc.* 3.30 By-laws of Young Broadcasting of Richmond, Inc.* 3.31 Certificate of Incorporation of Young Broadcasting of Green Bay, Inc.* 3.32 By-laws of Young Broadcasting of Green Bay, Inc.* 3.33 Certificate of Incorporation of Young Broadcasting of Davenport, Inc.** 3.34 By-laws of Young Broadcasting of Davenport, Inc.** 3.35 Certificate of Incorporation of Young Broadcasting of Sioux Falls, Inc. 3.36 By-laws of Young Broadcasting of Sioux Falls, Inc. 3.37 Certificate of Incorporation of Young Broadcasting of Rapid City, Inc. 3.38 By-laws of Young Broadcasting of Rapid City, Inc. 3.39 Certificate of Incorporation of Young Broadcasting of Los Angeles, Inc. 3.40 By-laws of Young Broadcasting of Los Angeles, Inc. 3.41 Certificate of Incorporation of Fidelity Television, Inc. 3.42 By-laws of Fidelity Television, Inc. 9.1(a) Voting Trust Agreement, dated July 1, 1991, between Adam Young, and Vincent Young and Richard Young as trustees* 71 9.1(b) Amendment No. 1, dated as of July 22, 1994, to Voting Trust Agreement* 9.1(c) Amendment No. 2, dated as of April 12, 1995, to Voting Trust Agreement** 9.1(d) Amendment No. 3, dated as of July 5, 1995, to Voting Trust Agreement** 9.1(e) Amendment No. 4, dated as of September 11, 1996, to Voting Trust Agreement 9.1(f) Amendment No. 5, dated as of January 21, 1997, to Voting Trust Agreement 9.1(g) Voting Trust Agreement, dated October 1, 1996, between Adam Young, and Vincent Young as trustee 10.1 Subscription and Shareholders Agreement, dated May 26, 1988, between the Company and Ronald J. Kwasnick* 10.2(a) Employment Agreement, dated as of March 1, 1993, between the Company and James A. Morgan* 10.2(b) Amendment, dated as of March 27, 1995, effective as of February 15, 1995, to Employment Agreement, dated as of March 1, 1993, between the Company and James A. Morgan*** 10.3 Operating Agreement, dated December 29, 1989, between WKRN, L.P. and Young Broadcasting of Nashville, Inc.* 10.4 Operating Agreement, dated December 29, 1989, between KLFY, L.P. and Young Broadcasting of Louisiana, Inc.* 10.5 Operating Agreement between WATE, L.P. and Young Broadcasting of Knoxville, Inc.* 10.6(a) Sublease, dated March 30, 1990, between the Company, as Sublessor, and Adam Young Inc.* 10.6(b) First Amendment to Sublease, dated January 14, 1997 10.7 Agreement, dated July 1, 1991, between Adam Young Inc. and Young Broadcasting of Albany, Inc. (Agreement filed hereunder is representative of five other substantially similar agreements. See Schedule filed with this Exhibit)* 10.8 Affiliation Agreements, each dated October 10, 1994, between Young Broadcasting of Albany, Inc. and ABC (for WTEN and WCDC)* 10.9 Affiliation Agreement, dated October 10, 1994, between WKRN, L.P. and ABC* 10.10 Affiliation Agreement, dated September 19, 1994, between Young Broadcasting of La Crosse, Inc. and CBS* 10.11 Affiliation Agreement, dated September 19, 1994, between KLFY, L.P. and CBS* 10.12 Affiliation Agreement, dated May 17, 1995, between Winnebago Television Corporation and ABC** 10.13 Affiliation Agreement, dated September 19, 1994, between Young Broadcasting of Lansing, Inc. and CBS* 10.14 Affiliation Agreement, dated October 10, 1994, between Young Broadcasting of Richmond, Inc. and ABC* 10.15 Affiliation Agreement, dated October 10, 1994, between WATE, L.P. and ABC* 10.16 Affiliation Agreement, dated October 10, 1994, between Young Broadcasting of Green Bay, Inc. and ABC* 10.17 Affiliation Agreement, dated February 3, 1995, between Broad Street Television, L.P. and NBC** 10.18 Affiliation Agreement, dated April 3, 1996, between Young Broadcasting of Sioux Falls, Inc. and CBS (KELO); Affiliation Agreements (satellite), each dated April 3, 1996, between Young Broadcasting of Sioux Falls, Inc. and CBS (KPLO and KDLO); and Affiliation Agreement, dated April 3, 1996, between Young Broadcasting of Rapid City, Inc. and CBS (KCLO)**** 10.19(a) Lease, dated March 29, 1990, between Lexreal Associates, as Landlord, and the Company* 10.19(b) First Amendment to Lease, dated January 14, 1997 72 10.20(a) Master Equipment Lease Agreement, dated May 31, 1990, between First Chicago Leasing Corporation and Young Broadcasting of Albany, Inc.* 10.20(b) Lease Supplement No. 1, dated May 31, 1990* 10.20(c) Lease Supplement No. 2, dated August 24, 1990* 10.20(d) Guaranty of the Company* 10.21(a) Master Equipment Lease Agreement, dated May 31, 1990, between First Chicago Leasing Corporation and Young Broadcasting of Nashville, Inc.* 10.21(b) Supplement No. 1, dated May 31, 1990* 10.21(c) Supplement No. 2, dated August 24, 1990* 10.21(d) Guaranty of the Company* 10.22(a) Credit Agreement for the Senior Credit Facility 10.22(b) Amendment No. 1 to Credit Agreement 10.23 Asset Purchase and Sale Agreement, dated as of July 31, 1995, between the Company and Broad Street Television, L.P. (schedules omitted; Registrant agrees to furnish supplementally a copy of any schedule to the Commission upon request)** 10.24 Asset Purchase and Sale Agreement, dated as of January 11, 1996, between the Company and MidContinent Television of South Dakota, Inc. (schedules omitted; Registrant agrees to furnish supplementally a copy of any schedule to the Commission upon request)***** 10.25 Acquisition Agreement, dated as of May 10, 1996, among the Company, KCAL Broadcasting, Inc., KCAL-TV, Inc. and Disney Enterprises, Inc. (schedules omitted; Registrant agrees to furnish supplementally a copy of any schedule to the Commission upon request)**** 10.26 Subscription Agreement, dated October 10, 1994, between ABC and the Company with the form of Warrant to be issued to ABC and the form of Registration Rights Agreement attached thereto* 10.27 Indenture, dated November 14, 1994, among the Company, the Subsidiary Guarantors and The First National Bank of Boston, as Trustee, relating to the November 1994 Notes* 10.28 Indenture, dated June 1, 1995, among the Company, the Subsidiary Guarantors and The First National Bank of Boston, as Trustee, relating to the June 1995 Notes** 10.29 Indenture, dated January 1, 1996, among the Company, the Subsidiary Guarantors and State Street Bank and Trust Company, as Trustee, relating to the January 1996 Notes***** 10.30 Young Broadcasting Inc. 1995 Stock Option Plan*** 10.31 Purchase Agreement, dated June 6, 1995, among the Company, the Subsidiary Guarantors and BT Securities Corporation and J.P. Morgan Securities Inc.** 10.32 Registration Rights Agreement, dated as of June 12, 1995, among the Company, the Subsidiary Guarantors and BT Securities Corporation and J.P. Morgan Securities Inc.** 10.33 Purchase Agreement, dated January 6, 1996, among the Company, the Subsidiary Guarantors and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.***** 10.34 Registration Rights Agreement, dated as of June 12, 1995, among the Company, the Subsidiary Guarantors and Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.***** 10.35 Agreement, dated as of September 3, 1996, between the Company and Disney relating to the ABC Repurchase**** 11.1 Statement re computation of per share earnings 18.1 Letter of Ernst & Young LLP regarding change in accounting principles* 21.1 Subsidiaries of the Company 27.1 Financial Data Schedule 73 - -------------------------- * Filed as an Exhibit to the Company's Registration Statement on Form S-1, Registration No. 33-83336, under the Securities Act of 1933 and incorporated herein by reference. ** Filed as an Exhibit to the Company's Registration Statement on Form S-4, Registration No. 33-94192, under the Securities Act of 1933 and incorporated herein by reference. *** Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995 under the Securities Exchange Act of 1934 and incorporated herein by reference. **** Filed as an Exhibit to the Company's Registration Statement on Form S-3, Registration No. 333-06241, under the Securities Act of 1933 and incorporated herein by reference. ***** Filed as an Exhibit to the Company's Registration Statement on Form S-4, Registration No. 333-2466, under the Securities Act of 1933 and incorporated herein by reference. 74 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. YOUNG BROADCASTING INC. Date: March 21, 1997 By /s/ Vincent J. Young ---------------------------- Vincent J. Young Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURES TITLE DATE ---------- ----- ---- /s/ Vincent J. Young - ------------------------ Vincent J. Young Chairman and Director March 21, 1997 (principal executive officer) /s/ Adam Young - ------------------------ Adam Young Treasurer and Director March 21, 1997 /s/ James A. Morgan - ------------------------ James A. Morgan Executive Vice President and March 21, 1997 Chief Financial Officer (principal financial officer and principal accounting officer) /s/ Ronald J. Kwasnick - ------------------------ Ronald J. Kwasnick President and Director March 21, 1997 /s/ Bernard F. Curry - ------------------------ Bernard F. Curry Director March 21, 1997 /s/ Alfred J. Hickey, Jr. - ------------------------ Alfred J. Hickey, Jr. Director March 21, 1997 /s/ Leif Lomo - ------------------------ Leif Lomo Director March 21, 1997 /s/ Michael S. Willner - ------------------------ Michael S. Willner Director March 21, 1997 75 EX-3.35 2 CERTIFICATE OF INCORPORATION - SIOUX FALL, INC. Exhibit 3.35 CERTIFICATE OF INCORPORATION OF YOUNG BROADCASTING OF STOUX FALLS, INC. FIRST: The name of the corporation is Young Broadcasting of Sioux Falls, Inc. SECOND: The address of its registered office in the State of Delaware and the name of the registered agent at such address is National Corporate Research, Ltd., 9 East Loockerman Street, Dover, DE 19901, City of Dover, County of Kent. THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares the corporation shall have authority to issue is three thousand shares (3000) of common stock, each with a par value of $.01. FIFTH: The corporation shall have perpetual existence. SIXTH: The name and mailing address of the Sole Incorporator is Fran Wagner, National Corporate Research, Ltd., 225 West 34th Street, New York, New York 10122-0032. SEVENTH: No director shall be personally liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholder's, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article Sixth by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. I, being the sole incorporator hereinbefore named, hereby sign this certificate for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware this 25th day of March, 1996. /s/ Fran Wagner ------------------------------ Fran Wagner, Sole Incorporator EX-3.36 3 BY-LAWS OF YOUNG BROADCASTING OF SIOUX FALLS, INC. EXHIBIT 3.36 BY-LAWS OF YOUNG BROADCASTING OF SIOUX FALLS, INC. ARTICLE I - OFFICES ------------------- The office of the Corporation shall be located in the City and State designated in the Certificate of Incorporation. The Corporation may also maintain offices at such other places within or without the United States as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING OF STOCKHOLDERS ------------------------------------ Section 1 - Annual Meetings: - --------------------------- The annual meeting of the stockholders of the Corporation shall be held within five months after the close of the fiscal year of the Corporation, for the purpose of electing directors, and transacting such other business as may properly come before the meeting. Section 2 - Special Meetings: - ---------------------------- Special meetings of the stockholders may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holders of ten percent (10%) of the shares then outstanding and entitled to vote thereat, or as otherwise required under the provisions of the Delaware General Corporation Law. Section 3 - Place of Meetings: - ----------------------------- All meetings of stockholders shall be held at the principal office of the Corporation, or at such other places as shall be designated in the notices or waivers of notice of such meetings. Section 4 - Notice of Meetings: - ------------------------------ (a) Except as otherwise provided by statute, written notice of By-Laws - 1 each meeting of stockholders, whether annual or special, stating the time when and place where it is to be held, shall be served either personally or by mail, not less than ten or more than sixty days before the meeting, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle stockholders to receive payment for their shares pursuant to statute, the notice of such meeting shall include a statement of that purpose and to that effect. If mailed, such notice shall be directed to each such shareholder at his address, as it appears on the records of the stockholders of the Corporation, unless he shall have previously filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case, it shall be mailed to the address designated in such request. (b) Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such notice and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who, in person or by proxy, submits a signed waiver of notice either before or after such meeting. Notice of any adjourned meeting of stockholders need not be given, unless otherwise required by statute. Section 5 - Quorum: - ------------------ (a) Except as otherwise provided herein, or by statute, or in the Certificate of Incorporation (such Certificate and any amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation") , at all meetings of stockholders of the Corporation, the presence at the commencement in person or by proxy of stockholders holding of record a majority of the total number of shares of the Corporation then issued and outstanding and entitled to vote, shall be necessary and sufficient to constitute a quorum for the transaction of any business. The withdrawal of any shareholder after the commencement of a meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (b) Despite the absence of a quorum at any annual or special meeting of stockholders, the stockholders, by a majority of the votes cast by the holders of shares entitled to vote thereon, may adjourn the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted at the meeting By-Laws - 2 as originally called if a quorum had been present. Section 6 - Voting: - ------------------ (a) Except as otherwise provided by statute or by the Certificate of Incorporation, any corporate action, other than the election of directors, to be taken by vote of the stockholders, shall be authorized by a by a majority of votes cast at a meeting of stockholders by the holders of shares entitled to vote thereon. (b) Except as otherwise provided by statute or by the Certificate of Incorporation, at each meeting of stockholders, each holder of record of stock of the Corporation entitled to vote thereat shall be entitled to one vote for each share of stock registered in his name on the books of the Corporation. (c) Each shareholder entitled to vote or to express consent or dissent without a meeting may do so by proxy; provided, however, that the instrument authorizing such proxy to act shall have been executed in writing by the shareholder himself, or by his attorney in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven months from the date of its execution, unless the person executing it shall have specified therein the length of time it is to continue in force. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. (d) Any resolution in writing, signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, shall be and constitute action by such stockholders to the effect therein expressed, with the same force and effect as if the same had been duly passed at a duly called meeting of stockholders and such resolution so signed shall be inserted in the Minute Book of the Corporation under its proper date. ARTICLE III - BOARD OF DIRECTORS -------------------------------- Section 1 - Number, Election and Term of Office: - ----------------------------------------------- (a) The number of the directors of the Corporation shall be two (2), unless and until otherwise determined by vote of a majority of the entire Board of Directors. (b) Except as may otherwise be provided or in the Certificate of Incorporation, the members of the Board of Directors of the By-Laws - 3 Corporation, who need not be stockholders, shall be elected by a majority of the votes cast at a meeting of stockholders, by the holders of shares, present in person or by proxy, entitled to vote in the election. (c) Each director shall hold office until the annual meeting of the stockholders next succeeding his election, and until his successor is elected and qualified, or until his prior death, resignation or removal. Section 2 - Duties and Powers: - ----------------------------- The Board of Directors shall be responsible for the control and management of the affairs, property and interest of the Corporation, and may exercise all powers of the Corporation, except as are in the Certificate of Incorporation or by statute expressly conferred upon or reserved to the stockholders. Section 3 - Annual and Regular Meetings; Notice: - ----------------------------------------------- (a) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the stockholders, at the place of such annual meeting of stockholders. (b) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the Board of Directors, and may fix the time and place thereof. (c) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in paragraph (b) Section 4 of this Article III, with respect to special meetings, unless such notice shall be waived in the manner set forth in paragraph (c) of such Section 4. Section 4 - Special Meetings; Notice: - ------------------------------------ (a) Special meetings of the Board of Directors shall be held whenever called by the President or by one of the directors, at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required by statute, notice of special By-Laws - 4 meeting shall be mailed directly to each directors, addressed to him at his residence or usual place of business, at least two (2) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. A notice, or waiver of notice, except as required by Section 8 of this Article III, need not specify the purpose of the meeting. (c) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairman: - -------------------- At all meetings of the Board of Directors, the Chairman of the Board, if any and if present, shall preside. If there shall be no Chairman, or he shall be absent, then the President shall preside, and in his absence, a Chairman chosen by the directors shall preside. Section 6 - Quorum and Adjournments: - ----------------------------------- (a) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws. (b) A majority of the directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, until a quorum shall be present. Section 7 - Manner of Acting: - ---------------------------- (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, the action of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. Any action By-Laws - 5 authorized, in writing, by all of the directors entitled to vote thereon and filed with the minutes of the corporation shall be the act of the Board of Directors with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board. Section 8 - Vacancies: - --------------------- Any vacancy in the Board of Directors occurring by reason of any increase in the number of directors, or by reason of the death, resignation, disqualification, removal (unless a vacancy created by the removal of a director by the stockholders shall be filled by the stockholders at the meeting at which the removal was effected) or inability to act of any director, or otherwise, shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at any regular meeting or special meeting of the Board of Directors called for that purpose. Section 9 - Resignation: - ----------------------- Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or such offer, and the acceptance of such resignation shall not be necessary to make it effective. Section 10 - Removal: - -------------------- Any director may be removed with or without cause at any time by the affirmative vote of stockholders holding of record in the aggregate at least a majority of the outstanding shares of the Corporation at a special meeting of the stockholders called for that purpose, and may be removed for cause by action of the Board. Section 11 - Salary: - ------------------- No stated salary shall be paid to directors, as such, for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. By-Laws - 6 Section 12 - Contracts: - ---------------------- (a) No contract or other transaction between this Corporation and any other Corporation shall be impaired, affected or invalidated, nor shall any director be liable in any way by reason of the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other Corporation, provided that such facts are disclosed or made known to the Board of Directors. (b) Any director, personally and individually, may be a party to or may be interested in any contract. or transaction of this Corporation, and no director shall be liable in any way by reason of such interest, provided that the fact of such interest be disclosed or made known to the Board of Directors, and provided that the Board of Directors shall authorize, approve or ratify such contract or transaction by the vote (not counting the vote of any such director) of a majority of a quorum, notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be counted in determining the presence of a quorum at such meeting. This Section shall not be construed to impair or invalidate or in any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise) applicable thereto. Section 13 - Committees: - ----------------------- The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members an executive committee and such other committees, and alternate members thereof, as they may deem desirable, each consisting of three or more members, with such powers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board. ARTICLE IV - OFFICERS --------------------- Section 1 - Number, Qualifications, Election of Office: - ------------------------------------------------------ (a) The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, and such other officers, including without limitation a Chairman of the Board of Directors and one or more Vice Presidents, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the By-Laws - 7 Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more offices may be held by the same person. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of stockholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been elected and qualified, or until his death, resignation or removal. Section 2 - Resignation: - ----------------------- Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or by such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 3 - Removal: - ------------------- Any officer may be removed, either with or without cause, and a successor elected by a majority vote of the Board of Directors at any time. Section 4 - Vacancies: - --------------------- A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any time be filled for the unexpired portion of the term by a majority vote of the Board of Directors. Section 5 - Duties of Officers: - ------------------------------ Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these By-Laws, or may from time to time be specifically conferred or imposed by the Board of Directors. The Chairman of the Board, if any, or in lieu thereof, the President shall be the chief executive officer of the Corporation. By-Laws - 8 Section 6 - Sureties and Bonds: ------------------------------ In case the Board of Directors shall so require, any officer, employee or agent of the Corporation shall execute to the Corporation a bond in such sum, and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. Section 7 - Shares of Other Corporations: ---------------------------------------- Whenever the Corporation is the holder of shares of any other Corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at stockholders meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the Chairman of the Board, if any, the President, any Vice President, or such other person as the Board of Directors may authorize. ARTICLE V - SHARES OF STOCK --------------------------- Section 1 - Certificate of Stock: - -------------------------------- (a) The certificates representing shares of the Corporation shall be in such from as shall be adopted by the Board of Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name and the number os shares, and shall be signed by (i) the Chairman of the Board, if any, or the President or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal. (b) No certificate representing shares shall be issued until the full amount of consideration therefore has been paid, except as otherwise permitted by law. (c) To the extent permitted by law, the Board of Directors may authorize the issuance of certificates for fractions of a share which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holding; or it may authorize the payment in cash of the fair value of fractions of a share as of the time when those entitled to receive such fractions are By-Laws - 9 determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder, except as therein provided. Section 2 - Lost or Destroyed Certificates: - ------------------------------------------ The holder of any certificate representing shares of the Corporation shall immediately notify the Corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of Directors in its discretion may require, the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgment of the Board of Directors, it is proper so to do. Section 3 - Transfer of Shares: - ------------------------------ (a) Transfers of shares of the Corporation shall be made on the share records of the Corporation only to the holder of record thereof, in person or by his duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such shares, with an assignment or power of transfer endorsed thereon of the authenticity of the signature and of authority to transfer and of payment of transfer taxes as the Corporation or its agents may require. (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: - ------------------------ By-Laws - 10 In lieu of closing the share records of the Corporation, the Board of Directors may fix, in advance, a date not exceeding fifty days, nor less than ten days, as the record date for the determination of stockholders entitled to receive notice of, or to vote at, any meeting of stockholders, or to consent to any proposal without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of determining stockholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided for herein, such determination shall apply to any adjournment thereof, unless the directors fix a new record date for the adjourned meeting. ARTICLE VI - DIVIDENDS ---------------------- Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. ARTICLE VII - FISCAL YEAR ------------------------- The fiscal year of the Corporation shall be fixed by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL ----------------------------- The corporate seal, if any, shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE IX - AMENDMENTS ----------------------- Section 1 - By Stockholders: - --------------------------- All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by the affirmative vote of stockholders holding of record in the aggregate at least a By-Laws - 11 majority of the outstanding shares entitled to vote in the election of directors at any annual or special meeting of stockholders, provided that the notice or waiver of notice of such meeting shall have a summarized or set forth in full therein, the proposed amendment. Section 2 - By Directors: - ------------------------ The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; provided, however, that the stockholders entitled to vote with respect thereto as in this Article IX above-provided may alter, amend or repeal by-laws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of stockholders or of the Board of Directors, or to change any provisions of'. the by-laws with respect to the removal of directors or the filling of vacancies in the Board resulting from the removal by the stockholders. If any bylaw regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of stockholders for the election of directors, the by-laws so adopted, amended or repealed, together with a concise statement of the change made. ARTICLE X-- INDEMNITY --------------------- The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer, employee or agent of the Corporation or is or was serving, at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. By-Laws - 12 EX-3.37 4 CERTIFICATE OF INCORPORATION - RAPID CITY, INC. Exhibit 3.37 CERTIFICATE OF INCORPORATION OF YOUNG BROADCASTING OF RAPID CITY, INC. FIRST: The name of the corporation is Young Broadcasting of Rapid City, Inc. SECOND: The address of its registered office in the State of Delaware and the name of the registered agent at such address is National Corporate Research, Ltd., 9 East Loockerman Street, Dover, DE 19901, City of Dover, County of Kent. THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares the corporation shall have authority to issue is three thousand shares (3000) of common stock, each with a par value of $.01. FIFTH: The corporation shall have perpetual existence. SIXTH: The name and mailing address of the Sole Incorporator is Fran Wagner, National Corporate Research, Ltd., 225 West 34th Street, New York, New York 10122-0032. SEVENTH: No director shall be personally liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholder's, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article Sixth by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. I, being the sole incorporator hereinbefore named, hereby sign this certificate for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware this 25th day of March, 1996. /s/ Fran Wagner ------------------------------ Fran Wagner, Sole Incorporator EX-3.38 5 BY-LAWS OF YOUNG BROADCASTING OF RAPID CITY, INC. EXHIBIT 3.38 BY-LAWS OF YOUNG BROADCASTING OF RAPID CITY, INC. ARTICLE I - OFFICES ------------------- The office of the Corporation shall be located in the City and State designated in the Certificate of Incorporation. The Corporation may also maintain offices at such other places within or without the United States as the Board of Directors may, from time to time, determine. ARTICLE II - MEETINGS OF STOCKHOLDERS ------------------------------------- Section 1 - Annual Meetings: - --------------------------- The annual meeting of the stockholders of the Corporation shall be held within five months after the close of the fiscal year of the Corporation, for the purpose of electing directors, and transacting such other business as may properly come before the meeting. Section 2 - Special Meetings: - ---------------------------- Special meetings of the stockholders may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holders of ten percent (10%) of the shares then outstanding and entitled to vote thereat, or as otherwise required under the provisions of the Delaware General Corporation Law. Section 3 - Place of Meetings: - ----------------------------- All meetings of stockholders shall be held at the principal office of the Corporation, or at such other places as shall be designated in the notices or waivers of notice of such meetings. Section 4 - Notice of Meetings: - ------------------------------ (a) Except as otherwise provided by statute, written notice of By-Laws - 1 each meeting of stockholders, whether annual or special, stating the time when and place where it is to be held, shall be served either personally or by mail, not less than ten or more than sixty days before the meeting, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle stockholders to receive payment for their shares pursuant to statute, the notice of such meeting shall include a statement of that purpose and to that effect. If mailed, such notice shall be directed to each such shareholder at his address, as it appears on the records of the stockholders of the Corporation, unless he shall have previously filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case, it shall be mailed to the address designated in such request. (b) Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such notice and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who, in person or by proxy, submits a signed waiver of notice either before or after such meeting. Notice of any adjourned meeting of stockholders need not be given, unless otherwise required by statute. Section 5 - Quorum: - ------------------ (a) Except as otherwise provided herein, or by statute, or in the Certificate of Incorporation (such Certificate and any amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation"), at all meetings of stockholders of the Corporation, the presence at the commencement in person or by proxy of stockholders holding of record a majority of the total number of shares of the Corporation then issued and outstanding and entitled to vote, shall be necessary and sufficient to constitute a quorum for the transaction of any business. The withdrawal of any shareholder after the commencement of a meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (b) Despite the absence of a quorum at any annual or special meeting of stockholders, the stockholders, by a majority of the votes cast by the holders of shares entitled to vote thereon, may adjourn the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted at the meeting By-Laws - 2 as originally called if a quorum had been present. Section 6 - Voting: - ------------------ (a) Except as otherwise provided by statute or by the Certificate of Incorporation, any corporate action, other than the election of directors, to be taken by vote of the stockholders, shall be authorized by a by a majority of votes cast at a meeting of stockholders by the holders of shares entitled to vote thereon. (b) Except as otherwise provided by statute or by the Certificate of Incorporation, at each meeting of stockholders, each holder of record of stock of the Corporation entitled to vote thereat shall be entitled to one vote for each share of stock registered in his name on the books of the Corporation. (c) Each shareholder entitled to vote or to express consent or dissent without a meeting may do so by proxy; provided, however, that the instrument authorizing such proxy to act shall have been executed in writing by the shareholder himself, or by his attorney-in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven months from the date of its execution, unless the person executing it shall have specified therein the length of time it is to continue in force. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. (d) Any resolution in writing, signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, shall be and constitute action by such stockholders to the effect therein expressed, with the same force and effect as if the same had been duly passed at a duly called meeting of stockholders and such resolution so signed shall be inserted in the Minute Book of the Corporation under its proper date. ARTICLE III - BOARD OF DIRECTORS -------------------------------- Section 1 - Number, Election and Term of Office: - ----------------------------------------------- (a) The number of the directors of the Corporation shall be two (2), unless and until otherwise determined by vote of a majority of the entire Board of Directors. (b) Except as may otherwise be provided or in the Certificate of Incorporation, the members of the Board of Directors of the By-Laws - 3 Corporation, who need not be stockholders, shall be elected by a majority of the votes cast at a meeting of stockholders, by the holders of shares, present in person or by proxy, entitled to vote in the election. (c) Each director shall hold office until the annual meeting of the stockholders next succeeding his election, and until his successor is elected and qualified, or until his prior death, resignation or removal. Section 2 - Duties and Powers: - ----------------------------- The Board of Directors shall be responsible for the control and management of the affairs, property and interest of the Corporation, and may exercise all powers of the Corporation, except as are in the Certificate of Incorporation or by statute expressly conferred upon or reserved to the stockholders. Section 3 - Annual and Regular Meetings; Notice: - ----------------------------------------------- (a) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the stockholders, at the place of such annual meeting of stockholders. (b) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the Board of Directors, and may fix the time and place thereof. (c) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in paragraph (b) Section 4 of this Article III, with respect to special meetings, unless such notice shall be waived in the manner set forth in paragraph (c) of such Section 4. Section 4 - Special Meetings; Notice: - ------------------------------------ (a) Special meetings of the Board of Directors shall be held whenever called by the President or by one of the directors, at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required by statute, notice of special By-Laws - 4 meeting shall be mailed directly to each directors, addressed to him at his residence or usual place of business, at least two (2) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. A notice, or waiver of notice, except as required by Section 8 of this Article III, need not specify the purpose of the meeting. (c) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairman: - -------------------- At all meetings of the Board of Directors, the Chairman of the Board, if any and if present, shall preside. If there shall be no Chairman, or he shall be absent, then the President shall preside, and in his absence, a Chairman chosen by the directors shall preside. Section 6 - Quorum and Adjournments: - ----------------------------------- (a) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws. (b) A majority of the directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, until a quorum shall be present. Section 7 - Manner of Acting: - ---------------------------- (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, the action of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. Any action By-Laws - 5 authorized, in writing, by all of the directors entitled to vote thereon and filed with the minutes of the corporation shall be the act of the Board of Directors with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board. Section 8 - Vacancies: - --------------------- Any vacancy in the Board of Directors occurring by reason of any increase in the number of directors, or by reason of the death, resignation, disqualification, removal (unless a vacancy created by the removal of a director by the stockholders shall be filled by the stockholders at the meeting at which the removal was effected) or inability to act of any director, or otherwise, shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at any regular meeting or special meeting of the Board of Directors called for that purpose. Section 9 - Resignation: - ----------------------- Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or such offer, and the acceptance of such resignation shall not be necessary to make it effective. Section 10 - Removal: - -------------------- Any director may be removed with or without cause at any time by the affirmative vote of stockholders holding of record in the aggregate at least a majority of the outstanding shares of the Corporation at a special meeting of the stockholders called for that purpose, and may be removed for cause by action of the Board. Section 11 - Salary: - ------------------- No stated salary shall be paid to directors, as such, for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. By-Laws - 6 Section 12 - Contracts: - ---------------------- (a) No contract or other transaction between this Corporation and any other Corporation shall be impaired, affected or invalidated, nor shall any director be liable in any way by reason of the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other Corporation, provided that such facts are disclosed or made known to the Board of Directors. (b) Any director, personally and individually, may be a party to or may be interested in any contract. or transaction of this Corporation, and no director shall be liable in any way by reason of such interest, provided that the fact of such interest be disclosed or made known to the Board of Directors, and provided that the Board of Directors shall authorize, approve or ratify such contract or transaction by the vote (not counting the vote of any such director) of a majority of a quorum, notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be counted in determining the presence of a quorum at such meeting. This Section shall not be construed to impair or invalidate or in any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise) applicable thereto. Section 13 - Committees: - ----------------------- The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members an executive committee and such other committees, and alternate members thereof, as they may deem desirable, each consisting of three or more members, with such powers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board. ARTICLE IV - OFFICERS --------------------- Section 1 - Number, Qualifications, Election of Office: - ------------------------------------------------------ (a) The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, and such other officers, including without limitation a Chairman of the Board of Directors and one or more Vice Presidents, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the By-Laws - 7 Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more offices may be held by the same person. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of stockholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been elected and qualified, or until his death, resignation or removal. Section 2 - Resignation: - ----------------------- Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or by such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 3 - Removal: - ------------------- Any officer may be removed, either with or without cause, and a successor elected by a majority vote of the Board of Directors at any time. Section 4 - Vacancies: - --------------------- A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any time be filled for the unexpired portion of the term by a majority vote of the Board of Directors. Section 5 - Duties of Officers: - ------------------------------ Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these By-Laws, or may from time to time be specifically conferred or imposed by the Board of Directors. The Chairman of the Board, if any, or in lieu thereof, the President shall be the chief executive officer of the Corporation. By-Laws - 8 Section 6 - Sureties and Bonds: ------------------------------ In case the Board of Directors shall so require, any officer, employee or agent of the Corporation shall execute to the Corporation a bond in such sum, and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. Section 7 - Shares of Other Corporations: - ---------------------------------------- Whenever the Corporation is the holder of shares of any other Corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at stockholders meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the Chairman of the Board, if any, the President, any Vice President, or such other person as the Board of Directors may authorize. ARTICLE V - SHARES OF STOCK --------------------------- Section 1 - Certificate of Stock: - -------------------------------- (a) The certificates representing shares of the Corporation shall be in such from as shall be adopted by the Board of Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name and the number os shares, and shall be signed by (i) the Chairman of the Board, if any, or the President or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal. (b) No certificate representing shares shall be issued until the full amount of consideration therefore has been paid, except as otherwise permitted by law. (c) To the extent permitted by law, the Board of Directors may authorize the issuance of certificates for fractions of a share which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holding; or it may authorize the payment in cash of the fair value of fractions of a share as of the time when those entitled to receive such fractions are By-Laws - 9 determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder, except as therein provided. Section 2 - Lost or Destroyed Certificates: - ------------------------------------------ The holder of any certificate representing shares of the Corporation shall immediately notify the Corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of Directors in its discretion may require, the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgment of the Board of Directors, it is proper so to do. Section 3 - Transfer of Shares: - ------------------------------ (a) Transfers of shares of the Corporation shall be made on the share records of the Corporation only to the holder of record thereof, in person or by his duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such shares, with an assignment or power of transfer endorsed thereon of the authenticity of the signature and of authority to transfer and of payment of transfer taxes as the Corporation or its agents may require. (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: - ------------------------ By-Laws - 10 In lieu of closing the share records of the Corporation, the Board of Directors may fix, in advance, a date not exceeding fifty days, nor less than ten days, as the record date for the determination of stockholders entitled to receive notice of, or to vote at, any meeting of stockholders, or to consent to any proposal without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of determining stockholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided for herein, such determination shall apply to any adjournment thereof, unless the directors fix a new record date for the adjourned meeting. ARTICLE VI - DIVIDENDS ---------------------- Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. ARTICLE VII - FISCAL YEAR ------------------------- The fiscal year of the Corporation shall be fixed by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL ----------------------------- The corporate seal, if any, shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE IX - AMENDMENTS ----------------------- Section 1 - By Stockholders: - --------------------------- All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by the affirmative vote of stockholders holding of record in the aggregate at least a majority of the outstanding shares entitled to vote in the election of directors at any annual or special meeting of By-Laws - 11 stockholders, provided that the notice or waiver of notice of such meeting shall have a summarized or set forth in full therein, the proposed amendment. Section 2 - By Directors: - ------------------------ The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; provided, however, that the stockholders entitled to vote with respect thereto as in this Article IX above- provided may alter, amend or repeal by-laws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of stockholders or of the Board of Directors, or to change any provisions of'. the by-laws with respect to the removal of directors or the filling of vacancies in the Board resulting from the removal by the stockholders. If any by-law regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of stockholders for the election of directors, the by-laws so adopted, amended or repealed, together with a concise statement of the change made. ARTICLE X-- INDEMNITY --------------------- The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer, employee or agent of the Corporation or is or was serving, at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. By-Laws - 12 EX-3.39 6 CERTIFICATE OF INCORPORATION - LOS ANGELES, INC. Exhibit 3.39 CERTIFICATE OF INCORPORATION OF YOUNG BROADCASTING OF LOS ANGELES, INC. FIRST: The name of the corporation is Young Broadcasting of Los Angeles, Inc. SECOND: The address of its registered office in the State of Delaware and the name of the registered agent at such address is National Corporate Research, Ltd., 9 East Loockerman Street, Dover, DE 19901, City of Dover, County of Kent. THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares the corporation shall have authority to issue is three thousand shares (3,000) of common stock, each with a par value of $.01. FIFTH: The corporation shall have perpetual existence. SIXTH: The name and mailing address of the Sole Incorporator is Fran Wagner, National Corporate Research, Ltd., 225 West 34th Street, New York, New York 10122-0032. SEVENTH: No director shall be personally liable to the corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholder's, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article Sixth by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. I, being the sole incorporator hereinbefore named, hereby sign this certificate for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware this 23th day of May, 1996. /s/ Fran Wagner ------------------------------ Fran Wagner, Sole Incorporator EX-3.40 7 BY-LAWS OF YOUNG BROADCASTING OF LOS ANGELES, INC. EXHIBIT 3.40 BY-LAWS OF YOUNG BROADCASTING OF LOS ANGELES, INC. ARTICLE I - OFFICES ------------------- The office of the Corporation shall be located in the City and State designated in the Certificate of Incorporation. The Corporation may also maintain offices at such other places within or without the United States as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING OF STOCKHOLDERS ------------------------------------ Section 1 - Annual Meetings: - --------------------------- The annual meeting of the stockholders of the Corporation shall be held within five months after the close of the fiscal year of the Corporation, for the purpose of electing directors, and transacting such other business as may properly come before the meeting. Section 2 - Special Meetings: - ---------------------------- Special meetings of the stockholders may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holders of ten percent (10%) of the shares then outstanding and entitled to vote thereat, or as otherwise required under the provisions of the Delaware General Corporation Law. Section 3 - Place of Meetings: - ----------------------------- All meetings of stockholders shall be held at the principal office of the Corporation, or at such other places as shall be designated in the notices or waivers of notice of such meetings. Section 4 - Notice of Meetings: - ------------------------------ (a) Except as otherwise provided by statute, written notice of By-Laws - 1 each meeting of stockholders, whether annual or special, stating the time when and place where it is to be held, shall be served either personally or by mail, not less than ten or more than sixty days before the meeting, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle stockholders to receive payment for their shares pursuant to statute, the notice of such meeting shall include a statement of that purpose and to that effect. If mailed, such notice shall be directed to each such shareholder at his address, as it appears on the records of the stockholders of the Corporation, unless he shall have previously filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address, in which case, it shall be mailed to the address designated in such request. (b) Notice of any meeting need not be given to any person who may become a shareholder of record after the mailing of such notice and prior to the meeting, or to any shareholder who attends such meeting, in person or by proxy, or to any shareholder who, in person or by proxy, submits a signed waiver of notice either before or after such meeting. Notice of any adjourned meeting of stockholders need not be given, unless otherwise required by statute. Section 5 - Quorum: - ------------------ (a) Except as otherwise provided herein, or by statute, or in the Certificate of Incorporation (such Certificate and any amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation"), at all meetings of stockholders of the Corporation, the presence at the commencement in person or by proxy of stockholders holding of record a majority of the total number of shares of the Corporation then issued and outstanding and entitled to vote, shall be necessary and sufficient to constitute a quorum for the transaction of any business. The withdrawal of any shareholder after the commencement of a meeting shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (b) Despite the absence of a quorum at any annual or special meeting of stockholders, the stockholders, by a majority of the votes cast by the holders of shares entitled to vote thereon, may adjourn the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted at the meeting By-Laws - 2 as originally called if a quorum had been present. Section 6 - Voting: - ------------------ (a) Except as otherwise provided by statute or by the Certificate of Incorporation, any corporate action, other than the election of directors, to be taken by vote of the stockholders, shall be authorized by a by a majority of votes cast at a meeting of stockholders by the holders of shares entitled to vote thereon. (b) Except as otherwise provided by statute or by the Certificate of Incorporation, at each meeting of stockholders, each holder of record of stock of the Corporation entitled to vote thereat shall be entitled to one vote for each share of stock registered in his name on the books of the Corporation. (c) Each shareholder entitled to vote or to express consent or dissent without a meeting may do so by proxy; provided, however, that the instrument authorizing such proxy to act shall have been executed in writing by the shareholder himself, or by his attorney in-fact thereunto duly authorized in writing. No proxy shall be valid after the expiration of eleven months from the date of its execution, unless the person executing it shall have specified therein the length of time it is to continue in force. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. (d) Any resolution in writing, signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, shall be and constitute action by such stockholders to the effect therein expressed, with the same force and effect as if the same had been duly passed at a duly called meeting of stockholders and such resolution so signed shall be inserted in the Minute Book of the Corporation under its proper date. ARTICLE III - BOARD OF DIRECTORS -------------------------------- Section 1 - Number, Election and Term of Office: - ----------------------------------------------- (a) The number of the directors of the Corporation shall be two (2), unless and until otherwise determined by vote of a majority of the entire Board of Directors. (b) Except as may otherwise be provided or in the Certificate of Incorporation, the members of the Board of Directors of the By-Laws - 3 Corporation, who need not be stockholders, shall be elected by a majority of the votes cast at a meeting of stockholders, by the holders of shares, present in person or by proxy, entitled to vote in the election. (c) Each director shall hold office until the annual meeting of the stockholders next succeeding his election, and until his successor is elected and qualified, or until his prior death, resignation or removal. Section 2 - Duties and Powers: - ----------------------------- The Board of Directors shall be responsible for the control and management of the affairs, property and interest of the Corporation, and may exercise all powers of the Corporation, except as are in the Certificate of Incorporation or by statute expressly conferred upon or reserved to the stockholders. Section 3 - Annual and Regular Meetings; Notice: - ----------------------------------------------- (a) A regular annual meeting of the Board of Directors shall be held immediately following the annual meeting of the stockholders, at the place of such annual meeting of stockholders. (b) The Board of Directors, from time to time, may provide by resolution for the holding of other regular meetings of the Board of Directors, and may fix the time and place thereof. (c) Notice of any regular meeting of the Board of Directors shall not be required to be given and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in paragraph (b) Section 4 of this Article III, with respect to special meetings, unless such notice shall be waived in the manner set forth in paragraph (c) of such Section 4. Section 4 - Special Meetings; Notice: - ------------------------------------ (a) Special meetings of the Board of Directors shall be held whenever called by the President or by one of the directors, at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required by statute, notice of special By-Laws - 4 meeting shall be mailed directly to each directors, addressed to him at his residence or usual place of business, at least two (2) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. A notice, or waiver of notice, except as required by Section 8 of this Article III, need not specify the purpose of the meeting. (c) Notice of any special meeting shall not be required to be given to any director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. Section 5 - Chairman: - -------------------- At all meetings of the Board of Directors, the Chairman of the Board, if any and if present, shall preside. If there shall be no Chairman, or he shall be absent, then the President shall preside, and in his absence, a Chairman chosen by the directors shall preside. Section 6 - Quorum and Adjournments: - ----------------------------------- (a) At all meetings of the Board of Directors, the presence of a majority of the entire Board shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws. (b) A majority of the directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, until a quorum shall be present. Section 7 - Manner of Acting: - ---------------------------- (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by statute, by the Certificate of Incorporation, or by these By-Laws, the action of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. Any action By-Laws - 5 authorized, in writing, by all of the directors entitled to vote thereon and filed with the minutes of the corporation shall be the act of the Board of Directors with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board. Section 8 - Vacancies: - --------------------- Any vacancy in the Board of Directors occurring by reason of any increase in the number of directors, or by reason of the death, resignation, disqualification, removal (unless a vacancy created by the removal of a director by the stockholders shall be filled by the stockholders at the meeting at which the removal was effected) or inability to act of any director, or otherwise, shall be filled for the unexpired portion of the term by a majority vote of the remaining directors, though less than a quorum, at any regular meeting or special meeting of the Board of Directors called for that purpose. Section 9 - Resignation: - ----------------------- Any director may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or such offer, and the acceptance of such resignation shall not be necessary to make it effective. Section 10 - Removal: - -------------------- Any director may be removed with or without cause at any time by the affirmative vote of stockholders holding of record in the aggregate at least a majority of the outstanding shares of the Corporation at a special meeting of the stockholders called for that purpose, and may be removed for cause by action of the Board. Section 11 - Salary: - ------------------- No stated salary shall be paid to directors, as such, for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. By-Laws - 6 Section 12 - Contracts: - ---------------------- (a) No contract or other transaction between this Corporation and any other Corporation shall be impaired, affected or invalidated, nor shall any director be liable in any way by reason of the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other Corporation, provided that such facts are disclosed or made known to the Board of Directors. (b) Any director, personally and individually, may be a party to or may be interested in any contract. or transaction of this Corporation, and no director shall be liable in any way by reason of such interest, provided that the fact of such interest be disclosed or made known to the Board of Directors, and provided that the Board of Directors shall authorize, approve or ratify such contract or transaction by the vote (not counting the vote of any such director) of a majority of a quorum, notwithstanding the presence of any such director at the meeting at which such action is taken. Such director or directors may be counted in determining the presence of a quorum at such meeting. This Section shall not be construed to impair or invalidate or in any way affect any contract or other transaction which would otherwise be valid under the law (common, statutory or otherwise) applicable thereto. Section 13 - Committees: - ----------------------- The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members an executive committee and such other committees, and alternate members thereof, as they may deem desirable, each consisting of three or more members, with such powers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board. ARTICLE IV - OFFICERS --------------------- Section 1 - Number, Qualifications, Election of Office: - ------------------------------------------------------ (a) The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, and such other officers, including without limitation a Chairman of the Board of Directors and one or more Vice Presidents, as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the By-Laws - 7 Board of Directors may be, but is not required to be, a director of the Corporation. Any two or more offices may be held by the same person. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of stockholders. (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been elected and qualified, or until his death, resignation or removal. Section 2 - Resignation: - ----------------------- Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, or to the President or the Secretary of the Corporation. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board of Directors or by such officer, and the acceptance of such resignation shall not be necessary to make it effective. Section 3 - Removal: - ------------------- Any officer may be removed, either with or without cause, and a successor elected by a majority vote of the Board of Directors at any time. Section 4 - Vacancies: - --------------------- A vacancy in any office by reason of death, resignation, inability to act, disqualification, or any other cause, may at any time be filled for the unexpired portion of the term by a majority vote of the Board of Directors. Section 5 - Duties of Officers: - ------------------------------ Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these By-Laws, or may from time to time be specifically conferred or imposed by the Board of Directors. The Chairman of the Board, if any, or in lieu thereof, the President shall be the chief executive officer of the Corporation. By-Laws - 8 Section 6 - Sureties and Bonds: ------------------------------ In case the Board of Directors shall so require, any officer, employee or agent of the Corporation shall execute to the Corporation a bond in such sum, and with such surety or sureties as the Board of Directors may direct, conditioned upon the faithful performance of his duties to the Corporation, including responsibility for negligence and for the accounting for all property, funds or securities of the Corporation which may come into his hands. Section 7 - Shares of Other Corporations: ---------------------------------------- Whenever the Corporation is the holder of shares of any other Corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at stockholders meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the Chairman of the Board, if any, the President, any Vice President, or such other person as the Board of Directors may authorize. ARTICLE V - SHARES OF STOCK --------------------------- Section 1 - Certificate of Stock: - -------------------------------- (a) The certificates representing shares of the Corporation shall be in such from as shall be adopted by the Board of Directors, and shall be numbered and registered in the order issued. They shall bear the holder's name and the number os shares, and shall be signed by (i) the Chairman of the Board, if any, or the President or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant Treasurer, and shall bear the corporate seal. (b) No certificate representing shares shall be issued until the full amount of consideration therefore has been paid, except as otherwise permitted by law. (c) To the extent permitted by law, the Board of Directors may authorize the issuance of certificates for fractions of a share which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holding; or it may authorize the payment in cash of the fair value of fractions of a share as of the time when those entitled to receive such fractions are By-Laws - 9 determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder, except as therein provided. Section 2 - Lost or Destroyed Certificates: - ------------------------------------------ The holder of any certificate representing shares of the Corporation shall immediately notify the Corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of Directors in its discretion may require, the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability or damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgment of the Board of Directors, it is proper so to do. Section 3 - Transfer of Shares: - ------------------------------ (a) Transfers of shares of the Corporation shall be made on the share records of the Corporation only to the holder of record thereof, in person or by his duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such shares, with an assignment or power of transfer endorsed thereon of the authenticity of the signature and of authority to transfer and of payment of transfer taxes as the Corporation or its agents may require. (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. Section 4 - Record Date: - ------------------------ By-Laws - 10 In lieu of closing the share records of the Corporation, the Board of Directors may fix, in advance, a date not exceeding fifty days, nor less than ten days, as the record date for the determination of stockholders entitled to receive notice of, or to vote at, any meeting of stockholders, or to consent to any proposal without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of determining stockholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which the meeting is held; the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the resolution of the directors relating thereto is adopted. When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided for herein, such determination shall apply to any adjournment thereof, unless the directors fix a new record date for the adjourned meeting. ARTICLE VI - DIVIDENDS ---------------------- Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. ARTICLE VII - FISCAL YEAR ------------------------- The fiscal year of the Corporation shall be fixed by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL ----------------------------- The corporate seal, if any, shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE IX - AMENDMENTS ----------------------- Section 1 - By Stockholders: - --------------------------- All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by the affirmative vote of stockholders holding of record in the aggregate at least a By-Laws - 11 majority of the outstanding shares entitled to vote in the election of directors at any annual or special meeting of stockholders, provided that the notice or waiver of notice of such meeting shall have a summarized or set forth in full therein, the proposed amendment. Section 2 - By Directors: - ------------------------ The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; provided, however, that the stockholders entitled to vote with respect thereto as in this Article IX above-provided may alter, amend or repeal by-laws made by the Board of Directors, except that the Board of Directors shall have no power to change the quorum for meetings of stockholders or of the Board of Directors, or to change any provisions of'. the by-laws with respect to the removal of directors or the filling of vacancies in the Board resulting from the removal by the stockholders. If any bylaw regulating an impending election of directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of stockholders for the election of directors, the by-laws so adopted, amended or repealed, together with a concise statement of the change made. ARTICLE X-- INDEMNITY --------------------- The Corporation shall indemnify to the full extent authorized by law any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer, employee or agent of the Corporation or is or was serving, at the request of the Corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. By-Laws - 12 EX-3.41 8 CERTIFICATE OF INCORPORATION - FIDELITY TELEVISION Exhibit 3.41 ARTICLES OF INCORPORATION OF FIDELITY TELEVISION, INC. - -------------------------------------------------------------------------------- WE, THE UNDERSIGNED, have this day voluntarily associated ourselves together for the purpose of forming a corporation under the laws of the State of California, AND WE DO HEREBY CERTIFY: I The name of the corporation shall be FIDELITY TELEVISION, INC. II The purposes for which said corporation is formed are as follows: (a) The specific business in which the corporation is primarily to engage is to establish and operate a television broadcasting business. (b) To purchase, sell, mortgage, transfer in trust, pledge, exchange, rent or lease, either as lessor or lessee, real estate, buildings, structures, machinery, equipment and personal property, of every kind and nature. (c) To finance, buy or sell real estate contracts, trust deeds, mortgages and other instruments of ownership or encumbrance. (d) To manufacture, buy, sell, lease or otherwise -1- acquire and deal in all kinds of personal property which the corporation may deem necessary or convenient for the purposes of its business. (e) To transact or engage in any business or calling which is lawful under and by virture of the laws of the State of California III The principal office for the transaction of the business of the corporation shall be located in the County of Orange, State of California. IV There shall be four Directors of the corporation. The names and addresses of the persons who are appointed to act as first Directors are: LOUIS J. CELLA - Santa Ana, California WALTER B. CHAFFEE - Fullerton, California ROSS W. CORTESE - Laguna Hills, California WILLIAM G. SIMON - Laguna Hills, California V The corporation shall have authority to issue 100,000 shares of common stock of the par value of $10.00 per share. The aggregate par value of all shares shall be $1,000,000.00. IN WITNESS WHEREOF, we, as incorporators and named hereinabove as first Directors, have set our hands hereto as such incorporators and first Directors, in the County of Orange, State of California, this 7th day of October, 1965. /s/ Louis J. Cella /s/ Ross W. Cortese - ------------------------ ---------------------------- LOUISE J. CELLA ROSS W. CORTESE /s/ Walter B. Chaffee /s/ William G. Simon - -------------------------- ----------------------------- WALTER B. CHAFFEE WILLIAM G. SIMON STATE OF CALIFORNIA ) ) SS. COUNTY OF ORANGE ) On this 7th day of October, 1965, before me, the undersigned, a Notary Public in and for said County and State, personally appeared, LOUIS J. CELLA, WALTER B. CHAFFEE, ROSS W. CORTESE, and WILLIAM G. SIMON, known to me to be the persons whose names are subscribed to the within Articles of Incorporation, and acknowledged to me that they executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. [SEAL] OFFICIAL SEAL JANICE A. HOCKERSMITH NOTARY PUBLIC - CALIFORNIA /s/ Janice A. Hockersmith PRINCIPAL OFFICE IN ----------------------------- ORANGE COUNTY Notary Public in and for said County and State JANICE A. HOCKERSMITH My Commission expires June 6, 1967 CERTIFICATE OF AMENDMENT of ARTICLES OF INCORPORATION of FIDELITY TELEVISION, INC., a California corporation WILLIAM G. SIMON and WALTER B. CHAFFEE certify that: 1. They are the duly elected and acting President and Secretary, respectively, of said corporation. 2. The Articles of Incorporation shall be amended by revising Article V thereof to read as follows: "The corporation shall have the authority to issue 500,000 shares of common stock of the par value of $10.00 per share. The aggregate par value of all shares shall be $5,000,000.00." 3. The foregoing amendment has been approved by the Board of Directors. 4. The foregoing amendment was approved, in writing, by the required shareholders of said corporation in accordance with Sections 920 and 603 of the California General Corporation Law; the total number of outstanding shares of the corporation is 92,943 shares of common stock; the total number of shares entitled to vote with respect to the foregoing amendment is 92,943 common shares; the total number of shares approving the foregoing amendment exceeded the required approval being 53,387 a majority of the outstanding shares of stock issued by the corporation. In witness whereof, the undersigned have executed this Certificate on April 29, 1985. /s/ William G. Simon ---------------------------- WILLIAM G. SIMON, President /s/ Walter B. Chaffee ------------------------------ WALTER B. CHAFFEE, Secretary The undersigned, WILLIAM G. SIMON and WALTER B. CHAFFEE, the president and secretary of Fidelity Television, Inc., each declares under penalty of perjury that the matters set out in the foregoing Certificate are true of his own knowledge. Executed at Los Angeles, California on April 29, 1985. /s/ William G. Simon ------------------------- William G. Simon /s/ Walter B. Chaffee ------------------------- Walter B. Chaffee CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF FIDELITY TELEVISION, INC. William G. Simon and Walter B. Chaffee certify that: 1. They are the President and Secretary, respectively, of Fidelity Television, Inc., a California corporation. 2. Article V of the Articles of Incorporation is amended to read: V The Corporation shall have authority to issue 600,000 shares of common stock of the par value of $10.00 per share. The aggregate par value of all shares shall be $6,000,000. 3. The Amendment herein set forth has been duly approved by the Board of Directors. 4. The Amendment herein set forth has been duly approved by the required vote of the shareholders in accordance with Section 903 of the Corporations Code. The Corporation has only class of shares and the number of outstanding shares is 117,943. The number of shares voting in favor of the Amendment equaled or exceeded the vote required. The percentage vote required for the approval of the Amendment herein set forth was more than 50 percent. /s/ William G. Simon ---------------------------- William G. Simon President /s/ Walter B. Chaffee ---------------------------- Walter B. Chaffee Secretary The undersigned, William G. Simon and Walter B. Chaffee each declares under penalty of perjury of the laws of the State of California that he has read the foregoing certificate and knows the contents thereof and that the same is true of his own knowledge. Dated: February 20, 1986 /s/ William G. Simon --------------------------- William G. Simon /s/ Walter B. Chaffee ---------------------------- Walter B. Chaffee 2 AGREEMENT OF MERGER AGREEMENT OF MERGER, made as of this 22nd day of May, 1987, by and between KHJ Acquisition Company ("Newco"), a California corporation and a wholly owned subsidiary of The Walt Disney Company ("Disney"), a Delaware corporation, and Fidelity Television, Inc., a California corporation ("Fidelity"), Newco and Fidelity being sometimes hereinafter referred to as the "Constituent Corporations." WHEREAS, Disney, RKO General, Inc., GTH, Inc. and Fidelity have entered into an Agreement for Settlement, Acquisition and Merger, dated as of April 14, 1987 (the "Acquisition Agreement"), providing (among other things) for the merger of Newco with and into Fidelity (the "Merger") upon the terms and subject to the conditions provided in the Acquisition Agreement and this Agreement and in accordance with the Corporations Code, as amended, of the State of California (the "Corporations Code"); WHEREAS, Fidelity is a corporation duly organized and existing under the laws of the State of California; WHEREAS, the authorized capital stock of Fidelity consists solely of 600,000 shares of Common Stock, par value $10.00 per share (the "Fidelity Common Stock"), of which 188,085 are issued and outstanding as of the date hereof; WHEREAS, Newco is a corporation duly organized and existing under the laws of the State of California; WHEREAS, the authorized capital stock of Newco consists solely of one million shares of Common Stock, no par value ("Newco Common Stock"), of which 100 shares are issued and outstanding as of the date hereof, all of which shares are held by Disney; and WHEREAS, the respective Boards of Directors of each of the Constituent Corporations deem it desirable and in the best interests of their respective corporations and the shareholders thereof that the Merger be consummated upon the terms and conditions provided for in the Acquisition Agreement and this Agreement and in accordance with the Corporations Code; NOW, THEREFORE, the parties hereto, subject to the conditions specified in the Acquisition Agreement, in consideration of the provisions and the mutual covenants and agreements contained therein and herein and of the benefits to accrue to them, hereby agree, prescribe and set forth (among other provisions) the terms and conditions of the Merger, the mode of carrying the same into effect, and the manner and basis of converting the shares of capital stock of the Constituent Corporations as follows: ARTICLE I THE MERGER Section 1.1 Merger. Subject to the conditions specified in the Acquisition ------ Agreement, and in accordance with the provisions of this Agreement and the Corporations Code, the Merger shall be consummated at the Effective Time (as defined in Section 1.2 hereof) by means of the merger of Newco with and into Fidelity. Section 1.2 Effectiveness of Merger. On the date provided in the ----------------------- Acquisition Agreement, this Agreement together with certificates of officers of the Constituent Corporations, shall be filed with the Secretary of State of California in accordance with the applicable provisions of the Corporations Code. The Merger shall become effective at the date and time of such filing, which date and time are herein collectively referred to as the "Effective Time." Section 1.3 The Company as Surviving Corporation. At the Effective Time, ------------------------------------ the separate existence of Newco shall cease and Fidelity shall continue its corporate existence under the laws of the State of California as the surviving corporation in the Merger (the "Surviving Corporation"). The name of the Surviving Corporation shall remain unchanged as "Fidelity Television, Inc." Section 1.4 Effect of Merger. At and after the Effective Time: ---------------- (a) the Surviving Corporation shall have the rights, privileges, immunities and powers, and shall be subject to all the duties and liabilities, of a business corporation organized under the laws of the State of California; (b) the Surviving Corporation shall possess all the rights, privileges, immunities and franchises, as well of a public as of a private nature, of Newco; and all of the property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares and all other choices of action, and all and every other interest of and belonging to or due to Newco, shall be taken and deemed to be transferred to and vested in the Surviving Corporation without further act or deed; and (c) the Surviving Corporation shall thenceforth be responsible and liable for all liabilities and obligations of Newco; and any claim existing or action or proceeding pending by or against Newco may be prosecuted as if the Merger had not taken place or the Surviving Corporation may be substituted in its place; and neither the rights of creditors nor liens upon the property of Newco shall be impaired by the Merger. 2 ARTICLE II ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION ------------------------------- Section 2.1 Articles of Incorporation. As of the Effective Time, the ------------------------- Articles of Incorporation of Fidelity as in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation and shall thereafter remain such until amended as provided by law. Section 2.2 By-Laws. As of the Effective Time, the By-Laws of Fidelity as ------- in effect immediately prior to the Effective Time shall be the By-Laws of the Surviving Corporation and shall thereafter remain such until amended as provided therein. Section 2.3 Directors and Officers. At the Effective Time, by virtue of ---------------------- the Merger and without any further corporate action: (i) the directors of Newco in office immediately prior to the Effective Time shall become and constitute all of the members of the Board of Directors of the Surviving Corporation; and (ii) the officers of Newco in office immediately prior to the Effective Date shall become the officers of the Surviving Corporation. All of such persons shall hold their respective directorships and offices until the election and qualification of their respective successors or until their tenure is otherwise terminated in accordance with the By-Laws of the Surviving Corporation. ARTICLE III MANNER OF CONVERTING SHARES; CAPITAL STOCK OF CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES ------------------------------------------ Section 3.1 Conversion of Shares. At the Effective Time, by virtue of the -------------------- Merger and without any action on the part of the holders thereof: (a) each share of Fidelity Common Stock issued and outstanding immediately prior to the Effective Time (other than any shares of Fidelity Common Stock which are eligible to become and thereafter become, or which have theretofore become, "dissenting shares" within the meaning of Section 1300(b) of the Corporations Code ("Dissenting Fidelity Shares")) shall thereupon be converted into the right, upon surrender of the certificate representing such share in accordance with Section 2.3 of the Acquisition Agreement, to receive $492.56 in cash without interest (the "Fidelity Consideration"). (b) each share of Newco Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of the Common Stock, par value $10.00 per share ("Surviving Corporation Common Stock"), of the Surviving Corporation. Section 3.2 Closing of Fidelity Transfer Books. At the Effective Time, ---------------------------------- the stock transfer books of Fidelity shall be closed and no transfer of shares of Fidelity Common Stock shall thereafter be made. If, after the Effective Time, certificates representing shares of Fidelity Common Stock are presented to the Exchange Agent or Disney (following the expiration of the Exchange Agent Agreement), they shall be cancelled and exchanged for cash as provided in Section 3.1 hereof. Section 3.3 Exchange of Certificates. To be entitled to receive the ------------------------ Fidelity consideration with respect to any shares of Fidelity Common Stock, a Fidelity Shareholder shall be required to surrender the certificates representing such shares in accordance with the terms of Section 2.3 of the Acquisition Agreement. ARTICLE IV MISCELLANEOUS ------------- Section 4.1 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same Agreement. Section 4.2 Effect on Other Parties. Except as otherwise provided in this ----------------------- Agreement, nothing herein expressed or implied is intended, or shall be construed, to confer upon or give any person, firm or corporation, other than the parties to this Agreement and their successors and assigns any rights or remedies under or by reason of this Agreement. Section 4.3 Applicable Law. This Agreement and the legal relations between -------------- the parties hereto shall be governed by and construed in accordance with the laws of the State of California. Section 4.4 Capitalized Terms. All capitalized terms used herein without ----------------- definition shall have the meaning assigned to them in the Acquisition Agreement. IN WITNESS WHEREOF, Newco and Fidelity have caused this Agreement to be signed by their respective officers thereunder duly authorized, all as of the date first written above. KHJ ACQUISITION COMPANY, a California corporation By: /s/ Neil McCarthy ----------------- Neil McCarthy Vice President ATTEST: /s/ Doris Smith - --------------- Doris Smith Secretary FIDELITY TELEVISION, INC. By: /s/ William G. Simon -------------------- William G. Simon President ATTEST: /s/ Walter B. Chaffee - --------------------- Secretary CERTIFICATE OF MERGER OF FIDELITY TELEVISION, INC. a California corporation Joseph M. Santaniello and Doris A. Smith certify that: 1. They are the duly elected and acting Vice President and Secretary, respectively, of said corporation (hereinafter called "this corporation"). 2. This Certificate is attached to the Agreement of Merger dated as of May 22, 1987 providing for the merger of this corporation with KHJ Acquisition Company, a California corporation (the "Merger"). 3. The Merger has been approved by the Board of Directors of this corporation. 4. The principal terms of the Agreement of Merger in the form attached hereto were approved by this corporation by all of the shares of each class entitled to vote on the Merger, the total number of outstanding shares of each class entitled to vote on the Merger and the vote required of each class being as follows: One class of Common Stock of which one hundred eighty-eight thousand eighty-five (188,085) shares were issued and outstanding, and such required vote being a majority of the outstanding shares. The undersigned, Joseph M. Santaniello and Doris A. Smith, respectively, of Fidelity Television, Inc., each declares under penalty of perjury that the matters set out in the foregoing Certificate of Merger are true of his or her own knowledge. Executed at Burbank, California on June 11, 1990. /s/ Joseph M. Santaniello ------------------------- Joseph M. Santaniello, Vice President /s/ Doris A. Smith ------------------ Doris A. Smith, Secretary CERTIFICATE OF MERGER OF KHJ ACQUISITION COMPANY a California corporation Joseph M. Santaniello and Doris A. Smith certify that: 1. They are the duly elected and acting Vice President and Secretary, respectively, of said corporation (hereinafter called "this corporation". 2. This Certificate is attached to the Agreement of Merger dated as of May 22, 1987 providing for the merger of this corporation with Fidelity Television, Inc., a California corporation (the "Merger"). 3. The Merger has been approved by the Board of Directors of this corporation. 4. The principal terms of the Agreement of Merger in the form attached hereto were approved by this corporation by all of the shares of each class entitled to vote on the Merger, the total number of outstanding shares of each class entitled to vote on the Merger and the vote required of each class being as follows: One class of Common Stock of which one hundred (100) shares were issued and outstanding, and such required vote being a majority of the outstanding shares. The undersigned, Joseph M. Santaniello and Doris A. Smith of KHJ Acquisition Company, each declares under penalty of perjury that the matters set out in the foregoing Certificate of Merger are true of his or her own knowledge. Executed at Burbank, California on June 11, 1990. /s/ Joseph M. Santaniello ------------------------- Joseph M. Santaniello, Vice President /s/ Doris A. Smith ------------------ Doris A. Smith, Secretary EX-3.42 9 BY-LAWS OF FIDELITY TELEVISION, INC. EXHIBIT 3.42 FIDELITY TELEVISION, INC. BYLAWS ARTICLE I OFFICES Section 1. PRINCIPAL OFFICES. The board of directors shall fix the --------- location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the corporation has one or more business offices in this state, the board of directors shall fix and designate a principal business office in the State of California. Section 2. OTHER OFFICES. The board of directors, or the president --------- or vice president, may at any time establish branch or subordinate offices at any place or places. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. PLACES OF MEETINGS. Meetings of shareholders shall be --------- held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders' meetings shall take place at the principal executive office of the corporation. Section 2. ANNUAL MEETING. The annual meeting of shareholders shall --------- be held each year on a date and at a time designated by the board of directors. At each annual meeting directors shall be elected, and any other proper business within the power of the shareholders may be transacted. Section 3. SPECIAL MEETING. A special meeting of the shareholders --------- may be called at any time by the board of directors, or by the chairman of the board, or by the president or vice president or secretary, or by one or more shareholders holding shares in the aggregate entitled to cast not less than ten percent of the votes at that meeting. If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by first class mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than 35 or more than 60 days after the receipt of the request. If the notice is not given with 20 days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing, or affecting the time when a meeting of shareholders called by action of the board of directors may be held. Section 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings --------- of shareholders shall be sent or otherwise given in accordance with Section 5 of this Article II not less than 10 nor more than 60 days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election. If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest under Section 310 of the Corporations Code of California, (ii) an amendment of the articles of incorporation under Section 902 of that code, (iii) a reorganization of the corporation under Section 1201 of that code, (iv) a voluntary dissolution of the corporation under Section 1900 of that code, or (v) a distribution in dissolution, other than in accordance with the rights of outstanding preferred shares, under Section 2007 of that code, the notice shall also state the general nature of that proposal. Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of --------- any shareholders' meeting shall be given either personally or by first class mail or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporation's books or has been so given, notice shall be deemed to have been given if sent to that shareholder by first class mail or telegraphic or other written communication to the corporation's principal executive office, or if published at least once in a 2 newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally, deposited in the mail, delivered to a common carrier for transmission to the recipient, actually transmitted by electronic means to the recipient by the person giving the notice, or sent by other means of written communication. If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice. An affidavit of the mailing or other means of giving any notice of any shareholders' meeting may be executed by the secretary, assistant secretary, or any transfer agent of the corporation giving the notice, and filed and maintained in the minute book of the corporation. Section 6. QUORUM. The presence in person or by proxy of the holders --------- of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Section 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, --------- annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 6 of this Article II. When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless after adjournment a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than 45 days from the date set for the original meeting, in which case the board of directors shall set a new record date. Notice of any such adjourned meeting, if 3 required, shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 4 and 5 of this Article II. At any adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. Section 8. VOTING. The shareholders entitled to vote at any meeting --------- of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II, subject to the provisions of Sections 702 to 704, inclusive, of the Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a corporation, or in joint ownership). The shareholders' vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun. On any matter other than the election of directors, any shareholder may vote part of the shareholder's shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares that the shareholder is entitled to vote. If a quorum is present (or if a quorum had been present earlier at the meeting but some shareholders had withdrawn) the affirmative vote of a majority of the shares represented and voting, provided such shares voting affirmatively also constitute a majority of the number of shares required for a quorum, shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the California General Corporation Law or by the articles of incorporation. At a shareholders' meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast), unless the candidates' names have been placed in nomination before commencement of the voting and a shareholder has given notice before commencement of the voting of the shareholder's intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholder's shares are normally entitled, or distribute the shareholder's votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. 4 Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The --------- transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though transacted at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting, or an approval of the minutes. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the waiver of notice or consent shall state the general nature of the proposal. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by law to be included in the notice of the meeting, but not so included, if that objection is expressly made at the meeting. Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. ---------- Any action which may be taken at any annual or special meeting of the shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted. Directors may be elected by written consent without a meeting only if the written consents of all outstanding shares entitled to vote are obtained, except that a vacancy in the board (other than a vacancy created by removal of a director) not filled by the board may be filled by the written consent of the holders of a majority of the outstanding shares entitled to vote. All such consents shall be filed with the secretary of the corporation and shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholder's proxy holder, or a transferee of the shares or a personal representative of the shareholder or their respective proxy holders, may revoke 5 the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary. If the consents of all shareholders entitled to vote have not been solicited in writing, and if the unanimous written consent of all such shareholders shall not have been received, the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. This notice shall be given in the manner specified in Section 5 of this Article II. In the case of approval of (i) contracts or transactions in which a director has a direct or indirect financial interest under Section 310 of the Corporations Code of California, (ii) indemnification of agents of the corporation, under Section 317 of that code, (iii) a reorganization of the corporation, under Section 1201 of that code, or (iv) a distribution in dissolution, other than in accordance with the rights of outstanding preferred shares, under Section 2007 of that code, notice of such approval shall be given at least 10 days before the consummation of any action authorized by that approval. Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, GIVING ---------- CONSENTS, AND PAYMENTS OF DIVIDENDS AND DISTRIBUTIONS. For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any other rights in respect of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than 60 days or less than 10 days before the date of any such meeting or more than 60 days before any such action without a meeting, and in this event only shareholders of record at the close of business on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the California General Corporation Law. If the board of directors does not so fix a record date: (a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given, or if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. 6 (b) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the 60th day before the date of such other action, whichever is later. (c) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board adopts the resolution relating thereto, or the 60th day prior to the date of such other action, whichever is later. Section 12. PROXIES. Every person entitled to vote for directors or ---------- on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the shareholder or the shareholder's attorney in fact A validly executed proxy that does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked, or by attendance at the meeting and voting in person by the person executing the proxy, or by a subsequent proxy executed by the same person and presented at the meeting; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of sections 705(e) and 705(f) of the Corporations Code of California. ARTICLE III DIRECTORS Section 1. POWERS. Subject to the provisions of the California --------- General Corporation Law and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 7 Section 2. NUMBER, ELECTION AND TERM OF OFFICE OF DIRECTORS. The --------- authorized number of directors shall be three. Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. Section 3. VACANCIES. Vacancies in the board of directors may be --------- filled by a majority of the remaining directors, whether or not less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the unanimous written consent of the holders of the outstanding shares entitled to vote. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote, except that filling a vacancy created by removal of a director shall require the written consent of the holders of all outstanding shares entitled to vote. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified. Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular --------- meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, as long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting. 8 Section 5. REGULAR MEETINGS. Regular meetings of the board of --------- directors shall be held without call at such time as shall from time to time be fixed by the board of directors. Such regular meetings may be held without notice. Section 6. SPECIAL MEETINGS. Special meetings of the board of --------- directors for any purpose or purposes may be called at any time by the chairman of the board or the president, any vice president, the secretary, or any two directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. In case the notice is mailed, it shall be deposited in the United States mail at least four days before the time of the meeting. In case the notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least 48 hours before the time of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director whom the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting, nor need it specify the place if the meeting is to be held at the principal executive office of the corporation. Section 7. QUORUM. A majority of the authorized number of directors --------- shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 9 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Corporations Code of California (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of that code (as to appointment of committees), and Section 317(e) of that code (as to indemnification of directors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. Section 8. WAIVER OF NOTICE. The transactions of any meeting of the --------- board of directors, however called and noticed or wherever held, shall be as valid as though transacted at a meeting duly held after regular call and notice if a quorum is present and if each director (a) has 9 received notice of the meeting, (b) attends the meeting without protesting, before or at the beginning of the meeting, the lack of notice to such director, or (c) before or after the meeting signs a waiver of notice, a consent to holding the meeting, or an approval of the minutes of the meeting. Any such waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Section 9. ADJOURNMENT. A majority of the directors present, whether --------- or not constituting a quorum, may adjourn any meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four hours, in which case notice of the time and place shall be given before the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment. Section 10. ACTION WITHOUT MEETING. Any action required or permitted ---------- to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board. Section 11. FEES AND COMPENSATION OF DIRECTORS. Directors and members ---------- of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the board of directors. This Section 11 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for those services. ARTICLE IV COMMITTEES Section 1. COMMITTEES OF DIRECTORS. The board of directors may, by --------- resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to: 10 (a) The approval of any action which, under the General Corporation Law of California, also requires shareholders' approval or approval of the outstanding shares; (b) The filling of vacancies on the board of directors or in any committee; (c) The fixing of compensation of the directors for serving on the board or on any committee; (d) The amendment or repeal of bylaws or the adoption of new bylaws; (e) The amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable; (f) A distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or (g) The appointment of any other committees of the board of directors or the members of these committees. Section 2. COMMITTEE MINUTES. The committee or committees shall keep --------- regular minutes of proceedings and report the same to the board when required. Section 3. MEETINGS AND ACTIONS OF COMMITTEES. Meetings and action of --------- committees shall be governed by, and held and taken in in accordance with, the provisions of Article III, Sections 4 (place of meeting), 5 (regular meetings), 6 (special meetings and notice), 7 (quorum), 8 (waiver of notice), 9 (adjournment), and 10 (action without meeting) of these bylaws, with such changes in the context as are necessary to substitute the committee and its members for the board of directors and its members, except that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee; special meetings of committees may also be called by resolution of the board of directors; and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. 11 ARTICLE V OFFICERS Section 1. OFFICERS. The officers of the corporation shall be a --------- president, a secretary, and a treasurer, who shall be the chief financial officer of the corporation. The corporation may have, at the discretion of the board, one or more vice presidents with powers determined according to this article. The corporation may also have such other officers with such titles and duties as shall be determined by the board of directors in accordance with the provisions of Section 3 of this Article V. Any number of offices may be held by the same person. All officers may sign contracts on the corporation's behalf where such contracts are entered into in the ordinary course of business of the corporation. Section 2. ELECTION OF OFFICERS. The officers of the corporation, --------- except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article V, shall be chosen by the board of directors, and each shall serve at the pleasure of the board, subject to the rights, if any, of any officer under any contract of employment. Section 3. SUBORDINATE OFFICERS. The board of directors may appoint, --------- and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the board of directors may from time to time determine. Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the --------- rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting of the board, or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Section 5. VACANCIES IN OFFICES. A vacancy in any office because of --------- death, resignation, removal, 12 disqualification, or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office. Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if any, --------- shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by the bylaws. If there is no president, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V. Section 7. PRESIDENT. Subject to such powers, if any, as may be --------- given by the bylaws or board of directors to the chairman of the board, the president shall be the general manager and chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or the bylaws. Section 8. VICE PRESIDENTS. The vice president, or if there be more --------- than one, the vice presidents in the order determined by the board of directors, shall in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 9. SECRETARY. The secretary shall keep or cause to be kept, --------- at the principal executive office or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice given, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings. The secretary shall keep, or cause to be kept, at the principal executive office or at such other place as the board of directors may direct, a record of shareholders, or a duplicate record of shareholders, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates 13 issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary or assistant secretary, or if they are absent or unable to act or refuse to act, any other officer of the corporation, shall give, or cause to be given, notice of all meetings of the shareholders, of the board of directors, and of committees of the board of directors, required by the bylaws or by law to be given. The secretary shall keep the seal of the corporation if one is adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by the bylaws. Section 10. TREASURER. The treasurer shall keep and maintain, or ---------- cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The book of account shall at all reasonable times be open to inspection by any director. The treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and treasurer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or the bylaws. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS Section 1. AGENTS, PROCEDURES AND EXPENSES. For the purposes of this --------- Article, "agent" means any person who is or was a director, officer, employee, or other agent of this corporation, or is or was serving at the request of this corporation as a director, officer, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation that was a predecessor corporation of this corporation or of another enterprise at the request of such predecessor corporation; "proceeding" means any threatened, pending, or completed action or proceeding, whether civil, criminal, administrative, or investigative; and "expenses" 14 includes, without limitation, attorneys' fees and any expenses of establishing a right to indemnification under Section 4 or Section 5(c) of this Article. Section 2. ACTIONS OTHER THAN BY THE CORPORATION. This corporation --------- shall have power to indemnify any person who was or is a party, or is threatened to be made a party, to any proceeding (other than an action by or in the right of this corporation to procure a judgment in its favor) by reason of the fact that such person is or was an agent of this corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding if that person acted in good faith and in a manner that person reasonably believed to be in the best interest of this corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of that person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner that the person reasonably believed to be in the best interest of this corporation or that the person had reasonable cause to believe that the person's conduct was unlawful. Section 3. ACTIONS BY THE CORPORATION. This corporation shall have --------- the power to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action by or in the right of this corporation to procure a judgment in its favor by reason of the fact that that person is or was an agent of this corporation, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of that action if that person acted in good faith, in a manner that person reasonably believed to be in the best interests of this corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. No indemnification shall be made under this Section 3: (a) With respect to any claim, issue, or matter as to which that person has been adjudged to be liable to this corporation in the performance of that person's duty to this corporation, unless and only to the extent that the court in which that proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, that person is fairly and reasonably entitled to indemnity for the expenses which the court shall determine; 15 (b) Of amounts paid in settling or otherwise disposing of a threatened or pending action, with or without court approval; or (c) Of expenses incurred in defending a threatened or pending action that is settled or otherwise disposed of without court approval. Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent --------- of this corporation has been successful on the merits in defense of any proceeding referred to in Sections 2 or 3 of this Article, or in defense in defense of any claim, issue, or matter therein, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith. Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of --------- this Article, any indemnification under this Article shall be made by this corporation only if authorized in the specific case on a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standards of conduct set forth in Sections 2 or 3 of this article by: (a) A majority vote of a quorum consisting of directors who are not parties to the proceeding; (b) Approval by the affirmative vote of a majority of the shares of this corporation entitled to vote, represented at a duly held meeting at which a quorum is present or by the written consent of holders of a majority of the outstanding shares entitled to vote. For this purpose, the shares owned by the person to be indemnified shall not be considered outstanding or entitled to vote thereon; or (c) The court in which the proceeding is or was pending, on application made by this corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not such application by the agent, attorney, or other person is opposed by this corporation. Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any --------- proceeding may be advanced by this corporation before the final disposition of the proceeding on receipt of an undertaking by or on behalf of the agent to repay the amount of the advance unless it shall be determined ultimately that the agent is entitled to be indemnified as authorized in this Article. Section 7. OTHER CONTRACTUAL RIGHTS. Nothing contained in this --------- Article shall affect any right to indemnification to which persons other than directors and 16 officers of this corporation or any subsidiary hereof may be entitled by contract or otherwise. Section 8. LIMITATIONS. No indemnification or advance shall be made --------- under this Article, except as provided in Section 4 or Section 5(c), in any circumstance where it appears: (a) That it would be inconsistent with a provision of the articles, a resolution of the shareholders, or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or (b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement. Section 9. INSURANCE. Upon and in the event of a determination by --------- the board of directors of this corporation to purchase such insurance, this corporation shall purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such whether or not this corporation would have the power to indemnify the agent against that liability under the provisions of this Article. Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This ---------- Article does not apply to any proceeding against any trustee, investment manager, or other fiduciary of an employee benefit plan in that person's capacity as such, even though that person may also be an agent of the corporation as defined in Section 1 of this Article. This corporation shall have the power to indemnify, and to purchase and maintain insurance on behalf of, any such trustee, investment manager, or other fiduciary of any pension, profit sharing, share bonus, share purchase, share option, savings, thrift, and other retirement, incentive, and benefit plan, trust, and other provision for any or all of the directors, officers, and employees of the corporation or any of its subsidiary or affiliated corporations, and to indemnify and purchase and maintain insurance on behalf of any fiduciary of such plans, trusts or provisions. Nothing contained in this Article shall limit any right to indemnification to which such a trustee, investment manager, or other fiduciary may be entitled by contract or otherwise, which shall be enforceable to the extent permitted by applicable law other than this Article. 17 ARTICLE VII RECORDS AND REPORTS Section 1. MAINTENANCE AND INSPECTION OF RECORD OF --------- SHAREHOLDERS. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the board of directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder. A shareholder may inspect and copy such record if such a privilege to do so is granted to that shareholder by statute. Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation --------- shall keep at its principal executive office, or if its principal executive office is not in the State of California, at its principal business office in this state, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of the bylaws as amended to date. Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. --------- The accounting books and records and minutes of proceedings of the shareholders and the board of directors and any committee or committees of the board of directors shall be kept at such place or places designated by the board of directors. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary corporation of the corporation. Section 4. INSPECTION BY DIRECTORS. Every director shall have the --------- absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This inspection by a 18 director may be made in person or by an agent or attorney and the right to inspection includes the right to copy and make extracts of documents. Section 5. ANNUAL REPORT TO SHAREHOLDERS; WAIVER. The board --------- of directors shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year adopted by the corporation. This report shall be sent at least 15 days (if third class mail is used, 35 days) before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified in Section 5 of Article II of these bylaws for giving notice to shareholders of the corporation. The annual report shall contain a balance sheet as of the end of the fiscal year and an income statement and statement of changes in financial position for the fiscal year, accompanied by any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation. This annual report is hereby waived whenever the corporation shall have less than 100 shareholders as defined in Section 605 of the Corporations Code of California. IF the corporation has more than 100 shareholders as defined in Section 605 and if it has no class of securities registered under Section 12 of the Securities and Exchange Act of 1934, or is exempt from such registration by Section 12(g)(2) of said act, the annual report of the corporation shall also describe briefly: (1) Any transaction (excluding compensation of officers and directors) during the previous fiscal year involving an amount in excess of $40,000 (other than contracts let at competitive bids or services rendered at prices regulated by law) to which the corporation or its parent or subsidiary was a party and in which any director or officer of the corporation or of a subsidiary was a party and in which any director or office of the corporation or of a subsidiary or (if known to the corporation or its parent or subsidiary) any holder of more than 10 percent of the outstanding voting shares of the corporation had a a direct or indirect material interest, naming such person and stating such person's relationship to the corporation, the nature of such person's interest in the transaction and, where practicable, the amount of such interest; provided that in the case of a transaction with a partnership in which such person is a partner, only the interest of the partnership need be stated; and provided further, that no such report need be made in the case of transactions approved by the shareholders under subdivision (a) of Section 310 of the California Corporations Code. (2) The amount and circumstances of any indemnification or advances aggregating more than $10,000 paid during the fiscal year to any officer or director of the corporation pursuant to Section 317 of 19 the California Corporations Code, provided that no such report need be made in the case of indemnification approved by the shareholders under paragraph (2) of the subdivision (e) of Section 317 of the California Corporations Code. Section 6. FINANCIAL STATEMENTS. A copy of any annual financial --------- statement and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for 12 months and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder. If a shareholder or shareholders holding at least five percent of the outstanding shares of any class of stock of the corporation make a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the current fiscal year ended more than 30 days before the date of the request, and a balance sheet of the corporation as of the end of that period, the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within 30 days after the receipt of the request. If the corporation has not sent the shareholders its annual report for the last fiscal year, this report shall likewise be delivered or mailed to the shareholder or shareholders within 30 days after the request. The corporation shall also, on the written request of any shareholder, mail to the shareholder a copy of the last annual, semiannual, or quarterly income statement which it has prepared, and a balance sheet as of the end of that period. The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accounts engaged by the corporation or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation. Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The corporation --------- shall, each year during the calendar month in which its articles of incorporation originally were filed with the California secretary of state, or during the preceding five calendar months, file with the secretary of state, on the prescribed form, a statement setting forth the authorized number of directors, the names and complete business or residence addresses of 20 all incumbent directors, the names and complete business or residence addresses of the chief executive officer, secretary, and chief financial officer, the street address of its principal executive office or principal business office in this state, and the general type of business constituting the principal business activity of the corporation, together with a designation of the agent of the corporation for the purpose of service of process, all in compliance with Section 1502 of the Corporations Code of California. ARTICLE VIII GENERAL CORPORATE MATTERS Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. --------- For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be more than 60 nor less than ten days before any such action, and in that case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the California General Corporation Law. If the board of directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the 60th day before the date of that action, whichever is later. Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, --------- drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the board of directors. Section 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The --------- board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances; and, unless so authorized or ratified by the board of directors or within the agency power of an 21 officer, no officer, agent, or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. Section 4. CERTIFICATES FOR SHARES. A certificate or certificates --------- for shares of the capital stock of the corporation shall be issued to each shareholder when any of these shares are fully paid, and the board of directors may authorize the issuance of certificates or shares as partly paid provided that these certificates shall state the amount of the consideration to be paid for them and the amount paid. All certificates shall be signed in the name of the corporation by the chairman of the board or vice chairman of the board or the president or vice president and by the chief financial officer or an assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that officer, transfer agent, or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent, or registrar at the date of issue. Section 5. LOST CERTIFICATES. Except as provided in this Section 5, --------- no new certificate for shares shall be issued to replace an old certificate unless the latter is surrendered to the corporation and canceled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen, or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the board may require, including provisions for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate. ARTICLE IX AMENDMENTS Section 1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or --------- these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote, except as otherwise provided by law, these bylaws, or the articles of 22 incorporation provided, however, that if the articles of incorporation of the corporation set forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the articles of incorporation. Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the --------- shareholders as provided in Section 1 of this Article IX, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors, may be adopted, amended, or repealed by the board of directors. 23 EX-9.1(E) 10 AMENDMENT NO. 4 TO VOTING TRUST AGREEMENT EXHIBIT 9.1(e) AMENDMENT NO. 4 TO VOTING TRUST AGREEMENT Amendment No. 4 dated as of September 11, 1996 (the "Amendment"), to the Voting Trust Agreement, dated as of July 1, 1991, as amended (the "Voting Trust Agreement"), by and between Richard Young, Sharon Conroy and Vincent Young, as Trustee under the Agreement of Trust (the "Family Trust Agreement") dated December 31, 1990, and Vincent Young and Richard Young, as trustees (the "Trustees"). WHEREAS, Vincent Young, as Trustee under the Family Trust Agreement, has distributed (the "Distribution") to Scott I. Fulmer, from the separate trust fund for the benefit of Scott I. Fulmer created pursuant to the Family Trust Agreement, 1,000 shares of Class B Common Stock, $.001 par value, of Young Broadcasting Inc., a Delaware corporation; and WHEREAS, the Trustees desire to amend Exhibit A to the Voting Trust Agreement to reflect the Distribution. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto agree as follows: 1. All capitalized terms not otherwise defined herein shall have the same meanings as set forth in the Voting Trust Agreement. 2. The Voting Trust Agreement is hereby amended by amending Exhibit A thereto to give effect to the Distribution. 3. A copy of Exhibit A, as so amended, is attached hereto and made a part hereof. 4. Except as amended hereby, the Voting Trust Agreement shall remain in full force and effect. The Trustees shall give notice of this Amendment to the registered owners of Trust Certificates. IN WITNESS WHEREOF, the Trustees have executed this Amendment as of the date and year first above written. ----------------------------- Vincent Young, as Trustee ----------------------------- Richard Young, as Trustee The undersigned, being collectively the registered owners of Trust Certificates representing a majority of the aggregate number of shares represented by all outstanding Trust Certificates, hereby consent to the foregoing Amendment No. 4 to the Voting Trust Agreement as of the date first above written. ------------------------- Vincent Young, as Trustee under the Agreement of Trust dated December 31, 1990 ------------------------- Richard Young - 2 - Exhibit A --------- Name of Stockholder Number of Shares - ------------------- ----------------
Sharon Conroy 29,820 Richard Young 30,792 Vincent Young, as Trustee under 4,522 the Agreement of Trust dated December 31, 1990 F/B/O Rachel Young Vincent Young, as Trustee under 4,522 the Agreement of Trust dated December 31, 1990 F/B/O Kinley Young Vincent Young, as Trustee under 4,522 the Agreement of Trust dated December 31, 1990 F/B/O Alexander Young Vincent Young, as Trustee under 4,522 the Agreement of Trust dated December 31, 1990 F/B/O Tyler Young Vincent Young, as Trustee under 15,172 the Agreement of Trust dated December 31, 1990 F/B/O Thomas T. Allan Vincent Young, as Trustee under 12,772 the Agreement of Trust dated December 31, 1990 F/B/O Adam Allan Vincent Young, as Trustee under 14,172 the Agreement of Trust dated December 31, 1990 F/B/O Scott I. Fulmer Vincent Young, as Trustee under 7,100 the Agreement of Trust dated December 31, 1990 F/B/O Margaret Young Vincent Young, as Trustee under 7,100 the Agreement of Trust dated December 31, 1990 F/B/O Kelly Young 135,016 =======
EX-9.1(F) 11 AMENDMENT NO. 5 TO VOTING TRUST AGREEMENT EXHIBIT 9.1(f) AMENDMENT NO. 5 TO VOTING TRUST AGREEMENT Amendment No. 5 dated as of January 21, 1997 (the "Amendment"), to the Voting Trust Agreement, dated as of July 1, 1991, as amended (the "Voting Trust Agreement"), by and between Richard Young, Sharon Conroy and Vincent Young, as Trustee under the Agreement of Trust dated December 31, 1990, and Vincent Young and Richard Young, as trustees (the "Trustees"). WHEREAS, Sharon Conroy desires to transfer 5,000 shares (the "Shares") of the Class B Common Stock, $.001 par value, of Young Broadcasting Inc., a Delaware corporation, deposited by her and held pursuant to the voting trust (the "Voting Trust") created by the Voting Trust Agreement; and WHEREAS, the Trustee desire to amend Exhibit A to the Voting Trust Agreement to reflect the removal of the Shares from the Voting Trust. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto agree as follows: 1. All capitalized terms not otherwise defined herein shall have the same meanings as set forth in the Voting Trust Agreement. 2. The Voting Trust Agreement is hereby amended by amending Exhibit A thereto to give the effect to the removal by Sharon Conroy of the Shares from the Voting Trust. 3. A copy of Exhibit A, as so amended, is attached hereto and made a part hereof. 4. Except as amended hereby, the Voting Trust Agreement shall remain in full force and effect. The Trustee shall give notice of this Amendment to the registered owners of Trust Certificates. IN WITNESS WHEREOF, the Trustees have executed this Amendment as of the date and year first above written. ----------------------------- Vincent Young, as Trustee ----------------------------- Richard Young, as Trustee The undersigned, being collectively the registered owners of Trust Certificates representing a majority of the aggregate number of shares represented by all outstanding Trust Certificates, hereby consent to the foregoing Amendment No. 5 to the Voting Trust Agreement as of the date first above written. ------------------------- Vincent Young, as Trustee under the Agreement of Trust dated December 31, 1990 ------------------------- Richard Young - 2 - Exhibit A --------- Name of Stockholder Number of Shares - ------------------- ---------------- Sharon Conroy 24,820 Richard Young 30,792 Vincent Young, as Trustee under 4,522 the Agreement of Trust dated December 31, 1990 F/B/O Rachel Young Vincent Young, as Trustee under 4,522 the Agreement of Trust dated December 31, 1990 F/B/O Kinley Young Vincent Young, as Trustee under 4,522 the Agreement of Trust dated December 31, 1990 F/B/O Alexander Young Vincent Young, as Trustee under 4,522 the Agreement of Trust dated December 31, 1990 F/B/O Tyler Young Vincent Young, as Trustee under 15,172 the Agreement of Trust dated December 31, 1990 F/B/O Thomas T. Allan Vincent Young, as Trustee under 12,772 the Agreement of Trust dated December 31, 1990 F/B/O Adam Allan Vincent Young, as Trustee under 15,172 the Agreement of Trust dated December 31, 1990 F/B/O Scott I. Fulmer Vincent Young, as Trustee under 6,100 the Agreement of Trust dated December 31, 1990 F/B/O Margaret Young Vincent Young, as Trustee under 7,100 the Agreement of Trust dated December 31, 1990 F/B/O Kelly Young 130,016 ======= - 3 - EX-9.1(G) 12 VOTING TRUST AGREEMENT EXHIBIT 9.1(g) VOTING TRUST AGREEMENT VOTING TRUST AGREEMENT made and entered into as of the 1st day of October, 1996, by and between Adam Young (the "Shareholder"), and Vincent Young as trustee (the "Trustee"). WHEREAS, the Shareholder is the owner and holder of Class B voting common stock of Young Broadcasting Inc., a corporation incorporated under the laws of the State of Delaware (the "Corporation"); and WHEREAS, the Shareholder deems it advisable and for the best interests of himself and the Corporation to insure continuity and stability of management of the Corporation and to protect his interests in the Corporation to enter into a voting trust; and WHEREAS, the Trustee has consented to act under this Agreement for the purposes herein provided; IT IS THEREFORE AGREED: ARTICLE I. DEPOSIT OF STOCK AND ISSUANCE OF VOTING TRUST CERTIFICATES Section 1.01. The Shareholder hereby agrees to deposit with the Trustee simultaneously with the execution of this Agreement the certificates representing the number of shares of Class B voting common stock of the Corporation as set forth on Exhibit A annexed hereto. The Trustee hereby covenants and agrees that he will receive and will hold this stock, and all additional stock of the Corporation as may be transferred to him as herein provided, in trust to be held, used, transferred, and disposed of for the uses and purposes and upon the terms and conditions set forth in this Agreement. Section 1.02. All stock certificates deposited by the Shareholder with the Trustee shall be endorsed or accompanied by such instrument of transfer to enable the Trustee to transfer such certificates into his name for purposes of exercising the voting rights granted to him hereunder. The Trustee shall issue to the Shareholder Voting Trust Certificates (the "Trust Certificates") for the stock transferred by the Shareholder to the Trustee in substantially the form hereto annexed as Exhibit B. Section 1.03. All stock certificates transferred and delivered to the Trustee pursuant to this Agreement shall be surrendered by the Trustee to the Corporation and the Corporation shall issue new certificates therefor in the name of the Trustee. Each stock certificate issued to the Trustee shall state that it is issued pursuant to this Voting Trust Agreement, a copy of which shall be on file both at the Corporation's registered office in Delaware and with the Trustee. The Shareholder and any registered owner of a Trust Certificate shall have the right to inspect the copy of this Agreement at the Corporation's registered office in Delaware during regular business hours. The stock ledger of the Corporation shall reflect that the stock certificates issued to the Trustee are issued pursuant to this Voting Trust Agreement. Section 1.04. Subject to the provisions of Section 1.05 hereof, each of the Trust Certificates shall be transferable at the offices of the Corporation (or at such other office as the Trustee may designate by notice in writing sent by mail to the registered holders of Trust Certificates) on the books of the Trustee by the registered holder thereof, either in person or by duly authorized attorney. Upon the transfer of the Trust Certificates, the Trustee may treat the registered holder as owner thereof for all purposes whatsoever. The Trustee shall not be required to deliver certificates evidencing shares pursuant to any provision of this Agreement to any registered holder of Trust Certificates without the surrender of such Trust Certificates by such holder. Section 1.05. The Shareholder agrees not to directly or indirectly sell, assign, donate or otherwise dispose of, or pledge or otherwise encumber, any of shares deposited hereunder during the term of this Agreement except in accordance with the provisions of this Section 1.05, provided that the Shareholder may transfer any or all of such shares to any other holder of Trust Certificates. If the Shareholder proposes to sell any of such shares (the "Offered Shares") to a third party (the "Proposed Purchaser") and the Proposed Purchaser shall have made a firm offer to purchase all of the Offered Shares in a bona fide arms-length transaction for fair value, then: (a) The Shareholder shall give written notice (the "Offer Notice") to each of the holders of Trust Certificates issued pursuant to this Agreement (the "Offerees") which shall state (i) the name and address of the Proposed Purchaser and (ii) the terms and conditions of such offer (including without limitation the form and amount of, and the time of receipt of, consideration) (the "Third Party Terms"). The Offer Notice shall constitute an offer to sell all of the Offered Shares to the Offerees upon the Third Party Terms. (b) The Offerees shall have 15 days after the giving of the Offer Notice within which to accept the offer contained therein by giving notice to such effect to the Shareholder. If the Offerees, whether acting individually or as a group, accept such offer, then the Shareholder shall sell to such Offerees and such Offerees shall purchase from the Shareholder, upon the Third Party Terms, all of the Offered Shares. If the Offerees do not accept such offer, the Shareholder may, within 30 days after the giving of the Offer Notice, sell all, but not less than all, of the Offered Shares to the Proposed Purchaser upon the Third Party Terms. If the Shareholder shall not so sell the Offered Shares to the Proposed Purchaser within such 30 day period, the Shareholder shall continue to hold the Offered Shares subject to the provisions of this Section 1.05. The restrictions of this Section 1.05 shall be fully applicable to all Trust Certificates issued pursuant to this Agreement and the holders of such Trust Certificates shall for purposes of this Section 1.05 be deemed the "Shareholder." Section 1.06. In case any Trust Certificate issued under this Agreement shall become mutilated, destroyed, stolen or lost, the Trustee shall issue a duplicate Trust Certificate, which shall be so marked, and the Trustee may, as a condition precedent to issuing the duplicate Trust Certificate, require the applicant to furnish satisfactory evidence of that mutilation, destruction, theft, or loss, together with reasonable indemnity satisfactory to the Trustee. ARTICLE II. DISTRIBUTIONS, LIQUIDATION AND REORGANIZATION Section 2.01. Prior to the termination of this Agreement, the holder of each Trust Certificate shall be entitled to receive payments equal to the cash dividends, if any, received by the Trustee upon a like number and class of shares of stock of the Corporation as is called for by each Trust Certificate. If any dividend in respect of the stock deposited with the Trustee is paid, in whole or in part, in Class B voting common stock (or in any other voting security) of the Corporation, the Trustee shall likewise hold, subject to the terms of this Agreement, the certificates for stock (or other voting security) which are received by them on account of that dividend, and the holder of each Trust Certificate representing stock on which the stock dividend has been paid shall be entitled to receive a Trust Certificate issued under this Agreement for the number of shares and class of stock received as that dividend. Holders entitled to receive the dividends described above shall be the owners of Trust Certificates registered as such on the transfer books of the Trustee at the close of business on the day fixed by the Corporation for the taking of a record to determine those holders of its stock entitled to receive those dividends. Section 2.02. If any dividend in respect of the stock deposited with the Trustee is paid other than in cash or in Class B voting common stock (or other voting securities) of the Corporation, then the Trust Certificates registered as such at the close of business on the day fixed by the Corporation as the record date to determine the holders of its stock entitled to receive that dividend shall be used to determine the distribution of the dividend to the owner of Trust Certificates. The distribution shall be made to those holders of voting trust certificates ratably, in accordance with the number of shares represented by their respective Trust Certificates. Section 2.03. If the shares represented by a Trust Certificate are redeemed by the Corporation, the proceeds from this redemption shall be distributed to the registered holder of the Trust Certificate in question upon surrender of the Trust Certificate duly endorsed to the Trustee. Section 2.04. In the event of the dissolution or total or partial liquidation of the Corporation, whether voluntary or involuntary, the Trustee shall receive the moneys, securities, rights or property to which the registered Trust Certificate holders are entitled, and shall distribute the same among the registered Trust Certificate holders in proportion to their interests, as shown by the books of the Trustee, as of the date those proceeds are received. Section 2.05. In case the Corporation is merged into or consolidated with another corporation, or all or substantially all of the assets of the Corporation are transferred to another corporation, then in connection with that transfer the term "Corporation" for all purposes of this Agreement shall be taken to include that successor corporation, and the Trustee shall receive and hold under this Agreement any voting securities of the successor corporation received on account of the ownership, as Trustee hereunder, of the stock held hereunder prior to the merger, consolidation and transfer. Trust Certificates issued and outstanding under this Agreement at the time of the merger, consolidation or transfer may remain outstanding, or the Trustee may substitute for the outstanding Trust Certificates new Trust Certificates in appropriate form. The terms "stock" and "capital stock" as used in this Agreement shall be taken to include any stock which may be received by the Trustee in lieu of all or any part of the capital stock of the Corporation. Any property other than common voting stock (or other voting securities) received by the Trustee as part of the transaction will be distributed in accordance with the provisions of Sections 2.02 through 2.04. ARTICLE III. POWERS AND OBLIGATIONS OF THE TRUSTEE Section 3.01. During the term of this Agreement, the Trustee shall exercise all voting rights and powers of a shareholder of the Corporation in respect of the shares held by the Trustee hereunder. The Trustee, in his discretion, shall have the right to vote in favor of or against any action or resolution presented to the voting shareholders of the Corporation or to express consent or dissent to any action in writing without a meeting, as the Trustee shall deem appropriate, and shall not be subject to the direction of holders of the Trust Certificates. Section 3.02. The Trustee, individually or otherwise, may hold Class B common voting stock of the Corporation or Trust Certificates issued to him pursuant to this Agreement and, individually or as Trustee, may vote for himself as a director and/or officer of the Corporation and participate in fixing the amount of compensation therefor or as an employee of the Corporation; and the Trustee, or any firm of which he is an employee, owner, director, or agent, may contract with the Corporation or be or become pecuniarily interested in any matter or transaction to which the Corporation may be a party, as fully as though he were not Trustee hereunder. Section 3.03. The Trustee shall serve without compensation. The Trustee shall have the right to incur and pay the reasonable expenses and charges, and to employ and pay those agents, attorneys and counsel that the Trustee may deem necessary and proper for carrying this Agreement into effect. Any expenses or charges incurred by and due to the Trustee may be deducted from the dividends or other moneys or property received by the Trustee on the stock deposited hereunder. Section 3.04. The Trustee shall not be personally liable for any act committed or omitted to be done under this Agreement, provided that the commission or omission does not amount to willful misconduct or gross negligence, and provided also that the Trustee at all times exercises good faith in all matters relating to this Agreement. Section 3.05. The Trustee may vote in person or by proxy on any action required to be taken pursuant to this Agreement. ARTICLE IV. RESIGNATION AND REPLACEMENT OF A TRUSTEE Section 4.01. The Trustee (and any successor Trustees) may at any time resign by mailing to the registered owners of Trust Certificates a written resignation, to take effect ten days thereafter or upon the prior acceptance thereof. Section 4.02. The Trustee, while acting as Trustee, shall have the right at any time hereafter to designate a successor Trustee to succeed him effective upon the Trustee's resignation by notice in writing to the Corporation. Section 4.03. The rights, powers, and privileges of the Trustee named hereunder shall be possessed by each successor Trustee, with the same effect as though the successor(s) had originally been parties to this Agreement. The word "Trustee," as used in this Agreement, means the Trustee or any successor Trustees acting hereunder, and shall include both the single and the plural number. The words "he," "him" and "his" as used in this Agreement in reference to the Trustee shall mean "they," "them" and "their" respectively, when more than one Trustee is acting hereunder. ARTICLE V. TERM OF THE TRUST; RIGHTS ON TERMINATION Section 5.01. Except to the extent otherwise provided in Section 5.02, this Agreement shall continue in effect for a period of ten (10) years from the date hereof. At any time within two years prior to the expiration of this Agreement, or at any time within two years of the expiration of any extension of this Agreement, one or more of the registered owners of Trust Certificates may, by agreement in writing, extend the duration of this Agreement for an additional period of time not to exceed ten years from the date of the extension. The extension agreement shall not affect the rights or obligations of registered owners of Trust Certificates that are not parties to the extension agreement and all of such registered owners of Trust Certificates shall be entitled to remove their shares from this Trust and promptly to have share certificates reissued in their names pursuant to Section 5.03. Section 5.02. This Agreement and any extension thereof may be terminated at any time by the Trustee. The Trustee shall promptly mail written notice of such termination to the registered owners of the Trust Certificates at the addresses appearing in the business records of the Trustee. After the date specified in such notice (which date shall be fixed by the Trustee), the Trust Certificates shall cease to have any effect, and the holders of the Trust Certificates shall have no further rights under this Agreement other than to receive certificates for shares of stock of the Corporation or other property distributable under the terms hereof upon the surrender of their respective Trust Certificates. Section 5.03. Following termination of this Agreement or any extension thereof, or, if a registered owner of a Trust Certificate does not elect to become a party to an extension, upon surrender of the Trust Certificates, duly endorsed in blank by the registered owner thereof, the Trustee shall, within 30 days of receipt of those Trust Certificates, deliver, or cause to be delivered to the registered owner thereof share certificates in the Corporation equal to the number of shares represented by the surrendered Trust Certificates together with all dividends or other distributions applicable to those shares held by the Trustee. ARTICLE VI. AMENDMENT Section 6.01. The Trustee shall have the power to amend this Agreement consistent with the general plan from time to time, but shall have no authority to extend the term. Notice of all amendments shall be given to the registered owners of Trust Certificates and if, within a period of 15 days from the giving of the notice, registered owners of Trust Certificates holding Trust Certificates representing a majority of the aggregate number of shares represented by the Trust Certificates shall file with the Trustee written notice of their consent to the amendments, then those amendments shall become effective and shall be binding upon all parties to this Agreement, and all of them shall be finally and conclusively deemed to have assented to the amendments whether they receive actual notice or not, and this Agreement shall be modified accordingly; provided, however, that all amendments, in any event, shall require the written consent of the Trustee. ARTICLE VII. MISCELLANEOUS Section 7.01. Any and all notices to the registered owners of Trust Certificates herein provided for shall be in writing and may be personally delivered or shall be given by mailing the notice by first-class mail, postage prepaid, to the address of the person or corporation to whom that notice is given, as shown upon the records of the Trustee. Section 7.02. If any provision of the Agreement shall under any circumstances be deemed invalid or inoperative to any extent, it is agreed and understood that this invalidity shall not invalidate the whole Agreement, but the Agreement shall be construed as not containing the provision or provisions deemed invalid and inoperative, and the right and obligations of the parties shall be construed and enforced accordingly. Section 7.03. The construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the State of Delaware. Section 7.04. During the term of this Agreement and any extension thereof, the registered owners of Trust Certificates shall retain all shareholder inspection and copying rights authorized by the law of the state of Delaware. In the event the Corporation refuses a copy or inspection request by a registered owner of Trust Certificates on the grounds that the registered owner of Trust Certificates is not the record owner of shares, the Trustee hereby agrees to make the identical request to the Corporation. Section 7.05. During the term of this Agreement and any extension thereof, the registered owners of Trust Certificates shall have the rights at any time during normal business hours to inspect and copy the records of the Trustee with respect to this Agreement upon giving two business days advance written notice of the request to the Trustee. Section 7.06. In construing the Agreement, feminine or neuter pronouns shall be substituted for those masculine in form and vice versa, and plural terms shall be substituted for singular and singular for plural in any place in which the context so requires. Section 7.07. This Agreement may be executed in counterparts by the Shareholder and the Trustee. Section 7.08. This Agreement shall be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. IN WITNESS WHEREOF, the parties have hereunto affixed their signatures and seals as of the day and year first above written. SHAREHOLDER: TRUSTEE: - ------------------------------- --------------------------------- Adam Young Vincent Young EXHIBIT A ---------- CERTIFICATE NUMBER NAME OF SHAREHOLDER AND NUMBER OF SHARES - --------------------------- ---------------------- Adam Young CB-0037 14,087 EXHIBIT B --------- VOTING TRUST CERTIFICATE ------------------------ THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO A VOTING TRUST AGREEMENT DATED AS OF OCTOBER 1, 1996. No. _________ _________ Class B Common Shares This certifies that ______________________________, or registered assign, is entitled to all the benefits arising from the deposit with the Trustee, as hereinafter defined, under the Voting Trust Agreement, as hereinafter defined, of certificates for ____ Shares of Class B Common Stock, par value $.001 each of YOUNG BROADCASTING INC. as provided in the Voting Trust Agreement and subject to the terms thereof. This certificate is issued, received and held under, and the rights of the holder hereof are subject to, the terms of that certain Voting Trust Agreement dated as of October 1, 1996, as the same may be amended from time to time (the "Voting Trust Agreement"), by and between Adam Young, and Vincent Young as trustee (the "Trustee"). The holder of this certificate, if not a signatory of the Voting Trust Agreement, by acceptance hereof, assents to all of the provisions of the Voting Trust Agreement and to be bound with the like effect as if such Voting Trust Agreement had been signed by him or her in person. THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR THE APPLICABILITY OF AN EXEMPTION THEREFROM. This certificate shall not be valid for any purpose until duly signed by the Trustee. IN WITNESS WHEREOF, the Trustee has signed this certificate on ______________________. TRUSTEE: ----------------------------- Vincent Young ASSIGNMENT ---------- For value received ___________________________ hereby assigns the within certificate, and all rights and interests represented thereby, to _________________________ and appoints ____________________________________ attorney to transfer this certificate on the books of the Trustee mentioned therein, with full power of substitution. Note: The signature to this assignment must correspond with the name as written upon the face of this certificate, in every particular, without alteration, enlargement or any change whatever. All endorsements, in the discretion of the Trustee, shall be guaranteed by a bank or trust company satisfactory to the Trustee. EX-10.6(B) 13 FIRST AMENDMENT TO SUBLEASE EXHIBIT 10.6(b) FIRST AMENDMENT TO SUBLEASE --------------------------- FIRST AMENDMENT TO SUBLEASE (this "Amendment") made as of the 14th day of January, 1997, between YOUNG BROADCASTING INC., a Delaware corporation with its principal place of business at 599 Lexington Avenue, New York, New York 10022 ("YBI") and ADAM YOUNG INC., with an address at 599 Lexington Avenue, New York, New York 10022 ("AYI"). W I T N E S S E T H : WHEREAS, YBI is the tenant of a portion of the forty-seventh (47th) floor (the "Original Leased Space") in the building known as 599 Lexington Avenue, New York, New York 10022 (the "Building") pursuant to a Lease Agreement between YBI, as Tenant and Lexreal Associates, as Landlord (the "Landlord"), dated March 29, 1990 (the "Original Lease"), a copy of which Lease, together with all Exhibits thereto, has been furnished to and reviewed by AYI; and WHEREAS, YBI and AYI entered into a Sublease, dated as of March 30, 1990 (the "Sublease"), whereby YBI sublet to AYI certain portions of the Original Leased Space, in accordance with the certain terms and conditions set forth in the Sublease; WHEREAS, YBI and the Landlord entered into a First Amendment to Lease dated January 14, 1997 (the "First Amendment"; together with the Original Lease, the "Lease"), whereby YBI became the tenant of a portion of the twenty-second (22nd) floor in the Building (the "First Additional Premises"); a copy of the First Amendment, together with all Exhibits thereto, has been furnished to and reviewed by AYI; and WHEREAS, AYI desires to sublet from Sublessor and Sublessor desires to sublet to Sublessee all of the First Additional Premises. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties agree as follows: Definitions. ----------- 1.1 Capitalized Terms used in this Agreement and not otherwise defined, shall have the meanings set forth in the Lease. 2. Term. ---- 2.1 Subject to all of the terms and conditions of this Amendment, YBI hereby sublets to AYI, and AYI hereby sublets from YBI, the First Additional Premises, commencing on the First Additional Premises Commencement Date and expiring on the First Additional Premises Expiration Date, or such earlier date, as set forth in the First Amendment. 3. Lease. ----- 3.1 AYI acknowledges that it is fully familiar with each of the provisions of the Lease, the First Amendment and all Exhibits thereto and takes the First Additional Premises subject to the terms and conditions of the Lease, the First Amendment and all Exhibits thereto. 3.2 AYI hereby covenants and agrees, effective on and after the Commencement Date, to assume, observe and perform all of the terms, covenants, conditions and obligations of Tenant contained in the Lease with respect to the First Additional Premises, except as otherwise set forth herein. References to "Tenant" in the Lease shall be deemed to refer to AYI and references to "Landlord" in the Lease shall be deemed to refer to YBI except that: (i) YBI does not assume and shall not be responsible for any obligations, covenants or representations contained in the Lease on the part of the Landlord; (ii) YBI remains responsible to the Landlord for all of its obligations to the Landlord, as Tenant under the Lease; and (iii) YBI reserves all rights under Articles 4 (and Exhibit C), 13, 21 and 22 and paragraphs 5.5, 20.22(a)(ii), (b) and (c) of the Original Lease. Any default of AYI under the Original Lease shall be deemed an automatic default under 2 this Amendment and YBI shall be entitled to all rights and remedies of the Landlord under the Original Lease. 4. Charges and Additional Charges. ------------------------------ 4.1 AYI shall pay to YBI all amounts during the term of this Amendment for which YBI is responsible, including, but not limited to, the payment obligations set forth in Sections 3 and 4 of the First Amendment. 5. Condition of Shared Space. ------------------------- 5.1 AYI accepts the First Additional Premises in its present "as is" condition and acknowledges and agrees that neither the Landlord nor YBI is required to perform any work with respect to the First Additional Premises, except as may be set forth in the First Amendment. 5.2 To the extent that removal of any Alterations, additions and/or improvements is required by the Landlord at the expiration or termination of the Lease, AYI agrees to comply with such requirements with respect to the First Additional Premises. 6. YBI's Right to Recapture. ------------------------ 6.1 YBI shall have the right at any time during the term of this Agreement, to terminate this Agreement as to all or any portion of the First Additional Premises provided, however, that YBI shall give written notice to AYI (the "Notice") not later than One Hundred Eighty (180) days prior to the proposed effective date of such termination ("Surrender Date") which Notice shall set forth (i) the space which YBI intends to recapture ("Surrender Space") and (ii) the Surrender Date. If YBI shall give the Notice to AYI, (i) this Agreement shall automatically terminate on the Surrender Date with respect to the Surrender Space, (ii) AYI shall surrender the Surrender Space on the Surrender Date and (iii) provided AYI complies with the requirements of (ii) of this sentence and is not otherwise in default under this Agreement, the Charges (including Additional Charges) shall abate, from and after the Surrender Date in proportion to the Surrender Space. Notwithstanding the 3 provisions of this Article 6, YBI shall not exercise its rights hereunder unless it has first terminated subleases of the Leased Space then in effect, between YBI and other parties. 7. Miscellaneous. ------------- 7.1 Notices under this Agreement shall be deemed properly given if sent in writing by registered or certified mail, addressed to YBI (to the Attention of Vincent Young) and AYI at the addresses set forth above or at such other address as each may hereafter designate in writing to the other. If to YBI, a copy of such notice shall also be sent to David S. Lester, Esq., Cooperman Levitt & Winikoff, P.C., 1129 Northern Boulevard, Manhasset, New York 11030. 7.2 The terms, covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. No modification of this Agreement shall be valid unless in writing and signed by the party to be charged. 7.3 YBI represents that the Lease is in full force and effect and neither party thereto has declared a default thereunder. 4 7.4 Except as set forth herein, the Sublease shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, YOUNG BROADCASTING INC. and ADAM YOUNG, INC., have executed this agreement the day and year first above written. YOUNG BROADCASTING INC. By: -------------------------------- Vincent Young By: -------------------------------- 5 EX-10.19(B) 14 FIRST AMENDMENT LEASE, DATED JANUARY 14, 1997 Exhibit 10.19(b) FIRST AMENDMENT TO LEASE ------------------------ FIRST AMENDMENT TO LEASE dated the 14th day of January, 1997 (this "First Amendment") by and between LEXREAL ASSOCIATES, a New York general partnership, as Landlord (the "Landlord") and YOUNG BROADCASTNG, INC., a Delaware corporation, as Tenant (the "Tenant"). W I T N E S S E T H: - - - - - - - - - - Preliminary Statement --------------------- WHEREAS, by Lease dated March 29, 1990 (the "Lease"), Tenant leased from Landlord certain premises consisting of the forty-seventh (47th) floor of the building known as 599 Lexington Avenue, New York, New York 10022 (the "Building"). Such premises (referred to in the Lease as the "Premises") are herein referred to as the "Initial Premises"; and WHEREAS, Landlord and Tenant desire further to expand the size of the Premises by adding to the Initial Premises certain office space on the twenty- second (22nd) floor of the Building more particularly described on the "Floor Plan With Respect To The First Additional Premises" attached hereto (the "First Additional Premises"). NOW THEREFORE, in consideration of Ten Dollars ($10.00) and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant confirm and agree as follows: 1. LEASE TERM WITH RESPECT TO THE FIRST ADDITIONAL PREMISES. Landlord and ------------------------------------ ------------------- Tenant agree that the Lease Term with respect to the First Additional Premises shall commence on the earlier of (a) the Substantial Completion Date with respect to the First Additional Premises or (b) the date upon which Tenant first occupies all or any portion of the First Additional Premises for the conduct of its business operations (the "First Additional Premises Commencement Date"), and shall end on June 30, 2002 (the "First Additional Premises Expiration Date"), or shall end on such earlier date upon which the Lease Term may expire or be terminated pursuant to any of the conditions of limitation or other provisions of the Lease, as amended by this First Amendment, or pursuant to law. 2. CONDITION OF THE FIRST ADDITIONAL PREMISES. ------------------------------------------ (a) The provisions of Article 4 and Exhibit C of the Lease shall apply, mutatis mutandis, to the construction of the First Additional Premises with the - ------- -------- following revisions thereto: (i) All references to the "Premises" shall mean the First Additional Premises and all references to the "Commencement Date" shall mean the First Additional Premises Commencement Date. (ii) Schedule C-1 (Landlord's Work) is hereby deleted and "Landlord's Work" shall mean (i) the construction of such demising walls as are necessary to separate the First Additional Premises from the balance of the floor, (ii) the installation of one building standard entry door to the First Additional Premises, (iii) the building standard painting of the First Additional Premises and (iv) the installation of new building standard carpet in the First Additional Premises. (iii) In Section 4.2(c), the parenthetical "(including the contractor's and/or subcontractors' sign-offs necessary for Tenant's architect to obtain an A-23 from the City Building Department)" is deleted. (iv) The second grammatical paragraph of Section 4.2(c) is amended to provide that the preliminary notice of the estimated Substantial Completion Date shall be given by Landlord to Tenant at least seven (7) days and not more than thirty (30) days prior to the estimated Substantial Completion Date. (v) In the fourth sentence of Section 4.3, the words "member of the firm of Swanke Hayden Connell, or to such other" are deleted. (vi) In Exhibit C, the "Plan Submission Date" shall mean the date of this First Amendment. (vii) Section 2(b) of Exhibit C is deleted. (viii) All references to the "Approved Contractor" in Exhibit C are revised to read "the contractor". (ix) "Landlord's Construction Representative" shall mean Thomas Hill, Boston Properties, Inc., with an address at the Building, and "Tenant's Construction Representative" shall mean Peter Grazioli, Young Broadcasting, Inc., with an address at the Building. (x) Section 5 of Exhibit C is deleted and the following substituted therefor: "Landlord, on Tenant's behalf at Tenant's sole cost and expense, shall file, or cause to be filed, with the appropriate governmental authority or authorities, the Plans and Specifications and shall take whatever action shall reasonably be necessary to obtain and maintain all governmental permits, authorizations, approvals and signoffs which may be required in connection with the Work. Tenant shall cooperate with Landlord in connection with the aforesaid." 2 (xi) In Section 6(a)(v) of Exhibit C, the phrase "in excess of ninety (90) days after Landlord authorizes its contractor to proceed with the Work" is deleted and the following substituted therefor: "in excess of that required for building standard items". (xii) In the second and third sentences of Section 7 of Exhibit C, the words "five (5) Operating Days" are changed to "two (2) Operating Days". (xiii) In the second sentence of Section 9 of Exhibit C, the words "seven (7) Days" are changed to "two (2) Operating Days". (xiv) Section 10 of Exhibit C is deleted and the following substituted therefor: "10. Landlord's Performance of the Work; Tenant's Cost. ------------------------------------------------- (a) Landlord shall perform the Work in accordance with Tenant's approved Plans and Specifications. Landlord's Work shall be Without cost to Tenant, but Tenant, prior to and during the progress of the Work, shall pay, as Additional Rent, Tenant's Cost. Upon Landlord's reasonable estimate of Tenant's Cost following approval by Landlord of the Plans and Specifications, Tenant shall promptly pay to Landlord (or, at Landlord's election, to Landlord's general contractor or construction manager), fifty percent (50%) of such estimated Tenant's Cost, and the balance in installments, reasonably specified by Landlord, within ten (10) days after rendition of bills therefor by Landlord, so that the full amount thereof shall be paid during the progress of the Work and the balance, if any, upon demand after the Substantial Completion Date. (b) Within a reasonable time (considering the amount of detail required and so as not to affect the time table of the work involved) after receipt of any request by Tenant to change the Plan or Specification, Landlord shall give notice to Tenant of Landlord's estimate of the amount, if any, of Tenant's Cost, including any Change Cost, arising therefrom. Landlord's representatives shall be available to Tenant to discuss such estimate. Tenant shall be deemed to have accepted such estimated amount unless within two (2) Operating Days after receipt thereof Tenant shall give notice to Landlord in detail of any disagreement therewith, in which event Landlord and Tenant shall attempt to resolve such disagreement within three (3) additional Operating Days. If no such notice by Tenant is given, or if agreement is reached, then the estimated amount stated in Landlord's notice, or 3 the amount agreed upon, as the case may be, shall thereafter be deemed accepted as an estimate, by both Landlord and Tenant. If such notice by Tenant is given and no agreement is reached, Landlord shall nevertheless proceed with the Work, but Tenant may direct Landlord to omit any item thereof, subject, however, to Landlord's right to withdraw its approval of the Plans and Specifications by reason of any such omission. (c) Landlord shall use reasonable efforts to obtain any Work at a reasonable cost to Tenant, but, in all events, Tenant shall pay Tenant's Cost of any Work. In connection with the foregoing, (i) Landlord shall consult with Tenant, and obtain Tenant's input for the selection of, and costs or fees payable to, the general contractor, architect, and any significant trade contractor, vendor, consultant or engineer performing any of the Work, (ii) Landlord shall keep Tenant's Construction Representative advised as to the status of the Work, and Tenant's Construction Representative shall be entitled to attend project meetings relating to the Work, and (iii) the Work shall be conducted by Landlord on an "open book" basis. Tenant's Construction Representative shall have reasonable access to Landlord's books and records relating to the Work (including those books and records relating to Tenant's Cost). Nothing contained in this subparagraph (c) shall permit Tenant to delay the completion by Landlord of any of the Work, whether or not the cost thereof is in dispute. If at any time any of the Plans and Specifications are changed by Tenant so as to eliminate or change any item of the Work in progress of engineering, fabrication or construction, the progress of such engineering, fabrication or construction shall not be stopped or altered until Tenant directs such action by a notice containing any acceptance by Tenant of any addition to Tenant's Cost which may result therefrom." (xv) Section 13 (Credit Towards Tenant's Costs) of Exhibit C is deleted. (xvi) In addition to the matters set forth in Section 6(a) of Exhibit C, Tenant's failure to authorize Landlord to commence performance of the Work on or before January 15, 1997 shall be deemed a Delay Caused By Tenant. 4 3. RENT; TENANT'S SHARE; BASE TAXES; BASE OPERATING EXPENSES. ------------------------------------------------------------ (a) Annual Fixed Rent. Effective as of the First Additional Premises ----------------- Commencement Date, "Exhibit J" to the Lease is amended by substituting in lieu thereof a new "Exhibit J" as attached hereto. (b) Tenant's Share. Effective as of the First Additional Premises -------------- Commencement Date, Tenant's Share shall mean: (i) 0.77% with respect to the Initial Premises; and (ii) 0.20% with respect to the First Additional Premises. (c) Payment of First Month's Rent. Tenant has, simultaneously with the ----------------------------- execution and delivery of this First Amendment, paid to Landlord an amount equal to one-twelfth of the Annual Fixed Rent with respect to the First Additional Premises, to be applied to the first monthly installment of Annual Fixed Rent with respect to the First Additional Premises. Landlord shall hold the amount paid by Tenant under this subsection in trust until the same is applied pursuant to this First Amendment or any other provision of the Lease as amended by this Amendment. (d) Rent Concession. Landlord waives payment of Annual Fixed Rent --------------- attributable only to the First Additional Premises for the period from and including the First Additional Premises Commencement Date to and including March 31, 1997. The rent concession provisions of Section 5.5 of the Lease are not applicable to payments of Annual Fixed Rent and Additional Rent attributable to the First Additional Premises. (e) Outside Completion Date. If the First Additional Premises ----------------------- Commencement Date shall not have occurred on or before March 1, 1997 (the "Outside Completion Date"), which date shall be extended as provided in Section 4.2 of the Lease as amended herein by reason of any Delay Caused by Tenant, without limit as to time and without limiting Landlord's other rights on account thereof, and/or by reason of any event or occurrence of the nature described in Section 14.3 of the Lease, there shall be added to the rent concession period provided for in Section 3(d) above, a number of days equal to the number of days from the date following the Outside Completion Date to and until the First Additional Premises Commencement Date. Such extension of the rent concession period shall be Tenant's sole and exclusive remedy for Landlord's failure to cause the First Additional Premises Commencement Date to occur within such time. Subject to the foregoing, Tenant hereby waives any right to rescind this First Amendment or the Lease under Section 223-a of the New York Real Property Law or any successor statute of similar import then in force and further waives the right to recover any damages which may result from Landlord's failure to complete Landlord's Work and/or Tenant's Work, or to deliver 5 possession of the First Additional Premises to Tenant on or before the Outside Completion Date. (F) Base Taxes and Base Operating Expenses. Landlord and Tenant confirm and -------------------------------------- agree as follows: (i) Base Taxes shall mean: (A) Nine Million Three Hundred Sixty-Four Thousand Seven Hundred Forty-Four and 40/100 Dollars ($9,364,744.40) with respect to the Initial Premises; and (B) The actual Taxes for the 1996-1997 Tax Year with respect to the First Additional premises. (ii) Base Operating Expenses shall mean: (A) Five Million Eight Hundred Seventy-Eight Thousand Three Hundred Eighty-Six and 88/100 Dollars ($5,878,386.88) with respect to the Initial Premises; and (B> The actual Operating Expenses for the 1997 Operating Year with respect to the First Additional Premises. 4. ELECTRICITY. The provisions of Section 16.1 of the Lease shall not ----------- apply to the First Additional Premises. Effective as of the First Additional Premises Commencement Date, solely with respect to the First Additional Premises, Tenant shall pay to Landlord an Electricity Charge as determined below with respect to the First Additional Premises. Accordingly, a new Section 16.1.1 is added to the Lease at the close of Section 16.1 as follows: 16.1.1 TENANT TO PURCHASE ELECTRICITY; FIRST ADDITIONAL PREMISES. --------------------------------------------------------- (a) Landlord shall furnish electricity to the First Additional Premises for a charge to Tenant initially of Five Thousand Three Hundred Fifty-One and 50/100 Dollars ($5,351.50) (the "Electricity Charge") per annum, which shall be adjusted from time to time in accordance with the provisions of this Section 16.1.1 and shall be payable on the first day of each and every calendar month during the Lease Term, and otherwise payable in the same fashion herein provided for the payment of Annual Fixed Rent. (b) The Electricity Charge is based upon Landlord's assumption that Tenant's initial electrical installation will not result in a total electrical consumption for lighting 6 and equipment in excess of 0.04 KWH per day, per rentable square foot of the First Additional Premises, and that except for office cleaning, Tenant will use electric energy only during Operating Hours. Accordingly, (i) if Tenant's initial electrical installation exceeds such criteria, or (ii) if there shall be a change in the space constituting the First Additional Premises, or (iii) if Tenant makes material use of electricity during hours other than Operating Hours, or (iv) if Tenant after completion of its initial installation adds or subtracts any machinery, appliances or equipment which materially increases or decreases the aggregate electrical load in the First Additional Premises, the Electricity Charge shall be increased proportionately to reflect any excess or increase in such use. On or after the First Additional Premises Commencement Date, Landlord may engage a reputable independent electrical consultant to make a survey of the electric consumption at the First Additional Premises to determine if Tenant's electric consumption exceeds the criteria set forth above. If any such survey discloses that such use exceeds the criteria set forth above, the Electricity Charge shall be increased proportionately by the amount of such excess, effective as of the First Additional Premises Commencement Date (or if the increase in such cost is a result of an increase in electrical consumption which began after the First Additional Premises Commencement Date, then effective as of the date of such increase in electrical consumption). Upon delivery of such statement, (A) Tenant shall pay Landlord the amount of such increase from the First Additional Premises Commencement Date (or from the date of any increase in electrical consumption, as the case may be) through the date of such statement, and (B) tenant's regular monthly payments under this Lease shall be increased to reflect any such increase in the Electricity Charge. If the Electricity Charge shall have been increased as hereinabove provided, and thereafter a subsequent survey discloses that the cost to Landlord of the Tenant's annual electric consumption shall have decreased following the prior survey, then the Electricity Charge shall be reduced by the amount of such decrease, effective as of the date of such decrease, provided, however, that in no event shall such Electricity Charge be reduced below the initial amount of the Electricity Charge effective on the First Additional Premises Commencement Date. In such event, Landlord shall reimburse Tenant for the amount of such decrease, and Tenant's regular monthly payments under this Lease shall be reduced to reflect any such decrease in the Electricity Charge. The cost of any such survey shall be shared equally by Landlord and Tenant. The findings of such consultant shall be conclusive and binding upon Landlord and Tenant. (c) If either (i) the public utility rate schedule for the supply of electricity to the Building shall be (A) increased or (B) superseded during the Lease Term (using the rate in effect on the date hereof as the base rate), or (ii) electricity or energy consumption shall be measured by any other means, including, but not limited to, the cost of private sources of energy, then the Electricity Charge shall be increased in the same percentage effective from the effective date of such increase in the public utility rate schedule. If after the Electricity Charge has been increased by reason of any such increase in the public utility rate schedule such public utility rate schedule shall 7 thereafter decrease, then the Electricity Charge shall be decreased in the same percentage effective from the effective date of such decrease, but in no event below the initial amount of the Electricity Charge. (d) Landlord reserves the right to discontinue furnishing electricity to Tenant in the First Additional Premises at any time upon not less than thirty (30) days' written notice to Tenant; provided, however, that Landlord shall not discontinue furnishing electricity to Tenant until Tenant shall have made arrangements to obtain electricity from the public utility serving the Building (unless Tenant shall have failed to use reasonable diligence to obtain such electric service). If Landlord, at Landlord's option, exercises such right of discontinuance as provided herein, this Lease shall continue in full force and effect and shall be unaffected thereby, except that, from and after the effective date of such discontinuance, (i) the Electricity Charge shall no longer be payable under this Lease, (ii) Tenant shall arrange to obtain electricity directly from the public utility company supplying electricity to the Building, (iii) all meters, equipment and other facilities which may be required for Tenant to obtain electricity directly from such public utility company shall be installed by Landlord, at Tenant's expense, and the actual cost thereof shall be payable to Landlord upon demand, as Additional Rent, without set-off or deduction, if in Landlord's reasonable judgment the same are necessary, and (iv) any such installation shall be maintained by Tenant, at its expense, and shall be subject to such conditions as Landlord and/or the public utility company may require, and Landlord shall not be liable to Tenant therefor and the same shall not be deemed to be a lessening or diminution of services within the meaning of any law, rule or regulation now or hereafter enacted, promulgated or issued. (e) Landlord reserves the right to determine Tenant's electrical consumption by a check-meter or other reasonable monitoring device, in which event Tenant shall pay to Landlord as an additional charge, for electricity supplied to the First Additional Premises an amount equal to (i) the Average Rate (as hereinafter defined) multiplied by the number of kilowatt-hours of electricity used in the First Additional Premises during the period for which such payment is being made, plus (ii) five percent (5%) of the amount set forth in clause (i) above. Such payments shall be made within ten (10) days after receipt of a statement setting forth the number of kilowatt-hours used in the First Additional Premises during such period, the Average Rate, and the computation of Tenant's payment. Landlord shall advise Tenant in advance of the time Landlord will be reading Tenant's meter(s), which reading shall not be more frequent than once every month, and Tenant or its representative shall have the right to accompany Landlord's representative for the purpose of verifying Landlord's reading. For purposes hereof, the term "Average Rate" shall mean the average cost to Landlord of supplying one (1) kilowatt-hour of electricity to the floor on which the First Additional Premises are located, and such Rate shall be determined by dividing (A) the electric bill for the floor on which the First Additional Premises are located 8 for the period(s) covered by Tenant's payment by (B) the number of kilowatt-hours of electricity supplied to such floor during such period. (f) If any taxes or charges are or shall be imposed upon Landlord or its agent in connection with the sale or resale of electricity to Tenant, Tenant covenants and agrees that, where permitted by law, Tenant's pro-rata share of such taxes or charges shall be passed on to Tenant and paid by Tenant to Landlord or its agent upon demand, as Additional Rent, without set-off or deduction. At all times during the Lease Term, Tenant shall comply with all present and future general rules, regulations, terms and conditions applicable to service equipment, wiring and requirements in accordance with the regulations of the public utility company supplying electricity to the Building. (g) Promptly after any adjustments in the Electricity Charge become effective pursuant to this Section 16.1.1, the parties shall execute, acknowledge and deliver to each other a supplemental agreement in such form as Landlord shall reasonably require confirming such adjustments, but failure to do so shall have no effect on any such adjustments. 5. FLOOR PLANS. Effective as of the First Additional Premises Commencement ----------- Date, "Exhibit B" to the Lease is hereby amended by adding thereto the "Floor Plan With Respect to the First Additional Premises" attached thereto. 6. ADDITIONAL CONDITION ON SUBLETTING THE FIRST ADDITIONAL ----------------------------------------------------- PREMISES. In addition to all of the conditions and restrictions contained in - -------- Article 13 of the Lease, in the event of a permitted subletting of the First Additional Premises, in no event shall there be more than one occupant (including Tenant) in the First Additional Premises. 7. HOLDING OVER WITH RESPECT TO FIRST ADDITIONAL PREMISES. ------------------------------------------------------ With respect to the First Additional Premises only, any holding over by Tenant after the expiration of the Lease Term with respect thereto which is accepted by Landlord shall be treated as creating a month-to-month tenancy at two hundred percent (200%) of the Annual Fixed Rent with respect to the First Additional Premises and at the full amount of the Additional Rent provided for herein with respect to the First Additional Premises immediately prior to such expiration and shall otherwise be on the terrns and conditions set forth in the Lease, as amended by this First Amendment, as far as applicable. Landlord waives no rights against Tenant by reason of accepting any holding over by Tenant, including without limitation the right to terminate such month-to-month tenancy as provided by law at any time after the expiration of the Lease Term with respect thereto and any right to damages in the event that Tenant's holding over causes Landlord to suffer any loss. 8. BROKERS. Tenant warrants and represents that Tenant has not dealt with ------- any broker in connection with the consummation of this First Amendment other than Williams Real Estate Co., Inc. and Edward S. Gordon Company, Inc. Landlord agrees that it shall be 9 solely responsible for the payment of any brokerage commission or fee which may be due to Williams Real Estate Co., Inc. and Edward S. Gordon Company, Inc. 9. DEFINITIONS All capitalized terms used herein shall have the same ----------- meaning as set forth in the Lease unless specifically otherwise provided herein. 10. EFFECT OF AMENDMENT. Except as set forth herein, the Lease shall ------------------- remain unchanged and in full force and effect. All references to the "Lease" shall be deemed to be references to the Lease as amended by this First Amendment. Signatures on next page. 10 EXECUTED in one or more counterparts by persons or officers hereunto duly authorized as of the date and year first above written. WITNESS: LANDLORD: LEXREAL ASSOCIATES By: 599 Lexington Avenue Associates Limited Partnership, General Partner By: 599 Lexington Avenue General Associates, Managing General Partner By: MSZ 1983 Limited Partnership, General Partner By: /s/ Mortimer B. Zuckerman - ------------------------- -------------------------- Mortimer B. Zuckerman General Partner TENANT: YOUNG BROADCASTING, INC. By: /s/ Alfred A. Porzio - ------------------------- ------------------------------ Name: Alfred A. Porzio Title: Vice President 11 EX-10.22(A) 15 AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 10.22(a) [CONFORMED COPY] $500,000,000 AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 15, 1996, among Young Broadcasting Inc., The Banks Listed Herein, Bankers Trust Company, as Administrative Agent and Issuing Bank, Canadian Imperial Bank of Commerce, as Documentation Agent, and Morgan Guaranty Trust Company of New York, as Syndication Agent Co-Arrangers: Bankers Trust Company Canadian Imperial Bank of Commerce J.P. Morgan Securities Inc. Managing Agent: First Union National Bank of North Carolina Co-Agents: Bank of America National Trust and Savings Association Bank of Tokyo - Mitsubishi Trust Company Fleet Bank, N.A. Heller Financial, Inc. Internationale Nederlanden (U.S.) Capital Corporation The First National Bank of Boston TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01. Certain Defined Terms...................................... 2 1.02. Computation of Time Periods................................ 37 1.03. Accounting Terms........................................... 37 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES 2.01. The Advances............................................... 38 (a) The Term Loan Advances................................ 38 (b) The Revolving Facility Advances....................... 38 (c) The Swingline Advances................................ 39 (d) Refunding of Swingline Advances....................... 39 2.02. Method of Borrowing........................................ 41 2.03. Notes...................................................... 43 2.04. Maturity of Term Loan Advances............................. 44 2.05. Interest Rates............................................. 44 2.06. Fees....................................................... 48 (a) Commitment Fees....................................... 48 (b) Participation Fees.................................... 48 (c) Administrative Fees................................... 48 (d) Letter of Credit Fees................................. 48 2.07. Optional Termination or Reduction of Commitments........... 49 2.08. Mandatory Termination or Reduction of Commitments.......... 50 2.09. Prepayments................................................ 52 (a) Optional Prepayments.................................. 52 (b) Mandatory Prepayments................................. 52 (c) Notice of Prepayments................................. 55 2.10. Letters of Credit.......................................... 55 2.11. General Provisions as to Payments.......................... 59 2.12. Funding Losses............................................. 60 2.13. Computation of Interest and Fees........................... 61 2.14. Taxes...................................................... 61 2.15. Voluntary and Mandatory Conversion of Advances............. 63 2.16. Basis for Determining Interest Rate Inadequate or Unfair... 65 2.17. Illegality................................................. 65 2.18. Increased Cost and Reduced Return.......................... 66 2.19. Base Rate Advances Substituted for Affected Fixed Rate Advances................................................... 68 2.20. Use of Proceeds............................................ 68 i Page ---- ARTICLE III CONDITIONS PRECEDENT 3.01. Conditions Precedent to Closing Date......................... 69 3.02. Conditions Precedent to Each Borrowing....................... 76 3.03. Conditions Precedent to Borrowings in Connection with Permitted Acquisitions....................................... 78 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.01. Representations and Warranties of the Borrower............... 83 (a) Due Incorporation, Etc.................................. 83 (b) Due Authorization and Execution, Etc.................... 84 (c) Government Consents..................................... 85 (d) Legal, Valid and Binding Nature......................... 85 (e) Capitalization and Subsidiaries......................... 85 (f) Financial Statement; No Material Adverse Change......... 86 (g) Solvency................................................ 87 (h) Absence of Litigation; Litigation Description........... 87 (i) Ownership of Properties; Absence of Liens and Encumbrances............................................ 88 (j) No Burdensome Agreements................................ 88 (k) Payment of Taxes........................................ 89 (l) Accuracy of Information Given to Lenders................ 89 (m) ERISA................................................... 90 (n) List of Debt............................................ 90 (o) Not a Purpose Credit.................................... 91 (p) Prohibited Securities Transactions...................... 91 (q) Investment Company Act.................................. 91 (r) Casualties.............................................. 91 (s) Executive Compensation Agreements....................... 91 (t) Collateral, Etc......................................... 91 (u) Consents................................................ 92 (v) Security Agreements..................................... 93 (w) Mortgages............................................... 93 (x) Status Under Communications Act......................... 93 (y) Compliance with Environmental Requirements; No Hazardous Materials..................................... 93 (z) Compliance with Laws.................................... 95 (aa) Representations in Related Documents are True and Correct................................................. 95 (bb) Obligations are Senior Debt and Designated Senior Debt.. 96 ii Page ---- ARTICLE V COVENANTS OF THE BORROWER 5.01. Affirmative Covenants....................................... 96 (a) Compliance with Laws, Etc.............................. 96 (b) Conduct of Business; Preservation of Corporate Existence.............................................. 97 (c) Visitation Rights...................................... 97 (d) Keeping of Books....................................... 97 (e) Maintenance of Insurance............................... 97 (f) Payment of Taxes, Etc.................................. 98 (g) Maintenance of Properties, Etc......................... 99 (h) Maintenance of FCC Licenses, Affiliation Agreements, Etc.................................................... 99 (i) Arm's-Length Transactions.............................. 99 (j) Solvency............................................... 100 (k) Plan Contribution...................................... 100 (l) Pro Forma Debt Service Coverage........................ 100 (m) Interest Charge........................................ 100 (n) Senior Debt to Operating Cash Flow Ratio............... 101 (o) Debt to Operating Cash Flow Ratio...................... 101 (p) Accuracy of Information Given to Lenders............... 101 (q) Management............................................. 102 (r) Further Assurances..................................... 102 (s) Management of Partnerships............................. 103 (t) Hazardous Materials; Remediation....................... 103 (u) FCC Filings............................................ 103 5.02. Negative Covenants.......................................... 103 (a) Liens, Etc............................................. 104 (b) Debt................................................... 104 (c) Mergers................................................ 105 (d) Sales, Etc., of Assets................................. 105 (e) Maintenance of Ownership of Subsidiaries; Issuance of Stock and Partnership Interests, Etc................... 105 (f) Investments in Other Persons and Asset Purchases....... 106 (g) Restricted Payments.................................... 107 (h) Prepayment of Debt..................................... 107 (i) Change in Business; Cease Broadcasting................. 109 (j) Change of Accounts..................................... 109 (k) Amendment of Charter or By-Laws........................ 109 (l) Termination of Licenses................................ 109 (m) Amendment, etc. of Related Documents................... 109 (n) Trade Debt............................................. 110 (o) Employee Benefit Costs and Liabilities................. 110 (p) Plan Amendments........................................ 110 (q) Limited Partners....................................... 110 iii Page ---- (r) Limitation on Payment Restrictions Affecting Subsidiaries.......................................... 111 (s) Interest Rate Protection.............................. 111 5.03. Reporting Requirements..................................... 111 ARTICLE VI EVENTS OF DEFAULT 6.01. Events of Default.......................................... 117 6.02. Cash Cover................................................. 122 ARTICLE VII THE AGENTS 7.01. Appointment and Authorization.............................. 123 7.02. Agents and Affiliates...................................... 123 7.03. Actions by Agents.......................................... 123 7.04. Consultation with Experts.................................. 124 7.05. Liability of Agents........................................ 124 7.06. Indemnification............................................ 124 7.07. Credit Decision............................................ 124 7.08. Successor Agent............................................ 125 7.09. Managing Agent and Co-Agents............................... 125 7.10. Notice of Default; Collateral Documents.................... 125 ARTICLE VIII MISCELLANEOUS 8.01. Amendments, Etc............................................ 126 8.02. Notices, Etc............................................... 129 8.03. No Waiver; Remedies........................................ 130 8.04. Costs and Expenses; Indemnities............................ 130 8.05. Right of Set-off........................................... 131 8.06. BINDING EFFECT; GOVERNING LAW.............................. 133 8.07. Successors and Assigns..................................... 133 8.08. Headings................................................... 136 8.09. Execution in Counterparts; Integration..................... 136 8.10. Severability of Provisions................................. 137 8.11. WAIVER OF JURY TRIAL....................................... 137 8.12. Submission to Jurisdiction; consent to Service of Process.. 137 8.13. Consent to Amend........................................... 137 8.14. Survival................................................... 138 iv Page ---- Appendix - Commitments SCHEDULES Schedule 1.01-1 - Collateral Documents Schedule 1.01-2 - Programming Cost Savings Schedule 4.01(a) - Subsidiaries of the Borrower Schedule 4.01(e) - Agreements Relating to Capital Stock Schedule 4.01(f) - Pro Forma Financial Statements Schedule 4.01(h) - Disclosed Litigation Schedule 4.01(i) - Existing Liens Schedule 4.01(m) - Plans and Multiemployer Plans Schedule 4.01(n) - Existing Debt Schedule 4.01(s) - Executive Compensation Agreements Schedule 4.01(t) - Descriptions and Locations of Real Property and Leasehold Interests Schedule 4.01(u) - Government and Third Party Consents Schedule 4.01(y) - Environmental Matters v EXHIBITS Exhibit A-1 - Form of Term Loan Note Exhibit A-2 - Form of Revolving Facility Note Exhibit A-3 - Form of Swingline Note Exhibit B - Form of Borrower Security Agreement Exhibit C - Form of Guarantor Security Agreement Exhibit D - Form of Global Security Agreement Amendment Exhibit E-1 - Form of Borrower Pledge Agreement Exhibit E-2 - Form of Amendment No. 1 to Borrower Pledge Agreement Exhibit F - Form of Guarantor Pledge Amendment Exhibit G - Form of Global Pledge Agreement Amendment Exhibit H - Form of Guaranty Agreement Exhibit I - Form of Guaranty Agreement Amendment Exhibit J - Form of Mortgage Exhibit K - Form of Mortgage Amendment Exhibit L - Form of Closing Date Assignment and Assumption Agreement Exhibit M - Form of Assignment and Assumption Agreement Exhibit N - Form of Borrower's Solvency Certificate Exhibit O - Form of Guarantor's Solvency Certificate Exhibit P - Form of Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C. Exhibit Q - Form of Local Counsel Opinion Exhibit R - Form of Opinion of Special FCC Counsel Exhibit S - Form of Opinion of Davis Polk & Wardwell Exhibit T - Form of Compliance Certificate vi Exhibit U - Form of Notice of Issuance Exhibit V - Form of Multiple Amendment vii AMENDED AND RESTATED CREDIT AGREEMENT dated as of November __, 1996 among YOUNG BROADCASTING INC., a Delaware corporation (the "Borrower"), the -------- banks and other financial institutions (the "Banks") listed on the signature ----- pages hereof, BANKERS TRUST COMPANY ("BTCo"), as Administrative Agent for the ---- Lenders and the Issuing Bank hereunder, CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), as Documentation Agent for the Lenders hereunder, and MORGAN GUARANTY - ------ TRUST COMPANY OF NEW YORK ("Morgan Guaranty"), as Syndication Agent for the --------------- Lenders hereunder. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower and certain financial institutions are parties to a $200,000,000 Credit Agreement dated as of November 14, 1994, as amended (as so amended and in effect on the date of this Amended Agreement immediately before the effectiveness of this Amended Agreement, the "Existing Credit --------------- Agreement"); and - --------- WHEREAS, the Old Lenders (as defined herein) and the Banks have agreed that immediately prior to (and subject to the condition subsequent of) the occurrence of the Closing Time (as defined herein), the Old Lenders will assign all of their rights and obligations under the Existing Credit Agreement to the Banks pursuant to the Closing Date Assignment and Assumption Agreement (as defined herein), upon the terms and subject to the conditions set forth therein; and WHEREAS, the Borrower has entered into an Acquisition Agreement dated as of May 10, 1996 (the "Acquisition Agreement") with KCAL Broadcasting, Inc., a --------------------- California corporation, KCAL-TV, Inc., a California corporation, and Disney Enterprises, Inc., a California corporation, pursuant to which the Borrower has agreed to acquire (the "Acquisition") certain assets associated with television ----------- broadcast station KCAL-TV in Los Angeles, California ("KCAL-TV"); and ------- WHEREAS, the parties hereto therefore wish to amend the Existing Credit Agreement by, among other things, increasing the amount of credit available thereunder and amending certain of the other provisions thereof, and, in that connection, wish to amend and restate the Existing Credit Agreement in its entirety; and WHEREAS, in order to set forth in one document, for the convenience of the parties, the text of the Existing Credit Agreement as amended by the amendments to be made upon the effectiveness hereof, the parties wish to amend and restate the Existing Credit Agreement in its entirety as set forth below; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the --------------------- following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Acquisition" has the meaning specified in the preamble to this ----------- Agreement. "Acquisition Agreement" has the meaning specified in the preamble to --------------------- this Agreement. "Acquisition Documents" means the Acquisition Agreement, including the --------------------- exhibits and schedules thereto, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith. "Adjusted CD Rate Advance" means an Advance which bears interest as ------------------------ provided in Section 2.05(b). "Administrative Agent" means BTCo in its capacity as Administrative -------------------- Agent for the Lenders hereunder, and its successors in such capacity. "Administrative Questionnaire" means (i) with respect to each Lender ---------------------------- listed on the signature pages hereof, the administrative questionnaire in the form submitted to such Lender by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender on or before the Closing Date and (ii) with respect to each other Lender, the Assignment and Assumption Agreement for such Lender as an Assignee. "Advance" means (i) a Term Loan Advance or a Revolving Facility ------- Advance, each of which may be an Adjusted CD Rate Advance, a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of Advance), or ---- (ii) a Swingline Advance, each of which shall be a Base Rate 2 Advance. "Affiliate" means, with respect to any Person, any other Person --------- directly or indirectly controlling, controlled by or under common control with such Person. The term "control" means the possession, directly or indirectly, of the power, whether or not exercised, to direct or cause the direction of the management or policies of any Person, whether through ownership of voting securities, by contract or otherwise. "Agents" means the Administrative Agent, the Documentation Agent and ------ the Syndication Agent, or any combination of the foregoing as the context may require, and "Agent" means any one of the foregoing. "Agreement" means the Existing Credit Agreement, as amended by this --------- Amended Agreement and as amended or otherwise modified from time to time. "Amended Agreement" means this Amended and Restated Credit Agreement. ----------------- "Amendment Documents" means this Amended Agreement, the Global ------------------- Security Agreement Amendment, the Global Pledge Agreement Amendment, the Guaranty Agreement Amendment, the Mortgage Amendments, the Guarantor Security Agreements between each of YB of Los Angeles and Fidelity, respectively, and the Administrative Agent, the Guarantor Pledge Agreement between YB of Los Angeles and the Administrative Agent, and the KCAL Mortgage. "Applicable Lending Office" means, with respect to each Lender, such ------------------------- Lender's Domestic Lending Office in the case of a Base Rate Advance, such Lender's CD Lending Office in the case of an Adjusted CD Rate Advance, and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance. "Asset Operating Cash Flow" means, with respect to each Asset Sale, ------------------------- the portion of Operating Cash Flow for the twelve months immediately preceding such Asset Sale that is attributable to the asset, property or business being disposed of pursuant to such Asset Sale. "Asset Purchase" means an acquisition by the Borrower or any of its -------------- Subsidiaries of (i) all or substantially all of the assets of any Person (other than the Borrower or any of its Subsidiaries) or (ii) property and assets of any Person (other than the Borrower or any of its Subsidiaries), in each case comprising a television 3 station or a business incidental thereto. "Asset Sale" means any sale, lease, assignment, transfer or other ---------- disposition by the Borrower or any of its Subsidiaries of any asset, property or business (including, without limitation, receivables and leasehold interests) whether now owned or hereafter acquired, but excluding dispositions of inventory in the ordinary course of business. "Assignee" has the meaning specified in Section 8.07(c). -------- "Assignment and Assumption Agreement" means (i) an Assignment and ----------------------------------- Assumption Agreement entered into by a Lender and an Assignee, and accepted by the Administrative Agent and consented to by the Borrower (if required), in substantially the form of Exhibit M, and (ii) the Closing Date Assignment and Assumption Agreement. "Banks" has the meaning specified in the preamble to this Agreement. ----- "Base Rate" means, for any day, a rate per annum equal to the higher --------- of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Advance" means an Advance which bears interest as provided ----------------- in Section 2.05(a). "Base Rate Margin" means, for any day, the percentage set forth below ---------------- opposite the applicable range for the Debt to Operating Cash Flow Ratio as specified in the most recent Notice of Debt to Operating Cash Flow Ratio received by the Administrative Agent on or before such day: Debt to Operating Cash Flow Ratio - ----------------------------------- Greater than But Base Rate or equal to less than Margin - ------------------- -------------- ---------- 6.5 N/A 1.625% 6.0 6.5 1.50% 5.5 6.0 1.25% 5.0 5.5 1.00% 4.0 5.0 0.50% 0.0 4.0 0.25% provided, however, that during any period in which an Event of Default shall - -------- ------- have occurred and be continuing, the Base Rate Margin shall be the Base Rate Margin indicated in the above table plus 2% per annum. 4 "Borrower Pledge Agreement" means the Borrower Pledge Agreement dated ------------------------- as of November 14, 1994 between the Borrower and the Administrative Agent, substantially in the form of Exhibit E-1, as amended by Amendment No. 1 thereto, substantially in the form of Exhibit E-2, as further amended by the Multiple Amendment and as further amended on the Closing Date by the Global Pledge Agreement Amendment, and each other pledge agreement entered into by the Borrower pursuant thereto or hereto, in each case as the same may be amended or otherwise modified from time to time. "Borrower Security Agreement" means the Borrower Security Agreement --------------------------- dated as of November 14, 1994 between the Borrower and the Administrative Agent, substantially in the form of Exhibit B, as amended by the Multiple Amendment and as amended on the Closing Date by the Global Security Agreement Amendment, and each other security agreement entered into by the Borrower pursuant thereto or hereto, in each case as the same may be amended or otherwise modified from time to time. "Borrowing" means a Term Loan Borrowing or a Revolving Facility --------- Borrowing. "BTCo" has the meaning specified in the preamble to this Agreement. ---- "Capital Expenditures" means, for any period, the aggregate of all -------------------- expenditures by the Borrower and its Subsidiaries for property, plant and equipment (including renewals, improvements, replacements and capitalized repairs) during such period, and all Capital Leases entered into during such period, which would be reflected as additions to property, plant or equipment (other than as a result of a Permitted Acquisition) on a consolidated balance sheet of the Borrower and its Subsidiaries prepared in accordance with generally accepted accounting principles. "Capital Lease" means any lease which is or should be, in accordance ------------- with generally accepted accounting principles, recorded as a capital lease. "Capital Lease Obligations" means, with respect to any lease of ------------------------- property which in accordance with generally accepted accounting principles should be capitalized on the lessee's balance sheet or for which the amount of the assets and liabilities thereunder, if so capitalized, should be disclosed in a note to such balance sheet, the amount of the liability which should be so capitalized or disclosed. 5 "CD Lending Office" means, with respect to any Lender, the office of ----------------- such Lender specified as its "CD Lending Office" opposite its name in its Administrative Questionnaire (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "CD Rate Margin" means, for any day during any Interest Period, the -------------- percentage set forth below opposite the applicable range for the Debt to Operating Cash Flow Ratio as specified in the most recent Notice of Debt to Operating Cash Flow Ratio received by the Administrative Agent on or before such day: Debt to Operating Cash Flow Ratio - ----------------------------------- Greater than But CD Rate or equal to less than Margin - ------------------- -------------- -------- 6.5 N/A 2.750% 6.0 6.5 2.625% 5.5 6.0 2.375% 5.0 5.5 2.125% 4.0 5.0 1.625% 0.0 4.0 1.375% provided, however, that during any period in which an Event of Default shall - -------- ------- have occurred and be continuing, the CD Rate Margin shall be the CD Rate Margin indicated in the above table plus 2% per annum. "CD Reference Banks" means BTCo, CIBC and Morgan Guaranty. ------------------ "CERCLA" means the Comprehensive Environmental Response, Compensation ------ and Liability Act of 1980 (42 U.S.C. Sections 9601 et seq.), as amended from -- ---- time to time, and regulations promulgated thereunder. "CIBC" has the meaning specified in the preamble to this Agreement. ---- "Closing Date" means the date on which the conditions set forth in ------------ Section 3.01 shall have been satisfied or waived in accordance with Section 8.01; provided that such date shall be no later than December 31, 1996. -------- "Closing Date Assignment and Assumption Agreement" means the ------------------------------------------------ Assignment and Assumption Agreement, dated as of the date of this Amended Agreement, the assignments under which will become effective on the Closing Date immediately 6 before the Closing Time, among the Old Lenders, as Assignors, the Banks, as Assignees, the Borrower and the Administrative Agent, substantially in the form of Exhibit L. "Closing Date Transactions" means, collectively, the effectiveness of ------------------------- this Amended Agreement and the other Amendment Documents, the Closing Date Assignment and Assumption Agreement and the Acquisition. "Closing Time" means the time on the Closing Date at which the ------------ amendment and restatement of the Existing Credit Agreement to be effected by this Amended Agreement shall become effective, in accordance with the provisions of Section 3.01. "Co-Arrangers" means BTCo, CIBC and J.P. Morgan Securities Inc. ------------ "Code" means the Internal Revenue Code of 1986, as the same may be ---- amended from time to time. "Collateral" means, collectively, the "Collateral" as defined in the ---------- Security Agreements, the "Collateral" as defined in the Pledge Agreements, the "Trust Property" and "Mortgaged Property" described in the Mortgages and all other property and assets of the Borrower or any Guarantor to which any Collateral Document relates. "Collateral Documents" means the Security Agreements, the Pledge -------------------- Agreements and the Mortgages, including without limitation the agreements, documents and instruments listed on Schedule 1.01-1. "Communications Act" means the Communications Act of 1934, as amended ------------------ from time to time, and the regulations promulgated thereunder. "Consolidated" refers to the consolidation of accounts of the Borrower ------------ and its Subsidiaries in accordance with generally accepted accounting principles, including principles of consolidation. "Convert", "Conversion" and "Converted" each refers to a conversion of ------- ---------- --------- Advances of one Type into Advances of another Type pursuant to Section 2.15 or 2.17. "CTSI" means Community Television Service, Inc., a South Dakota ---- corporation. "Debt" of any Person means at any date, without ---- 7 duplication, (i) all obligations of such Person for borrowed money or to pay the deferred purchase price of property or services (including, without limitation, all obligations, contingent or otherwise, of such Person in connection with letter of credit facilities, acceptance facilities or other similar facilities and in connection with any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any capital stock of such Person, but excluding all amounts payable with respect to Programming Liabilities), (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, (iii) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all obligations of such Person under Capital Leases, (v) all Debt of any other entity of the type referred to in clause (i), (ii), (iii) or (iv) above secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt, (vi) all equity securities of such Person subject to repurchase or redemption other than at the sole option of such Person, valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (vii) all Guaranteed Debt of such Person, (viii) all liabilities incurred by the Borrower or any ERISA Affiliate to the PBGC upon the termination under Section 4041 or Section 4042 of ERISA of any Plan, (ix) all Withdrawal Liabilities of such Person or any of its ERISA Affiliates, (x) all increases in the amount of contributions required to be made by the Borrower and its ERISA Affiliates in each fiscal year of the Borrower to Multiemployer Plans, due to the reorganization or termination of any such Multiemployer Plan within the meaning of Title IV of ERISA, over the average annual amount of such contributions required to be made during the last 3 years preceding such reorganization or termination and (xi) the aggregate amount of Derivatives Obligations of such Person; provided that for the purposes of calculating Debt -------- to determine the Debt to Operating Cash Flow Ratio and of calculating Senior Debt to determine compliance with Section 5.01(n), Debt shall be reduced by the aggregate amount of Temporary Cash Investments held by the Borrower or any Guarantor (excluding Permitted Acquisition Deposits) on the date of determination, to the extent that such amount exceeds the greater of (A) $5,000,000 and (B) the product of (x) $400,000 and (y) the sum of (X) the number of television 8 broadcast stations owned by the Subsidiaries of the Borrower as of such date and (Y) the number one. "Debt to Operating Cash Flow Ratio" means, as of any day, the ratio of --------------------------------- (i) the aggregate unpaid Consolidated principal amount of all Debt of the Borrower and its Subsidiaries on such day to (ii) Operating Cash Flow of the Borrower and its Subsidiaries for the twelve consecutive calendar months then most recently ended or ending on such day. "Default" means any Event of Default or any event that would ------- constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Derivatives Obligations" of any Person means all obligations of such ----------------------- Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. "Disclosed Litigation" has the meaning specified in Section 4.01(h). -------------------- "Documentation Agent" means CIBC in its capacity as Documentation ------------------- Agent for the Lenders hereunder, and its successors in such capacity. "Domestic Business Day" means any day except a Saturday, Sunday or --------------------- other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, with respect to any Lender, the ----------------------- office of such Lender specified as its "Domestic Lending Office" opposite its name in the Administrative Questionnaire or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Environmental Laws" means any and all applicable federal, state, ------------------ local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and governmental restrictions, whether now or hereafter in 9 effect, relating to human health, the environment or to emissions, discharges or releases of pollutants, contaminants, Hazardous Materials or wastes into the environment, including ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Materials or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time, and the regulations promulgated and rulings issued thereunder. References to sections or parts of ERISA as in effect on the date hereof include corresponding successor provisions after the date hereof. "ERISA Affiliate" means any trade or business (whether or not --------------- incorporated) which is a member of a group of which the Borrower is a member or which is under common control with the Borrower within the meaning of Section 414 of the Code, and the regulations promulgated and rulings issued thereunder. "Eurodollar Business Day" means any Domestic Business Day on which ----------------------- commercial banks are open for international business (including dealings in dollar deposits) in London. "Eurodollar Lending Office" means, with respect to any Lender, the ------------------------- office of such Lender specified as its "Eurodollar Lending Office" opposite its name in its Administrative Questionnaire (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "Eurodollar Margin" means, for any day during any Interest Period, the ----------------- percentage set forth below opposite the applicable range for the Debt to Operating Cash Flow Ratio as specified in the most recent Notice of Debt to Operating Cash Flow Ratio received by the Administrative Agent on or before such day: 10 Debt to Operating Cash Flow Ratio - ----------------------------------- Greater than But Eurodollar or equal to less than Margin - ------------------- -------------- ----------- 6.5 N/A 2.625% 6.0 6.5 2.50% 5.5 6.0 2.25% 5.0 5.5 2.00% 4.0 5.0 1.50% 0.0 4.0 1.25% provided, however, that during any period in which an Event of Default shall - -------- ------- have occurred and be continuing, the Eurodollar Margin shall be the Eurodollar Margin indicated in the above table plus 2% per annum. "Eurodollar Rate Advance" means an Advance which bears interest as ----------------------- provided in Section 2.05(c). "Eurodollar Reference Banks" means the principal London offices of -------------------------- BTCo, CIBC and Morgan Guaranty. "Events of Default" has the meaning specified in Section 6.01. ----------------- "Excess Cash Flow" means, for any Fiscal Year, the excess, if any of: ---------------- (a) the sum of (i) the Borrower's Operating Cash Flow for such Fiscal Year, plus (ii) the cash proceeds received by the Borrower and its ---- Subsidiaries in respect of Asset Sales during such Fiscal Year, plus (iii) ---- any decrease in Net Working Investment between the beginning and end of such Fiscal Year, over ---- (b) the sum of (i) the amount of Total Interest Expense for such Fiscal Year, plus (ii) the amount of Capital Expenditures for such Fiscal ---- Year, to the extent that such Capital Expenditures are not financed during such Fiscal Year (and will not later be financed) with the proceeds of Debt permitted by clause (C) or (D) of Section 5.02(b), plus (iii) any increase ---- in Net Working Investment between the beginning and end of such Fiscal Year, plus (iv) the aggregate amount of Restricted Payments made in cash ---- during such Fiscal Year in accordance with Section 5.02(g)(iii), plus (v) ---- the aggregate amount of all scheduled principal payments on all Debt of the Borrower or any of its Subsidiaries then required to be made and made during such Fiscal Year (excluding any prepayments during any 11 Fiscal Year pursuant to Section 2.09(b) of this Agreement, other than prepayments made pursuant to Section 2.09(b)(iii) in respect of Permitted Asset Sales), plus (vi) all optional prepayments of the Term Loan Advances ---- during such Fiscal Year pursuant to Section 2.09(a), all determined in accordance with generally accepted accounting principles; provided that if the Acquisition or any Permitted Acquisition occurs during such - -------- Fiscal Year, the calculation of Excess Cash Flow for such Fiscal Year shall give effect to the items set forth above (including Operating Cash Flow for this purpose, notwithstanding the first proviso contained in the definition thereof) to the extent that they are properly attributable to the acquired assets or properties, related costs or expenses or the financing therefor only for periods ---- on and after the closing date for the Acquisition or Permitted Acquisition. "Existing Credit Agreement" has the meaning specified in the preamble ------------------------- to this Agreement. "Existing Financing Statements" has the meaning specified in Section ----------------------------- 3.01(g)(6)(C). "Existing Guarantors" means all of the Guarantors on the Closing Date ------------------- other than YB of Los Angeles and Fidelity. "Existing Notes" means the "A Notes", the "B Notes" and the "C Notes" -------------- (each such term as defined in the Existing Credit Agreement), delivered by the Borrower pursuant to the Existing Credit Agreement to the Old Lenders before the Closing Date, substantially in the form of Exhibits A-1, A-2 and A-3, respectively, to the Existing Credit Agreement. "Existing Subordinated Debt" means the 1994 Subordinated Notes, the -------------------------- 1995 Subordinated Notes and the 1996 Subordinated Notes. "FCC" means the Federal Communications Commission and any successor --- thereto. "FCC License" means any license, permit, certificate of compliance, ----------- franchise, approval or authorization granted or issued by the FCC and owned or held by the Borrower or any of its Subsidiaries in order to conduct the broadcast operations of a television station. 12 "Federal Funds Rate" means, for any day, the rate per annum (rounded ------------------ upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business -------- Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day and so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on such transactions as determined by the Administrative Agent. "Fidelity" means Fidelity Television, Inc., a California corporation. -------- "Film Expense" means, with respect to any accounting period, all ------------ amounts which become due and payable by the Borrower or any of its Subsidiaries during such period in respect of Programming Liabilities of the Borrower or any of its Subsidiaries, as determined in accordance with generally accepted accounting principles. "Fiscal Quarter" means a fiscal quarter of the Borrower consisting of -------------- a calendar quarter ending on March 31, June 30, September 30 or December 31, as the case may be. "Fiscal Year" means a fiscal year of the Borrower consisting of a ----------- calendar year ending on December 31. "Fixed Rate Advances" means Adjusted CD Rate Advances or Eurodollar ------------------- Rate Advances or any combination thereof. "Fixed Rate Borrowing" means a borrowing consisting of Adjusted CD -------------------- Rate Advances or Eurodollar Rate Advances made on the same day by the Lenders. "Global Pledge Agreement Amendment" means Amendment No. 3 to Borrower --------------------------------- Pledge Agreement and Amendment No. 2 to Guarantor Pledge Agreement dated as of the date of this Amended Agreement among the Borrower, YB of Sioux Falls and the Administrative Agent, substantially in the form of Exhibit G. 13 "Global Security Agreement Amendment" means Amendment No. 2 to ----------------------------------- Borrower Security Agreement and Amendment No. 2 to Guarantor Security Agreements dated as of the date of this Amended Agreement among the Borrower, each Existing Guarantor and the Administrative Agent, substantially in the form of Exhibit D. "Guaranteed Debt" of any Person means all Debt referred to in clause --------------- (i), (ii), (iii) or (iv) of the definition of "Debt" in this section guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Debt or to advance or supply funds for the payment or purchase of such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss, (iii) to supply funds to, or in any other manner invest in, the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss. "Guarantor" means each of the Subsidiaries of the Borrower listed on --------- Schedule 4.01(a) and each of the Subsidiaries of the Borrower which shall become a Guarantor in accordance with this Agreement (including Section 5.02(f)). "Guarantor Pledge Agreements" means, collectively (i) the Guarantor --------------------------- Pledge Agreement dated as of the date of this Amended Agreement between YB of Los Angeles and the Administrative Agent, (ii) the Guarantor Pledge Agreement dated as of May 31, 1996 between YB of Sioux Falls and the Administrative Agent, as amended by the Multiple Amendment and as amended on the Closing Date by the Global Pledge Agreement Amendment, in each case substantially in the form of Exhibit F, and (iii) each other pledge agreement entered into by any Guarantor pursuant thereto or hereto, in each case as the same may be amended or otherwise modified from time to time. "Guarantor Security Agreements" means, collectively (i) the Guarantor ----------------------------- Security Agreements dated as of the date of this Amended Agreement between each of YB of Los Angeles and Fidelity, respectively, and the Administrative Agent, (ii) each of the Guarantor Security Agreements dated as of April 15, 1996 between each of YB of Davenport, YB of Sioux Falls and YB of Rapid City, respectively, and the Administrative Agent, each as amended 14 by the Multiple Amendment and as amended on the Closing Date by the Global Security Agreement Amendment, and (iii) each of the Guarantor Security Agreements dated as of November 14, 1994, between each of the Existing Guarantors other than YB of Davenport, YB of Sioux Falls and YB of Rapid City, and the Administrative Agent, each as amended by the Multiple Amendment and as amended on the Closing Date by the Global Security Agreement Amendment, in each case substantially in the form of Exhibit C, and (iv) each other security agreement entered into by any of the Guarantors pursuant thereto or hereto, in each case as the same may be amended or otherwise modified from time to time. "Guaranty Agreement" means the Amended and Restated Guaranty Agreement ------------------ dated as of April 15, 1996, among the Borrower, each of the Existing Guarantors and the Administrative Agent, substantially in the form of Exhibit H, as amended by the Multiple Amendment and as amended on the Closing Date by the Guaranty Agreement Amendment, and as the same may be amended or otherwise modified from time to time. "Guaranty Agreement Amendment" means Amendment No. 2 to Amended and ---------------------------- Restated Guaranty Agreement dated as of the date of this Amended Agreement, among the Borrower, each Guarantor and the Administrative Agent, substantially in the form of Exhibit I. "Hazardous Materials" means (i) any "hazardous substance" as defined ------------------- in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) petroleum, its derivatives, by-products and other hydrocarbons; and (v) any other toxic, radioactive, caustic or otherwise hazardous substance regulated under Environmental Laws. "Independent Public Accountants" means (i) Ernst & Young LLP, (ii) ------------------------------ another 'Big Six' independent public accounting firm or (iii) another independent public accounting firm of nationally recognized standing reasonably acceptable to the Majority Lenders. "Insufficiency" means, with respect to any Plan, the amount, if any, ------------- by which the present value of the accrued benefits under such Plan, as determined using the actuarial assumptions then used for the purpose of determining the contributions to be made to such Plan, exceeds the fair market value of the assets of such Plan allocable to such benefits. "Interest Period" means: (i) with respect to each Eurodollar Rate --------------- Advance, the period commencing on the date 15 of such Borrowing and ending 1, 3, 6 or, if the Administrative Agent determines that deposits in such maturity are available in the London interbank market for such period, 12 months thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: -------- (a) any Interest Period which would otherwise end on a day which is not a Eurodollar Business Day shall be extended to the next succeeding Eurodollar Business Day unless such Eurodollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Eurodollar Business Day; and (b) any Interest Period which begins on the last Eurodollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Eurodollar Business Day of a calendar month; and (c) if any Interest Period includes a date on which a payment of principal of the Advances is required to be made under Section 2.04 but does not end on such date, then (i) the principal amount (if any) of each Eurodollar Rate Advance required to be repaid on such date shall have an Interest Period ending on such date and (ii) the remainder (if any) of each such Eurodollar Rate Advance shall have an Interest Period determined as set forth above; and (ii) with respect to each Adjusted CD Rate Advance, the period commencing on the date of such Borrowing and ending 30, 90, 180 or, if the Administrative Agent determines that certificates of deposit in such maturity are available in accordance with the definition of CD Base Rate for such period, 360 days thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: - -------- (a) any Interest Period (other than an Interest Period determined pursuant to clause (b)(i) below) which would otherwise end on a day which is not a Eurodollar Business Day shall be extended to the next succeeding Eurodollar Business Day; and (b) if any Interest Period includes a date on which a payment of principal of the Advances is required to be made under Section 2.04 but does not end on such date, then (i) the principal amount (if any) of each Adjusted CD Rate Advance required to be repaid on such date shall have an Interest Period ending on such 16 date and (ii) the remainder (if any) of each such Adjusted CD Rate Advance shall have an Interest Period determined as set forth above. "Interest Rate Protection Agreement" means any interest rate cap ---------------------------------- agreement, interest rate swap agreement and any other interest rate protection agreement between the Borrower and any Person that is a Lender or any Affiliate of any Lender on conditions acceptable to the Agents and in accordance with Section 5.02(s), as such agreement may be amended from time to time with the consent of the Agents. "Issuing Bank" means BTCo, as the issuer of a Letter of Credit. ------------ "KCAL Financing Statements" has the meaning specified in Section ------------------------- 3.01(g)(6)(B). "KCAL Mortgage" means the Deed of Trust, Assignment of Leases and ------------- Rents, Security Agreement and Fixture Filing effective as of the Closing Date from YB of Los Angeles, as trustor, to Chicago Title Insurance Company, as trustee, for the benefit of the Administrative Agent, as beneficiary, covering the Real Property located at 5515 Melrose Avenue, Los Angeles, California. "KCAL-TV" has the meaning specified in the preamble to this Agreement. ------- "KLFY Partnership" means KLFY, L.P., a Delaware limited partnership of ---------------- which YB of Louisiana is the sole general partner and of which LAT is the sole limited partner and which is governed by the KLFY Partnership Agreement. "KLFY Partnership Agreement" means the Agreement of Limited -------------------------- Partnership of KLFY, L.P. dated as of December 29, 1989 by and among YB of Louisiana and LAT, as the same may be amended from time to time. "LAT" means LAT, Inc., a Delaware corporation and wholly owned --- subsidiary of the Borrower. "Leaseholds" means all of the right, title and interest of the ---------- Borrower or any of its Subsidiaries in, to and under any leases, licenses or other agreements granting to the Borrower or any of its Subsidiaries, directly or indirectly, rights to enter, occupy or use any land, improvements and fixtures, including, without limitation, the "Ground Leases" as described in certain of the Mortgages. 17 "Lender Share" means, with respect to any Lender, an amount equal to ------------ the sum of such Lender's Term Loan Commitment and Revolving Facility Commitment or, if the Revolving Facility Commitment shall have been terminated, the aggregate outstanding amount of such Lender's Term Loan Advances, Revolving Facility Advances and Letter of Credit Obligations. "Lenders" means the Banks listed on the signature pages hereof and ------- each Assignee that shall become a party hereto pursuant to Section 8.07, including without limitation the Swingline Lender. "Letter of Credit Obligations" means, for any Lender and at any time, ---------------------------- the sum of (x) the amounts then owing to such Lender (including in its capacity as the Issuing Bank) under Section 2.10 to reimburse it in respect of amounts drawn under Letters of Credit and (y) such Lender's ratable participation in the aggregate amount then available for drawing under all Letters of Credit, calculated in accordance with Section 2.10. "Letters of Credit" has the meaning specified in Section 2.10. ----------------- "Lien" means, with respect to any asset, any mortgage, deed of trust, ---- pledge, lien, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan Documents" means this Agreement, the Notes, the Guaranty -------------- Agreement, the Collateral Documents, any Interest Rate Protection Agreements and all agreements, documents and instruments executed and delivered in connection with any Letters of Credit, in each case as the same may hereafter be amended or otherwise modified from time to time, including without limitation the Amendment Documents. "Loan Party" means the Borrower and each Guarantor. ---------- "Major Casualty Proceeds" means (i) the aggregate insurance proceeds ----------------------- received in connection with one or more 18 related events by the Borrower or any of its Subsidiaries under any insurance policy maintained to cover losses with respect to tangible real or personal property or improve ments or losses from business interruption or (ii) any award or other compensation with respect to any condemnation of property (or any transfer or disposition of property in lieu of condemnation) received by the Borrower or any of its Subsidiaries, if the amount of such aggregate insurance proceeds or award or other compensation exceeds $1,000,000. "Majority Lenders" means Lenders having at least 51% of the aggregate ---------------- amount of the Lender Shares for all Lenders. "Material Financial Obligations" means a principal or face amount of ------------------------------ Debt and/or payment obligations in respect of Derivatives Obligations of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, exceeding in the aggregate $1,000,000. "Morgan Guaranty" has the meaning specified in the preamble to this --------------- Agreement. "Mortgage Amendment" means, with respect to each Mortgage executed ------------------ pursuant to the Existing Credit Agreement, an amendment thereto dated as of the Closing Date substantially in the form of Exhibit K. "Mortgages" means the KCAL Mortgage, the other mortgages and deeds of --------- trust listed on Schedule 1.01-1, in each case as amended on the Closing Date by the relevant Mortgage Amendment, and any other mortgages, deeds of trust or similar instruments in substantially the form of Exhibit J executed from time to time pursuant hereto, as the same may be amended or otherwise modified from time to time. "Multiemployer Plan" means a "multiemployer plan" as defined in ------------------ Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, including for these purposes any Person that ceased to be an ERISA Affiliate during such five year period. "Multiple Amendment" means Amendment No. 5 to the Existing Credit ------------------ Agreement, Amendment No. 1 to Borrower Security Agreement, Amendment No. 2 to Borrower Pledge Agreement, Amendment No. 1 to Guarantor Security Agreements, Amendment No. 1 to Guarantor Pledge Agreement and Amendment 19 No. 1 to Amended and Restated Guaranty Agreement dated as of the date of this Amended Agreement, substantially in the form of Exhibit V. "Multiple Employer Plan" means an employee benefit plan, other than a ---------------------- Multiemployer Plan, subject to Title IV of ERISA to which the Borrower or any ERISA Affiliate, and at least one employer other than the Borrower or an ERISA Affiliate, are making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which the Borrower or any ERISA Affiliate made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan, including for these purposes any Person that ceased to be an ERISA Affiliate during such five year period. "Net Income" means, for any accounting period, net income (or net ---------- deficit, as the case may be), as determined in accordance with generally accepted accounting principles. "Net Proceeds" means, with respect to any issuance by the Borrower of ------------ any equity securities or Permitted Subordinated Debt or any Permitted Asset Sale by any Loan Party, an amount equal to the net cash proceeds received by the Borrower or such Loan Party with respect to such equity securities or Permitted Subordinated Debt or pursuant to such Permitted Asset Sale, as the case may be, less (without duplication) any expenses relating thereto reasonably incurred by the Borrower or such Loan Party in connection therewith. "Net Working Investment" means at any date (x) the Consolidated ---------------------- current assets of the Borrower and its Subsidiaries (excluding cash, short-term investments and Television Film Exhibition Rights) minus (y) the Consolidated ----- current liabilities of the Borrower and its Subsidiaries (excluding Programming Liabilities and principal of and interest on Debt), all determined as of such date. Net Working Investment at any date may be a positive or negative number. Net Working Investment increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative. "1994 Subordinated Note Documents" means the 1994 Subordinated Notes -------------------------------- and the Indenture dated as of November 14, 1994, as supplemented, among the Borrower, as issuer, each of the Subsidiaries of the Borrower named therein as the Initial Guarantors, as guarantors thereunder, and State Street Bank and Trust Company, as successor trustee. 20 "1994 Subordinated Notes" means the Borrower's 11-3/4% Senior ----------------------- Subordinated Notes due 2004. "1995 Subordinated Note Documents" means the 1995 Subordinated Notes -------------------------------- and the Indenture dated as of June 1, 1995, as supplemented, among the Borrower, as issuer, each of the Subsidiaries of the Borrower named therein as the Initial Guarantors, as guarantors thereunder, and State Street Bank and Trust Company, as successor trustee. "1995 Subordinated Notes" means the Borrower's 10-1/8% Senior ----------------------- Subordinated Notes due 2005. "1996 Subordinated Note Documents" means the 1996 Subordinated Notes -------------------------------- and the Indenture dated as of January 1, 1996, as supplemented, among the Borrower, as issuer, each of the Subsidiaries of the Borrower named therein as the Initial Guarantors, as guarantors thereunder, and State Street Bank and Trust Company, as trustee. "1996 Subordinated Notes" means the Borrower's 9% Senior Subordinated ----------------------- Notes due 2006. "Non-Cash Charges" means, for any accounting period, charges properly ---------------- attributable to such period for depreciation, amortization and other non-cash items as determined in accordance with generally accepted accounting principles; provided that Non-Cash Charges shall include amortization of transaction fees - -------- and expenses incurred in connection with the Closing Date Transactions and non- cash compensation provided to employees of the Borrower or any of its Subsidiaries. "Nonpermitted Swingline Advance" means an advance made by the ------------------------------ Swingline Lender to the Borrower that purports to be a Swingline Advance but which advance (i) does not comply with the limitations contained in the proviso to the first sentence of Section 2.01(c), or (ii) was made during a period described in Section 2.01(d)(v). For purposes of determining compliance with the limitations contained in the proviso to the first sentence of Section 2.01(c), the Swingline Lender may rely on information received by it from the Administrative Agent; provided that the Administrative Agent shall have no -------- obligation (except upon a request made by the Swingline Lender) to inform the Swingline Lender with respect to such limitations. "Notes" means the Term Loan Notes, the Revolving Facility Notes and ----- the Swingline Note. "Notice of Borrowing" has the meaning specified in ------------------- 21 Section 2.02. "Notice of Debt to Operating Cash Flow Ratio" means (i) until the ------------------------------------------- Borrower delivers a Notice of Debt to Operating Cash Flow Ratio pursuant to Section 5.03(a), the certificate delivered by the Borrower pursuant to Section 3.01(g)(22) and (ii) thereafter, a Notice of Debt to Operating Cash Flow Ratio delivered pursuant to Section 5.03(a). "Notice of Issuance" has the meaning specified in Section 2.10. ------------------ "Notice of Swingline Refunding" has the meaning specified in Section ----------------------------- 2.01(d)(i). "Obligations" means all obligations described in any Loan Document. ----------- "Old Lenders" means the Lenders under the Existing Credit Agreement as ----------- in effect immediately before the effectiveness of the Closing Date Assignment and Assumption Agreement. "Operating Cash Flow" means, for any accounting period, the amount ------------------- calculated as follows: Consolidated Net Income for such period, plus to the extent deducted in determining such Consolidated Net Income, ---- Consolidated Non-Cash Charges and any other extraordinary non-cash losses (including any losses from the sale of assets) for such period, plus Consolidated interest expense, net of interest income, for such ---- period (after giving effect to all costs of, and savings realized by, each interest rate cap or other interest rate protection agreement which the Borrower may enter into with respect to interest payable on any Debt or any portion thereof), plus Consolidated income tax expense for such period, ---- plus if such accounting period includes any one or more of the first ---- twelve consecutive calendar months following the Closing Date, the amount identified as "Total Cost Savings" opposite the latest such month on Schedule 1.01-2 (each, a "Total Cost Savings Add-Back"), --------------------------- 22 minus all cash payments in respect of income taxes by the Borrower or any of ----- its Subsidiaries during such period, minus to the extent included in Consolidated Net Income for such period, any ----- extraordinary non-cash gains (including gains from the sale of assets) for such period, minus Consolidated cash payments of Film Expense made during such period, ----- all determined in accordance with generally accepted accounting principles; provided that if the Acquisition or any Permitted Acquisition occurs during such - -------- accounting period, the calculation of Operating Cash Flow for such accounting period shall give effect, on a Pro Forma Basis, to the items set forth above for periods during such accounting period but prior to the closing date for the Acquisition or the Permitted Acquisition, to the extent such items are properly attributable to the acquired assets or properties, related costs or expenses or the financing therefor; and provided further that in calculating Operating Cash -------- ------- Flow on a Pro Forma Basis for any period which includes a period prior to the Closing Date, the following Television Film Exhibition Rights shall be deemed not to be attributable to the assets and properties acquired in the Acquisition - --- or related costs or expenses: (i) the Television Film Exhibition Rights of YB of Los Angeles relating to Empty Nest, Golden Girls and Perfect Strangers (because ---------- ------------ ----------------- the liability related to such Television Film Exhibition Rights shall be retained by KCAL Broadcasting, Inc. and not assumed by the Borrower or any of its Subsidiaries in the Acquisition) and (ii) the Television Film Exhibition Rights relating to George/Alana and Marilyn Kagan (because these television ------------ ------------- shows have been cancelled prior to the Closing Date). "Parent" means, with respect to any Lender, any Person controlling ------ such Lender. "Participant" has the meaning specified in Section 8.07(b). ----------- "Payment Date" means the last day of each March, June, September and ------------ December (or, if such day is not a Domestic Business Day, the next succeeding Domestic Business Day), commencing with the first such date occurring after the Closing Date. 23 "PBGC" means the Pension Benefit Guaranty Corporation. ---- "Permitted Acquisition" means an acquisition by any one or more --------------------- wholly-owned Subsidiaries of the Borrower of any one or more television stations or of any one or more businesses incidental to the ownership and operation of television stations, or an acquisition by the Borrower or any one or more wholly-owned Subsidiaries of the Borrower of all of the capital stock of a corporation owning one or more television stations or one or more businesses incidental to the ownership and operation of such television stations; provided -------- that: (a) at least thirty (30) days prior to the closing date for such acquisition, the Borrower shall have delivered to each of the Lenders (i) a compliance certificate, substantially in the form of Exhibit T, certifying the Borrower's compliance with the provisions of this Agreement set forth in Exhibit T, as of the most recent date for compliance prior to the date of such certificate, after giving effect on a Pro Forma Basis to such acquisition, and (ii) a report of the chief financial officer of the Borrower, in a form and providing sufficient detail and justification for the information provided therein, including assumptions, as shall be found to be reasonable by each of the Agents in its sole good faith discretion, after completion of reasonable due diligence, establishing that: (x) after giving effect to such acquisition and the financing therefor, the Borrower shall be in compliance at the end of each fiscal year until the Termination Date with the covenants contained in Sections 5.01(l), 5.01(m), 5.01(n), 5.01(o), 5.02(a), 5.02(b), 5.02(d), 5.02(f), 5.02(g) and 5.02(h); and (y) after giving effect to such acquisition and the financing therefor, the Debt to Operating Cash Flow Ratio, calculated after giving effect to any pro forma cost savings, shall be less than 6.0; (b) at the time of such acquisition, no Default is then continuing or would result therefrom; and (c) at the time of such acquisition, the stock of any new Subsidiaries of the Borrower acquired or 24 created in connection therewith or resulting therefrom shall be pledged to the Administrative Agent for its benefit and the benefit of the Lenders, each of such new Subsidiaries shall become a Guarantor hereunder and each of such new Subsidiaries shall grant liens and security interests in all of its assets to the Administrative Agent for its benefit and the benefit of the Secured Parties; provided further that, for the avoidance of doubt, the parties hereto agree that - -------- ------- the Acquisition is a Permitted Acquisition. "Permitted Acquisition Deposit" means a deposit made by the Borrower ----------------------------- or any of its Subsidiaries pursuant to any purchase agreement to which it is or is to be a party in connection with an acquisition that it proposes to make as a Permitted Acquisition; provided that at the time of the making of such deposit, -------- no Default is then continuing or would result therefrom. "Permitted Acquisition Mortgage" has the meaning specified in Section ------------------------------ 3.03(e)(5). "Permitted Asset Sale" means any Asset Sale by the Borrower or any of -------------------- its Subsidiaries (a) where the Net Proceeds of such Asset Sale, when added to the Net Proceeds of any related Asset Sales, are less than $500,000, unless such Asset Sale is the disposition of property and assets comprising a television station or a business incidental thereto; (b) which is the sale of television station WTVO in Rockford, Illinois; or (c) where the Net Proceeds of such Asset Sale are greater than or equal to $500,000 or such Asset Sale is the disposition of property and assets comprising a television station or a business incidental thereto, if (x) before and after giving effect thereto no Default shall have occurred and be continuing; (y) except in the case of a Qualifying FCC-Mandated Sale, the aggregate total amount of the Asset Operating Cash Flow with respect to all such Asset Sales since the Closing Date (excluding any Qualifying FCC- Mandated Sale) (A) with respect to any such Asset Sale occurring after the first anniversary of the Closing Date, constitutes less than fifteen percent (15%) of the greatest amount of Operating Cash Flow for any consecutive twelve-month period commencing after the Closing Date or (B) with respect to any such Asset Sale occurring within twelve months of the Closing Date, constitutes less than fifteen percent (15%) of Operating Cash Flow for the most recent twelve months ended prior to such Asset Sale, calculated after giving effect, on a Pro Forma Basis, to the latest such Asset Sale, all other Permitted Asset Sales and 25 all Permitted Acquisitions occurring on or after the Closing Date; and (z) at least thirty (30) days prior to the date of each such Asset Sale, the Borrower shall have delivered to each of the Lenders (i) a compliance certificate, substantially in the form of Exhibit T, certifying the Borrower's compliance with the provisions of this Agreement set forth in Exhibit T, as of the most recent date for compliance prior to the date of such certificate, after giving effect on a Pro Forma Basis to such Asset Sale, and (ii) a report of the chief financial officer of the Borrower, in a form and providing sufficient detail and justification for the information provided therein, including assumptions, as shall be found to be reasonable by each of the Agents in its sole good faith discretion, after completion of reasonable due diligence, establishing that after giving effect to such Asset Sale, the Borrower shall be in compliance at the end of each fiscal year until the Termination Date with the covenants contained in Sections 5.01(l), 5.01(m), 5.01(n), 5.01(o), 5.02(a), 5.02(b), 5.02(d), 5.02(f), 5.02(g) and 5.02(h). "Permitted Liens" means: --------------- (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not at the time required by Section 5.01(f); (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due or being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, if a reserve or other appropriate provision, if any, as shall be required by generally accepted accounting principles shall have been made therefor; (iii) Liens, other than Liens created by Section 4068 of ERISA, incurred or deposits made in the ordinary course of business in connection with workmen's compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety, customs and appeal bonds, bids, leases, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) Liens, in an aggregate amount existing from time to time not to exceed $2,000,000, which Liens (A) arise in the ordinary course of business, (B) do 26 not secure Debt or Derivatives Obligations and (C) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (v) leases or subleases granted to others in the ordinary course of business or existing on property at the time acquired and not interfering with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (vi) Permitted Encumbrances, as defined in each Mortgage, with respect to the Real Property covered thereby; (vii) purchase money Liens upon or in any property acquired or held by the Borrower or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or to secure Debt incurred solely for the purpose of financing the acquisition of such property, or Liens existing on such property at the time of its acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided that (A) the aggregate -------- amount of Liens described in this clause (vii) that are outstanding or existing at any time shall not exceed $10,000,000 and (B) no such Lien shall extend to or cover any property other than the property being acquired, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; provided that Liens on property acquired or held by -------- the Borrower or any of its Subsidiaries to secure the purchase price of any Asset Purchase or Permitted Acquisition or to secure Debt incurred for the purpose of financing any Asset Purchase or Permitted Acquisition are understood not to be Liens described of a type in this clause (vii); (viii) Liens existing on the Closing Date and set forth in Schedule 4.01(i); (ix) Liens created by the Collateral Documents; (x) one or more attachments or judgment Liens not exceeding $1,000,000 in the aggregate unless the judgment such Lien secures shall not, within 30 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 30 days after the expiration of any such stay; and 27 (xi) Liens created after the Closing Date upon any Real Property owned by the Borrower or any of its Subsidiaries; provided that (A) such -------- Liens shall be junior and subordinate to the Liens created by or pursuant to the Loan Documents, (B) the aggregate amount of the obligations secured by such Liens shall not at any time exceed $5,000,000 and (C) each of such Liens and such Liens in the aggregate must not interfere with the ordinary conduct of business of the Borrower or any of its Subsidiaries; provided, however, that no Lien in favor of the PBGC shall, in any event, be a - -------- ------- "Permitted Lien"; and provided further that no Lien shall constitute a Permitted -------- ------- Lien on and after the commencement in respect thereof of any enforcement, collection, execution, levy or foreclosure proceeding where such Lien secures any obligation in an amount equal to or exceeding $50,000. "Permitted Subordinated Debt" means Debt other than Existing --------------------------- Subordinated Debt for which the Borrower is directly and primarily liable, but which may be guaranteed by any one or more Guarantors (provided that any -------- obligations of any Guarantor in respect thereof are subordinate to such Guarantor's obligations under the Guaranty Agreement to the same extent and on similar terms as such Guarantor's obligations in respect of the Existing Subordinated Debt), and which (v) is subordinated in right of payment to the prior payment in full in cash of all of the obligations of the Borrower and the Guarantors to pay principal of and interest on the Notes, all Letter of Credit Obligations and all fees and other amounts payable hereunder or under any other Loan Document, pursuant to subordination provisions that are no less favorable to the Lenders than the subordination provisions for any Existing Subordinated Debt; (w) contains no mandatory redemption provisions which would require any redemption in circumstances in which the mandatory redemption provisions for any Existing Subordinated Debt would not require redemption of any Existing Subordinated Debt; (x) contains financial covenants and events of default that are no more onerous to the Borrower and its Subsidiaries than the financial covenants and events of default for any Existing Subordinated Debt; (y) has a maturity date no earlier than January 15, 2006; and (z) is not secured by any Lien; provided that at least fifteen (15) days prior to the incurrence of such -------- Debt, the Borrower shall have delivered to each of the Lenders (i) a compliance certificate, substantially in the form of Exhibit T, certifying the Borrower's compliance with the provisions of this Agreement set forth in Exhibit T, as of the most 28 recent date for compliance prior to the date of such certificate, after giving effect on a Pro Forma Basis to the incurrence of such Debt, and (ii) a report of the chief financial officer of the Borrower, in a form and providing sufficient detail and justification for the information provided therein, including assumptions, as shall be found to be reasonable by each of the Agents in its sole good faith discretion, after completion of reasonable due diligence, establishing that after giving effect to the incurrence of such Debt, the Borrower shall be in compliance at the end of each fiscal year until the Termination Date with the covenants contained in Sections 5.01(l), 5.01(m), 5.01(n), 5.01(o), 5.02(a), 5.02(b), 5.02(d), 5.02(f), 5.02(g) and 5.02(h). "Permitted Subordinated Debt Repurchase" means a prepayment, -------------------------------------- redemption, defeasance or purchase of any Existing Subordinated Debt or Permitted Subordinated Debt to the extent permitted by clause (iv) of Section 5.02(h). "Person" means an individual, partnership, corporation (including a ------ business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means an employee benefit plan, other than a Multiemployer ---- Plan, (i) which is maintained for employees of the Borrower or any ERISA Affiliate and subject to Title IV of ERISA or (ii) which could subject the Borrower or any ERISA Affiliate to liability under Section 4069 of ERISA in the event that such plan has been or was to be terminated. "Pledge Agreements" means the Borrower Pledge Agreement and the ----------------- Guarantor Pledge Agreements. "Pledged Instruments" means the Pledged Instruments as defined in the ------------------- Pledge Agreements and all Instruments as defined in the Security Agreements. "Pledged Stock" has the meaning specified in the Pledge Agreements. ------------- "Prime Rate" means the rate of interest publicly announced by BTCo in ---------- New York City from time to time as its Prime Rate. "Pro Forma Basis" means, at any time, a pro forma basis as agreed --------------- among the Borrower and the Agents at such time. 29 "Pro Forma Debt Service" means, at any date, the sum of (i) Total ---------------------- Interest Expense for the four consecutive Fiscal Quarters then most recently ended plus (ii) the aggregate amount of all scheduled principal payments (including mandatory principal repayments required by Section 2.04, mandatory principal repayments required by Section 2.08(d)(ii) and mandatory principal payments (to the extent reasonably foreseeable) required by Section 2.09(b)(ii)) on all Debt of the Borrower or any of its Subsidiaries, including the portion of any payments under Capital Leases that is allocable to principal, for the four consecutive Fiscal Quarters immediately following the Fiscal Quarter during which such date occurs. "Programming Liabilities" means, as to any Person, all obligations of ----------------------- such Person under contracts for the acquisition of broadcast rights to television programs and films, as determined in accordance with generally accepted accounting principles. "Quad Cities Joint Venture" means PCI/RIBCO, the joint venture formed ------------------------- pursuant to the Joint Venture Agreement dated as of September 30, 1981, between YB of Davenport, as successor to Palmer Communications Incorporated, and Coronet Communications Company, as successor to Rock Island Broadcasting Co. "Qualifying FCC-Mandated Sale" means an Asset Sale by the Borrower or ---------------------------- any of its Subsidiaries (a) which is the disposition of property and assets comprising a television station or a business incidental thereto, (b) which is required by the FCC as a condition to or otherwise in connection with a Permitted Acquisition and (c) where Operating Cash Flow on a Pro Forma Basis for the twelve-month period immediately after the consummation of both such Asset Sale and the related Permitted Acquisition is (A) with respect to any such Asset Sale occurring after the first anniversary of the Closing Date, at least ninety- five percent (95%) of the greatest amount of Operating Cash Flow for any consecutive twelve-month period commencing after the Closing Date (but prior to the earlier of such FCC-Mandated Sale and such related Permitted Acquisition) or (B) with respect to any such Asset Sale occurring within twelve months of the Closing Date, at least ninety-five percent (95%) of Operating Cash Flow for the most recent twelve months ended prior to such Asset Sale, calculated after giving effect, on a Pro Forma Basis, to the latest such Asset Sale, all other Permitted Asset Sales and all Permitted Acquisitions occurring on or after the Closing Date. 30 "Real Property" means all of the Borrower's and its Subsidiaries' ------------- right, title and interest (including Leaseholds) in and to land, improvements and fixtures, including, without limitation, the "Property" described in each of the Mortgages. "Reference Banks" means the CD Reference Banks or the Eurodollar --------------- Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Refinancing Permitted Subordinated Debt" means Permitted Subordinated --------------------------------------- Debt incurred by the Borrower, the Net Proceeds of which shall be used at the time of issuance thereof solely for the prepayment, redemption, defeasance or purchase of any Existing Subordinated Debt or Permitted Subordinated Debt to the extent permitted by clause (iv) of Section 5.02(h). "Register" has the meaning specified in Section 8.07(e). -------- "Regulation G" means Regulation G of the Board of Governors of the ------------ Federal Reserve System, as in effect from time to time. "Regulation U" means Regulation U of the Board of Governors of the ------------ Federal Reserve System, as in effect from time to time. "Related Documents" means the Acquisition Documents and the ----------------- Subordinated Debt Documents and, in each case, all amendments thereto. "Restricted Payment" means, (i) any dividend or other distribution on ------------------ any shares of the Borrower's capital stock (except dividends payable solely in shares of its capital stock of the same class) or (ii) any payment on account of the purchase, redemption, retirement, defeasance, acquisition, return or distribution with respect to (a) any shares of the Borrower's capital stock or (b) any option, warrant or other right to acquire shares of the Borrower's capital stock. "Revolving Facility Advance" has the meaning specified in Section -------------------------- 2.01(b). "Revolving Facility Borrowing" means a borrowing consisting of ---------------------------- Revolving Facility Advances made or Converted on the same day by the Lenders. "Revolving Facility Commitment" means, with ----------------------------- 31 respect to each Lender, the amount set forth opposite such Lender's name on the Appendix hereto under the caption "Revolving Facility Commitment", in each case as such amount may be reduced or terminated pursuant to Section 2.07, 2.08, 2.09(b) or 6.01; provided that if at any time a Lender shall have entered into -------- one or more Assignment and Assumption Agreements, such Lender's Revolving Facility Commitment thereafter shall be the amount set forth for such Lender as its Revolving Facility Commitment in the Register maintained by the Administrative Agent pursuant to Section 8.07(e), as such amount may be reduced or terminated pursuant to Section 2.07, 2.08, 2.09(b) or 6.01. "Revolving Facility Commitment Reduction Date" means the last day of -------------------------------------------- each March, June, September and December (or, if such day is not a Domestic Business Day, the next succeeding Domestic Business Day), commencing with the first such date occurring in 1999. "Revolving Facility Note" means the promissory note issued by the ----------------------- Borrower payable to the order of a Lender, in substantially the form of Exhibit A-2, evidencing the indebtedness of the Borrower to such Lender in respect of the Revolving Facility Advances made by such Lender. "Revolving Facility Percentage" means, with respect to each Lender at ----------------------------- any time, the percentage that its Revolving Facility Commitment represents of the aggregate amount of the Revolving Facility Commitments of all Lenders at such time. "Revolving Facility Termination Date" means the earlier of the last ----------------------------------- Domestic Business Day in September, 2003 and the date of termination in whole of the Revolving Facility Commitments pursuant to Section 2.07 or 6.01. "Secured Parties" means the Secured Parties as defined in the --------------- Collateral Documents. "Security Agreements" means the Borrower Security Agreement and the ------------------- Guarantor Security Agreements. "Senior Debt" means, as of any date, the aggregate unpaid principal ----------- amount on such date of all Debt of the Borrower and its Subsidiaries other than the Existing Subordinated Debt and Permitted Subordinated Debt. "Solvency Certificate" has the meaning specified in Section -------------------- 3.01(g)(12). "Solvent" means, with respect to any Person on a ------- 32 particular date, that on such date (i) the fair value of the property of such Person is greater than the total amount of its liabilities (including, without limitation, liabilities on all claims, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured) of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its existing debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in each respective industry in which such person is engaged. "Subordinated Debt Documents" means the 1994 Subordinated Note --------------------------- Documents, the 1995 Subordinated Note Documents, the 1996 Subordinated Note Documents and any notes, indentures and other documents governing any other Permitted Subordinated Debt, and, in each case, all amendments thereto. "Subsidiary" of any Person means (i) any corporation of which more ---------- than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries, or by one or more other Subsidiaries and (ii) any partnership, joint venture or similar entity of which the Borrower or any Subsidiary is, directly or indirectly, a general partner or of which the Borrower or any Subsidiary has the right, directly or indirectly, by law, contract or otherwise, to control or to manage the business and affairs, including without limitation the KLFY Partnership, the WKRN Partnership and the WATE Partnership; provided that no Tower Affiliate shall be deemed to be a -------- Subsidiary of the Borrower or of any of its Subsidiaries. "Swingline Advance" has the meaning specified in ----------------- 33 Section 2.01(c). "Swingline Commitment" means the commitment of the Swingline Lender to -------------------- make Swingline Advances to the Borrower hereunder, in an aggregate amount not to exceed $10,000,000, as such amount may be reduced or terminated pursuant to Section 2.07, 2.08, 2.09(b) or 6.01. "Swingline Lender" means First Union National Bank of North Carolina ---------------- in its capacity as Swingline Lender hereunder, and its successors in such capacity. "Swingline Note" means the promissory note issued by the Borrower -------------- payable to the order of the Swingline Lender, in substantially the form of Exhibit A-3, evidencing the indebtedness of the Borrower to the Swingline Lender in respect of the Swingline Advances made by the Swingline Lender. "Syndication Agent" means Morgan Guaranty in its capacity as ----------------- Syndication Agent for the Lenders hereunder, and its successors in such capacity. "Television Film Exhibition Rights" means the asset on the Borrower's --------------------------------- Consolidated balance sheet which, in accordance with generally accepted accounting principles, should represent contract rights of the Borrower and its Consolidated Subsidiaries relating to television film exhibition. "Temporary Cash Investments" means (i) commercial paper of any -------------------------- corporation incorporated under the laws of the United States of America or any State thereof rated at least P-1 or its equivalent by Moody's Investors Service, Inc. or A-1 or its equivalent by Standard and Poor's Corporation and maturing within 270 days, (ii) direct obligations of, or obligations the principal of or any interest on which are unconditionally guaranteed by, the United States of America, in each case maturing within one year from the date of acquisition thereof by the Borrower or any Subsidiary (as the case may be) and (iii) any time deposit with, including certificates of deposit issued by, a commercial bank of recognized standing operating in the United States of America having combined capital and surplus of at least $50,000,000. "Term Loan Advance" has the meaning specified in Section 2.01(a). ----------------- "Term Loan Borrowing" means a borrowing consisting of Term Loan ------------------- Advances made or Converted on the same day by 34 the Lenders. "Term Loan Commitment" means, with respect to each Lender, the amount -------------------- set forth opposite such Lender's name on the Appendix hereto under the caption "Term Loan Commitment", as such amount may be reduced or terminated pursuant to Section 2.07, 2.08, 2.09(b) or 6.01; provided that if at any time a Lender shall -------- have entered into one or more Assignment and Assumption Agreements, such Lender's Term Loan Commitment thereafter shall be the amount set forth for such Lender as its Term Loan Commitment in the Register maintained by the Administrative Agent pursuant to Section 8.07(e), as such amount may be reduced or terminated pursuant to Section 2.07, 2.08, 2.09(b) or 6.01. "Term Loan Note" means the promissory note issued by the Borrower -------------- payable to the order of a Lender, in substantially the form of Exhibit A-1, evidencing the indebtedness of the Borrower to such Lender in respect of the Term Loan Advances made by such Lender. "Term Loan Termination Date" means the earlier of the last Domestic -------------------------- Business Day in September, 2003 and the date of termination in whole of the Term Loan Commitments pursuant to Section 2.07 or 6.01. "Termination Date" means the latest to occur of the Term Loan ---------------- Termination Date, the Revolving Facility Termination Date and the date when all Term Loan Advances, Revolving Facility Advances and Letter of Credit Obligations shall have terminated or been repaid in full. "Termination Event" means (i) a "reportable event", as such term is ----------------- described in Section 4043 of ERISA (other than a "reportable event" as to which the 30-day notice requirement has been waived by the PBGC), or an event described in Section 4068(f) of ERISA, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) providing notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 or ERISA, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. 35 "Total Interest Expense" means, for any accounting period, the ---------------------- Consolidated amount of all interest charges, whether expensed or capitalized, including the portion of any obligation under Capital Leases allocable to interest expense in accordance with generally accepted accounting principles (after giving effect to all costs of, and savings realized by, each interest rate swap or cap agreement which the Borrower may enter into with respect to interest payable on any Debt or any portion thereof) and all premiums and other amounts that are amortized (other than interest charges and principal), in each case with respect to any Debt of the Borrower or any of its Subsidiaries during such period. "Tower Affiliate" means (i) the Quad Cities Joint Venture, (ii) CTSI --------------- and (iii) any other Person (A) of which the Borrower or any Guarantor shall acquire an ownership interest as a result of a Permitted Acquisition and (B) of which the sole activity is the ownership and operation of a transmission tower or towers. "Trade Debt" means, for any accounting period, accounts payable ---------- accrued during such period for the deferred purchase price of property or services (but excluding Film Expense) to the extent such payables and obligations are not overdue by more than 6 months. "Type" has the meaning specified in the definition of the term ---- "Advance" contained in this Article I. "Voting Stock" of any Person means stock of any class or classes (or ------------ equivalent interests), if the holders of the stock of such class or classes (or equivalent interests) are ordinarily, in the absence of contingencies, entitled to vote for the election of a majority of the directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. "WATE Partnership" means WATE, L.P., a Delaware limited partnership of ---------------- which YB of Knoxville is the sole general partner and of which YBK is the sole limited partner and which is governed by the WATE Partnership Agreement. "WATE Partnership Agreement" means the Agreement of Limited -------------------------- Partnership of WATE, L.P. dated as of November 10, 1994 between YB of Knoxville and YBK, as the same may be amended from time to time. "Withdrawal Liability" shall have the meaning -------------------- 36 given such term under Part I of Subtitle E of Title IV of ERISA. "WKRN Partnership" means WKRN, L.P., a Delaware limited partnership of ---------------- which YB of Nashville is the sole general partner and of which YBT is the sole limited partner and which is governed by the WKRN Partnership Agreement. "WKRN Partnership Agreement" means the Agreement of Limited -------------------------- Partnership of WKRN, L.P. dated as of December 29, 1989 by and among YB of Nashville and YBT, as the same may be amended from time to time. "YB of Davenport" means Young Broadcasting of Davenport, Inc., a --------------- Delaware corporation. "YB of Knoxville" means Young Broadcasting of Knoxville, Inc., a --------------- Delaware corporation. "YB of Los Angeles" means Young Broadcasting of Los Angeles, Inc., a ----------------- Delaware corporation. "YB of Louisiana" means Young Broadcasting of Louisiana, Inc., a --------------- Delaware corporation. "YB of Nashville" means Young Broadcasting of Nashville, Inc., a --------------- Delaware corporation. "YB of Rapid City" means Young Broadcasting of Rapid City, Inc., a ---------------- Delaware corporation. "YB of Sioux Falls" means Young Broadcasting of Sioux Falls, Inc., a ----------------- Delaware corporation. "YBK" means YBK, Inc., a Delaware corporation and wholly owned --- subsidiary of the Borrower. "YBT" means YBT, Inc., a Delaware corporation and wholly owned --- subsidiary of the Borrower. SECTION 1.02. Computation of Time Periods. In this Agreement in the --------------------------- computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". SECTION 1.03. 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 37 generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Independent Public Accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders; provided that, if there is a change in generally accepted accounting principles - -------- at any time and the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article V (or the definition of any term used therein) to eliminate the effect of such change on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Majority Lenders wish to amend Article I or V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Majority Lenders. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The Advances. ------------ 2.01(a) The Term Loan Advances. (i) Each Lender severally agrees, ---------------------- on the terms and conditions set forth herein, to make a single advance to the Borrower on the Closing Date (each such advance, a "Term Loan Advance") pursuant ----------------- to this Section 2.01(a) in an amount equal to the amount of such Lender's Term Loan Commitment. Each Term Loan Advance made on the Closing Date shall be a Base Rate Advance and shall remain a Base Rate Advance until Converted to a Fixed Rate Advance pursuant to Section 2.15. (ii) Each Term Loan Borrowing shall be in an aggregate amount not less than $10,000,000 or an integral multiple of $100,000 in excess thereof and shall consist of Term Loan Advances of the same Type made or Converted on the same day by the Lenders ratably according to their respective Term Loan Commitments. (iii) The Term Loan Advances are not revolving in nature and any amounts of any Term Loan Advances that are repaid pursuant to Section 2.04 or prepaid pursuant to Section 2.09 may not be reborrowed. 2.01(b) The Revolving Facility Advances. Each ------------------------------- 38 Lender severally agrees, on the terms and conditions set forth herein, to make one or more advances (each such advance, a "Revolving Facility Advance") to the -------------------------- Borrower from time to time during the period from the Closing Date until the Revolving Facility Termination Date pursuant to this Section 2.01(b); provided -------- that immediately after each Revolving Facility Advance, the sum of the aggregate outstanding principal amount of all Revolving Facility Advances for such Lender, all Letter of Credit Obligations for such Lender and such Lender's Revolving Facility Percentage of the aggregate outstanding principal amount of all Swingline Advances (excluding any portion of the Swingline Advances to be repaid with the proceeds of such Revolving Facility Advance) does not exceed at any time such Lender's Revolving Facility Commitment. Each Revolving Facility Borrowing shall be in an aggregate amount not less than $1,000,000 or an integral multiple of $100,000 in excess thereof and shall consist of Revolving Facility Advances of the same Type made or Converted on the same day by the Lenders ratably according to their respective Revolving Facility Commitments. Within the foregoing limits, the Borrower may borrow under this Section 2.01(b), and repay or, to the extent permitted by Section 2.09, prepay Revolving Facility Advances and reborrow under this Section 2.01(b) at any time until the Revolving Facility Termination Date. 2.01(c) The Swingline Advances. The Swingline Lender agrees, on the ---------------------- terms and conditions set forth herein, to make one or more advances (each such advance, a "Swingline Advance") to the Borrower from time to time during the ----------------- period from the Closing Date until the Revolving Facility Termination Date pursuant to this Section 2.01(c); provided that, immediately after each -------- Swingline Advance, (i) the aggregate principal amount of all Swingline Advances shall not exceed the Swingline Commitment and (ii) the sum of the aggregate principal amount of all Swingline Advances plus the aggregate principal amount of all Revolving Facility Advances and all Letter of Credit Obligations shall not at any time exceed the aggregate amount of the Revolving Facility Commitments. Each Swingline Advance shall be a Base Rate Advance and shall be in an aggregate amount not less than $50,000 or an integral multiple thereof. Within the foregoing limits, the Borrower may borrow under this Section 2.01(c), and repay or, to the extent permitted by Section 2.09, prepay Swingline Advances and reborrow under this Section 2.01(c) at any time until the earlier of the Revolving Facility Termination Date and the date when the Swingline Commitment shall have been reduced to zero or terminated pursuant to Section 2.07, 2.08, 2.09(b) or 6.01. 39 2.01(d) Refunding of Swingline Advances. ------------------------------- (i) The Borrower shall pay to the Swingline Lender, on demand, the amount of any outstanding Swingline Advances. (ii) At any time and from time to time the Swingline Lender may, by written notice to the Administrative Agent, which the Administrative Agent shall promptly forward to each Lender with a Revolving Facility Commitment, require each Lender with a Revolving Facility Commitment to pay to the Swingline Lender an amount equal to such Lender's Revolving Facility Percentage of the aggregate unpaid principal amount of the Swingline Advances (excluding any Nonpermitted Swingline Advances) then outstanding. Any such notice (a "Notice of Swingline ------------------- Refunding") shall specify the date on which such payments are to be made, which - --------- date shall be the next Domestic Business Day after such Notice of Swingline Refunding is delivered to the Administrative Agent, the aggregate unpaid principal amount of such Swingline Advances and payment instructions for such payments. (iii) Not later than 3:00 p.m. (New York City time) on the date specified in the Notice of Swingline Refunding, each Lender with a Revolving Facility Commitment shall pay such Lender's Revolving Facility Percentage of the aggregate unpaid principal amount of the Swingline Advances (excluding any Nonpermitted Swingline Advances) then outstanding to the Swingline Lender in accordance with the payment instructions set forth in the Notice of Swingline Refunding, in Federal or other funds immediately available in Charlotte, North Carolina. The amount so paid by each Lender with a Revolving Facility Commitment shall constitute a Revolving Facility Advance to the Borrower which shall be a Base Rate Advance; provided that, if the Lenders with Revolving -------- Facility Commitments are prevented from making such Revolving Facility Advances to the Borrower by the provisions of the United States Bankruptcy Code or otherwise, the amount so paid by each such Lender shall constitute a purchase by it of an assignment in the unpaid principal amount of the Swingline Advances (and interest accruing thereon after the date of such payment), and the Swingline Lender and each Lender with a Revolving Facility Commitment shall promptly execute and deliver to the Administrative Agent an Assignment and Assumption Agreement to evidence such assignment. (iv) Each Lender with a Revolving Facility Commitment acknowledges and agrees that its obligations to 40 refund Swingline Advances in accordance with the terms of this Section 2.01(d) are absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Lender or any other Person may have against the Swingline Lender or the Borrower, (ii) the occurrence or continuance of a Default or an Event of Default or the termination of the Revolving Facility Commitments, (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any other Person, (iv) any breach of this Agreement by the Borrower or any other Lender (other than the Swingline Lender, in such capacity) or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided that no -------- Lender shall be obligated to make any payment to the Swingline Lender under this Section 2.01(d) with respect to any portion of any Nonpermitted Swingline Advance. (v) If at any time the Swingline Lender is given written notice by the Administrative Agent or the Borrower that any condition set forth in Section 3.02 is not then satisfied, the Lenders shall not have any obligations pursuant to this Section 2.01(d) to refund (or purchase any assignment in) any Swingline Advances made by the Swingline Lender during the period after it has received such written notice until the time when it receives written notice from the Administrative Agent that such condition has been satisfied. SECTION 2.02. Method of Borrowing. 2.02(a) The Borrower shall give ------------------- the Administrative Agent notice (a "Notice of Borrowing") of (i) each Borrowing ------------------- to be made on the Closing Date no later than the Domestic Business Day prior to the Closing Date, (ii) each Revolving Facility Borrowing thereafter (other than Revolving Facility Borrowings made to refund Swingline Advances pursuant to Section 2.01(d)(iii)) not later than 10:00 A.M. (New York City time) on the third Eurodollar Business Day before each Eurodollar Rate Advance, the third Domestic Business Day before each Adjusted CD Rate Advance and the Domestic Business Day before each Base Rate Advance and (iii) each Swingline Advance not later than 11:00 A.M. (New York City time) on the date of each Swingline Advance, specifying: (i) the date of such Borrowing or Swingline Advance, which shall be a Domestic Business Day in the case of an Adjusted CD Rate Advance or a Base Rate Advance or a Eurodollar Business Day in the case of a Eurodollar Rate Advance, 41 (ii) the aggregate amount of such Borrowing or Swingline Advance, (iii) the Type of Advances comprising such Borrowing or that the advance will be a Swingline Advance, and (iv) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. The Borrower shall deliver a copy of each Notice of Borrowing for a Swingline Advance to the Swingline Lender not later than 11:00 A.M. (New York City time) on the date of such Swingline Advance. 2.02(b) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender's share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. 2.02(c) Not later than Noon (New York City time) on the date of each Revolving Facility Borrowing, each Lender with a Revolving Facility Commitment shall make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 8.02. Unless the Administrative Agent determines that any applicable condition specified in Article III has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent's aforesaid address. 2.02(d) Not later than Noon (New York City time) on the date of each Swingline Advance, the Swingline Lender will make available the amount of such Swingline Advance, in Federal or other funds immediately available in Charlotte, to the Borrower at the Swingline Lender's address specified in or pursuant to Section 8.02. 2.02(e) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (c) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the 42 Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such share available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.05 and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance included in such Borrowing for purposes of this Agreement. Nothing herein shall affect any rights that the Borrower may have against such defaulting Lender. 2.02(f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. Notes. 2.03(a) On the Closing Date, each "A Note" (as ----- defined in the Existing Credit Agreement) issued pursuant to the Existing Credit Agreement shall be amended and restated by a Term Loan Note substantially in the form of Exhibit A-1, each "B Note" (as defined in the Existing Credit Agreement) issued pursuant to the Existing Credit Agreement shall be of no further force and effect and each "C Note" (as defined in the Existing Credit Agreement) issued pursuant to the Existing Credit Agreement shall be amended and restated by a Revolving Facility Note substantially in the form of Exhibit A-2. From and after the Closing Date, the Term Loan Advances, Revolving Facility Advances and Swingline Advances of each Lender shall be evidenced, respectively, by a Term Loan Note, Revolving Facility Note and Swingline Note payable to the order of such Lender for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Lender's Term Loan Advances and Revolving Facility Advances and Swingline Advances, respectively. 2.03(b) Upon receipt of each Lender's Notes from the Borrower pursuant to Section 3.01, the Documentation Agent shall mail such Notes to such Lender. Each Lender shall record the date, amount and maturity of each Advance 43 made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and prior to any transfer of its Note shall endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding; provided that the failure of any Lender to make any such recordation or - -------- endorsement, or any error in such recordation or endorsement, shall not affect the obligations of the Borrower hereunder or under the Notes. Each Lender is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.04. Maturity of Term Loan Advances. The Borrower shall ------------------------------ repay the principal amount of all outstanding Term Loan Advances in installments on each Payment Date as set forth in the table below. The principal amount due on each Payment Date for all outstanding Term Loan Advances shall be an aggregate amount equal to the amount specified in the table below for such Payment Date, which shall be applied ratably among the Lenders on the basis of the aggregate amount of each Lender's outstanding Term Loan Advances: 44 Principal Amount Due on Payment Date Specified Payment Date In Principal Amount Due March, 1998 $ 5,625,000 June, 1998 5,625,000 September, 1998 5,625,000 December, 1998 5,625,000 March, 1999 8,750,000 June, 1999 8,750,000 September, 1999 8,750,000 December, 1999 8,750,000 March, 2000 10,625,000 June, 2000 10,625,000 September, 2000 10,625,000 December, 2000 10,625,000 March, 2001 14,375,000 June, 2001 14,375,000 September, 2001 14,375,000 December, 2001 14,375,000 March, 2002 16,250,000 June, 2002 16,250,000 September, 2002 16,250,000 December, 2002 16,250,000 March, 2003 19,375,000 June, 2003 19,375,000 September, 2003 38,750,000 SECTION 2.05. Interest Rates. 2.05(a) Each Base Rate Advance -------------- (including each Swingline Advance) shall bear interest on the outstanding principal amount thereof, for each day from the later of the Closing Date and the date such Advance is made until it becomes due, at a rate per annum equal to the sum of (i) the applicable Base Rate Margin plus (ii) the Base Rate for such day. Except as provided in Section 3.01(c) or 2.05(f), such interest shall be payable in arrears on each Payment Date and, with respect to the principal amount of any Base Rate Advance converted to a Fixed Rate Advance, on the date when such Base Rate Advance is so converted. 45 2.05(b) Each Adjusted CD Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and after the Closing Date during the Interest Period applicable thereto, at a rate per annum equal to the sum of (i) the applicable CD Rate Margin plus (ii) the applicable Adjusted CD Rate; provided that if any Adjusted CD Rate Advance or any portion thereof -------- shall, as a result of clause (ii)(b)(i) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Advances during such period. Except as otherwise provided in Section 3.01(c) or 2.05(f), such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upwards, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of ------------ interest determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the unpaid principal amount of the Adjusted CD Rate Advance of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage --------------------------- (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the 46 Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in --------------- effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. (S) 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. 2.05(c) Each Eurodollar Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and after the Closing Date during the Interest Period applicable thereto, at a rate per annum equal to the sum of (i) the applicable Eurodollar Margin plus (ii) the applicable Adjusted London Interbank Offered Rate. Except as otherwise provided in Section 3.01(c) or 2.05(f), such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Eurodollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Eurodollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Eurodollar Business Days before the first day of such 47 Interest Period in an amount approximately equal to the principal amount of the Eurodollar Rate Advance of such Eurodollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Eurodollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Rate Advances is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. 2.05(d) The Administrative Agent shall determine each interest rate applicable to the Advances hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Lenders by telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. 2.05(e) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated hereby. If any Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 2.16 shall apply. 2.05(f) Any overdue interest on any Advance shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the rate of interest borne by such Advance for such day. 48 SECTION 2.06. Fees. ---- 2.06(a) Commitment Fees. The Borrower shall pay to the --------------- Administrative Agent, for the account of the Lenders ratably in proportion to their respective Revolving Facility Commitments on each day, a commitment fee for each day on the amount by which the aggregate amount of the Revolving Facility Commitments exceeds the sum of the aggregate outstanding principal amount of the Revolving Facility Advances and the aggregate amount of Letter of Credit Obligations on such day, at the rate of (i) if the Debt to Operating Cash Flow Ratio as specified in the most recent Notice of Debt to Operating Cash Flow Ratio received by the Administrative Agent on or before such day is greater than 4.0, 3/8 of 1% per annum, (ii) otherwise, 1/4 of 1% per annum. Such commitment fee shall accrue from the Closing Date to the Revolving Facility Termination Date and shall be payable quarterly in arrears on each Payment Date. 2.06(b) Participation Fees. On the Closing Date, the Borrower shall ------------------ pay to the Administrative Agent, for the account of the Co-Arrangers and the Lenders as previously agreed among them, participation fees in the amounts previously agreed among the Borrower and the Co-Arrangers. 2.06(c) Administrative Fees. On the Closing Date and on each ------------------- anniversary of the Closing Date and on the Termination Date, the Borrower shall pay to the Administrative Agent for its own account annual administrative fees in the amounts previously agreed between the Borrower and the Administrative Agent; provided that if the Termination Date is not an anniversary of the -------- Closing Date, the administrative fees payable on the Termination Date shall be a proportionate amount of the annual administrative fees, based on the number of days elapsed since the immediately preceding anniversary of the Closing Date. 2.06(d) Letter of Credit Fees. The Borrower shall pay to the --------------------- Administrative Agent a letter of credit fee at a rate per annum equal to the Letter of Credit Fee Rate in effect from time to time on the aggregate amount available for drawing under any Letters of Credits issued from time to time, such fee to be payable for the account of the Lenders with Revolving Facility Commitments ratably in proportion to their participation therein. The "Letter of Credit Fee Rate" in effect on any day, for any Letter of Credit, shall be the rate set forth below opposite the applicable range for the Debt to Operating 49 Cash Flow Ratio as specified in the most recent Notice of Debt to Operating Cash Flow Ratio received by the Administrative Agent prior to such day: Debt to Operating Cash Flow Ratio - ----------------------------------- Letter of Greater than But Credit or equal to less than Fee Rate - ----------------------------------- ---------- 6.5 N/A 2.625% 6.0 6.5 2.50% 5.5 6.0 2.25% 5.0 5.5 2.00% 4.0 5.0 1.50% 0.0 4.0 1.25% provided, however, that during any period in which an Event of Default shall - -------- ------- have occurred and be continuing, the Letter of Credit Fee Rate shall be the Letter of Credit Fee Rate indicated in the above table plus 2% per annum. Such fee shall be payable in arrears on each Payment Date for so long as any Letter of Credit is outstanding. The Borrower shall also pay to the Issuing Bank fronting fees and issuance, payment, amendment and extension charges in the amounts and at the times as agreed between the Borrower and the Issuing Bank. SECTION 2.07. Optional Termination or Reduction of Commitments. The ------------------------------------------------ Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Term Loan Commitments at any time if no Term Loan Advances are outstanding at such time, (ii) terminate the Revolving Facility Commitments if no Revolving Facility Advances, Swingline Advances or Letter of Credit Obligations are outstanding at such time, (iii) terminate the Swingline Commitment at any time if no Swingline Advances are outstanding at such time, (iv) ratably reduce from time to time, by an aggregate amount of $500,000 or any larger multiple of $100,000, the aggregate amount of the Revolving Facility Commitments in excess of the aggregate outstanding principal amount of the Revolving Facility Advances, Swingline Advances and Letter of Credit Obligations or (v) reduce from time to time, by an aggregate amount of $50,000 or any integral multiple thereof, the amount of the Swingline Commitment in excess of the aggregate outstanding principal amount of the Swingline Advances. Each such reduction in the Revolving Facility Commitments shall reduce, in inverse order, the amounts set forth under the heading "Revolving Facility Commitment Reduction" in the schedule set forth in Section 2.08(d) (as the amounts therein may have been reduced from time to time, in accordance with this Agreement, prior thereto). 50 SECTION 2.08. Mandatory Termination or Reduction of Commitments. ------------------------------------------------- 2.08(a) The Term Loan Commitments shall terminate on the Term Loan Termination Date, and any Term Loan Advances then outstanding (together with accrued interest thereon) shall be due and payable on such date. The Revolving Facility Commitments and the Swingline Commitment shall terminate on the Revolving Facility Termination Date, and any Revolving Facility Advances and Swingline Advances then outstanding (together with accrued interest thereon) shall be due and payable on such date. 2.08(b) On any date on which the Term Loan Commitment of any Lender shall be greater than the principal amount of the Term Loan Advances of such Lender outstanding on such date (after giving effect to any repayment on such date), the Term Loan Commitment of such Lender shall be automatically reduced to an amount equal to such principal amount. 2.08(c) Each Lender's Term Loan Commitment shall be further reduced by an amount equal to such Lender's ratable share of each repayment or prepayment by the Borrower pursuant to the terms of this Agreement of all or a portion of the principal amount of Term Loan Advances, such reduction to be effective as of the date of such repayment or prepayment. 2.08(d) On each Revolving Facility Commitment Reduction Date, (i) the Revolving Facility Commitments shall be reduced by an aggregate amount equal to the amount set forth in the table below for such Revolving Facility Commitment Reduction Date, in each case with such reduction being applied ratably among the Lenders on the basis of their respective Revolving Facility Commitments at such time (provided that the Swingline Commitment shall simultaneously be reduced to -------- the extent that the aggregate amount of the Revolving Facility Commitments of all Lenders is reduced to an amount that is less than the amount of the Swingline Commitment), and (ii) the Borrower shall repay (or make a payment to the Administrative Agent in accordance with the last sentence of this Section 2.08(d)) such amount of outstanding Revolving Facility Advances, Swingline Advances and Letter of Credit Obligations as may be necessary so that after such repayment (x) the aggregate unpaid principal amount of each Lender's outstanding Revolving Facility Advances and Letter of Credit Obligations does not exceed the amount of such Lender's Revolving Facility Commitment as then reduced, (y) the aggregate unpaid principal amount of all outstanding Revolving Facility Advances, Swingline 51 Advances and Letter of Credit Obligations does not exceed the aggregate amount of the Revolving Facility Commitments of all Lenders as then reduced and (z) the aggregate unpaid principal amount of all outstanding Swingline Advances does not exceed the aggregate amount of the Swingline Commitments as then reduced. Each such required repayment shall be made with respect to such outstanding Revolving Facility Borrowings, Swingline Advances and/or Letter of Credit Obligations as the Borrower may specify by notice to the Administrative Agent or, failing such designation by the Borrower, as the Administrative Agent may specify by notice to the Borrower and the Lenders. 52 Revolving Facility Commitment Reduction on Revolving Facility Commitment - --------------------------------------------- Reduction Date Specified Revolving Facility Commitment Reduction Revolving Facility - --------------------- -------------------- Date During Commitment Reduction March, 1999 5,000,000 June, 1999 5,000,000 September, 1999 5,000,000 December, 1999 5,000,000 March, 2000 5,000,000 June, 2000 5,000,000 September, 2000 5,000,000 December, 2000 5,000,000 March, 2001 7,500,000 June, 2001 7,500,000 September, 2001 7,500,000 December, 2001 7,500,000 March, 2002 7,500,000 June, 2002 7,500,000 September, 2002 7,500,000 December, 2002 7,500,000 March, 2003 25,000,000 June, 2003 25,000,000 September, 2003 50,000,000 If the aggregate amount of the Revolving Facility Commitments shall be reduced at any time pursuant to this Section 2.08(d) to an amount that is less than the aggregate amount then available for drawing under all outstanding Letters of Credit, the Borrower shall forthwith, without any notice or demand or any other act by the Administrative Agent or any Lender, pay to the Administrative Agent in immediately available funds an amount equal to the difference, and such funds shall be held as collateral for the Lenders pursuant to arrangements satisfactory to the Administrative Agent. SECTION 2.09. Prepayments. ----------- 2.09(a) Optional Prepayments. The Borrower may, upon notice to the -------------------- Administrative Agent in accordance with Section 2.09(c), prepay any Advance in whole at any time, or from time to time in part, in amounts aggregating $5,000,000 or any larger multiple of $500,000 in the case of Term Loan Advances, in amounts aggregating $100,000 or any larger multiple thereof in the case of Revolving Facility Advances and in amounts aggregating $50,000 or any larger multiple thereof in the case of Swingline Advances by paying the 53 principal amount to be prepaid together with accrued interest thereon to the date of prepayment and all amounts then owing under Section 2.12 in respect of such prepayment. Each such optional prepayment in respect of Term Loan Advances shall be applied to reduce ratably all then remaining unpaid installments of principal of the Term Loan Advances (based on the schedule set forth in Section 2.04, as the amounts therein may have been reduced from time to time, in accordance with this Agreement, due to repayments and prepayments of principal prior thereto), and shall be applied ratably between the Term Loan Advances of the several Lenders, and each such prepayment in respect of Revolving Facility Advances shall be applied to prepay ratably the Revolving Facility Advances of the several Lenders. 2.09(b) Mandatory Prepayments. (i) If the Debt to Operating Cash --------------------- Flow Ratio as of the last day of any Fiscal Year is equal to or greater than 4.5, then no later than the next April 30, the Borrower shall prepay an outstanding principal amount of the Term Loan Advances equal to 75% of Excess Cash Flow for such Fiscal Year. If the Debt to Operating Cash Flow Ratio as of the last day of any Fiscal Year is less than 4.5 but greater than or equal to 3.0, then no later than the next April 30, the Borrower shall prepay an outstanding principal amount of the Term Loan Advances equal to 50% of Excess Cash Flow for such Fiscal Year. In each case, the Borrower shall pay the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and all amounts then owing under Section 2.12 in respect of such prepayment and such prepayment shall be applied to reduce ratably all then remaining unpaid installments of principal of the Term Loan Advances (based on the schedule set forth in Section 2.04, as the amounts therein may have been reduced from time to time, in accordance with this Agreement, due to repayments and prepayments of principal prior thereto). For purposes of this Section 2.09(b): (x) Excess Cash Flow for any Fiscal Year shall be determined on the basis of the amount of Excess Cash Flow for such Fiscal Year set forth on the certificate delivered to the Lenders pursuant to Section 5.03(r); and (y) Excess Cash Flow shall be determined using an amount for Operating Cash Flow that is calculated in accordance with the definition thereof but excluding any Total Cost Savings Add-Back (as defined in the definition of Operating Cash Flow). (ii) If, on the date the Borrower shall issue any equity securities (including, without limitation, any common stock, preferred stock, rights to subscribe for or to purchase, or any warrants or options to acquire any equity 54 security or any instrument convertible into any equity security), the Debt to Operating Cash Flow Ratio on such day is greater than 4.50, then within five Domestic Business Days after the date on which the Borrower shall issue such equity securities, the Borrower shall repay or prepay an outstanding principal amount of Advances equal to the Net Proceeds of such issuance of equity securities to the extent necessary to reduce such Debt to Operating Cash Flow Ratio to 4.50. In each case, the Borrower shall pay the principal amount to be repaid or prepaid together with accrued interest thereon to the date of prepayment and all amounts then owing under Section 2.12 in respect of such prepayment and such prepayment shall be applied first to repay Revolving Facility Advances and/or, in the Borrower's discretion, to prepay the remaining unpaid installments of principal in inverse order of maturity of the Term Loan Advances (based on the schedule set forth in Section 2.04, as the amounts therein may have been reduced from time to time, in accordance with this Agreement, due to repayments of principal prior thereto); provided that if such -------- issuance of equity occurs after May 10, 1997, and the Borrower elects to apply any such Net Proceeds to repay any amount of Revolving Facility Advances, the Revolving Facility Commitments shall automatically be reduced by an amount equal to fifty percent (50%) of the amount of such repayment of Revolving Facility Advances, with such reduction being applied to reduce, in inverse order, the amounts set forth under the heading "Revolving Facility Commitment Reduction" in the schedule set forth in Section 2.08(d) (as the amounts therein may have been reduced from time to time, in accordance with this Agreement, prior thereto), and with such reduction being applied ratably among the Lenders on the basis of their respective Revolving Facility Commitments at such time (provided that the -------- Swingline Commitment shall simultaneously be reduced to the extent that the aggregate amount of the Revolving Facility Commitments of all Lenders is reduced to an amount that is less than the amount of the Swingline Commitment); and provided further that if at any time the Borrower shall be required by this - -------- ------- Section 2.09(b)(ii) to repay Revolving Facility Advances by an amount that exceeds the amount of Revolving Facility Advances then outstanding, the Borrower shall forthwith, without any notice or demand or any other act by the Administrative Agent or any Lender, pay to the Administrative Agent in immediately available funds an amount equal to the lesser of such excess and the aggregate amount then available for drawing under all outstanding Letters of Credit, which amount shall be held as collateral for the benefit of the Lenders pursuant to arrangements satisfactory to the Administrative Agent. 55 (iii) If, on the date the Borrower shall issue any Permitted Subordinated Debt (other than any Refinancing Permitted Subordinated Debt) or make any Permitted Asset Sale, the Debt to Operating Cash Flow Ratio (measured on such date after giving effect to the issuance of such Permitted Subordinated Debt or to the consummation of such Permitted Asset Sale and the receipt of the Net Proceeds thereof, as the case may be) is greater than or equal to 4.50, then within five Domestic Business Days after the date on which the Borrower shall issue such Permitted Subordinated Debt or make such Permitted Asset Sale, as the case may be, the Borrower shall prepay an outstanding principal amount of the Term Loan Advances by the amount of the Net Proceeds of such issuance of Permitted Subordinated Debt or of such Permitted Asset Sale, as the case may be, or such lesser amount as may be necessary to reduce such Debt to Operating Cash Flow Ratio to less than 4.50. In each case, the Borrower shall pay the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and all amounts then owing under Section 2.12 in respect of such prepayment and such prepayment shall be applied to prepay the remaining unpaid installments of principal in inverse order of maturity (based on the schedule set forth in Section 2.04, as the amounts therein may have been reduced from time to time, in accordance with this Agreement, due to repayments of principal prior thereto). (iv) If on any date the Borrower or any of its Subsidiaries shall have received any Major Casualty Proceeds, and the aggregate amount of such Major Casualty Proceeds exceeds the aggregate amount of costs incurred by the Borrower or such Subsidiary within one year after such date or to be incurred thereafter for the purpose of repairing, reconstructing or replacing the property in respect of which such Major Casualty Proceeds were received, then on the first anniversary of such date (or, if such repairs, reconstruction or replacement shall be continuing in due course, on such later date when such repairs, reconstruction or replacement shall have been completed or discontinued): (x) if no Event of Default shall have occurred and be continuing, the Borrower shall apply an amount equal to 100% of such excess to prepay ratably an outstanding principal amount of the Term Loan Advances, and the Borrower shall pay accrued interest thereon to the date of such prepayment and all amounts then owing under Section 2.12 in respect of such prepayment or (y) if an Event of Default shall have occurred and be continuing, an amount equal to 100% of such excess shall be applied to satisfy obligations owed by the Borrower or such Subsidiary based on the order of priorities set forth in Section 9 of the 56 Security Agreements. Any such amount applied to prepay the Term Loan Advances shall be applied to prepay the remaining unpaid installments of principal in inverse order of maturity (based on the schedule set forth in Section 2.04, as the amounts therein may have been reduced from time to time, in accordance with this Agreement, due to repayments and prepayments of principal prior thereto). 2.09(c) Notice of Prepayment. In the case of any optional or -------------------- mandatory prepayment pursuant to this Section 2.09, the Borrower shall give the Administrative Agent prior notice, of one Domestic Business Day in the case of the prepayment of Base Rate Advances and of three Domestic Business Days in the case of the prepayment of Eurodollar Rate Advances or Adjusted CD Rate Advances, stating the proposed date and aggregate principal amount of such prepayment. Upon receipt of a notice of prepayment pursuant to this Section 2.09, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.10. Letters of Credit. ----------------- 2.10(a) Subject to the terms and conditions hereof, the Issuing Bank agrees to issue trade or standby letters of credit hereunder from time to time before the 30th day before the Revolving Facility Termination Date upon the request of the Borrower (the "Letters of Credit"); provided that, immediately ----------------- -------- after each Letter of Credit is issued, (i) the aggregate amount of the Letter of Credit Obligations shall not exceed the lesser of $5,000,000 and the aggregate amount of all Revolving Facility Commitments and (ii) the aggregate amount of the Letter of Credit Obligations plus the aggregate outstanding amount of all Revolving Facility Advances and Swingline Advances shall not exceed the aggregate amount of the Revolving Facility Commitments of all Lenders. Upon the date of issuance by the Issuing Bank of a Letter of Credit, the Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Lender with a Revolving Facility Commitment, and each Lender with a Revolving Facility Commitment shall be deemed, without further action by any party hereto, to have purchased from the Issuing Bank, a participation in such Letter of Credit and the related Letter of Credit Obligations in proportion to its Revolving Facility Percentage. 2.10(b) The Borrower shall give the Issuing Bank and the Administrative Agent written notice, in substantially the form of Exhibit U, at least two Domestic 57 Business Days, or such shorter period as may be agreed to by the Issuing Bank in any particular instance, prior to the requested issuance of a Letter of Credit specifying the date such Letter of Credit is to be issued, and describing the terms of such Letter of Credit and the nature of the transactions to be supported thereby (such notice, including any such notice given in connection with the extension of a Letter of Credit, a "Notice of Issuance"). Upon receipt ------------------ of a Notice of Issuance, the Administrative Agent shall promptly notify each Lender of the contents thereof. Promptly after issuing a Letter of Credit, the Issuing Bank shall deliver to the Administrative Agent a copy of the Letter of Credit, and the Administrative Agent shall promptly deliver a copy of the Letter of Credit to each Lender with a Revolving Facility Commitment, and notify each such Lender of its participation in such Letter of Credit. The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Article III, be subject to the conditions precedent that such Letter of Credit shall be in such form and contain such terms as shall be satisfactory to the Issuing Bank and that the Borrower shall have executed and delivered such other instruments and agreements relating to such Letter of Credit as the Issuing Bank shall have reasonably requested. The extension or renewal of any Letter of Credit shall be deemed to be an issuance of such Letter of Credit for all purposes of this Agreement. If any Letter of Credit contains a provision pursuant to which it is deemed to be extended unless notice of termination is given by the Issuing Bank, the Issuing Bank (i) shall not be required to give such notice of termination unless the Borrower has timely requested such termination and (ii) may timely give such notice of termination unless it has theretofore timely received a Notice of Issuance and the other conditions to issuance of a Letter of Credit have also theretofore been met with respect to such extension. No Letter of Credit shall have a term of more than one year; provided that a Letter of Credit may contain a provision pursuant to -------- which it is deemed to be extended on an annual basis unless notice of termination is given by the Issuing Bank; provided further that no Letter of -------- ------- Credit shall have a term extending or be so extendible beyond the Revolving Facility Termination Date. 2.10(c) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the Issuing Bank shall notify the Administrative Agent and the Borrower, and the Administrative Agent shall promptly notify each Lender with a Revolving Facility Commitment, as to the amount to be paid as a result of such demand or drawing and the payment date. The Borrower shall be irrevocably and unconditionally 58 obligated forthwith to reimburse the Issuing Bank on such payment date for any amounts paid by the Issuing Bank upon any drawing under any Letter of Credit issued by it, without presentment, demand, protest or other formalities of any kind. All such amounts paid by the Issuing Bank and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate that would be applicable to a Revolving Facility Advance bearing interest at the Base Rate for such day. In addition, each Lender with a Revolving Facility Commitment will pay to the Administrative Agent, for the account of the Issuing Bank, immediately upon the Issuing Bank's demand at any time during the period commencing after such drawing until reimbursement therefor in full by the Borrower, an amount equal to such Lender's ratable share of the amount of such drawing remaining unpaid by the Borrower (in proportion to its participation therein), together with interest on such amount for each day from the date of the Issuing Bank's demand for such payment (or, if such demand is made after Noon (New York City time) on such date, from the next succeeding Domestic Business Day) to and including the date of payment by such Lender of such amount at a rate of interest per annum equal to the rate that would be applicable to a Revolving Facility Advance bearing interest at the Base Rate for such period. The Issuing Bank will pay to the Administrative Agent for the account of each Lender with a Revolving Facility Commitment ratably all amounts received from the Borrower for application in payment of its reimbursement obligations in respect of any Letter of Credit, but only to the extent such Lender has made payment to the Issuing Bank in respect of such Letter of Credit pursuant hereto and the Administrative Agent will promptly distribute such amounts to such Lender in accordance with Section 2.11. 2.10(d) The obligations of the Borrower and each Lender with a Revolving Facility Commitment under Section 2.10(c) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including without limitation the following circumstances: (i) any lack of validity or enforceability of this Agreement or any Letter of Credit or any document related hereto or thereto; (ii) any amendment or waiver of or any consent to departure from all or any of the provisions of this Agreement or any Letter of Credit or any document 59 related hereto or thereto; (iii) the use which may be made of the Letter of Credit by, or any acts or omission of, a beneficiary of a Letter of Credit (or any Person for whom the beneficiary may be acting); (iv) the existence of any claim, set-off, defense or other rights that the Borrower may have at any time against a beneficiary of a Letter of Credit (or any Person for whom the beneficiary may be acting), the Lenders (including the Issuing Bank) or any other Person, whether in connection with this Agreement or any Letter of Credit or any document related hereto or thereto or any unrelated transaction; (v) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (vi) payment under a Letter of Credit against presentation to the Issuing Bank of a draft or certificate that does not comply with the terms of such Letter of Credit; provided that the Issuing Bank's determination -------- that documents presented under such Letter of Credit comply with the terms thereof shall not have constituted gross negligence or willful misconduct of the Issuing Bank; or (vii) any other act or omission to act or delay of any kind by any Lender (including the Issuing Bank), the Administrative Agent or any other Person or any other event or circumstance whatsoever that might, but for the provisions of this subsection (vii), constitute a legal or equitable discharge of the Borrower's or the Lender's obligations hereunder. 2.10(e) The Borrower hereby indemnifies and holds harmless each Lender (including the Issuing Bank) and the Administrative Agent from and against any and all claims, damages, losses, liabilities, costs or expenses which such Lender or the Administrative Agent may incur, and none of the Lenders (including the Issuing Bank) nor the Administrative Agent nor any of their Affiliates or their respective officers or directors or employees or agents shall be liable or responsible therefor, by reason of or in connection with the execution and delivery or transfer of or payment or failure to pay under any Letter of Credit, inclu ding without limitation any of the circumstances enumerated 60 in subsection (d) above, as well as (i) any error, omission, interruption or delay in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, (ii) any error in interpretation of technical terms, (iii) any loss or delay in the transmission of any document required in order to make a drawing under a Letter of Credit, (iv) any consequences arising from causes beyond the control of the Issuing Bank, including without limitation any government acts, or any other circumstances whatsoever in making or failing to make payment under such Letter of Credit; provided that the Borrower shall not -------- be required to indemnify the Issuing Bank for any claims, damages, losses, liabilities, costs or expenses, and the Borrower shall have a claim for direct (but not consequential) damage suffered by it, to the extent found by a court of competent jurisdiction to have been caused by (x) the willful misconduct or gross negligence of the Issuing Bank in determining whether a request presented under any Letter of Credit issued by it complied with the terms of such Letter of Credit or (y) the Issuing Bank's willful failure to pay under any Letter of Credit issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit. Nothing in this subsection (e) is intended to limit the obligations of the Borrower under any other provision of this Agreement. SECTION 2.11. General Provisions as to Payments. --------------------------------- 2.11(a) The Borrower shall make each payment of principal of, and interest on, the Advances, of each Letter of Credit Obligation, and of all fees, expenses and other amounts payable hereunder, not later than Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 8.02. Payments received by the Administrative Agent on such date but after such time shall be deemed to have been received on the next Domestic Business Day. The Administrative Agent will promptly distribute to each Lender its ratable share of each such payment received by the Administrative Agent for the account of the Lenders. Whenever any payment of principal of, or interest on, the Base Rate Advances or Adjusted CD Rate Advances or of any Letter of Credit or other fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Eurodollar Rate Advances shall be due on a day which is not a Eurodollar Business Day, the date for payment thereof shall be extended to the next succeeding Eurodollar Business Day unless such Eurodollar Business Day falls in another 61 calendar month, in which case the date for payment thereof shall be the next preceding Eurodollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. 2.11(b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so made such payment, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. SECTION 2.12. Funding Losses. If the Borrower makes any payment -------------- (including any prepayment) of principal with respect to any Fixed Rate Advances (pursuant to this Article II, Article VI or otherwise) on any day other than the last day of the Interest Period applicable thereto, or if the Borrower fails to borrow or Convert any Fixed Rate Advances after notice has been given to any Lender in accordance with Section 2.02(b) or Section 2.15, as the case may be, the Borrower shall reimburse each Lender within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Advance), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow; provided that such Lender shall have delivered to the Borrower a -------- certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.13. Computation of Interest and Fees. Interest based on -------------------------------- the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and commitment and letter of credit fees hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but 62 excluding the last day). SECTION 2.14. Taxes. ----- 2.14(a) For purposes of this Section 2.14, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Lender and the Administrative --------- Agent, taxes imposed on its net income, and franchise or similar taxes imposed on its net income, by a jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Lender, in which its Applicable Lending Office is located and (ii) in the case of each Lender, any United States withholding tax imposed on such payments but only to the extent that such Lender is subject to United States withholding tax at the time such Lender first becomes a party to this Agreement. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. 2.14(b) Any and all payments by the Borrower to or for the account of any Lender or the Administrative Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower -------- shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 8.02, the original or a certified copy of a receipt evidencing payment thereof. 2.14(c) The Borrower agrees to indemnify each 63 Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 2.14) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Lender or the Administrative Agent (as the case may be) makes demand therefor. 2.14(d) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Lender from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Lender or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. 2.14(e) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form pursuant to Section 2.14(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 2.14(b) or (c) with respect to Taxes imposed by the United States; provided that -------- if a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. 2.14(f) If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 2.14, then such Lender will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Lender, such change (i) will eliminate or reduce any such additional payment which may thereafter 64 accrue and (ii) is not otherwise disadvantageous to such Lender. SECTION 2.15. Voluntary and Mandatory Conversion of Advances. ---------------------------------------------- 2.15(a) On any Domestic Business Day after the third Domestic Business Day following the Closing Date, the Borrower may, upon notice given to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Domestic Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.15(b), (c) and (d), 2.16 and 2.17, Convert all or a portion of each Lender's ratable share of Term Loan Advances or Revolving Facility Advances, as the case may be, of one Type comprising the same Borrowing into one or more Borrowings, each comprised of a ratable share of each Lender's Term Loan Advances or Revolving Facility Advances, as the case may be, of another Type; provided, however, that any Conversion of any Fixed Rate -------- -------- Advances into Advances of another Type shall be made on, and only on, the last day of an Interest Period for such Fixed Rate Advances; and provided further -------- ------- that during the three months prior to any date when any principal prepayment or repayment is payable, the Borrower may Convert a portion of all Term Loan Advances or Revolving Facility Advances, as the case may be, comprising the same Borrowing into Base Rate Advances such that the aggregate principal amount of such Borrowing shall equal the principal prepayment or repayment payable on such date. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is into Fixed Rate Advances, the duration of the Interest Period for each such Advance. 2.15(b) If the Borrower shall fail to select the duration of any Interest Period for any Adjusted CD Rate Advances or any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. 2.15(c) If the aggregate unpaid principal amount of Term Loan Advances comprising any Borrowing or Borrowings shall be reduced, by payment or prepayment or otherwise (including but not limited to a Conversion permitted by the second proviso of Section 2.15(a)), to less than $10,000,000, such Term Loan Advances shall, if they are 65 Fixed Rate Advances, automatically Convert into Base Rate Advances on the last day of the Interest Period for such Fixed Rate Advances, and on and after such date the right of the Borrower to Convert such Advances into Term Loan Advances of a Type other than Base Rate Advances shall terminate; provided, however, that -------- ------- if and so long as each such Term Loan Advance shall be of the same Type and have the same Interest Period as any other Term Loan Advances comprising another Borrowing and other Borrowings, and the aggregate unpaid principal amount of all such Term Loan Advances shall equal or exceed $10,000,000, the Borrower shall have the right to continue all such Term Loan Advances as, and to Convert all such Term Loan Advances into, Term Loan Advances of such Type having such Interest Period. 2.15(d) If the aggregate unpaid principal amount of Revolving Facility Advances comprising any Borrowing or Borrowings shall be reduced, by payment or prepayment or otherwise (including but not limited to a Conversion permitted by the second proviso of Section 2.15(a)), to less than $500,000, such Revolving Facility Advances shall, if they are Fixed Rate Advances, automatically Convert into Base Rate Advances on the last day of the Interest Period for such Fixed Rate Advances, and on and after such date the right of the Borrower to Convert such Advances into Revolving Facility Advances of a Type other than Base Rate Advances shall terminate; provided, however, that if and so -------- ------- long as each such Revolving Facility Advance shall be of the same Type and have the same Interest Period as any other Revolving Facility Advances comprising another Borrowing and other Borrowings, and the aggregate unpaid principal amount of all such Revolving Facility Advances shall equal or exceed $500,000, the Borrower shall have the right to continue all such Revolving Facility Advances as, and to Convert all such Revolving Facility Advances into, Revolving Facility Advances of such Type having such Interest Period. SECTION 2.16. Basis for Determining Interest Rate Inadequate or ------------------------------------------------- Unfair. If on or prior to the first day of any Interest Period for any Fixed - ------ Rate Borrowing: (a) the Administrative Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) any Lender advises the Administrative Agent that the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the case may be, as determined by the Administrative Agent will not 66 adequately and fairly reflect the cost to such Lender of funding its Adjusted CD Rate Advance or Eurodollar Rate Advance, as the case may be, for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Lenders to make Adjusted CD Rate Advances or Eurodollar Rate Advances, as the case may be, shall be suspended. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be a Base Rate Advance Borrowing. SECTION 2.17. Illegality. If, on or after the date of this ---------- Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Eurodollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Lender (or its Eurodollar Lending Office) to make, maintain or fund its Eurodollar Advances and such Lender shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Advances shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall designate a different Eurodollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such Lender shall determine that it may not lawfully continue to maintain and fund any of its outstanding Eurodollar Advances to maturity and shall so specify in such notice, (i) the obligation of such Lender to make Eurodollar Rate Advances and to Convert Advances into Eurodollar Rate Advances shall terminate and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate Advances of such Lender then outstanding, together with accrued interest thereon, unless the Borrower, within five Domestic Business Days of such 67 notice and demand, Converts all Eurodollar Rate Advances of all Lenders then outstanding into Base Rate Advances in accordance with Section 2.15(a), except that such Conversion may occur, notwithstanding Section 2.15(a), other than on the last day of the respective Interest Periods for such Eurodollar Rate Advances, if the Borrower has paid any amounts payable under Section 2.12. SECTION 2.18. Increased Cost and Reduced Return. --------------------------------- 2.18(a) If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) with respect to any Adjusted CD Rate Advance any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Eurodollar Rate Advance any such requirement included in an applicable EuroDollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any Adjusted CD Rate Advance, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Applicable Lending Office) or shall impose on any Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Advances, its Note or its obligation to make Fixed Rate Advances and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making or maintaining any Fixed Rate Advance, or of issuing or maintaining any Letter of Credit or its obligations with respect thereto as the Issuing Bank or as a Lender participating therein, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Lender to be material, then, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender on an after-tax basis for such increased cost or reduction. 68 2.18(b) If any Lender shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Lender (or its Parent) as a consequence of such Lender's obligations hereunder to a level below that which such Lender (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender (or its Parent) on an after-tax basis for such reduction. 2.18(c) Each Lender will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. SECTION 2.19. Base Rate Advances Substituted for Affected Fixed Rate ------------------------------------------------------ Advances. If (i) the obligation of any Lender to make Eurodollar Rate Advances - -------- had been suspended pursuant to Section 2.17 or (ii) any Lender has demanded compensation under Section 2.14 or 2.18(a) and the Borrower shall, by at least five Eurodollar Business Days' prior notice to such Lender through the Administrative Agent, have elected that the provisions of this Section shall apply to such Lender, then, unless and until such Lender notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Advances which would otherwise be made by 69 such Lender as Adjusted CD Rate Advances or Eurodollar Rate Advances, as the case may be, shall be made instead as Base Rate Advances (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Advances of the other Lenders), and (b) after each of its Adjusted CD Rate Advances or Eurodollar Rate Advances, as the case may be, has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Advances shall be applied to repay its Base Rate Advances instead. 70 SECTION 2.20. Use of Proceeds. The Borrower will use the proceeds of --------------- all Borrowings made on the Closing Date, including a Revolving Facility Borrowing of up to $125,000,000, solely for the payment of amounts due in respect of the Acquisition, including transaction fees and expenses in connection therewith. The Borrower will use the proceeds of Revolving Facility Borrowings and Swingline Advances after the Closing Date for working capital needs, Capital Expenditures, and general corporate purposes of the Borrower and the Guarantors; provided that (x) for this purpose, "general corporate purposes" -------- includes Restricted Payments to the extent permitted by clause (iii) or (iv) of Section 5.02(g) hereof, Permitted Acquisitions and Permitted Subordinated Debt Repurchases and (y) the aggregate amount of Revolving Facility Borrowings, including any Revolving Facility Borrowings used for the payment of amounts due in respect of the Acquisition, that shall have been used for Restricted Payments, Permitted Acquisitions, and Permitted Subordinated Debt Repurchases on and after the Closing Date shall not, in the aggregate, exceed $185,000,000 outstanding at any time minus the aggregate amount of all reductions in the ----- Revolving Facility Commitments pursuant to Section 2.07, 2.08 or 2.09 hereof. None of the proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation G or Regulation U, other than proceeds of Advances used to purchase shares of common stock of the Borrower to the extent permitted by Section 5.02(g) hereof. ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. Conditions Precedent to Closing Date. Notwithstanding ------------------------------------ the execution and delivery of this Amended Agreement by all parties hereto, the Existing Credit Agreement shall remain in full force and effect and shall not be amended hereby unless and until the Closing Date occurs. The effectiveness of the amendment and restatement of the Existing Credit Agreement to be effected by this Amended Agreement, and the obligation of each Lender to make its Term Loan Advance, any Revolving Facility Advance and any Swingline Advance, if any, on the Closing Date shall occur at the Closing Time on the Closing Date and shall be subject to the conditions precedent that: 3.01(a) The Documentation Agent shall have received certified copies of the respective certificates of 71 incorporation and bylaws of the Borrower and its corporate Subsidiaries and the respective certificates of limited partnership and agreements of limited partnership for the partnership Subsidiaries; 3.01(b) The Borrower shall have demonstrated to the satisfaction of the Documentation Agent in its sole good faith discretion that all conditions to the closing of the Acquisition shall occur or have been waived on or before the Closing Date (including payment of all amounts due under the Acquisition Documents), and that all transactions contemplated by the Related Documents to be consummated on the closing date of the Acquisition will take place prior to or simultaneously with the transactions hereunder contemplated to take place on the Closing Date, and the Majority Lenders shall be satisfied in their sole good faith discretion with the terms and conditions of each of the Related Documents; 3.01(c) The Borrower shall have paid or caused to be paid, or the Documentation Agent shall have received evidence satisfactory to it in its sole good faith discretion that on the Closing Date the Borrower shall pay, or cause to be paid, (i) all interest and commitment fees that are accrued but unpaid to the Closing Date under the Existing Credit Agreement (whether or not then payable under the terms thereof), (ii) all fees and expenses (if any) payable under Section 8.04 of the Existing Credit Agreement, (iii) all accrued fees and expenses of the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Arrangers and the Lenders, including without limitation the participation fees payable under Section 2.06(b) and the administrative fees payable under Section 2.06(c) and (iv) all fees and expenses of Davis Polk & Wardwell, in connection with the preparation, execution and delivery of this Amended Agreement, the other Loan Documents and the consummation of the transactions contemplated hereby and thereby, in each case for which the Borrower has received a statement on or before the Closing Date; 3.01(d) There shall not have been any material adverse change in the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries since December 31, 1995; 3.01(e) Except for the Disclosed Litigation, there shall exist no pending or threatened action, suit, investigation, litigation or proceeding in any court or before any arbitrator or governmental instrumentality which, in the reasonable opinion of the Lenders, could have a material adverse effect on the condition (financial or 72 otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries or which, in the reasonable opinion of the Majority Lenders, may adversely affect the legality, validity or enforceability of this Agreement, any other Loan Document or any Related Document, the ability of any Loan Party to perform its obligations hereunder or thereunder, or the rights of any Lender hereunder or thereunder or the ability of any Lender to exercise such rights; 3.01(f) All material governmental and third party consents and approvals necessary or, in the opinion of the Majority Lenders, desirable or appropriate in connection with the Closing Date Transactions shall have been obtained (without the imposition of any conditions other than conditions that have been satisfied or waived on or before the Closing Date) and shall be in effect (it being understood that all Federal governmental consents and approvals are material), and the Documentation Agent shall have received evidence satisfactory to it that the station licenses issued by the FCC relating to the television broadcasting operations of KCAL-TV shall have been validly assigned to YB of Los Angeles, and are in full force and effect; 3.01(g) The Documentation Agent shall have received the following, each effective on the Closing Date (unless otherwise indicated below), in form and substance satisfactory to the Documentation Agent and in sufficient copies for each Lender (except for the Notes, the certificates representing the Pledged Stock, the stock powers delivered in connection with the Pledged Stock, and the instruments representing the Pledged Instruments): (1) A Notice of Borrowing as required by Section 2.02(a) in respect of each Term Loan Borrowing, Revolving Facility Borrowing and Swingline Advance to be borrowed on the Closing Date, dated the date of its delivery; (2) Duly executed counterparts of each of the Closing Date Assignment and Assumption Agreement and the Multiple Amendment, signed by each of the parties thereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Documentation Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart thereof by such party), and evidence satisfactory to the Documentation Agent of receipt by the Administrative Agent from each Lender of all 73 amounts payable by such Lender pursuant to Section 3 of the Closing Date Assignment and Assumption Agreement; (3) The Term Loan Notes, Revolving Facility Notes and Swingline Note to the order of the respective Lenders; (4) Duly executed counterparts of this Amended Agreement, signed by each of the parties hereto (or, in the case of any Lender as to which an executed counterpart shall not have been received, receipt by the Documentation Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such Lender of execution of a counterpart hereof by such Lender); (5) Duly executed counterparts of the Guaranty Agreement Amendment and the Global Security Agreement Amendment; (6) Duly executed counterparts of the Global Pledge Agreement Amendment, the Guarantor Pledge Agreement between YB of Los Angeles and the Administrative Agent and the Guarantor Security Agreements between each of YB of Los Angeles and Fidelity, respectively, and the Administrative Agent, together with: (A) certificates and instruments representing the Pledged Stock and Pledged Instruments relating to YB of Los Angeles and Fidelity, accompanied by duly executed instruments of transfer or assignment in blank, in form and substance satisfactory to the Documentation Agent; (B) financing statements signed by the Borrower, YB of Los Angeles or Fidelity (the "KCAL Financing Statements"), with evidence ------------------------- reasonably satisfactory to the Documentation Agent that such financing statements will be duly filed under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Documentation Agent, desirable or appropriate to perfect the security interests created by the Security Agreements, the Pledge Agreements and the KCAL Mortgage; (C) evidence reasonably satisfactory to the Documentation Agent that financing statements (the "Existing Financing Statements") have ----------------------------- previously been duly filed under the Uniform Commercial Code 74 of all jurisdictions as may be necessary or, in the opinion of the Documentation Agent, desirable or appropriate to perfect the security interests created by the Security Agreements, the Pledge Agreements and the Mortgages, as such agreements relate to the Borrower or any Existing Guarantors; and (D) evidence that all other actions necessary or, in the opinion of the Documentation Agent, desirable or appropriate to perfect and protect the security interests and liens created by, and to reflect the fact that the Administrative Agent is the secured party under, the Pledge Agreements and the Security Agreements have been taken; (7) Duly executed counterparts of the KCAL Mortgage, the Mortgage Amendments and: (A) with respect to each Mortgage (other than the KCAL Mortgage) a mortgage modification or similar endorsement to the policy of title insurance issued under the Existing Credit Agreement with respect thereto insuring the Lien of such Mortgage, as amended by the relevant Mortgage Amendment, together with a date-down of such policy, in each case issued by the title company insuring the Lien of such Mortgage under the Existing Credit Agreement; (B) with respect to the KCAL Mortgage, a policy of title insurance dated the Closing Date (or irrevocable commitments to issue such policy, with all conditions marked satisfied, dated and recertified the Closing Date) insuring the perfection, enforceability and first priority of the Lien created under such KCAL Mortgage as a valid first mortgage Lien on the Real Property described therein in form and substance and in an amount satisfactory to the Documentation Agent (with all premiums, expenses and fees paid or caused to be paid by the Borrower), each of which policy or policies shall (w) be issued by a title company reasonably satisfactory to the Documentation Agent, (x) include such reinsurance arrangements (with provisions for direct access) as shall be reasonably acceptable to the Documentation Agent, (y) have been supplemented by such endorsements, or, where such endorsements are not available at commercially reasonable premium 75 costs, opinion letters of special counsel, architects or other professionals, which counsel, architects or other professionals shall be reasonably acceptable to the Documentation Agent, as shall be requested by Documentation Agent (including, without limitation, endorsements or opinion letters on matters relating to usury, contiguity, revolving credit, doing business, last dollar and so- called comprehensive coverage over covenants and restrictions) and (z) contain only such exceptions to title as shall be reasonably satisfactory to the Documentation Agent; (C) with respect to the Real Property encumbered by the KCAL Mortgage, an ALTA survey with respect to such Real Property, in form and substance reasonably satisfactory to the Documentation Agent; and (D) evidence satisfactory to the Documentation Agent that arrangements shall have been made for the recording of the KCAL Mortgage and each Mortgage Amendment; (8) Certified copies of the resolutions of the Board of Directors of the Borrower approving each Loan Document and each Related Document to which it is or is to be a party and of the resolutions of the Board of Directors of each Guarantor approving each Loan Document and each Related Document to which it is or is to be a party; (9) A certificate of the Secretary or an Assistant Secretary of the Borrower and each Guarantor certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document and Related Document to which it is or is to be a party and the other documents to be delivered by it hereunder; (10) Copies of duly executed copies of each Related Document and each other agreement, document and certificate prepared or delivered in connection with any Related Document that the Documentation Agent or any Lender through the Documentation Agent may request; (11) Copies of all authorizations, consents and approvals of, evidence of other actions by, notices to and filings with all governmental authorities and regulatory bodies required for the due execution, delivery and performance by each of the Borrower and 76 the Guarantors of the Loan Documents and the Related Documents; (12) Certificates of the chief financial officer of the Borrower and of each Guarantor, in substantially the form of Exhibit N or O, as the case may be (each being a "Solvency Certificate"); -------------------- (13) Copies of the financial statements described in Section 4.01(f); (14) Evidence of insurance for the business and properties of the Borrower and its Subsidiaries, in form and substance satisfactory to the Documentation Agent (and if requested by the Documentation Agent, naming the Administrative Agent as insured and loss payee) with responsible and reputable insurance companies or associations satisfactory to the Majority Lenders in such amounts and covering such risks as are satisfactory to the Majority Lenders; (15) Copies of each agreement, note, instrument or other document evidencing Debt listed on Schedule 4.01(n) having an unpaid principal amount in excess of $100,000, together with copies of all consents of the obligees of the Debt listed on Schedule 4.01(n) (regardless of principal amount) necessary or, in the judgment of the Majority Lenders, desirable; (16) A favorable opinion of Cooperman Levitt Winikoff Lester & Newman, P.C., counsel for the Borrower and each Guarantor, in substantially the form of Exhibit P and as to such other matters as any Lender through the Documentation Agent may reasonably request; (17) Favorable opinions of Fahart, Story & Krauss, P.C., special Michigan counsel for the Borrower, Hale, Skemp, Hanson, Skemp & Sleik, special Wisconsin counsel for the Borrower, Nesser, King & LeBlanc, special Louisiana counsel for the Borrower, Wildman, Harrold, Allen & Dixon, special Illinois counsel for the Borrower, Sherrard & Roe, PLC, special Tennessee counsel for the Borrower, Turner Parks & Herring P.L.C., special Virginia counsel for the Borrower, Carlin, Hellstrom & Bittner, special Iowa counsel for the Borrower, Woods, Fuller, Shultz & Smith P.C., special South Dakota counsel for the Borrower, and Troy & Gould, special California counsel for the Borrower, in each case in substantially the form of Exhibit Q-1 through Q-9, respectively, and a favorable opinion of special FCC counsel for the Borrower, in 77 substantially the form of Exhibit R, and such other opinions as any Lender through the Documentation Agent may reasonably request; (18) An opinion of Davis Polk & Wardwell, in substantially the form of Exhibit S; (19) A letter, in form and substance satisfactory to the Documentation Agent and the Lenders, from the Borrower to the Independent Public Accountants, advising such accountants that the Agents and the Lenders have been authorized to exercise all rights of the Borrower to require such accountants to disclose any and all financial statements and any other information of any kind that they may have with respect to the Borrower and each of its Subsidiaries, directing such accountants to comply with any request of any Agent or any Lender for such information and advising such accountants that the Lenders will rely on such information in making credit decisions with respect to the Borrower; (20) An environmental report, in form and substance satisfactory to the Majority Lenders, from Dames & Moore with respect to the properties to be owned, leased or operated by the Borrower or any of its Subsidiaries in connection with KCAL-TV; (21) The written consent of each party (other than the Borrower or any of its Subsidiaries) to the Acquisition Agreement to the assignment by the Borrower of its rights and claims under the Acquisition Documents to the Administrative Agent under the Borrower Security Agreement; (22) A certificate of the chief financial officer of the Borrower, in substantially the form of Exhibit T, determining the Debt to Operating Cash Flow Ratio as of September 30, 1996 and certifying the Borrower's compliance as of September 30, 1996 with the provisions of this Agreement set forth therein; (23) A certificate of the chief financial officer of the Borrower to the effect that both before and immediately after the making of the Borrowings to be made on the Closing Date and the consummation of the Acquisition, (i) no Default shall have occurred and be continuing and (ii) the representations and warranties of the Borrower made in this Agreement are true; (24) A copy of (i) a written notice delivered by 78 the Borrower to State Street Bank and Trust Company, as trustee under each of the indentures governing the 1994 Subordinated Notes, the 1995 Subordinated Notes and the 1996 Subordinated Notes, that all of the obligations of the Borrower and the Guarantors under this Agreement, the Guaranty Agreement and the other Loan Documents are "Designated Senior Debt" under each such indenture and (ii) written confirmation by State Street Bank and Trust Company of receipt of such notice; (25) All Existing Notes, each of which shall be cancelled and returned to the Borrower on the Closing Date; and (26) Such other financial and non-financial information regarding the Borrower or any of its Subsidiaries and such other approvals, opinions or documents as any Lender through the Documentation Agent may reasonably request. SECTION 3.02. Conditions Precedent to Each Borrowing. The obligation -------------------------------------- of each Lender to make an Advance on the occasion of each Borrowing (including on the Closing Date), of the Issuing Bank to issue a Letter of Credit and of the Swingline Lender to make a Swingline Advance shall be subject to the further conditions precedent that on the date of such Borrowing, Letter of Credit issuance or Swingline Advance, the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Notice of Issuance and the acceptance by the Borrower of the proceeds of such Borrowing or Swingline Advance or the issuance of the Letter of Credit on behalf of the Borrower shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or of such Letter of Credit issuance, such statements are true): 3.02(a) the Administrative Agent shall have received a Notice of Borrowing with respect to such Borrowing or Swingline Advance (with a copy to the Swingline Lender, in the case of a Swingline Advance) as required by Section 2.02(a) or the Issuing Bank shall have received a Notice of Issuance with respect to such Letter of Credit issuance as required by Section 2.10; 3.02(b) immediately after such Borrowing or Letter of Credit issuance or Swingline Advance, the aggregate outstanding principal amount of all Revolving Facility Advances, Swingline Advances and Letter of Credit Obligations will not exceed the aggregate amount of all Revolving Facility Commitments, the aggregate 79 outstanding principal amount of all Term Loan Advances will not exceed the aggregate amount of all Term Loan Commitments and the aggregate outstanding principal amount of all Swingline Advances will not exceed the Swingline Commitment; 3.02(c) the representations and warranties contained in this Agreement, the Guaranty Agreement, each Security Agreement, each Pledge Agreement and each Mortgage are correct on and as of the date of such Borrowing, Swingline Advance or Letter of Credit issuance, before and after giving effect to such Borrowing, Swingline Advance or Letter of Credit issuance, and to the application of the proceeds therefrom, as though made on and as of such date; 3.02(d) no event shall have occurred and be continuing, or would result from such Borrowing or Letter of Credit issuance or Swingline Advance, or from the application of the proceeds therefrom, which constitutes a Default or an Event of Default; 3.02(e) if such Borrowing, Letter of Credit issuance or Swingline Advance is to be secured, directly or indirectly, by any "margin stock" (within the meaning of Regulation G or Regulation U), the Administrative Agent shall have received (i) a duly executed Federal Reserve Form FR U-1 for each Lender that is a bank, for the Issuing Bank or for the Swingline Lender, as the case may be, and (ii) a duly executed Federal Reserve Form FR G-3 for each Lender that is not a bank, in each case signed and accepted by a duly authorized representative of the applicable Lender, the Issuing Bank or the Swingline Lender, as the case may be; and 3.02(f) the Administrative Agent, or the Issuing Bank in the case of a Letter of Credit issuance, shall have received such other approvals, opinions or documents as any Lender through the Administrative Agent may reasonably request. SECTION 3.03. Conditions Precedent to Borrowings in Connection with ----------------------------------------------------- Permitted Acquisitions. The obligation of each Lender to make an Advance on or - ---------------------- after the date of any Permitted Acquisition shall be subject to the conditions precedent that: 3.03(a) The Borrower shall have demonstrated to the satisfaction of the Agents that the acquisition constitutes a Permitted Acquisition; 80 3.03(b) The Borrower shall have demonstrated to the satisfaction of the Agents in their sole good faith discretion that the closing of such Permitted Acquisition shall occur on such date; 3.03(c) Except for the Disclosed Litigation, there shall exist no pending or threatened action, suit, investigation, litigation or proceeding in any court or before any arbitrator or governmental instrumentality which, in the reasonable opinion of the Agents, could have a material adverse effect on the condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries, whether before or after giving effect to such Permitted Acquisition, or which, in the reasonable opinion of the Agents, may adversely affect the legality, validity or enforceability of this Agreement, any other Loan Document or any Related Document, the ability of any Loan Party to perform its obligations hereunder or thereunder, or the rights of any Lender hereunder or thereunder or the ability of any Lender to exercise such rights; 3.03(d) All material governmental and third party consents and approvals necessary or, in the opinion of the Agents, desirable or appropriate in connection with the consummation of such Permitted Acquisition shall have been obtained (without the imposition of any material adverse conditions) and shall be in effect (it being understood that all Federal governmental consents and approvals are material), and the Administrative Agent shall have received evidence satisfactory to it that the station licenses issued by the FCC relating to the television broadcasting operations of any television stations to be acquired pursuant to such Permitted Acquisition shall have been validly assigned to one or more Subsidiaries of the Borrower, and shall be in full force and effect; 3.03(e) The Administrative Agent shall have received the following, each dated the closing date for such Permitted Acquisition (unless otherwise indicated below), in form and substance satisfactory to the Administrative Agent and in sufficient copies for each Lender (except for the certificates representing any Pledged Stock to be pledged to the Administrative Agent, the stock powers delivered in connection with such Pledged Stock, and any instruments representing Pledged Instruments to be pledged to the Administrative Agent): (1) A Notice of Borrowing as required by Section 2.02(a) in respect of any Revolving Facility Borrowing 81 to be borrowed on the closing date for such Permitted Acquisition, dated the date of its delivery; (2) Duly executed counterparts of an agreement pursuant to which each Subsidiary created or acquired in connection with such Permitted Acquisition shall become obligated as a Guarantor under the Guaranty Agreement; (3) Certificates and instruments representing any Pledged Stock or Pledged Instruments required to be delivered by the Borrower or any Subsidiary on or before the closing date for such Permitted Acquisition, including certificates representing all shares of capital stock of each Subsidiary created or acquired in connection with such Permitted Acquisition, accompanied by duly executed instruments of transfer or assignment in blank, in form and substance satisfactory to the Administrative Agent; (4) Duly executed counterparts of a Guarantor Security Agreement, and, if applicable, of a Guarantor Pledge Agreement with respect to each Subsidiary created or acquired in connection with such Permitted Acquisition, together with: (A) financing statements signed by each Subsidiary created or acquired in connection with such Permitted Acquisition, with evidence reasonably satisfactory to the Administrative Agent that such financing statements will be duly filed under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Administrative Agent, desirable or appropriate to perfect the security interests created by the Security Agreements and the Mortgages, and (B) evidence that all other actions necessary or, in the opinion of the Administrative Agent, desirable or appropriate to perfect and protect the security interests and liens created by, and to reflect the fact that the Administrative Agent is the secured party under, the Borrower Pledge Agreement, any applicable Guarantor Pledge Agreement and the Security Agreements shall have been taken; (5) Duly executed counterparts of Mortgages (each, a "Permitted --------- Acquisition Mortgage") with respect to any Real Property to be acquired by -------------------- the Borrower or 82 any of its Subsidiaries in connection with such Permitted Acquisition and, with respect to each Permitted Acquisition Mortgage: (A) a policy of title insurance dated the closing date for such Permitted Acquisition (or irrevocable commitments to issue such policy, with all conditions marked satisfied, dated and recertified the closing date for such Permitted Acquisition) insuring the perfection, enforceability and first priority of the Lien created under such Permitted Acquisition Mortgage as a valid first mortgage Lien on the Real Property described therein in form and substance and in an amount satisfactory to the Documentation Agent (with all premiums, expenses and fees paid or caused to be paid by the Borrower), each of which policy or policies shall (w) be issued by a title company reasonably satisfactory to the Documentation Agent, (x) include such reinsurance arrangements (with provisions for direct access) as shall be reasonably acceptable to the Documentation Agent, (y) have been supplemented by such endorsements, or, where such endorsements are not available at commercially reasonable premium costs, opinion letters of special counsel, architects or other professionals, which counsel, architects or other professionals shall be reasonably acceptable to the Documentation Agent, as shall be requested by Documentation Agent (including, without limitation, endorsements or opinion letters on matters relating to usury, contiguity, revolving credit, doing business, and so-called comprehensive coverage over covenants and restrictions) and (z) contain only such exceptions to title as shall be reasonably satisfactory to the Documentation Agent; (B) with respect to the Real Property encumbered by each Permitted Acquisition Mortgage, an ALTA survey with respect to such Real Property, in form and substance reasonably satisfactory to the Documentation Agent; and (C) evidence satisfactory to the Documentation Agent that arrangements shall have been made for the recording of each Permitted Acquisition Mortgage; (6) Certified copies of the resolutions of the Board of Directors of the Borrower and each Subsidiary 83 party hereto and thereto approving each agreement to which it is or is to be a party in connection with such Permitted Acquisition; (7) A certificate of the Secretary or an Assistant Secretary of the Borrower and each Subsidiary certifying the names and true signatures of the officers of the Borrower or such Subsidiary who shall be authorized to sign each agreement to which it is or is to be a party in connection with such Permitted Acquisition and the other documents to be delivered by it hereunder or thereunder; (8) Copies of all authorizations, consents and approvals of, evidence of other actions by, notices to and filings with all governmental authorities and regulatory bodies required for the due execution, delivery and performance by the Borrower or any Subsidiary of each agreement to which it is or is to be a party in connection with such Permitted Acquisition and the other documents to be delivered by it thereunder; (9) Certificates of the chief financial officer of the Borrower and of each Subsidiary created or acquired in connection with such Permitted Acquisition in substantially the form of Exhibit N or O, as the case may be; (10) Evidence of insurance for the business and properties of each Subsidiary created or acquired in connection with such Permitted Acquisition, in form and substance satisfactory to the Administrative Agent (and if requested by the Administrative Agent, naming the Administrative Agent as additional insured and loss payee) with responsible and reputable insurance companies or associations satisfactory to the Co-Arrangers in such amounts and covering such risks as are satisfactory to the Agents; (11) A favorable opinion of Cooperman Levitt Winikoff Lester & Newman, P.C., counsel for the Borrower and each Guarantor, in substantially the form of Exhibit P (but expressing opinions with respect to such Permitted Acquisition in lieu of the Acquisition) and as to such other matters as any Lender through the Administrative Agent may reasonably request. (12) Favorable opinions of local counsel for the Borrower with respect to each jurisdiction where any Real Property to be acquired in connection with such 84 Permitted Acquisition shall be located, in each case in substantially the form of Exhibit Q (but expressing opinions with respect to such Permitted Acquisition in lieu of the Acquisition), and a favorable opinion of special FCC counsel for the Borrower, in substantially the form of Exhibit R (but expressing opinions with respect to such Permitted Acquisition in lieu of the Acquisition), and such other opinions as any Lender through the Administrative Agent may reasonably request; (13) An environmental report, in each case in form and substance satisfactory to the Agents, with respect to properties to be acquired, leased or operated by the Borrower or any of its Subsidiaries in connection with such Permitted Acquisition; (14) The written consent of each party (other than the Borrower or any of its Subsidiaries) to any agreement to which it is or is to be a party in connection with such Permitted Acquisition to the assignment by the Borrower or any Guarantor of its rights and claims under such agreement to the Administrative Agent under the Borrower Security Agreement or a Guarantor Security Agreement; (15) A certificate of the chief financial officer of the Borrower, in substantially the form of Exhibit T, certifying the Borrower's compliance as of the most recent date for compliance prior to the date of such certificate, after giving effect on a Pro Forma Basis to such Permitted Acquisition, with the provisions of this Agreement set forth therein; and (16) Such other financial and non-financial information regarding the Borrower or any of its Subsidiaries and such other approvals, opinions or documents as any Lender through the Documentation Agent may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The ---------------------------------------------- Borrower represents and warrants as follows: 4.01(a) Due Incorporation, Etc. Each of the Borrower and its ---------------------- Subsidiaries that is a corporation is a 85 corporation duly organized, validly existing and in good standing under the laws of the jurisdiction indicated next to such corporation's name on Schedule 4.01(a) and has all requisite corporate powers and all FCC and all other material governmental licenses, authorizations, consents and approvals required to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted and to execute and deliver, and to perform all of its obligations under, the Loan Documents and Related Documents to which it is or will be a party. Each of the Borrower and each of its Subsidiaries that is a corporation is duly qualified or licensed to do business as a foreign corporation in good standing in all jurisdictions in which it owns or leases assets and property or in which the conduct of its business requires it to so qualify or be licensed, except for such jurisdictions in which the failure to so qualify or be licensed would not have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or such Subsidiary, as the case may be. Each of the Borrower's Subsidiaries that is a partnership is a partnership duly organized, validly existing and in good standing under the laws of the jurisdiction under which it is organized and has all requisite power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted and to execute and deliver, and to perform all of its obligations under, the Loan Documents and Related Documents to which it is or will be a party. Each of the Borrower's Subsidiaries that is a partnership is duly qualified or licensed to do business and has complied with all fictitious name statutes and other similar laws in all jurisdictions in which it owns or leases assets and property or in which the conduct of its business requires it to so qualify or be licensed or comply, except for such jurisdictions in which the failure to so qualify or be licensed or comply would not have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of such Subsidiary. 4.01(b) Due Authorization and Execution, Etc. The execution, ------------------------------------ delivery and performance by the Borrower and each of its Subsidiaries of each Loan Document and each Related Document to which it is or will be a party and the consummation of the Acquisition and the transactions contemplated by the Loan Documents and the Related Documents are within the Borrower's and such Subsidiary's corporate powers (or its partnership powers, in the case of each Subsidiary that is a 86 partnership), have been duly authorized by all necessary corporate action (or all necessary action of the partners, in the case of each Subsidiary that is a partnership) and do not and will not (i) require any consent or approval of the stockholders or partners of the Borrower or such Subsidiary except such consents and approvals as shall have been duly obtained and shall be in full force and effect, (ii) contravene the Borrower's or such Subsidiary's certificate of incorporation or by-laws, in the case of each Subsidiary that is a corporation, or the partnership agreement governing such Subsidiary, in the case of each Subsidiary that is a partnership, (iii) violate any law, rule, regulation (including, without limitation, Regulations G, U and X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award or any contractual restriction binding on or affecting the Borrower or such Subsidiary, or any of their respective properties, or (iv) result in or require the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance of any nature (other than pursuant to the Loan Documents) upon or with respect to any of the properties now owned or hereafter acquired by the Borrower or any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries is in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or restriction. 4.01(c) Government Consents. No authorization, consent, approval or ------------------- other action by, and no notice to or filing with, any governmental, administrative or judicial authority or regulatory body is currently, or is reasonably expected to be, required for the due execution, delivery or performance by the Borrower or any of its Subsidiaries of any Loan Document to which it is or will be a party and the operation of the television broadcasting business of the Borrower and its Subsidiaries other than the filing of the Financing Statements and the recording of the Mortgages, all of which have been made and are in full force and effect, and except for the filing of certain of the Loan Documents with the FCC within 30 days of their execution pursuant to 47 C.F.R. Section 73.3613. No authorization, consent, approval or other action by, and no notice to or filing with, any governmental, administrative or judicial authority or regulatory body is currently, or is reasonably expected to be, required for the consummation of the Acquisition, except such authorizations, consents, approvals, other actions, notices or filings as shall have been duly obtained, taken, given or made and shall be in full force and effect and shall not have been appealed and shall no longer be subject to appeal, rehearing, certiorari or other administrative review. 4.01(d) Legal, Valid and Binding Nature. This ------------------------------- 87 Agreement is, and each other Loan Document and each Related Document to which the Borrower or any of its Subsidiaries is or will be a party will, when delivered, be a legal, valid and binding obligation of the Borrower and such Subsidiaries as are or will be parties thereto, enforceable against the Borrower and such Subsidiaries in accordance with its respective terms, except (other than in the case of Article X of the indentures governing the 1994 Subordinated Notes, the 1995 Subordinated Notes and the 1996 Subordinated Notes and any similar provisions of any indentures governing any other Permitted Subordinated Debt) as such enforcement may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and general principles of equity. 4.01(e) Capitalization and Subsidiaries. On the Closing Date, the ------------------------------- authorized capital stock of the Borrower will consist of: 20,000,000 shares of Class A Common Stock, par value $.001 per share; 20,000,000 shares of Class B Common Stock, par value $.001 per share; and 20,000,000 shares of Class C Common Stock, par value $.001 per share. Set forth on Schedule 4.01(a) is a complete and accurate list of all of the Borrower's Subsidiaries as of the Closing Date, showing as of such date (as to each such Subsidiary) the jurisdiction of its incorporation, the number of shares of each class of capital stock authorized, the number of shares of each class of capital stock outstanding on the date hereof, the direct owner of the outstanding shares of each such class owned and the jurisdictions in which such Subsidiary is qualified to do business as a foreign corporation. All of the general and limited partnership interests of each Subsidiary that is a partnership are owned, legally and beneficially, by the Borrower or a wholly owned Subsidiary of the Borrower, in each case free and clear of all liens, security interests and other charges or encumbrances other than the liens and security interests under the Security Agreements. Except as set forth in Schedule 4.01(e), there are no outstanding options, warrants, rights of conversion or purchase, or similar rights to acquire capital stock or partnership interests of the Borrower or any of its Subsidiaries or other agreements of any character whatsoever relating to any shares of capital stock or partnership interests of the Borrower or any such Subsidiaries; all of the issued and outstanding capital stock of the Borrower and each of its Subsidiaries that is a corporation has been duly authorized, validly issued and is fully paid and non-assessable; all of the partnership interests of each Subsidiary that is a partnership have been validly issued pursuant to the terms of the applicable partnership agreement; all of the issued 88 and outstanding capital stock of each Subsidiary of the Borrower that is a corporation is directly owned, legally and beneficially, by the Borrower, in each case free and clear of all liens, security interests and other charges or encumbrances other than the Liens created by the Pledge Agreements and Security Agreements. 4.01(f) Financial Statements; No Material Adverse Change. The ------------------------------------------------ consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1995 and the related consolidated statements of income and shareholders' equity and statement of changes in cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, fairly present, respectively, the consolidated financial condition of the Borrower and its Subsidiaries as at such date and the consolidated results of operations of the Borrower and its Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles. To the knowledge of the Borrower, the financial statements of KCAL-TV for the fiscal years ended September 30, 1994 and 1995 which were delivered to the Lenders prior to the Closing Date fairly present the results of operations and operating cash flow of KCAL-TV for the period ended on such date, in accordance with generally accepted accounting principles. The pro forma financial statements described on Schedule 4.01(f) fairly present the information shown therein, have been properly compiled on the pro forma basis described therein, and, in the opinion of the Borrower, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. Copies of each of the financial statements described in this Section 4.01(f) have been furnished to each Lender. Since December 31, 1995 there has been no material adverse change in the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or of any of its Subsidiaries or of the Borrower and its Subsidiaries taken as a whole. To the knowledge of the Borrower, after reasonable and customary due diligence, since December 31, 1995, there has been no material adverse change in the respective business, condition (financial or otherwise), operations, properties or prospects of KCAL-TV. The effectiveness of the Closing Date Transactions shall not be deemed to be such a change. 4.01(g) Solvency. Each of the Borrower and the Borrower and its -------- Subsidiaries taken as a whole and each Guarantor individually and taken as a whole with its Subsidiaries is and, after receipt and application of the Advances in accordance with the terms of this Agreement, will be Solvent. 89 4.01(h) Absence of Litigation; Litigation Description. --------------------------------------------- (i) No actions, suits, investigations, litigation or proceedings are pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries or the properties of the Borrower or any such Subsidiary before any court, arbitrator or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (A) which may materially adversely affect the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any such Subsidiary, except as disclosed in Schedule 4.01(h) (the "Disclosed Litigation"), or (B) which -------------------- purports to affect the legality, validity or enforceability of this Agreement, any other Loan Document or any Related Document, the ability of any Loan Party to perform its obligations hereunder or thereunder, or the rights of any Lender hereunder or thereunder or the ability of any Lender to exercise such rights. (ii) Except for the Disclosed Litigation, no action, suit, investigation, litigation or proceeding is pending or, to the knowledge of the Borrower, threatened in any court or before any arbitrator or governmental entity specified above in connection with the Acquisition or the other Closing Date Transactions or in connection with the use of the proceeds hereof or thereof. (iii) On the Closing Date and at all times thereafter, there shall have been no change since the date of this Amended Agreement in the status of any of the actions, suits, investigations, litigation or proceedings referred to in Schedule 4.01(h) that is materially adverse to the Borrower or any of its Subsidiaries, the Acquisition, the other Closing Date Transactions or the Loan Documents. 4.01(i) Ownership of Properties; Absence of Liens and Encumbrances. ---------------------------------------------------------- The Borrower and its Subsidiaries have good and marketable title to and are in lawful possession of, or have valid leasehold interests in, or have the right to use pursuant to valid and enforceable agreements or arrangements, all of their respective properties and other assets (real or personal, tangible, intangible or mixed), except where the failure to have or possess the same with respect to such properties or other assets would not, in the 90 aggregate, have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries. Except as disclosed on Schedule 4.01(i), there are no material Liens on any property or asset of the Borrower or any of its Subsidiaries except for the security interests created under the Pledge Agreements, the Security Agreements and the Mortgages, it being understood that, for purposes only of this Section 4.01(i), any Lien having a value of $250,000 or more on property or assets is material. 4.01(j) No Burdensome Agreements. Neither the Borrower nor any of ------------------------ its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction or partnership agreement or other partnership restriction that would have a material adverse effect (i) on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries, or (ii) on the ability of the Borrower or any of its Subsidiaries to carry out its obligations under any of the Loan Documents or Related Documents to which it is or will be a party; provided that it is agreed that the -------- indentures governing the 1994 Subordinated Notes, the 1995 Subordinated Notes and the 1996 Subordinated Notes and any other indentures in substantially the same form as such indentures, do not have any such effect. 4.01(k) Payment of Taxes. The Borrower and each of its Subsidiaries ---------------- has filed or caused to be filed all Federal, state and franchise tax returns and information and other similar filings, and all material other tax returns and information and other similar filings, required to be filed, and paid all amounts of taxes, including interest and penalties, which have become due pursuant to such returns or pursuant to any assessments received by the Borrower or any of its Subsidiaries, except to the extent of any taxes being contested by or on behalf of the Borrower or such Subsidiary in good faith and by proper proceedings and for which adequate provision for payment has been made and adequate reserves are being maintained in accordance with generally accepted accounting principles consistently applied by the Borrower or such Subsidiary, as the case may be, and so long as the proceedings referred to above could not subject any Agent or any Lender to any civil or criminal penalty or liability or involve any risk of loss, sale or forfeiture of any material item of Collateral. The Borrower has no knowledge of any actual or proposed additional tax assessments against it or any of its Subsidiaries which, singly or in the aggregate, could have a material adverse 91 effect on the Borrower or any of its Subsidiaries. 4.01(l) Accuracy of Information Given to Lenders. No information, ---------------------------------------- exhibit, report, document, certificate or written statement, including without limitation this Agreement, furnished in writing to any Lender by or on behalf of the Borrower in connection herewith contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained therein, in light of the circumstances under which such information, exhibit, report or other written information was or is to be used, not misleading, nor do such information, exhibits, reports, documents, certificates and statements, taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading. There is no fact known to the Borrower or any officer of the Borrower which the Borrower has not disclosed to the Lenders in writing which in the reasonable judgment of the Borrower and its officers would materially adversely affect the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries or the ability of the Borrower or any of its Subsidiaries to perform its respective obligations under any Loan Document or any document contemplated hereby or thereby. The financial projections and forecasts of the Borrower delivered by the Borrower to any of the Agents, the Co-Arrangers and the Lenders were prepared on the basis of the assumptions stated therein and represented, at the time of delivery, the Borrower's best estimate of its future financial performance and such assumptions were fair in the light of business conditions existing at the time of such delivery of such projections and forecasts; and any such financial projections and forecasts, if prepared as of the date hereof, would contain estimates of the Borrower's future financial performance which would not materially adversely differ from the respective estimates contained in the financial projections and forecasts delivered by the Borrower to any of the Agents, the Co-Arrangers and the Lenders. 4.01(m) ERISA. Except as described in Schedule 4.01(m), no Plan or ----- Multiemployer Plan exists as of the date of this Agreement. On and after the Closing Date with respect to each Plan described in Schedule 4.01(m), and on and after the first date on which any other Plan shall exist with respect to such other Plan: (i) no Termination Event has occurred or is reasonably expected to occur with respect to any Plan and (ii) no event requiring notice to the PBGC under Section 302(f)(4)(A) of ERISA has occurred or is 92 reasonably expected to occur with respect to any Plan. On and after the Closing Date with respect to each Multiemployer Plan described in Schedule 4.01(m), and on and after the first date on which any other Multiemployer Plan shall exist with respect to such other Multiemployer Plan: (i) neither the Borrower nor any ERISA Affiliate of the Borrower has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan and (ii) neither the Borrower nor any ERISA Affiliate of the Borrower has received any notification that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated within the meaning of Title IV of ERISA. 4.01(n) List of Debt. Set forth on Schedule 4.01(n) is a complete ------------ and accurate list of all Debt of the Borrower and its Subsidiaries that will be outstanding as of the Closing Date following the Borrowings hereunder and the application of the proceeds thereof as contemplated hereby, other than (i) Debt arising under the Loan Documents and the Related Documents and (ii) Debt having a principal amount of less than $500,000. 4.01(o) Not a Purpose Credit. The Borrower is not engaged in the -------------------- business of extending credit for the purpose of purchasing or carrying "margin stock" (within the meaning of Regulation G or Regulation U), and no proceeds of any Advance, other than proceeds of Advances used to purchase shares of common stock of the Borrower to the extent permitted by Section 5.02(g) hereof, will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock; none of the Pledged Stock constitutes margin stock. 4.01(p) Prohibited Securities Transactions. No proceeds of any ---------------------------------- Advance will be used by the Borrower or any of its Subsidiaries to acquire any security in any transaction that is subject to Section 12 of the Securities Exchange Act of 1934, as amended, other than proceeds of Advances used to purchase shares of common stock of the Borrower to the extent permitted by clause (iv) of Section 5.02(g) hereof. 4.01(q) Investment Company Act. Neither the Borrower nor any of its ---------------------- Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 4.01(r) Casualties. Neither the business nor the ---------- 93 properties of the Borrower or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty, materially adversely affecting the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any such Subsidiary. 4.01(s) Executive Compensation Agreements. Set forth in Schedule --------------------------------- 4.01(s) is a complete and accurate list of all compensation arrangements in effect as of the date of this Amended Agreement between the Borrower or any of its Subsidiaries and the five most highly compensated executive officers of the Borrower and its Subsidiaries. 4.01(t) Collateral, Etc. --------------- (i) Schedule 4.01(t) contains a complete and accurate description and list as of the Closing Date of the location, by state, county and street address and operating division, of all of the Real Property of the Borrower and its Subsidiaries, together with the lessors thereof, the status of any consent from the lessor with respect to any such Leasehold obtained or proposed to be obtained in connection with the Acquisition, any Loan Document or any Related Document. (ii) The Borrower or a Guarantor is the record and beneficial owner of all of the presently existing Collateral covered by (A) the Security Agreements, (B) the Pledge Agreements and (C) the Mortgages, in each case free and clear of all mortgages, deeds of trust, pledges, liens, security interests, options and other charges or encumbrances, except for those created or permitted by this Agreement and the Collateral Documents. (iii) The Borrower or a Guarantor has good, marketable and insurable fee simple title to all Real Property and a valid and indefeasible leasehold interest in all Leaseholds, free and clear of all liens, charges and encumbrances of every kind and character, except for those created or permitted by this Agreement and the Collateral Documents. (iv) Each Ground Lease (as defined in the Mortgages) is a valid and subsisting lease in full force and effect in accordance with the terms thereof; the Borrower or a Guarantor, as the case may be, is in possession of all Real Property and the Leaseholds constituting part of the Collateral and no material 94 default by the Borrower or such Guarantor, as the case may be, exists and neither the Borrower nor any Guarantor has knowledge of any other default under such Ground Lease or other agreement relating to any Real Property or Leaseholds constituting part of the Collateral; and no lien, charge or encumbrance of any kind or character exists on or with respect to the Borrower's or the Guarantor's, as the case may be, interest in any such Real Property or Leasehold, other than Permitted Liens. 4.01(u) Consents. Set forth in Schedule 4.01(u) is a complete and -------- accurate list of all consents required in connection with the Acquisition, the other Closing Date Transactions and the Loan Documents (including, but not limited to, consents relating to all network affiliation contracts, power site leases and FCC matters), all of which will have been duly obtained and shall be in full force and effect on the Closing Date and at all times thereafter, except where the failure to obtain such consents will not have a material adverse effect, alone or in the aggregate, on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries. 4.01(v) Security Agreements. As of the Closing Date and at all times ------------------- thereafter, each Security Agreement will create valid and perfected first priority security interests in and liens on the Collateral covered thereby (except as provided therein), such security interests and liens being in each case enforceable against all third parties and securing the payment of all obligations purported to be secured thereby, and all filings and other actions necessary or advisable to perfect and protect such security interests shall have been duly made or taken. 4.01(w) Mortgages. From and after the recording of the Mortgage --------- Amendments and the KCAL Mortgage, each Mortgage will create a valid and enforceable first priority mortgage lien on and security interest in the Real Property covered thereby, enforceable against the Borrower or the Guarantor granting such Mortgage, as the case may be, and all third parties, and securing the payment of all obligations purported to be secured thereby, and all filings and other actions necessary or desirable to perfect and protect such mortgage lien and security interest will have been duly taken. 4.01(x) Status Under Communications Act. Each material license, ------------------------------- permit and other authority issued, granted, approved or otherwise authorized by the FCC for the 95 benefit of the Borrower or any of its Subsidiaries is in good standing, unimpaired by any act or omission of the Borrower or any of its Subsidiaries or any of their respective officers, directors, employees or agents. Neither the Borrower nor any of its Subsidiaries is the subject of any outstanding citation, order or, to the knowledge of the Borrower, investigation by the FCC which would have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries, and no such citation, order or investigation to the knowledge of the Borrower or any of its Subsidiaries is contemplated by the FCC. The Borrower and each of its Subsidiaries has filed all material reports and applications required to be filed by the FCC or the Communications Act and has paid all fees required to be paid by the FCC or the Communications Act. 4.01(y) Compliance with Environmental Requirements; No Hazardous -------------------------------------------------------- Materials. Except as described on Schedule 4.01(y) and except to the extent the - --------- matters referred to below would result in liabilities for the Borrower and its Subsidiaries of less than $100,000 in the aggregate, after giving effect to the Acquisition: (i) Other than in compliance with all applicable Environmental Laws, no Hazardous Materials are located on any properties now or previously owned, leased or operated by the Borrower or any of its Subsidiaries or have been released into the environment, or deposited, discharged, placed or disposed of at, on or under any of such properties. No portion of any such property is being used, or has been used at any previous time, for the disposal, storage, treatment, processing or other handling of Hazardous Materials (other than processing or handling incidental to the generation of Hazardous Materials in compliance with all applicable Environmental Laws). (ii) No asbestos or asbestos-containing materials in airborne or friable form are present on any of the properties now or previously owned, leased or operated by the Borrower or any of its Subsidiaries. (iii) No polychlorinated biphenyls are located on or in any properties now or previously owned, leased or operated by the Borrower or any of its Subsidiaries, in the form of electrical transformers, fluorescent light fixtures with ballasts, cooling oils or any other device or form. 96 (iv) No underground storage tanks are located on any properties now or previously owned, leased or operated by the Borrower or any of its Subsidiaries, or were located on any such property and subsequently removed or filled. (v) No notice, notification, demand, request for information, complaint, citation, summons, investigation, administrative order, consent order and agreement, litigation or settlement with respect to Hazardous Materials has been received by the Borrower or any of its Subsidiaries or, to the Borrower's knowledge, is proposed, threatened or anticipated with respect to or in connection with the operation of any properties now or previously owned, leased or operated by the Borrower or any of its Subsidiaries. All such properties and their existing and prior uses comply and at all times have complied with any applicable governmental requirements relating to environmental matters or Hazardous Materials. There is no condition on any of such properties which is in violation of any applicable governmental requirements relating to Hazardous Materials, and neither the Borrower nor any of its Subsidiaries has received any communication from or on behalf of any governmental authority that any such condition exists. None of such properties nor any property to which the Borrower has, directly or indirectly, transported or arranged for the transportation of any material is listed or, to the Borrower's knowledge, proposed for listing on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign list of sites requiring investigation or cleanup, nor, to the knowledge of the Borrower, is any such property anticipated or threatened to be placed on any such list. (vi) There has been no environmental investigation, study, audit, test, review or other analysis conducted of which the Borrower has knowledge in relation to the current or prior business of the Borrower or any property or facility now or previously owned, leased or operated by the Borrower or any of its Subsidiaries which has not been delivered to the Lenders or will not have been delivered to the Lenders at least five days prior to the Closing Date. For purposes of this Section 4.01(y), (x) the terms "Borrower" and "Subsidiary" shall include any business or business entity (including a corporation) which is, in whole 97 or in part, a predecessor of the Borrower or any Subsidiary if the Borrower or such Subsidiary, as a successor to such business or business entity, is or could be subject to successor liability under applicable law and (y) any representation made with respect to properties not presently owned, leased or operated by the Company or any of its Subsidiaries shall be limited to conditions, activities or requirements at or in connection with such properties for which the Borrower or any of its Subsidiaries is or could be subject to liability. 4.01(z) Compliance with Laws. The Borrower and its Subsidiaries are -------------------- in compliance in all material respects with all applicable laws, rules and regulations, other than such laws, rules or regulations (i) the validity or applicability of which the Borrower or such Subsidiary is contesting in good faith or (ii) the failure to comply with which would not have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries. 4.01(aa) Representations in Related Documents are True and Correct. --------------------------------------------------------- Each of the representations and warranties of the Borrower and its Subsidiaries contained in the Related Documents is true and correct in all material respects. 4.01(bb) Obligations are Senior Debt and Designated Senior Debt. All ------------------------------------------------------ obligations of the Borrower and the Guarantors under this Amended Agreement, the Notes, the Letters of Credit, the Guaranty Agreement, the other Loan Documents and any Interest Rate Protection Agreements are "Senior Debt" and "Designated Senior Debt" within the meaning of, and are entitled to the benefits of, Article X of the indentures governing the 1994 Subordinated Notes, the 1995 Subordinated Notes and the 1996 Subordinated Notes and of any indentures governing any other Permitted Subordinated Debt. ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Obligation --------------------- hereunder or under any Loan Document shall remain unpaid, or any Letter of Credit shall be outstanding, or any Lender shall have any Term Loan Commitment or Revolving Facility Commitment hereunder, the Borrower will, unless the Majority Lenders otherwise consent in writing: 98 5.01(a) Compliance with Laws, Etc. Perform and promptly comply, and -------------------------- cause each of its Subsidiaries to perform and promptly comply, in all material respects, and cause all property of the Borrower and each such Subsidiary to be maintained, used and operated in all material respects in accordance with all (i) present and future laws, ordinances, rules, regulations, orders and requirements (including, without limitation, the Communications Act, Environmental Laws and ERISA) of every duly constituted governmental or quasi-governmental authority or agency applicable to the Borrower, any of its Subsidiaries or any of their properties, (ii) similarly applicable orders, rules and regulations of any regulatory, licensing, accrediting, insurance underwriting or rating organization or other body exercising similar functions, and (iii) similarly applicable duties or obligations of any kind imposed under any certificate of occupancy, Leasehold or otherwise by law, covenant, conditions, agreement or easement, public or private, in each case except where the failure to perform and promptly comply would not result in a material adverse affect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower, of any of its Subsidiaries or of the Borrower and its Subsidiaries taken as a whole. 5.01(b) Conduct of Business; Preservation of Corporate Existence. -------------------------------------------------------- Continue, and cause each of its Subsidiaries to continue, to engage only in business of the same general type as now conducted by the Borrower and its Subsidiaries, and preserve and maintain, and cause each of its Subsidiaries that is a corporation to preserve and maintain, its corporate existence and corporate rights (charter and statutory), and those corporate franchises material to the business or operations of the Borrower or such Subsidiary and to cause each of its Subsidiaries that is a partnership to preserve and maintain its existence as a partnership and its rights (both under law and pursuant to its partnership agreement) as such, and those franchises material to the business or operations of such partnership. 5.01(c) Visitation Rights. At any reasonable time and from time to ----------------- time, upon reasonable notice permit any Agent or any of the Lenders or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of 99 its Subsidiaries, and to discuss the business and financial affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors and with its independent certified public accountants and advise such accountants that the Agents and the Lenders have been authorized to exercise all rights of the Borrower to require such accountants to disclose any and all financial statements and other information of any kind that they may have with respect to the Borrower and any of its Subsidiaries and direct such accountants to comply with any requirements of any Agent or any Lender for such information. 5.01(d) Keeping of Books. Keep, and cause each of its Subsidiaries ---------------- to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each of its Subsidiaries in accordance with generally accepted accounting principles. 5.01(e) Maintenance of Insurance. Maintain, and cause each of its ------------------------ Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts, with such deductibles and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. If the Borrower or any Subsidiary receives any Major Casualty Proceeds, notwithstanding any requirements contained in the Collateral Documents requiring that Major Casualty Proceeds must be paid directly to the Administrative Agent, the Borrower shall deliver, and shall cause each of its Subsidiaries to deliver, such Major Casualty Proceeds to the Administrative Agent, to be held, applied and distributed in accordance with Section 5 of the Security Agreement. Until so delivered, any such Major Casualty Proceeds shall be held in trust for the benefit of the Administrative Agent, the Documentation Agent, the Lenders and the Issuing Bank, and shall not be commingled with any other funds or property of the Borrower or any of its Subsidiaries. 5.01(f) Payment of Taxes, Etc. (i) File, and cause each of its ---------------------- Subsidiaries to file, all tax returns and information and other similar filings (Federal, state, local and foreign) required to be filed; (ii) pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become 100 delinquent, (A) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (B) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, -------- ------- that neither the Borrower nor any such Subsidiary shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and in respect of which adequate provision for payment has been made and adequate reserves are being maintained in accordance with generally accepted accounting principles and as long as the proceedings referred to above could not subject any Agent or any Lender to any civil or criminal penalty or liability or involve any risk of the sale, loss or forfeiture of any item of Collateral and, where applicable, in accordance with the Mortgages; and provided further that in the case of any item of the foregoing description -------- ------- involving in excess of $250,000, the appropriateness of the proceedings shall be supported by an opinion of the independent counsel responsible for such proceedings and the adequacy of such reserves, if any, shall be supported by an opinion of the independent accountants of the contesting Person (which opinions shall be delivered to the Lenders); and (iii) maintain, and cause each of its Subsidiaries to maintain, appropriate reserves in respect of all taxes, assessments, governmental charges and levies imposed on it or upon its property. 5.01(g) Maintenance of Properties, Etc. Maintain and preserve, and ------------------------------- cause each of its Subsidiaries to maintain and preserve, in good working order and condition, ordinary wear and tear excepted, all of its properties with respect to which failure to so maintain and preserve would have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any Subsidiary or on the value or utility to the Borrower or such Subsidiary of any property material to its business. 5.01(h) Maintenance of FCC Licenses, Affiliation Agreements, Etc. --------------------------------------------------------- Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, each license, franchise, permit and other authorization necessary or desirable under the Communications Act or otherwise with respect to which the failure to so maintain and preserve would have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any such Subsidiary or on the value or 101 utility to the Borrower or such Subsidiary of any such authorization, including, but not limited to, performing and observing (except as otherwise provided by law) each term and provision of each network affiliation agreement to which it is a party and maintaining each such agreement in full force and effect, it being understood that failure to maintain any such network affiliation agreement in full force and effect shall be deemed to result in such a material adverse effect, such material adverse effect being deemed to occur at such time as programming ceases to be provided pursuant to such network affiliation agreement; provided that -------- such material adverse effect shall not be deemed to occur if, prior to the time that such programming ceases, the Borrower or such Subsidiary shall have entered into a network affiliation agreement with another network which agreement and network are reasonably satisfactory to the Majority Lenders. 5.01(i) Arm's-Length Transactions. Conduct, and cause each of its ------------------------- Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of its Affiliates (including Adam Young Inc.) on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Borrower or any such Subsidiary, as the case may be, and, in each case in which Adam Young Inc. or another Affiliate of the Borrower acts as sales representative, commission agent or the like on behalf of the Borrower or any of its Subsidiaries, cause the arrangements with respect thereto to provide that such Affiliate (i) shall not receive, directly or indirectly, compensation (including percentage of the sales price to be paid, time and terms of payment) or other benefits greater than that which is then typical in the industry for similar transactions, and (ii) shall deal at all times with the Borrower and its Subsidiaries at arm's length; provided that, so -------- long as the Borrower owns (directly or indirectly) 100% of the capital stock or partnership interests of each Guarantor, transactions between the Borrower and any Guarantor or between any two Guarantors need not be on terms no less favorable than any such party would obtain in a comparable arm's-length transaction. 5.01(j) Solvency. Continue to be Solvent and cause each of its -------- Subsidiaries to continue to be Solvent. 102 5.01(k) Plan Contribution. Make, and cause each Subsidiary to make, ----------------- when due, all contributions required by law to be made to all Plans. 5.01(l) Pro Forma Debt Service Coverage. Cause, at all times, the ------------------------------- ratio of (i) the excess of Operating Cash Flow over Capital Expenditures, in each case for the four consecutive Fiscal Quarters then most recently ended, to (ii) Pro Forma Debt Service at such time to be not less than 1.10 to 1. 5.01(m) Interest Coverage. Cause, (i) as of the Closing Date, the ----------------- ratio of Operating Cash Flow to Total Interest Expense, in each case for the four consecutive Fiscal Quarters then most recently ended, to be not less than 1.50 and (ii) as of the last day of each Fiscal Quarter during any year set forth below, the ratio of Operating Cash Flow to Total Interest Expense, in each case for the four consecutive Fiscal Quarters ending on such day, to be not less than the required ratio set forth below opposite such year: Fiscal Quarter Required Ending During Ratio ---------------------- -------- 1996 1.50 1997 1.60 1998 1.80 1999 1.95 Thereafter 2.25 5.01(n) Senior Debt to Operating Cash Flow Ratio. Cause, (i) as of ---------------------------------------- the Closing Date, the ratio of (x) Senior Debt as of the Closing Date to (y) Operating Cash Flow for the four consecutive Fiscal Quarters then most recently ended to be not greater than 3.50 and (ii) as of the last day of each Fiscal Quarter during any year set forth below, the ratio of (A) Senior Debt as of such day to (B) Operating Cash Flow for the four consecutive Fiscal Quarters ending on such day to be not greater than the required ratio set forth below opposite the last day of such Fiscal Quarter: 103 Fiscal Quarter Required Ending During Ratio ---------------------- -------- 1996 3.25 1997 3.00 1998 2.75 1999 2.75 Thereafter 2.25 5.01(o) Debt to Operating Cash Flow Ratio. Cause the Debt to --------------------------------- Operating Cash Flow Ratio (i) as of the Closing Date to be equal to or less than 6.50 and (ii) as of the last day of each Fiscal Quarter during any year set forth below, to be equal to or less than the required ratio set forth below opposite the last day of such Fiscal Quarter: Fiscal Quarter Required Ending During Ratio ---------------------- -------- 1996 6.25 1997 6.25 1998 5.50 1999 5.00 Thereafter 4.50 5.01(p) Accuracy of Information Given to Lenders. Use its best ---------------------------------------- efforts to ensure that all written information, exhibits or reports furnished by the Borrower or any of its Subsidiaries to any Agent or any Lender will contain no untrue statement of a material fact and will not omit to state any material fact or any fact necessary to make the statements contained therein not misleading. 5.01(q) Management. Retain as its chief executive officer its ---------- present Chairman. Notwithstanding anything to the contrary in this Agreement, all policy and operational decisions relating to the operations of any television broadcasting stations now or hereafter owned or operated by the Borrower or any of its Subsidiaries will remain within the exclusive control of the Borrower or its Subsidiaries. 5.01(r) Further Assurances. Promptly, upon request by any Agent or ------------------ any Lender through the Documentation Agent, correct, and cause each party to a 104 Loan Document to promptly correct, any defect or error that may be discovered in any Loan Document or in the execution, acknowledgement or recordation thereof. Promptly, upon request by any Agent or any Lender through the Documentation Agent, the Borrower also will, and will cause each Guarantor to, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all such further acts, deeds, conveyances, pledge agreements, security agreements, mortgages, deeds of trust, trust deeds, assignments, estoppel certificates, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments (including but not limited to subleases or other grants of rights with respect to the Leasehold interests) as any Agent or any Lender through the Documentation Agent may require from time to time in order (i) to carry out more effectively the purposes of this Agreement or any other Loan Document, (ii) to subject to the Liens created by any of the Loan Documents any of the Borrower's and its Subsidiaries' properties, rights or interests covered or now or hereafter intended to be covered by any of the Loan Documents, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Agents and the Lenders the rights granted or now or hereafter intended to be granted to the Agents and/or the Lenders under any Loan Document or under any other instrument executed in connection with any Loan Document to which the Borrower or any of its Subsidiaries is or may become a party. 5.01(s) Management of Partnerships. Cause the KLFY Partnership, the -------------------------- WKRN Partnership and the WATE Partnership to be managed and operated, and cause their respective affairs to be conducted, in accordance with the terms and conditions of the KLFY Partnership Agreement, the WKRN Partnership Agreement and the WATE Partnership Agreement, respectively. 5.01(t) Hazardous Materials; Remediation. Promptly give notice to -------------------------------- the Lenders in writing of any complaint, order, citation, notice or other written communication from any Person with respect to, or if the Borrower becomes aware of, (x) the existence or alleged existence of a violation of any applicable Environmental Law or the incurrence of any material liability, obligation, loss, damage, cost, expense, 105 fine, penalty or sanction or the requirement to commence any material remedial action resulting from or in connection with any air emission, water discharge, noise emission, Hazardous Material or any other environmental, health or safety matter at, upon, under or within any of the properties now or previously owned, leased or operated by the Borrower or any of its Subsidiaries, or due to the operations or activities of the Borrower, any Subsidiary or any other Person on or in connection with any such property or any part thereof, in each case if the Borrower or any of its Subsidiaries is or could be subject to liability therefor or (y) any release on any of such properties of Hazardous Materials in a quantity that is reportable under any applicable Environmental Law; and (ii) promptly comply with any governmental requirements requiring the removal, treatment or disposal of such Hazardous Materials and provide evidence satisfactory to the Majority Lenders of such compliance. 5.01(u) FCC Filings. Within 30 days of the execution hereof and ----------- thereof, file with the FCC a copy of this Agreement and of each other Loan Document required to be filed with the FCC pursuant to 47 C.F.R. Section 73.3613, and confirm in writing to the Administrative Agent that such copies have been duly and timely filed. SECTION 5.02. Negative Covenants. So long as any Obligation ------------------ hereunder or under any Loan Document shall remain unpaid, or any Letter of Credit shall be outstanding, or any Lender shall have any Term Loan Commitment or Revolving Facility Commitment hereunder, the Borrower will not, without the written consent of the Majority Lenders or, in the case of Section 5.02(c) or Section 5.02(d), without the written consent of each Lender: 5.02(a) Liens, Etc. Create, incur, assume or suffer to exist, or ----------- permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its assets or properties of any character (including, without limitation, accounts and shares of capital stock and partnership interests of the Borrower's Subsidiaries), whether now owned or hereafter acquired, or assign any right to receive income, or sign or file, or permit any of its Subsidiaries to sign or file, under the Uniform Commercial Code or any comparable statute of any jurisdiction a financing statement that names the Borrower or any of its Subsidiaries as debtor, or sign, or permit any of its Subsidiaries to sign, any security 106 agreement authorizing any secured party thereunder to file such a financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts; excluding, however, from the operation of the foregoing --------- ------- restrictions the Liens created by or pursuant to the Loan Documents and Permitted Liens. 5.02(b) Debt. Create, incur, assume, guarantee or suffer to exist, ---- or permit any of its Subsidiaries to create, incur, assume, guarantee or suffer to exist, any Debt, other than (i) Debt under the Loan Documents, (ii) Debt existing on the date of this Amended Agreement and listed on Schedule 4.01(n), (iii) Debt existing on the date of this Amended Agreement and not listed on Schedule 4.01(n) in an aggregate principal amount not to exceed $250,000, (iv) Existing Subordinated Debt, and (v) Debt incurred after the Closing Date when no Default is then continuing or would result therefrom as follows: (A) Debt incurred by the Borrower or any Subsidiary of the Borrower in the ordinary course of business, consistent with past practice, for the deferred purchase price of goods or services; (B) Permitted Subordinated Debt; (C) Debt of the Borrower or any Subsidiary of the Borrower secured by a Lien described in clause (vii) of the definition of Permitted Liens, in an aggregate principal amount outstanding at any time not to exceed $10,000,000; (D) Obligations of the Borrower or any Subsidiary under Capital Leases; provided that the aggregate amount of Capital Lease -------- Obligations with respect to all such Capital Leases shall not at any time exceed $5,000,000; (E) Guaranteed Debt in an aggregate principal amount outstanding at any time not to exceed $1,000,000; and (F) Obligations of the Borrower under any Interest Rate Protection Agreements and other Derivatives Obligations to the extent permitted by Section 5.02(s). 5.02(c) Mergers. Merge or consolidate with or into any Person, or ------- permit any of its Subsidiaries to do so or agree to any such transaction; provided that -------- 107 if no Default shall have occurred and be continuing, and the Borrower or such Subsidiary is the surviving entity, the prior written consent of each Lender shall not be required but the prior written consent of the Majority Lenders shall be required. 5.02(d) Sales, Etc., of Assets. Unless the Borrower obtains the ---------------------- prior written consent of each Lender, sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, except (i) sales, leases, transfers and other dispositions of inventory and used, surplus or worn-out equipment (including abandonment of assets having no further useful life to the Borrower or such Subsidiary, as the case may be) made in the ordinary course of business of the Borrower or such Subsidiary, as the case may be, (ii) transfers by the Borrower or a Guarantor to another Guarantor or the Borrower so long as the Borrower owns directly 100% of the capital stock of each Guarantor that is a corporation and directly or through one or more wholly owned Subsidiaries 100% of the partnership interests of each Guarantor that is a partnership, and (iii) Permitted Asset Sales. 5.02(e) Maintenance of Ownership of Subsidiaries; Issuance of Stock ----------------------------------------------------------- and Partnership Interests, Etc. Sell or otherwise dispose of, or commit to ------------------------------- sell or otherwise dispose of, any shares of capital stock of or any partnership interests in any of its Subsidiaries unless such disposition constitutes a Permitted Asset Sale, or permit any of its Subsidiaries to issue, sell or otherwise dispose of, or commit to issue, sell or otherwise dispose of, any shares of its capital stock or any partnership interests or capital stock of or partnership interests in any other Subsidiary of the Borrower. 5.02(f) Investments in Other Persons and Asset Purchases. Make, or ------------------------------------------------ permit any of its Subsidiaries to make, any loan or advance to, or investment in, any other Person, or purchase or otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise acquire, any shares of capital stock, obligations or other securities of, make any capital contribution to, or otherwise invest in, any other Person (an "Investment"), or make any Asset Purchase except for (i) Temporary Cash ---------- Investments, (ii) trade receivables created in the ordinary course of the business of the Borrower or its Subsidiaries, (iii) Investments in the Borrower by any Guarantor, Investments in any Guarantor 108 by the Borrower or by any other Guarantor and purchases of shares of common stock of the Borrower to the extent permitted by clause (iv) of Section 5.02(g) hereof, (iv) Asset Purchases and Investments made after the date hereof in any one or more Persons, other than the Borrower or any Guarantor, in an aggregate amount of all Asset Purchases made since the Closing Date, together with Investments outstanding at any time, not exceeding $7,500,000, (v) Permitted Acquisitions, (vi) Permitted Acquisition Deposits and (vii) Investments in Tower Affiliates, to the extent incidental to the ownership and operation of the transmission towers owned by such Tower Affiliates. Without limiting the generality of the foregoing, the Borrower will not, and will not permit any Subsidiary to, acquire or create any Subsidiary, unless (x) arrangements satisfactory to the Agents shall have been made for (A) the pledge of the stock of such Subsidiary to the Administrative Agent for its benefit and the benefit of the Secured Parties, (B) such Subsidiary to become a Guarantor hereunder and (C) the granting of liens and security interests in substantially all of the assets of such Subsidiary to the Administrative Agent for its benefit and the benefit of the Secured Parties or (y) such Subsidiary is created in anticipation of a Permitted Acquisition and, prior to the time of such Permitted Acquisition, neither the book value nor the fair market value of the assets of such Subsidiary (disregarding its rights, if any, under the related acquisition agreement) exceeds $50,000; provided that the -------- provisions of clause (c) of the definition of "Permitted Acquisition" must be satisfied at the time of such Permitted Acquisition. 5.02(g) Restricted Payments. Declare or make any Restricted Payment, ------------------- or return any capital to its stockholders as such, or make any distribution of assets, stock, warrants, rights, obligations or securities to its stockholders as such, or permit any of its Subsidiaries to declare or make any Restricted Payment, or return any capital to any of their stockholders or to any of the Borrower's stockholders, or make any distribution of assets to any of their stockholders or any of the Borrower's stockholders as such, except that (i) the Borrower's Subsidiaries may pay cash dividends to the Borrower, (ii) any Subsidiary of the Borrower that is a partnership may make distributions to its partners in accordance with the provisions of the partnership agreement governing such partnership, (iii) the Borrower may purchase shares of (or options to purchase shares of) its common stock 109 from employees of the Borrower or any Subsidiary of the Borrower so long as (x) before and after giving effect to any such purchase, no Default shall have occurred and be continuing and (y) the aggregate number of shares (including the equivalent number of shares in the case of options) purchased by the Borrower from all employees since the Closing Date shall not exceed 2% of the aggregate number of shares of the Borrower's Class A Common Stock, Class B Common Stock and Class C Common Stock outstanding on the Closing Date and (iv) the Borrower may purchase, or make distributions of cash dividends on, shares of its common stock so long as before and after giving effect to any such purchase or distribution, (A) no Default shall have occurred and be continuing, (B) at the time of any such purchase or distribution, the Debt to Operating Cash Flow Ratio, after giving effect to such purchase or distribution, shall be less than 5.50, (C) the aggregate amount paid by the Borrower for all such purchases and distributions pursuant to this clause (iv) from and after the Closing Date shall not exceed $20,000,000 and (D) before and after giving effect to any such purchase or distribution, the Borrower shall be in compliance with Section 4.05(a) of the indenture governing any Existing Subordinated Debt as in effect on the Closing Date, and of any equivalent provisions of any indentures governing any Permitted Subordinated Debt. 5.02(h) Prepayment of Debt. Prepay, redeem, defease (whether ------------------ actually or in substance) or purchase, in any manner (or deposit or set aside funds for the purpose of any of the foregoing), make any payment in respect of principal of or premium on, or make any payment in respect of interest on any Debt (including, without limitation, any Existing Subordinated Debt and any Permitted Subordinated Debt), or permit any of its Subsidiaries to prepay, redeem, defease (whether actually or in substance) or purchase in any manner, make any payment in respect of principal of or premium on, or make any payment in respect of interest on any Debt (including, without limitation, any Existing Subordinated Debt and any Permitted Subordinated Debt), in each case other than: (i) regularly scheduled repayments of principal or payments of interest required in accordance with the terms of the instruments governing the respective Debt; (ii) any repayments or prepayments of principal and any payments of interest in respect of the Notes; 110 (iii) regularly scheduled rental payments in respect of Capital Leases; (iv) if the Debt to Operating Cash Flow Ratio is 5.0 or greater on or before June 30, 2000, or 4.5 or greater thereafter, any prepayment, redemption, defeasance or purchase of any Existing Subordinated Debt or Permitted Subordinated Debt, so long as before and after giving effect thereto, (A) the aggregate amount paid by the Borrower or any other Loan Party for all such prepayments, redemptions, defeasances and purchases pursuant to this clause (iv) after the Closing Date shall not exceed $20,000,000, (B) no Default shall have occurred and be continuing and (C) the Borrower shall be in compliance with all Subordinated Debt Documents; (v) if the Debt to Operating Cash Flow Ratio is less than 5.0 on or before June 30, 2000, or 4.5 thereafter, any prepayment, redemption, defeasance or purchase of any Existing Subordinated Debt or Permitted Subordinated Debt in an unlimited amount, so long as before and after giving effect thereto, (A) no Default shall have occurred and be continuing and (B) the Borrower shall be in compliance with all Subordinated Debt Documents; and (vi) any prepayment, redemption, defeasance or purchase of any Existing Subordinated Debt from the Net Proceeds of Refinancing Permitted Subordinated Debt at the time of issuance thereof so long as before and after giving effect thereto, no Default shall have occurred and be continuing and the Borrower shall be in compliance with all Subordinated Debt Documents. 5.02(i) Change in Business; Cease Broadcasting. Engage, or permit -------------------------------------- any of its Subsidiaries to engage, in any business other than over-the-air television broadcasting and activities incidental or reasonably related thereto; or permit any broadcast station operated by the Borrower or any of its Subsidiaries to cease broadcasting for a period in excess of 10 consecutive days. 5.02(j) Change of Accountants. Replace its then current Independent --------------------- Public Accountants unless the successor independent public accountants qualify as an Independent Public Accountant as defined in this Agreement and the Borrower shall have delivered to the successor independent public accountants a letter complying with the provisions of Section 3.01(g)(19). 111 5.02(k) Amendment of Charter or By-Laws. Amend, modify or change in ------------------------------- any manner, or permit any of its Subsidiaries to amend, modify or change in any manner, the provisions of its certificate of incorporation or by-laws or any agreement entered into by it or any of its Subsidiaries with respect to its capital stock or partnership interests, including the KLFY Partnership Agreement, the WKRN Partnership Agreement and the WATE Partnership Agreement, unless in each case such amendment, modification or change would not be disadvantageous to the Lenders and the Borrower shall have delivered prior written notice to the Lenders of such amendment, modification or change, with a copy thereof. 5.02(l) Termination of Licenses. Terminate, lose, fail to hold or ----------------------- fail to renew, or permit any of its Subsidiaries to terminate, lose, fail to hold or fail to renew, any license, permit or authorization granted by the FCC if such termination, loss or failure to hold or failure to renew would have a materially adverse effect upon the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any such Subsidiary. 5.02(m) Amendment, Etc. of Related Documents. Without the express ------------------------------------ prior written consent of the Majority Lenders, (i) cancel or terminate any Related Document or consent to or accept any cancellation or termination thereof, (ii) amend or otherwise modify any material term or provision of any Related Document or give any consent, waiver or approval with respect thereto (provided that the provisions of Article X of the indentures -------- governing the 1994 Subordinated Notes, the 1995 Subordinated Notes and the 1996 Subordinated Notes, any similar provisions of any indentures governing any other Permitted Subordinated Debt and the definitions of any defined terms used therein shall be deemed to be material), (iii) waive any breach of any material term or provision of any Related Document or any default thereunder as a result thereof, or (iv) take or fail to take any other action in connection with the Related Documents that would impair the interests or rights of any Agent or any Lender. 5.02(n) Trade Debt. Create, incur, assume, guarantee, or suffer to ---------- exist Trade Debt other than in the ordinary course of business. 5.02(o) Employee Benefit Costs and Liabilities. -------------------------------------- 112 Create, incur, assume, guarantee or suffer to exist, or permit any ERISA Affiliate to create, incur, assume, guarantee or suffer to exist, (i) any Insufficiency with respect to a Plan or any obligation with respect to a Multiemployer Plan or (ii) any liability with respect to welfare plans (as defined in Section 3(1) of ERISA, but excluding medical plans established for the benefit of employees of the Borrower or any Subsidiaries) if, immediately after giving effect to such liability, the aggregate annualized cost (including, without limitation, the cost of insurance premiums) with respect to such plans for which the Borrower is or may become liable in any fiscal year of the Borrower would exceed $250,000. 5.02(p) Plan Amendments. Adopt an amendment with respect to which --------------- security is required under Section 307 of ERISA to any Plan. 5.02(q) Limited Partners. Permit LAT, YBT or YBK (i) to conduct any ---------------- business other than to acquire and hold a limited partnership interest in, respectively, the KLFY Partnership, the WKRN Partnership and the WATE Partnership and to exercise their rights and perform their obligations under the KLFY Partnership Agreement, the WKRN Partnership Agreement and the WATE Partnership Agreement, respectively, (ii) to cause or permit, or agree to cause or permit in the future (upon the happening of a contingency or otherwise), any consensual security interest, lien or other encumbrance upon any of its assets or (iii) to hold any interest whatsoever in any asset other than (A) a limited partnership interest in the KLFY Partnership, the WKRN Partnership or the WATE Partnership and (B) cash; provided that any cash in excess of $10,000 is distributed to the Borrower -------- or paid to the KLFY Partnership, the WKRN Partnership or the WATE Partnership within 30 days of receipt thereof by LAT, YBT or YBK. 5.02(r) Limitation on Payment Restrictions Affecting Subsidiaries. --------------------------------------------------------- Permit to exist, directly or indirectly, or create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary in existence on the Closing Date to: (i) pay any dividends or make any other distributions on its capital stock or partnership or other equity interests owned by the Borrower or any Subsidiary of the Borrower; (ii) pay any obligations owed to the Borrower or any other Subsidiary; (iii) make loans or advances 113 to the Borrower or any other Subsidiary; or (iv) transfer any of its properties or assets to the Borrower or any other Subsidiary, except for encumbrances or restrictions existing under applicable law. 5.02(s) Interest Rate Protection. Enter into, or permit any of its ------------------------ Subsidiaries to enter into, interest rate cap agreements or other interest rate protection, except (i) Interest Rate Protection Agreements or (ii) other interest rate cap agreements or other interest rate protection that do not require or provide for the imposition of any Lien on any asset of the Borrower or any of its Subsidiaries, and which contain conditions and are with financial institutions acceptable to the Agents. SECTION 5.03. Reporting Requirements. So long as any Obligation ---------------------- hereunder or under any Loan Document shall remain unpaid, or any Letter of Credit shall be outstanding, or any Lender shall have any Term Loan Commitment or Revolving Facility Commitment hereunder, the Borrower will furnish to each Lender (and, in the case of the Notice of Debt to Operating Cash Flow Ratio, also to the Administrative Agent) the following: 5.03(a) In a form reasonably acceptable to the Majority Lenders (i) on or before the 25th day after the end of each month that is not the last month of a Fiscal Quarter, Consolidated balance sheets of the Borrower and its Subsidiaries as of the last day of such month and Consolidated statements of income and retained earnings (including the sales and Operating Cash Flow components thereof) and Consolidated statements of changes in cash flow (including, without limitation, cash payments in respect of Capital Expenditures and Film Expense) of the Borrower and its Subsidiaries for such month and for the period commencing on the first day of such Fiscal Year and ending on the last day of such month (and, in the case of such statements of income, comparing the actual amounts thereof with the amounts budgeted therefor and with the actual amounts thereof in the equivalent periods of the immediately preceding Fiscal Year), in each case certified by the chief financial officer of the Borrower, together with (A) a certificate of the chief financial officer of the Borrower stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken or proposes to take with respect thereto and (B) 114 a schedule (each, a "Notice of Debt to Operating Cash Flow Ratio") ------------------------------------------- prepared by the chief financial officer of the Borrower, in form satisfactory to the Lenders, of the computations used by the Borrower to determine the Debt to Operating Cash Flow Ratio as of the last day of such month. 5.03(b) As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year of the Borrower, the Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter, and the related Consolidated statements of income and retained earnings and Consolidated statements of changes in cash flow of the Borrower and its Subsidiaries for each of such quarters and the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, in each case in form and substance satisfactory to the Lenders, certified by the chief financial officer of the Borrower as having been prepared in accordance with generally accepted accounting principles, together with (i) a certificate of the chief financial officer of the Borrower, substantially in the form of Exhibit T and (ii) a schedule prepared by the chief financial officer of the Borrower, in form satisfactory to the Lenders, of the computations used by the Borrower in determining, as of the end of such fiscal quarter, compliance with the limitations contained in Sections 5.01(l), 5.01(m), 5.01(n), 5.01(o), 5.02(a), 5.02(b), 5.02(d), 5.02(f), 5.02(g), 5.02(h), 6.01(d), 6.01(g), 6.01(k), 6.01(m), 6.01(n) and 6.01(o). 5.03(c) As soon as available and in any event within 90 days after the end of each Fiscal Year of the Borrower, a copy of the annual report for such year for the Borrower and its Subsidiaries, including therein a Consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and a Consolidated statement of income and retained earnings and a Consolidated statement of changes in cash flow, of the Borrower and its Subsidiaries for such Fiscal Year, certified in a manner acceptable to the Lenders by the Independent Public Accountants, together with (i) a certificate of such accounting firm to the Lenders stating that, in the course of the regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is 115 continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, (ii) a certificate of the chief financial officer of the Borrower substantially in the form of Exhibit T, (iii) a schedule prepared by the chief financial officer of the Borrower, in form satisfactory to the Lenders, of the computations used by the Borrower in determining, as of the end of such Fiscal Year, compliance with limitations contained in Sections 5.01(l), 5.01(m), 5.01(n), 5.01(o), 5.02(a), 5.02(b), 5.02(d), 5.02(f), 5.02(g), 5.02(h), 6.01(d), 6.01(g), 6.01(k), 6.01(m), 6.01(n) and 6.01(o) and the calculation of the Debt to Operating Cash Flow Ratio as of the last day of such Fiscal Year, and (iv) unaudited consolidating balance sheets as of the end of such Fiscal Year and statements of income and retained earnings and statements of the sources and uses of funds for such Fiscal Year for the Borrower and each of its Subsidiaries, certified by the chief financial officer of the Borrower; 5.03(d) As soon as available and in any event by the end of each Fiscal Year, a copy of the annual business and financial plan of the Borrower and its Consolidated Subsidiaries for the next ending Fiscal Year on a monthly basis (for each fiscal month) and for the subsequent Fiscal Year on an annual basis, in form and substance satisfactory to the Administrative Agent, which plan will include (i) projected Consolidated balance sheets of the Borrower for the next ending Fiscal Year; (ii) projected Consolidated cash flow analyses of the Borrower and each of its Subsidiaries for each of the twelve months following the end of such Fiscal Year, on a monthly basis, and for the next ending Fiscal Year on an annual basis; and (iii) projected Consolidated income statements of the Borrower and each of its Subsidiaries for each of the twelve months following the end of such Fiscal Year, on a monthly basis, and for the next ending Fiscal Year on an annual basis; 5.03(e) Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports which the Borrower or any of its Subsidiaries sends to their respective shareholders and copies of all registration statements and reports on Forms 10-K, 10-Q and 8-K (or their equivalent) which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; 116 5.03(f) Promptly after the commencement thereof, notice of all actions, suits, hearings and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(h) or in Section 6.01(g); 5.03(g) As soon as possible and in any event within five days after the occurrence of any Default, a statement by the chief financial officer of the Borrower setting forth details of such Default and the action which the Borrower has taken or proposes to take with respect thereto; 5.03(h) Promptly upon becoming aware that any Termination Event with respect to any Plan has occurred, a statement by the chief financial officer of the Borrower describing such Termination Event and each action, if any, which the Borrower and each such ERISA Affiliate proposes to take with respect thereto; 5.03(i) Promptly and in any event within two Domestic Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the PBGC, copies of each notice received by the Borrower or any ERISA Affiliate from the PBGC stating the PBGC's intention to terminate any Plan or to have a trustee appointed to administer any Plan; 5.03(j) Promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; 5.03(k) At the time notice is given or required to be given to the PBGC under Section 302(f)(4)(A) of ERISA of the failure to make timely payments to a Plan, a copy of any such notice filed and a statement of the chief financial officer of the Borrower setting forth (A) sufficient information necessary to determine the amount of the lien under Section 302(f)(3), (B) the reason for the failure to make the required payments and (C) the action, if any, which the Borrower or its ERISA Affiliates proposes to take with respect thereto; 5.03(l) Promptly and in any event within five Domestic Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by 117 the Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA or (D) the amount of liability incurred, or expected to be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (A), (B) or (C) above; 5.03(m) Promptly notify, and cause each of its Subsidiaries to promptly notify, the Administrative Agent (i) of any lapse, termination or relinquishment of any station license, permit or other authorization from the FCC held by the Borrower or any of its Subsidiaries or any failure by the FCC to renew or extend any such license, permit or other authorization for other than the usual period thereof, which lapse, termination, relinquishment, failure to renew or extend would have a material adverse effect on the business, condition (financial or otherwise), operations, properties or prospects of the Borrower or any of its Subsidiaries; and (ii) of any complaint or other matter filed with or communicated to the FCC, of which the Borrower or any of its Subsidiaries has knowledge and which might have a materially adverse effect upon the renewal or extension of any station license, permit or other authorization held by the Borrower or any of its Subsidiaries, including, without limitation, (A) any complaint to which the FCC has requested an answer, (B) any petition to deny, or informal objection filed with regard to, an application filed by the Borrower or any of its Subsidiaries with the FCC or any mutually exclusive competing application filed for authority to broadcast on the frequencies or channels licensed to the Borrower or any of its Subsidiaries and (C) any citation or notice of violation or order to show cause or order to become a party to a proceeding issued by the FCC against the Borrower or any of its Subsidiaries; 5.03(n) Promptly after any significant change in accounting policies or reporting practices, notice and a description in reasonable detail of such change; 5.03(o) Copies of any statement or report to be furnished to any other holder of the securities of the Borrower or any of its Subsidiaries pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to 118 the Lenders pursuant to any other clause of this Section 5.03, at such time as such statement or report is to be furnished to such other holder pursuant to such terms; 5.03(p) As soon as possible after the end of each Fiscal Year, a statement certified by the chief financial officer of the Borrower setting forth in reasonable detail any changes since the date of this Agreement, not previously reported pursuant to this paragraph (p), in the information set forth in Schedules 4.01(h), 4.01(m), 4.01(t) and 4.01(y), or stating that no such changes have occurred; 5.03(q) Such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as the Administrative Agent or any Lender may from time to time reasonably request; 5.03(r) On or before the 90th day of each Fiscal Year, a certificate of the Independent Public Accountants, in form satisfactory to the Lenders, setting forth their calculation of Excess Cash Flow for the immediately preceding Fiscal Year, both before and after giving effect to clause (y) of the last sentence of Section 2.09(b); 5.03(s) Promptly after (i) the Borrower shall fail to make any payment when due under the Subordinated Debt Documents, (ii) there shall have been an acceleration of the maturity of any Existing Subordinated Debt or any Permitted Subordinated Debt, (iii) the trustee under the indenture for any Existing Subordinated Debt or any Permitted Subordinated Debt or any holder thereof shall have asserted in writing that an "Event of Default" as defined therein shall have occurred and (iv) the commencement of any enforcement proceeding with respect to any Existing Subordinated Debt or any Permitted Subordinated Debt, notice thereof, including a description in reasonable detail of the circumstances, and a statement of the chief financial officer of the Borrower setting forth the action the Borrower has taken or proposes to take with respect thereto; and 5.03(t) Promptly after the expiration or any termination of any network affiliation agreements of the Borrower or any Subsidiary, notice thereof, including a description in reasonable detail of the circumstances, and a statement of the chief financial 119 officer of the Borrower setting forth the action the Borrower has taken or proposes to take with respect thereto. ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ----------------- ("Events of Default") shall occur and be continuing: - ------------------- 6.01(a) The Borrower shall fail to pay within two days of the due date any interest on any Note, shall fail to reimburse when due any drawing under any Letter of Credit or shall fail to pay when due any principal on any Note, any fees or other amounts payable under any Loan Document; or 6.01(b) Any representation or warranty made by any Loan Party in or in connection with any Loan Document or any amendment thereto or Related Document to which it is a party or any certificate or financial information delivered pursuant to any Loan Document or any amendment thereto or Related Document shall prove to have been incorrect in any material respect when made; or 6.01(c) Any Loan Party (i) shall fail to perform or observe any term, covenant or agreement contained in Section 2.20, 5.01, 5.02 or 5.03(g) of this Agreement, in any Mortgage, in Sections 4, 6, 7, 8, 9 or 10 of any Security Agreement or in any other provision of any Collateral Document that is comparable to any such Section of any Security Agreement or (ii) shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 10 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or 6.01(d) The Borrower or any Subsidiary shall fail to make when due or within any applicable grace period any payment in respect of any Material Financial Obligations (other than the Notes); any event or condition shall occur which results in the acceleration of the maturity of any Debt (excluding Debt evidenced by the Notes) of the Borrower or any of its Subsidiaries (as the case may be) having an aggregate 120 unpaid principal amount in excess of $1,000,000 or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; the Borrower or any of its Subsidiaries shall fail to pay when the same becomes due any rental payments in respect of any leases (other than payments with respect to Capital Lease Obligations) requiring in the aggregate, annual lease payments in excess of $1,000,000, and such failure shall continue after the applicable grace period, if any, specified in the lease or leases relating to such rental payment; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or 6.01(e) Any "Event of Default" as defined in any Subordinated Debt Document; or 6.01(f) The Borrower or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or the Borrower or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or 6.01(g) One or more judgments or orders for the payment of money aggregating more than $1,000,000 shall be rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings 121 shall have been commenced by any creditor upon such judgment(s) or order(s) or (ii) there shall be any period of 10 consecutive days (or, if such proceedings are in a state court, such longer period (not to exceed 30 days) following the entry of such judgement or order during which the Borrower shall be entitled under applicable state law to file an appeal as of right) during which a stay of enforcement of such judgment(s) or order(s), by reason of a pending appeal or otherwise, shall not be in effect; or 6.01(h) Any non-monetary judgment or order shall be rendered against the Borrower or any of its Subsidiaries that is materially adverse to the Borrower and its Subsidiaries taken as a whole, and either (i) enforcement proceedings shall have been commenced by any Person upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or 6.01(i) Any provision of any Loan Document after delivery thereof shall for any reason cease to be valid and binding on any Loan Party, or any Loan Party shall so state in writing; or 6.01(j) Any Collateral Document after delivery thereof shall for any reason cease to create a valid and perfected first priority security interest in any Collateral purported to be covered thereby; or 6.01(k) Any Termination Event with respect to a Plan shall have occurred and, 30 days after notice thereof was required by the terms hereof to have been given to the Administrative Agent by the Borrower, (i) such Termination Event shall still exist and (ii) the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which a Termination Event shall have occurred and then exist (or, in the case of a Plan with respect to which a Termination Event described in clause (ii) of the definition of Termination Event shall have occurred and then exist, the liability related thereto) is equal to or greater than $250,000; or 6.01(l) The Borrower shall cease to own directly 100% of the issued and outstanding Voting Stock of each Subsidiary that is a corporation or shall cease to own, 122 directly or through one or more wholly owned Subsidiaries, 100% of the partnership interests of each Subsidiary that is a partnership, except in the case of any Subsidiary of which the Borrower shall have disposed of all Voting Stock and all partnership interests pursuant to a Permitted Asset Sale; or 6.01(m) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $250,000; or 6.01(n) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the average annual amounts contributed to such Multiemployer Plans for the three most recent plan years which include the date hereof by an amount exceeding $250,000; or 6.01(o) The Borrower or any ERISA Affiliate shall have committed a failure described in Section 302(f)(1) of ERISA and the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $250,000; or 6.01(p) The Acquisition shall be voided or otherwise declared ineffective before any court or governmental entity; or any such proceeding shall be commenced and shall not be dismissed within 60 days and the Administrative Agent shall not have received an opinion of counsel satisfactory to the Majority Lenders to the effect that there is no substantial likelihood that the outcome of the proceedings would have the effect of voiding or otherwise declaring ineffective the Acquisition; or 6.01(q) The FCC shall designate for hearing any station license or permit held by the Borrower or any of its Subsidiaries (i) to determine whether the station license or permit should be revoked or modified 123 in a materially adverse manner, (ii) to determine whether the station license should be renewed or (iii) to determine whether an application for renewal of a license for a station operated by the Borrower or any of its Subsidiaries should be granted or whether the application of another party for said frequency or channel should be granted and in each such case there is a reasonable possibility of an adverse decision which could adversely affect the condition (financial or otherwise), operations or properties of the Borrower or such Subsidiary; or the FCC shall reverse, modify or set aside the FCC order approving the Acquisition or remand the proceeding relating to any such order for reconsideration; or 6.01(r) There shall occur a material adverse change in the condition (financial or otherwise), operations or properties of (i) the Borrower or (ii) any of its Subsidiaries or (iii) the Borrower and its Subsidiaries taken as a whole; or 6.01(s) Vincent Young, Adam Young, members of their respective immediate families, Persons controlled (as defined in the definition of Affiliate) by Vincent Young or Adam Young and members of management of the Borrower shall fail to hold, in the aggregate for all such individuals and other Persons, record and beneficial title to at least 51% (by number of votes) of the Voting Stock of the Borrower; or 6.01(t) Any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended), other than Vincent Young, Adam Young and members of their respective immediate families, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 25% or more (by number of votes) of the Voting Stock of the Borrower; or, during any period of 12 consecutive calendar months (or 24 consecutive calendar months if the Borrower shall have a board of directors with staggered terms of office), individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower; or then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances and the obligation of the Issuing Bank to issue Letters of Credit to 124 be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the Notes, all interest thereon, all Letter of Credit Obligations, all Letter of Credit fees and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all interest thereon, all Letter of Credit Obligations, all Letter of Credit fees and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of -------- ------- the acceleration of the maturity of any Permitted Subordinated Debt or the commencement of any voluntary proceeding or the taking of any corporate action referred to in subsection (f) above, or the actual or deemed entry of an order for relief with respect to the Borrower or any of its Subsidiaries under the Bankruptcy Reform Act of 1978, as amended, (A) the obligation of each Lender to make Advances (including Swingline Advances) and the obligation of the Issuing Bank to issue Letters of Credit shall automatically be terminated and (B) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. SECTION 6.02. Cash Cover. The Borrower agrees, in addition to the ---------- provisions of Section 6.01 hereof, that upon the occurrence and during the continuance of any Event of Default, it shall, if requested by the Administrative Agent upon the instruction of Lenders having more than 50% in aggregate amount of the Revolving Facility Commitments (or, if the Revolving Facility Commitments shall have been terminated, holding at least 50% of the Letter of Credit Obligations), pay to the Administrative Agent an amount in immediately available funds equal to the aggregate amount available for drawing under all Letters of Credit then outstanding at such time, and such funds shall be held as collateral pursuant to arrangements satisfactory to the Administrative Agent); provided that, upon the occurrence of any Event of -------- Default specified in clause (f) of Section 6.01 with respect to the Borrower, the Borrower shall pay such amount forthwith without any notice or demand or any other act by the Administrative Agent or any Lender. ARTICLE VII THE AGENTS SECTION 7.01. Appointment and Authorization. ----------------------------- 125 Each Lender appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under this Agreement, the Notes and the Collateral Documents as are delegated to such Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agents and Affiliates. Each Agent shall have the same --------------------- rights and powers under this Agreement as any other Lender and may exercise or refrain from exercising the same as though it were not an Agent. Each Agent and each of their respective affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not an Agent hereunder. SECTION 7.03. Actions by Agents. The obligations of the Agents ----------------- hereunder are only those expressly set forth herein and neither the Agents nor the Co-Arrangers shall have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist with respect to the Agents or the Co-Arrangers. Without limiting the generality of the foregoing, no Agent shall be required to take any action with respect to any Default, except as expressly provided in Article VI or Section 7.10. SECTION 7.04. Consultation with Experts. Each of the Agents may ------------------------- consult with legal counsel (who may be internal counsel or counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agents. No Agent or any of such Agent's ------------------- affiliates nor any of their respective directors, officers, agents, or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Majority Lenders or (ii) in the absence of its own gross negligence or willful misconduct. No Agent nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, 126 except receipt of items required to be delivered to the Documentation Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. No Agent shall incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Lender shall, ratably in --------------- accordance with its Lender Share, indemnify each of the Agents, their respective affiliates and the directors, officers, agents and employees of each of the Agents or of their respective affiliates (each an "Indemnitee") (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Indemnitee's gross negligence or willful misconduct) that the Indemnitee may suffer or incur in connection with this Agreement or any action taken or omitted by the Indemnitee hereunder. The provisions of this Section 7.06 shall survive any termination of this Agreement. SECTION 7.07. Credit Decision. Each Lender acknowledges that it has, --------------- independently and without reliance upon any Agent, any Co-Arranger, any Agent's affiliate, any Co-Arranger's affiliate, any other Lender or any of their respective directors, officers, agents or employees, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent, any Co-Arranger, any Agent's affiliate, any Co-Arranger's affiliate, any other Lender or any of their respective directors, officers, agents or employees, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Agent. Any Agent may resign at any time by --------------- giving written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor to such Agent. If no such successor for such Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a 127 successor Agent, which shall be a Lender organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as an Agent hereunder by a successor Agent in the same capacity, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent. SECTION 7.09. Managing Agent and Co-Agents. None of the Banks listed ---------------------------- on the cover page hereof as Managing Agent or as Co-Agent, in its capacity as Managing Agent or Co-Agent, as the case may be, shall have any rights or responsibilities under this Agreement or any other Loan Documents in such capacity. This Section 7.09 shall not affect in any way the rights and responsibilities of any such Bank as a Lender (including as a Swingline Lender) hereunder. SECTION 7.10. Notice of Default; Collateral Documents. --------------------------------------- 7.10(a) The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower or any Guarantor referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". If the Administrative Agent receives such a notice, it shall give prompt notice thereof to each of the Lenders. 7.10(b) Subject to Section 8.01, as to any matters not expressly provided for in the Collateral Documents (including the timing and methods of realization upon any Collateral), the Administrative Agent shall act or refrain from acting in accordance with written instructions from the Majority Lenders or, in the absence of such instructions, in accordance with its discretion; provided that the Administrative Agent shall not be obligated to take any action - -------- if the Administrative Agent believes that such action is or may be contrary to any applicable law or might cause the Administrative Agent to incur any loss or liability for which it has not been indemnified to its reasonable satisfaction. 7.10(c) The Administrative Agent shall not be 128 responsible for the existence, genuineness or value of any Collateral or for the validity, perfection, priority or enforceability of the security interests in any Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part under any Collateral Document. The Administrative Agent shall have no duty to ascertain or inquire as to the performance or observance of any terms of any Collateral Document by any Person. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. ---------------- 8.01(a) No amendment or waiver of any provision of this Agreement or of any Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders (and, if the rights or duties of any Agent or the Issuing Bank are affected thereby, by such Agent or the Issuing Bank, as the case may be), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such -------- ------- amendment, waiver or consent shall, unless in writing and signed by all Lenders, do any of the following: (a) waive any of the conditions specified in Article III, (b) change the percentage of the Lender Shares or the percentage of any of the Term Loan Commitments or Revolving Facility Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action hereunder, (c) amend this Section 8.01, or (d) change the definition of Majority Lenders; and provided further -------- ------- that no such amendment, waiver or consent shall, unless in writing and signed by all Lenders with Term Loan Commitments, do any of the following: (i) increase any of the Term Loan Commitments or subject such Lenders to any additional obligations, 129 (ii) reduce the principal of, the interest rate or accrued interest on, the Term Loan Advances or any fees or other amounts payable to any such Lenders under any Loan Document, (iii) postpone the Term Loan Termination Date or any date fixed for any payment of interest or fees in respect of any Term Loan Advance; and provided further that no such amendment, waiver or consent shall, unless in -------- ------- writing and signed by all Lenders with Revolving Facility Commitments, do any of the following: (x) increase the Revolving Facility Commitments or subject such Lenders to any additional obligations, (y) reduce the principal of, the interest rate or accrued interest on, the Revolving Facility Advances or the amount of any Letter of Credit Obligations or any fees or other amounts payable to any such Lenders under any Loan Document, or (z) postpone the Revolving Facility Termination Date or any date fixed for any payment of interest or fees in respect of any Revolving Facility Advance; and provided further that no such amendment, waiver or consent shall, unless in -------- ------- writing and signed by all Lenders with Revolving Facility Commitments and the Swingline Lender, do any of the following: (1) increase the Swingline Commitment or subject the Swingline Lender to any additional obligations, (2) reduce the principal of, the interest rate or accrued interest on, the Swingline Advances or any fees or other amounts payable to the Swingline Lender under any Loan Document, or (3) postpone any date fixed for any payment of principal, interest or fees in respect of any Swingline Advance; and provided further that no such amendment, waiver or consent shall -------- ------- (A) postpone any date fixed for any repayment or prepayment of principal of any Term Loan Advance, or reduce the amount of any mandatory repayment or prepayment of any Term Loan Advance, unless it is in 130 writing and signed by Lenders with at least 75% of the aggregate unpaid amount of the Term Loan Advances; provided that no such date shall be -------- postponed beyond the Term Loan Termination Date unless it is in writing and signed by all Lenders with Term Loan Commitments, or (B) postpone any date fixed for any repayment or prepayment of principal of any Revolving Facility Advance or Letter of Credit Obligation, or for any reduction in the Revolving Facility Commitments, or reduce the amount of any mandatory repayment or prepayment of any Revolving Facility Advance, unless it is in writing and signed by Lenders with at least 75% of the aggregate amount of the Revolving Facility Commitments; provided that -------- no such date shall be postponed beyond the Revolving Facility Termination Date unless it is in writing and signed by all Lenders with Revolving Facility Commitments. 8.01(b) No amendment or waiver of any provision of any Mortgage, nor consent to any departure by the applicable Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the applicable Guarantor and the Administrative Agent with the written consent of the Majority Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided -------- that, except as provided in Section 7.02 of the applicable Mortgage, no such amendment, waiver or consent shall release any of the Collateral unless in writing and signed by the applicable Guarantor and the Administrative Agent with the written consent of all of the Lenders; and provided further that no such -------- ------- amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent with the written consent of all of the Lenders, amend Section 7.02 of any Mortgage, Section 7.04 of any Mortgage that is a mortgage or Section 7.05 of any Mortgage that is a deed of trust. 8.01(c) No amendment or waiver of any provision of any other Loan Document, nor consent to any departure by the applicable Loan Party therefrom, shall be effective except in accordance with the terms thereof. SECTION 8.02. Notices, Etc. All notices and other communications ------------- provided for hereunder or under any other Loan Document shall be in writing (including telegraphic, telecopy, telex or cable communication) and mailed (prepaid registered or certified mail, return receipt requested), telegraphed, telecopied, telexed, cabled or 131 delivered (by hand or other courier service): if to the Borrower, at its address at 599 Lexington Avenue, New York, New York 10022, Attention: Vincent J. Young, Chairman, with a copy to Cooperman Levitt Winikoff Lester & Newman, P.C., 800 Third Avenue, New York, New York, 10022, Attention: Robert L. Winikoff, Esq.; if to any Guarantor, at its address c/o the Borrower, 599 Lexington Avenue, New York, New York 10022, Attention: Vincent J. Young, Chairman, with a copy to Cooperman Levitt Winikoff Lester & Newman, P.C., 800 Third Avenue, New York, New York 10022, Attention: Robert L. Winikoff, Esq.; if to any Bank, at its Domestic Lending Office specified in its Administrative Questionnaire; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Assumption Agreement pursuant to which it became a Lender; if to the Syndication Agent, at its address at 60 Wall Street, New York, New York 10260, Attention: R. Blake Witherington; if to the Documentation Agent, at its address at 425 Lexington Avenue, New York, New York 10017, Attention: Lorain C. Granberg; and if to the Administrative Agent, at its address at 130 Liberty Street, Mail Stop 2144, New York, New York 10006, Attention: Agency Services Group, Attention: Paul Raghunandan or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, be effective three days after being mailed and, when telegraphed, telecopied, telexed or cabled, be effective when delivered to the telegraph company, sent by telecopy, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to the Administrative Agent pursuant to Article II shall not be effective until received by the Administrative Agent. SECTION 8.03. No Waiver; Remedies. No failure on the part of any ------------------- Lender or any Agent to exercise, and no delay in exercising, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses; Indemnities. ------------------------------- 8.04(a) The Borrower agrees to pay on demand all reasonable costs and expenses incurred by any Agent or any Affiliate of an Agent or by a Person acting upon the request or on behalf of any Agent or any Affiliate of an Agent in connection with the preparation, execution, delivery, 132 filing, recording, administration, modification and amendment of the Loan Documents and the other documents to be delivered thereunder (such administration costs and expenses shall include, without limitation, reasonable costs incurred in connection with any audits of the Borrower and its Subsidiaries, all costs and expenses incurred in connection with appraisals, audits and search reports, all filing fees, and the fees and expenses of counsel that any Agent or any Affiliate of an Agent may consult, from time to time, in connection with the Loan Documents), including, without limitation, the reasonable fees and out-of-pocket expenses of Davis Polk & Wardwell, local counsel who may be retained by any of said counsel or by any Agent or any Affiliate of an Agent with respect thereto and with respect to advising any Agent or any Affiliate of an Agent as to its rights and responsibilities under the Loan Documents, and all reasonable costs and expenses, if any (including reasonable fees and out-of-pocket expenses of counsel to any Agent or Affiliate of an Agent, or any Lender or Affiliate of a Lender (including in-house counsel of any Lender or of such Affiliate of a Lender) and all other FCC fees), incurred by any Agent, any Affiliate of an Agent, any Lender or any Affiliate of a Lender or any Person acting upon the request or on behalf of any Agent, any Affiliate of an Agent, any Lender or any Affiliate of a Lender in connection with the enforcement of the Loan Documents and the other documents to be delivered under the Loan Documents. 8.04(b) The Borrower agrees to indemnify, pay and hold harmless each Agent, each Affiliate of an Agent, each Lender, each Affiliate of a Lender and their respective officers, directors, employees and agents (collectively called the "Indemnitees") from and against any and all liabilities, obligations, ----------- losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee) in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitee shall be designated a party thereto, and the expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by or on behalf of any Agent or any Lender) asserting any right to payment for the transactions contemplated hereby, which may be imposed on, incurred by or asserted against such Indemnitee as a result of or in connection with the transactions contemplated hereby or by the other Related Documents (including (i)(A) as a direct or indirect result of the presence on or under, or escape, seepage, leakage, spillage, discharge, emission or release 133 from, any property now or previously owned, leased or operated by the Borrower or any of its Subsidiaries of any Hazardous Materials, (B) arising out of or relating to the offsite disposal of any materials generated or present on any such property or (C) arising out of or resulting from the environmental condition of any such property or the applicability of any governmental requirements relating to Hazardous Materials, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of the Borrower or any of its Subsidiaries, and (ii) proposed and actual extensions of credit under this Agreement) and the use or intended use of the proceeds of any Borrowing, except that the Borrower shall have no obligation hereunder to an Indemnitee with respect to any liability resulting from the gross negligence or wilful misconduct of such Indemnitee. To the extent that the undertaking set forth in the immediately preceding sentence may be unenforceable, the Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them. Without limiting the generality of any provision of this Section, to the fullest extent permitted by law, the Borrower hereby waives all rights for contribution or any other rights of recovery with respect to liabilities, losses, damages, costs and expenses arising under or relating to Environmental Laws that it might have by statute or otherwise against any Indemnitee. 134 SECTION 8.05 Right of Set-off. ---------------- 8.05(a) Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes and the Letter of Credit Obligations due and payable pursuant to the provisions of Section 6.01, each Lender (and a Participant thereof) is hereby authorized, subject to the provisions of Section 8.05(b), at any time and from time to time, to the fullest extent permitted by law (without penalty, sanction or loss of collateral), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing to such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under any Loan Document, irrespective of whether or not such Lender shall have made any demand under such Loan Document and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after such set-off and application made by such Lender; provided that such failure to give such--------notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have. Each Lender agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it and Letter of Credit Obligations owed to it which is greater than the proportion received by any other Lender in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Lender and Letter of Credit Obligations owed to such other Lender, such adjustments shall be made as may be required so that all such payments of principal and interest with respect to the Notes held by the Lenders and Letter of Credit Obligations owed to all Lenders shall be shared by the Lenders pro rata. 8.05(b) The Lenders agree among themselves that, except upon the written consent of the Majority Lenders, no Lender shall, with respect to any Note or other obligation under any Loan Document, exercise any right described in Section 8.05(a). If a Lender breaches its obligation under the foregoing sentence, then such Lender shall be deemed to have waived any right to the benefits of the Collateral Documents, as against any other Lender. Each Lender waives all rights to enforce any rights under this Agreement, under the Notes or under any other Loan Document without the prior 135 written consent of the Majority Lenders. Each Lender further agrees that all rights under the Collateral Documents shall be exercised only through the Administrative Agent. SECTION 8.06. BINDING EFFECT; GOVERNING LAW. THIS AGREEMENT SHALL ----------------------------- BECOME EFFECTIVE WHEN IT SHALL HAVE BEEN EXECUTED BY THE BORROWER, EACH EXISTING GUARANTOR, THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE DOCUMENTATION AGENT AND THE SWINGLINE LENDER AND WHEN THE DOCUMENTATION AGENT SHALL HAVE BEEN NOTIFIED BY EACH BANK (OTHER THAN THE SWINGLINE LENDER) THAT SUCH BANK HAS EXECUTED IT (WHICH NOTIFICATION MAY BE IN THE FORM OF DELIVERY OF AN EXECUTED SIGNATURE PAGE TO THE DOCUMENTATION AGENT BY FACSIMILE TRANSMISSION) AND THEREAFTER SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE SYNDICATION AGENT, THE DOCUMENTATION AGENT AND EACH LENDER AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, EXCEPT THAT THE BORROWER SHALL NOT HAVE THE RIGHT TO ASSIGN ITS RIGHTS HEREUNDER OR ANY INTEREST HEREIN WITHOUT THE PRIOR WRITTEN CONSENT OF ALL LENDERS. IF THE CLOSING DATE SHALL NOT HAVE OCCURRED BY DECEMBER 31, 1996, THIS AGREEMENT SHALL TERMINATE AND CEASE TO BE OF ANY FORCE OR EFFECT. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 8.07. Successors and Assigns. 8.07(a) The provisions of ---------------------- this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Lenders. 8.07(b) Any Lender may at any time grant to one or more commercial banks, mutual funds, financial institutions or other "accredited investors" (as defined in Regulation D of the Securities Act of 1933, as amended) (each a "Participant") participating interests in its Term Loan Commitment, Revolving Facility Commitment or any or all of its Advances. In the event of any such grant by a Lender of a participating interest to a Participant, whether or not any notice thereof is given to the Borrower or the Administrative Agent, such Lender shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall 136 retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided -------- that such participation agreement may provide that such Lender will not agree to any modification, amendment or waiver of this Agreement described in clause (i) of the second proviso, clause (x) of the third proviso or clause (1) of the fourth proviso, to Section 8.01(a) (unless the participant's share of such Lender's Term Loan Commitment or Revolving Facility Commitment would not be increased and any additional obligations imposed on the Lenders would not be imposed upon the participant) or in clauses (ii) or (iii) of the second proviso, clauses (y) or (z) of the third proviso or clauses (2) and (3) of the fourth proviso, of Section 8.01(a) without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Sections 2.10(e), 2.12, 2.14, 2.16, 2.17, 2.18, 2.19 and 8.04 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). 8.07(c) Any Lender may at any time assign to one or more commercial banks, mutual funds, financial institutions or other "accredited investors" (as defined in Regulation D of the Securities Act of 1933, as amended) (each an "Assignee") all or any part (equivalent, except when the Assignee is either an Affiliate of such transferor Lender or already a Lender prior to such assignment, to at least $5,000,000) of its rights and obligations under this Agreement, and such Assignee shall assume such rights and obligations, in respect of (i) its Term Loan Commitment and all of its outstanding Term Loan Advances, and/or (ii) its Revolving Facility Commitment, all of its outstanding Revolving Facility Advances, all of its outstanding Letters of Credit and all of its outstanding Letter of Credit Obligations. In addition, the Swingline Lender may at any time assign its rights in respect of outstanding Swingline Advances to Lenders with Revolving Facility Commitments in accordance with Section 2.01(d). When all of the following conditions shall have been satisfied, such Assignee shall be a Lender party to this Agreement and shall have all the rights and obligations of a Lender with a Term Loan Commitment and/or a Revolving Facility Commitment and/or Swingline Advances, as the case may be, as set forth in such Assignment and Assumption Agreement, and the transferor Lender shall be released from its obligations hereunder to a 137 corresponding extent, and no further consent or action by any party shall be required: (x) delivery of an Assignment and Assumption Agreement executed by such Assignee and such transferor Lender, with the subscribed consent of the Borrower and the Administrative Agent, which consents shall not be unreasonably withheld or delayed; provided that (i) if the Assignee is either an Affiliate of such transferor -------- Lender or was a Lender immediately prior to such assignment, no such consents shall be required and (ii) if such assignment is made while any Default is continuing, the consent of the Borrower shall not be required; (y) payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee (or, in the case of the assignment of Swingline Advances, payment of the purchase price as set forth in Section 2.01(d)); and (z) except in the case of the assignments pursuant to the Closing Date Assignment and Assumption Agreement and assignments of Swingline Advances pursuant to Section 2.01(d), payment to the Administrative Agent of a non- refundable administrative fee for processing such assignment in the amount of $1,000 if the Assignee was a Lender immediately prior to such assignment, or $3,500 otherwise. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 2.14. 8.07(d) Any Lender may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Lender from its obligations hereunder. 8.07(e) The Administrative Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Assumption Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Term Loan Commitment, Revolving Facility Commitment and Swingline Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The -------- 138 entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 8.07(f) Upon its receipt of a completed Assignment and Assumption Agreement that has been executed and consented to in accordance with Section 8.07(c), together with any Note or Notes subject to such assignment, the Administrative Agent shall (i) accept such Assignment and Assumption Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Except in the case of assignments pursuant to the Closing Date Assignment and Assumption Agreement, within five Domestic Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes, appropriate new Note or Notes, to the order of such Assignee and, if the assigning Lender has retained any Term Loan Commitment, Revolving Facility Commitment or any Advances, appropriate new Note or Notes to the order of the assigning Lender. Except in the case of the assignments pursuant to the Closing Date Assignment and Assumption Agreement, as described in Section 2.03(a), and except in the case of assignments of Swingline Advances, such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Assumption Agreement and shall otherwise be in substantially the form of Exhibit A-1 or Exhibit A-2, as the case may be. 8.07(g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, -------- the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender. SECTION 8.08. Headings. Article and Section headings in this -------- Agreement are included for convenience of reference only and shall not constitute a part of this 139 Agreement for any other purpose. SECTION 8.09. Execution in Counterparts; Integration. This Agreement -------------------------------------- may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 8.10. Severability of Provisions. Any provision of this -------------------------- Agreement which is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 8.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE -------------------- SYNDICATION AGENT, THE DOCUMENTATION AGENT, THE ADMINISTRATIVE AGENT, THE ISSUING BANK AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. SECTION 8.12. Submission to Jurisdiction; Consent to Service of ------------------------------------------------- Process. The Borrower hereby submits to the nonexclusive jurisdiction of the - ------- United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Each of the parties hereto irrevocably consents to service of process in the manner provided for notices in Section 8.02 (except that process may not be served by telecopy). Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 8.13. Consent to Amendment. Each Lender hereby consents to, -------------------- and hereby authorizes the Administrative Agent to execute and deliver, the Global Security Agreement 140 Amendment, the Global Pledge Agreement Amendment, the Guaranty Agreement Amendment, the Mortgage Amendments, the 141 Guarantor Security Agreements between each of YB of Los Angeles and Fidelity, respectively, and the Administrative Agent and the Guarantor Pledge Agreement between YB of Los Angeles and the Administrative Agent. SECTION 8.14. Survival. The obligations of the Borrower under -------- Sections 2.10(e), 2.12, 2.14, 2.18 and 8.04 hereof and the obligations of the Lenders under Section 7.06 hereof shall survive the repayment of the Advances and the Letter of Credit Obligations and the termination of the Term Loan Commitments, the Revolving Facility Commitments, the Swingline Commitment and the Letters of Credit. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. YOUNG BROADCASTING INC. By /s/ James A. Morgan ---------------------------- Title: Exec. V.P./CFO BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT AND AS ISSUING BANK By /s/ T. J. Morris ---------------------------- Title: VP CANADIAN IMPERIAL BANK OF COMMERCE, AS DOCUMENTATION AGENT By /s/ Lorain C. Granberg ---------------------------- Title: Director, CIBC Wood Gundy Securities Corp., As Agent 142 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS SYNDICATION AGENT By /s/ R. Blake Witherington ---------------------------- Title: Vice President BANKS ----- BANKERS TRUST COMPANY By /s/ T.J. Morris ---------------------------- Title: VP CANADIAN IMPERIAL BANK OF COMMERCE By /s/ Lorain C. Granberg ---------------------------- Title: Director, CIBC Wood Gundy Securities Corp., As Agent MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ R. Blake Witherington ---------------------------- Title: Vice President FIRST UNION NATIONAL BANK OF NORTH CAROLINA, AS SWINGLINE LENDER AND AS A BANK By /s/ Bruce W. Loftin ---------------------------- Title: Senior Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Fred L. Thorne ---------------------------- Title: Vice President 143 BANK OF TOKYO-MITSUBISHI TRUST COMPANY By /s/ Augustine Okwu Jr. ---------------------------- Title: VP FLEET BANK, N.A. By /s/ Adam Bester ---------------------------- Title: Senior Vice President HELLER FINANCIAL, INC. By /s/ Joann L. Holman ---------------------------- Title: Assistant Vice President INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By /s/ Joan M. Chiappe ---------------------------- Title: /s/ Vice President THE FIRST NATIONAL BANK OF BOSTON By /s/ Robert F. Milordi ---------------------------- Title: Managing Director BANQUE PARIBAS By /s/ Lynne S. Randall ---------------------------- Title: Vice President By /s/ William B. Schink ---------------------------- Title: Vice President 144 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By /s/ Brian O'Leary ---------------------------- Title: Vice President By /s/ Marcus Edward ---------------------------- Title: Vice President MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION By /s/ Gregory D. Knudsen ---------------------------- Title: Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By /s/ Jeffrey W. Maillet ---------------------------- Title: Senior Vice President & Director THE BANK OF NEW YORK By /s/ Jerome Kapelus ---------------------------- Title: Vice President BARCLAYS BANK PLC By /s/ Keith F. Arnsdorff ---------------------------- Title: Associate Director THE DAI-ICHI KANGYO BANK, LTD. By /s/ D. Murdock ---------------------------- Title: Vice President 145 THE INDUSTRIAL BANK OF JAPAN, LIMITED By /s/ Jeffrey Cole ---------------------------- Title: Senior Vice President LTCB TRUST COMPANY By /s/ John J. Sullivan ---------------------------- Title: Executive Vice President MELLON BANK N.A. By /s/ Stephen R. Viehe ---------------------------- Title: Vice President THE NIPPON CREDIT BANK, LTD. By /s/ David C. Carrington ---------------------------- Title: Vice President & Manager COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By /s/ Ian Reece ---------------------------- Title: Vice President & Manager By /s/ Dana W. Hemenway ---------------------------- Title: Vice Predsident THE SANWA BANK, LIMITED, NEW YORK BRANCH By /s/ Shayn P. March ---------------------------- Title: Assistant Vice President 146 SOCIETE GENERALE By /s/ Elaine Khalil ---------------------------- Title: Vice President BANK OF IRELAND GRAND CAYMAN By /s/ Roger M. Burns ---------------------------- Title: Vice President BANQUE FRANCAISE DU COMMERCE EXTERIEUR By /s/ Peter Karl Harris ---------------------------- Title: Vice President By /s/ William C. Maier ---------------------------- Title: VP-Group Manager 147 THE UNDERSIGNED EXISTING GUARANTORS HEREBY CONSENT TO THE FOREGOING AMENDED AGREEMENT: YOUNG BROADCASTING OF LANSING, INC. YOUNG BROADCASTING OF LOUISIANA, INC. YOUNG BROADCASTING OF LA CROSSE, INC. YOUNG BROADCASTING OF NASHVILLE, INC. YOUNG BROADCASTING OF ALBANY, INC. WINNEBAGO TELEVISION CORPORATION KLFY, L.P. By: Young Broadcasting of Louisiana, Inc., its General Partner WKRN, L.P. By: Young Broadcasting of Nashville, Inc., its General Partner LAT, INC. YBT, INC. YOUNG BROADCASTING OF RICHMOND, INC. YOUNG BROADCASTING OF GREEN BAY, INC. YOUNG BROADCASTING OF KNOXVILLE, INC. WATE, L.P. By: Young Broadcasting of Knoxville, Inc., its General Partner YBK, INC. YOUNG BROADCASTING OF DAVENPORT, INC. YOUNG BROADCASTING OF SIOUX FALLS, INC. YOUNG BROADCASTING OF RAPID CITY, INC. By /s/ James A. Morgan -------------------------- Title: Executive Vice President and Chief Financial Officer 148 APPENDIX -------- Commitments ----------- Name of Bank Term Loan Revolving Facility - ------------------------- Commitment Commitment ------------ ------------------ Bankers Trust Company $ 25,200,000 $ 16,800,000 Canadian Imperial Bank 18,000,000 12,000,000 of Commerce Morgan Guaranty Trust 18,000,000 12,000,000 Company of New York First Union National 18,000,000 12,000,000 Bank of North Carolina Bank of America 15,000,000 10,000,000 National Trust and Savings Association Bank of Tokyo- 15,000,000 10,000,000 Mitsubishi Trust Company Fleet Bank, N.A. 15,000,000 10,000,000 Heller Financial, Inc. 15,000,000 10,000,000 Internationale 15,000,000 10,000,000 Nederlanden (U.S.) Capital Corporation 10,000,000 The First National Bank 15,000,000 of Boston Banque Paribas 11,700,000 7,800,000 Compagnie Financiere de 11,700,000 7,800,000 CIC et de l'Union Europeenne Mercantile Bank of St. 11,700,000 7,800,000 Louis National Association 149 Name of Bank Term Loan Revolving Facility - ------------------------- Commitment Commitment ------------ ------------------ Van Kampen American 11,700,000 7,800,000 Capital Prime Rate Income Trust The Bank of New York 7,200,000 4,800,000 Barclays Bank PLC 7,200,000 4,800,000 The Dai-Ichi Kangyo 7,200,000 4,800,000 Bank, Ltd. The Industrial Bank of Japan, Limited 7,200,000 4,800,000 LTCB Trust Company 7,200,000 4,800,000 Mellon Bank N.A. 7,200,000 4,800,000 The Nippon Credit Bank, 7,200,000 4,800,000 Ltd. Cooperatieve Centrale 7,200,000 4,800,000 Raiffeisen- Boerenleenbank B.A., "Rabobank Nederland", New York Branch The Sanwa Bank, 7,200,000 4,800,000 Limited, New York Branch Societe Generale 7,200,000 4,800,000 Bank of Ireland Grand 6,000,000 4,000,000 Cayman Banque Francaise du Commerce Exterieur 6,000,000 4,000,000 ------------ ------------ ============ ================== Total $300,000,000 $200,000,000 ============ ============ 150 EX-10.22(B) 16 AMENDMENT NO. 1 TO CREDIT AGREEMENT EXHIBIT 10.22(b) [CONFORMED COPY] AMENDMENT NO. 1 TO CREDIT AGREEMENT AMENDMENT NO. 1 dated as of December 20, 1996 to the Amended and Restated Credit Agreement (the "Credit Agreement") dated as of November 15, 1996 ---------------- among Young Broadcasting Inc., a Delaware corporation (the "Borrower"), the -------- banks and other financial institutions listed on the signature pages thereof, Bankers Trust Company, as Administrative Agent and Issuing Bank (the "Agent"), ----- Canadian Imperial Bank of Commerce, as Documentation Agent, and Morgan Guaranty Trust Company of New York, as Syndication Agent. W I T N E S S E T H: WHEREAS, the Borrower, the Guarantors and the Lenders party hereto have agreed to amend one of the Event of Default provisions contained in the Credit Agreement as set forth herein; and NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Unless otherwise defined herein, terms ----------- defined in the Credit Agreement are used herein as therein defined. ARTICLE II AMENDMENT SECTION 2.01. Amendment to Change of Control Event of Default. ----------------------------------------------- Section 6.01(s) of the Credit Agreement is amended and restated in its entirety to read as follows: 6.01(s) Vincent Young, Adam Young, members of their respective immediate families, Persons controlled (as defined in the definition of Affiliate) by Vincent Young, Adam Young or members of their respective immediate families and members of management of the Borrower shall fail to hold, in the aggregate for all such individuals and other Persons, record and beneficial title to at least 51% (by number of votes) of the Voting Stock of the Borrower; or ARTICLE III MISCELLANEOUS SECTION 3.01. Representations Correct; No Default. The Borrower ----------------------------------- represents and warrants that on and as of the date hereof: (i) the representations and warranties contained in the Credit Agreement (after giving effect to this Amendment), the Guaranty Agreement, each Security Agreement, each Pledge Agreement and each Mortgage are and shall be correct, before and after giving effect to any Borrowing or Letter of Credit issuance on such date and to the application of the proceeds therefrom, as though made on and as of such date and (ii) no event has or shall have occurred and be continuing, or would result from any Borrowing or Letter of Credit issuance on such date, or from the application of the proceeds therefrom, which constitutes a Default. SECTION 3.02. Effectiveness. This Amendment No. 1 shall become ------------- effective when the Administrative Agent shall have received duly executed counterparts hereof signed by the Borrower, each Guarantor and the Majority Lenders (or, in the case of any party as to which an executed counterpart thereof shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 3.03. GOVERNING LAW. THIS AMENDMENT NO. 1 SHALL BE GOVERNED ------------- BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 3.04. Effect of Amendments. Except as expressly set forth -------------------- herein, the amendments contained herein shall not constitute a waiver or amendment of any term or condition of the Credit Agreement or any other Loan Document, and all such terms and conditions shall remain in full force and effect and are hereby ratified and confirmed in all respects. SECTION 3.05. Execution in Counterparts. This Amendment No. 1 may be ------------------------- executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed being deemed an original and all of which taken together constituting one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this 2 Amendment No. 1 to be executed by their respective authorized officers as of the date first above written. YOUNG BROADCASTING INC. By: /s/ James A. Morgan ------------------------------------- Name: James A. Morgan Title: Executive Vice President and Chief Financial Officer BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT AND AS ISSUING BANK By: /s/ Patricia Hogan ---------------------------------------- Name: Patricia Hogan Title: Vice President CANADIAN IMPERIAL BANK OF COMMERCE, AS DOCUMENTATION AGENT By: /s/ Lorain C. Granberg ------------------------------------- Name: Lorain C. Granberg Title: Director, CIBC Wood Gundy Securities Corp., as Agent MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS SYNDICATION AGENT By: /s/ R. Blake Witherington ----------------------------------------- Name: R. Blake Witherington Title: Vice President BANKS ----- 3 BANKERS TRUST COMPANY By: /s/ Patricia Hogan ---------------------------------------- Name: Patricia Hogan Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Fred L. Thorne --------------------------------------- Name: Fred L. Thorne Title: Vice President BANK OF IRELAND GRAND CAYMAN By: /s/ Joan Mitchell ----------------------------------------- Name: Joan Mitchell Title: Account Manager THE BANK OF NEW YORK By: /s/ Jerome Kapelus --------------------------------------- Name: Jerome Kapelus Title: Vice President BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ John P. Judge ----------------------------------------- Name: John P. Judge Title: Vice President BANQUE FRANCAISE DU COMMERCE 4 EXTERIEUR By: /s/ Peter Karl Harris ----------------------------------------- Name: Peter Karl Harris Title: Vice President By: /s/ William C. Maier --------------------------------------- Name: William C. Maier Title: VP-Group Manager BANQUE PARIBAS By: /s/ Lynne S. Randall ---------------------------------------- Name: Lynne S. Randall Title: Vice President By: /s/ William B. Schink --------------------------------------- Name: William B. Schink Title: Vice President BARCLAYS BANK PLC By: ______________________________ Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ Lorain C. Granberg ------------------------------------- Name: Lorain C. Granberg Title: Director, CIBC Wood Gundy Securities Corp., as Agent COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE 5 By: /s/ Brian O'Leary ---------------------------------------- Name: Brian O'Leary Title: Vice President By: /s/ Marcus Edward -------------------------------------- Name: Marcus Edward Title: Vice President COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By: /s/ W. Jeffrey Vollack -------------------------------------- Name: W. Jeffrey Vollack Title: Vice President, Manager THE DAI-ICHI KANGYO BANK, LTD. By: /s/ Seiji Imai ------------------------------------------- Name: Seiji Imai Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By: /s/ Robert F. Milordi --------------------------------------- Name: Robert F. Milordi Title: Managing Director THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Kenneth A. Selle --------------------------------------- Name: Kenneth A. Selle Title: Authorized Agent 6 FIRST UNION NATIONAL BANK OF NORTH CAROLINA, AS SWINGLINE LENDER AND AS A BANK By: /s/ Bruce W. Loflin --------------------------------------- Name: Bruce W. Loflin Title: Senior Vice President FLEET BANK, N.A. By: /s/ Adam Bester ---------------------------------------- Name: Adam Bester Title: Senior Vice President HELLER FINANCIAL, INC. By: /s/ Joann L. Holman -------------------------------------- Name: Joann L. Holman Title: Assistant Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ Jeffrey Cole ------------------------------------------ Name: Jeffrey Cole Title: Senior Vice President LTCB TRUST COMPANY By: /s/ Satoru Otsubo ---------------------------------------- Name: Satoru Otsubo Title: Executive Vice President 7 MELLON BANK N.A. By: /s/ Nathan H. Kehm ------------------------------------- Name: Nathan H. Kehm Title: Assistant Vice President MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION By: /s/ Gregory D. Knudsen ------------------------------------ Name: Gregory D. Knudsen Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ R. Blake Witherington ------------------------------------ Name: R. Blake Witherington Title: Vice President MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Christopher A. Pucillo ------------------------------------- Name: Christopher A. Pucillo Title: Vice President THE NIPPON CREDIT BANK, LTD. By: /s/ David C. Carrington ------------------------------------- Name: David C. Carrington Title: Vice President and Manager 8 By: ______________________________ Name: Title: THE SANWA BANK, LIMITED, NEW YORK BRANCH By: /s/ Shayn P. March -------------------------------------- Name: Shayn P. March Title: Assistant Vice President SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisors By: /s/ Scott H. Page ----------------------------------------- Name: Scott H. Page Title: Vice President and Portfolio Manager SOCIETE GENERALE By: /s/ Elaine I. Khalil ----------------------------------------- Name: Elaine I. Khalil Title: Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By: /s/ Jeffrey W. Maillet --------------------------------------- Name: Jeffrey W. Maillet Title: Senior Vice President and Director EACH OF THE UNDERSIGNED GUARANTORS HEREBY CONSENTS 9 TO THE FOREGOING AMENDMENT NO. 1 AND HEREBY AFFIRMS ITS GUARANTY OF THE OBLIGATIONS OF THE BORROWER UNDER CREDIT AGREEMENT, AS AMENDED BY THE FOREGOING AMENDMENT NO. 1, PURSUANT TO THE GUARANTY AGREEMENT: YOUNG BROADCASTING OF LANSING, INC. YOUNG BROADCASTING OF LOUISIANA, INC. YOUNG BROADCASTING OF LA CROSSE, INC. YOUNG BROADCASTING OF NASHVILLE, INC. YOUNG BROADCASTING OF ALBANY, INC. WINNEBAGO TELEVISION CORPORATION KLFY, L.P. BY: YOUNG BROADCASTING OF LOUISIANA, INC., ITS GENERAL PARTNER WKRN, L.P. BY: YOUNG BROADCASTING OF NASHVILLE, INC., ITS GENERAL PARTNER LAT, INC. YBT, INC. YOUNG BROADCASTING OF RICHMOND, INC. YOUNG BROADCASTING OF GREEN BAY, INC. YOUNG BROADCASTING OF KNOXVILLE, INC. WATE, L.P. BY: YOUNG BROADCASTING OF KNOXVILLE, INC., ITS GENERAL PARTNER YBK, INC. YOUNG BROADCASTING OF DAVENPORT, INC. YOUNG BROADCASTING OF SIOUX FALLS, INC. YOUNG BROADCASTING OF RAPID CITY, INC. YOUNG BROADCASTING OF LOS ANGELES, INC. FIDELITY TELEVISION, INC. By: /s/ James A. Morgan -------------------------------------- Name: James A. Morgan Title: Executive Vice President and Chief Financial Officer THE UNDERSIGNED LENDER HEREBY CONSENTS TO THE FOREGOING AMENDMENT NO. 1: IMPERIAL BANK By: /s/ John F. Farrace ---------------------------------------- 10 Name: John F. Farrace Title: Assistant Vice President 11 EX-11.1 17 RE COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11.1 YOUNG BROADCASTING INC. AND SUBSIDIARIES RE COMPUTATION OF PER SHARE EARNINGS
YEARS ENDED --------------------------------------------- DEC. 31, DEC. 31, DEC. 31, 1994 1995 1996 -------------- ------------- ----------- SHARES OF COMMON STOCK OUTSTANDING FOR THE ENTIRE PERIOD........................ 2,234,370 10,819,049 10,548,181 CONVERSION OF 1,349,000 SHARES OF A PREFERRED, 213,000 of B PREFERRED AND 1,421,065 OF C PREFERRED 384,120 - - CONVERSION OF D, E AND F PREFERRED WARRANTS OF 429,550.............................. 55,312 - - ISSUANCE OF 3,672,064 PUBLICLY OFFERED STOCK................................. 472,841 - - ISSUANCE OF COMMON STOCK TO CAPITAL CITIES................................. 193,151 - - ISSUANCE OF 21,696 SHARES OF COMMON STOCK TO THE COMPANY'S DEFINED CONTRIBUTION PLAN - 17,357 - ISSUANCE OF 27,685 SHARES OF COMMON STOCK TO THE COMPANY'S DEFINED CONTRIBUTION PLAN IN 1996................................... - - 27,382 ISSUANCE OF 19,312 SHARES OF COMMON STOCK UPON EXERCISE OF OPTIONS IN 1995....... - 11,111 - ISSUANCE OF 5,937 SHARES OF COMMON STOCK UPON EXERCISE OF OPTIONS IN 1996............ - - 4,327 ISSUANCE OF 9,937 SHARES OF COMMON STOCK UPON EXERCISE OF OPTIONS IN 1996........... - - 6,071 REPURCHASE OF 311,876 SHARES OF COMMON STOCK FROM J.P. MORGAN CAPITAL CORPORATION IN 1995................................... - (8,545) - REPURCHASE OF 111,383 SHARES OF COMMON STOCK FROM J.P. MORGAN CAPITAL CORPORATION IN 1996.................................. - - (110,773) ISSUANCE OF 3,750,000 PUBLICLY OFFERED STOCK................................ - - 904,110 -------------- ------------- ----------- WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING.......................... 3,339,794 10,838,972 11,379,298 PRIMARY DILUTIVE EFFECT OF OPTIONS AND WARRANTS IN 1995 AND 1996 EXPECTED TO BE EXERCISED UNDER THE TREASURY STOCK METHOD USING THE WEIGHTED AVERAGE MARKET PRICE OF THE COMPANY'S SHARES OF COMMON STOCK...................... - 232,182 403,824 -------------- ------------- ----------- TOTAL PRIMARY WEIGHTED AVERAGE SHARES OF COMMON STOCK FOR THE PERIOD.......... - 11,071,154 11,783,122 -------------- ------------- ----------- FULLY DILUTIVE EFFECT OF OPTIONS AND WARRANTS IN 1995 AND 1996 EXPECTED TO BE EXERCISED UNDER TREASURY STOCK METHOD USING THE PERIOD-END MARKET PRICE FOR 1995 AND AVERAGE MARKET PRICE FOR 1996 OF THE COMPANY'S SHARES OF COMMON STOCK..... - 330,988 403,824 -------------- ------------- ----------- TOTAL FULLY DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK FOR THE PERIOD...... - 11,169,960 11,783,122 -------------- ------------- ----------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ($12,062,232) $2,533,743 $905,299 ============== ============= =========== NET INCOME (LOSS) ($18,088,900) ($6,591,257) $905,299 ============== ============= =========== INCOME (LOSS) PER COMMON SHARE PRIMARY BEFORE EXTRAORDINARY ITEM ........... ($3.62) $0.23 $0.08 ============== ============= =========== NET INCOME (LOSS).................... ($5.42) $(0.61) $0.08 ============== ============= =========== FULLY DILUTED BEFORE EXTRAORDINARY ITEM............ ($3.62) $0.23 $0.08 ============== ============= =========== NET INCOME (LOSS)................... ($5.42) ($0.61) $0.08 ============== ============= ===========
EX-21.1 18 SUBSIDIARIES OF REGISTRANT EXHIBIT 21.1 SUBSIDIARIES OF REGISTRANT - -------------------------- YOUNG BROADCASTING OF LOUISIANA, INC. YOUNG BROADCASTING OF LANSING, INC. YOUNG BROADCASTING OF LA CROSSE, INC. YOUNG BROADCASTING OF ALBANY, INC. YOUNG BROADCASTING OF NASHVILLE, INC. WINNEBAGO TELEVISION CORPORATION YBT, INC. LAT, INC. YOUNG BROADCASTING OF GREEN BAY, INC. YOUNG BROADCASTING OF KNOXVILLE, INC. YOUNG BROADCASTING OF RICHMOND, INC. YBK, INC. YOUNG BROADCASTING OF DAVENPORT, INC. YOUNG BROADCASTING OF SIOUX FALLS, INC. YOUNG BROADCASTING OF RAPID CITY, INC. YOUNG BROADCASTING OF LOS ANGELES, INC. FIDELITY TELEVISION, INC. WKRN, L.P. KLFY, L.P. WATE, L.P. EX-27.1 19 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 7005 0 60152 2210 0 91080 226800 79498 893151 72583 370000 0 0 14 80504 893151 0 154343 0 111861 838 0 40739 905 0 905 0 0 0 905 .08 .08
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