-----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, T7jC62Ag9ERqTKAdoIRcBzbmhjzc5Ujy4CVwz4qExgo9DMUfYkSMK36S+Xbr8C9U BR1XLoUDmqVO0l+tVsRz+w== 0000950130-98-001612.txt : 19980401 0000950130-98-001612.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950130-98-001612 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEARST ARGYLE TELEVISION INC CENTRAL INDEX KEY: 0000949536 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 742717523 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-27000 FILM NUMBER: 98580567 BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVE CITY: NEW YORK STATE: NY ZIP: 10106 BUSINESS PHONE: 2108281700 MAIL ADDRESS: STREET 1: 200 CONCORD PLAZA STREET 2: STE 700 CITY: SAN ANTONIO STATE: TX ZIP: 78216 FORMER COMPANY: FORMER CONFORMED NAME: ARGYLE TELEVISION INC DATE OF NAME CHANGE: 19951006 10-K405 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-K (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 or |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________to__________ Commission file number 0-2700 HEARST-ARGYLE TELEVISION, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-2717523 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 888 Seventh Avenue 10106 New York, NY (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (212) 649-2300 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Series A Common Stock, par value $.01 per share (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 |_| The aggregate market value of the Registrant's voting stock held by nonaffiliates on March 6, 1998, based on the closing price for the Registrant's Series A Common Stock on such date as reported on the Nasdaq National Market, was approximately $405,000,000. Shares of Common Stock outstanding at March 6, 1998: 53,839,252 shares, (consisting of 12,540,604 shares of Series A Common Stock and 41,298,648 shares of Series B Common Stock). 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| DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's Proxy Statement relating to the 1998 Annual Meeting of Stockholders are incorporated by reference into Part III (Items 10, 11, 12 and 13), and Item 4 of the Company's Current Reports on Form 8-K filed with the Commission on October 17, 1997 and October 20, 1997, is incorporated into Part II (Item 9). ================================================================================ 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 HEREIN) 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 The Company owns or manages 15 network-affiliated television stations reaching approximately 11.5% of U.S. television households. The Company is the largest, "pure-play" publicly owned television broadcast group in the U.S. The Company was formed in 1994 as a Delaware corporation under the name Argyle Television, Inc. ("Argyle"), and its business operations began in January 1995 with the consummation of its acquisition of three television stations. The Company is the successor to the combined operations of Argyle and the television broadcast group of The Hearst Corporation ("Hearst") pursuant to a merger transaction that was consummated on August 29, 1997 (the "Hearst Transaction"). Hearst, one of the nation's largest privately-held companies, is a diversified communications company engaged in a broad range of publishing, broadcasting, cable television networks and other communications activities. In the Hearst Transaction, Hearst contributed its television broadcast group and related broadcast operations (the "Hearst Broadcast Group") to Argyle and merged a wholly-owned subsidiary of Hearst with and into Argyle, with Argyle as the surviving corporation (renamed "Hearst-Argyle Television, Inc."). As a result of the Hearst Transaction and related transactions, Hearst currently owns through a subsidiary approximately 41.3 million shares of the Company's Series B Common Stock, comprising approximately 77% of the total outstanding common stock of the Company. Through its ownership of the Company's Series B Common Stock, Hearst has the right to elect nine of the 11 members of the Company's Board of Directors. The Stations The Company owns 12 television stations (the "Stations"), eight of which are in the top 50 of the 211 generally recognized geographic designated market areas ("DMAs") according to A.C. Nielsen Co. ("Nielsen") estimates for the 1997-1998 broadcasting season. In addition, the Company manages two television stations and two radio stations that are owned by Hearst: WWWB-TV in Tampa, Florida, WPBF-TV in West Palm Beach, Florida and WBAL(AM) and WIYY(FM) in Baltimore, Maryland. The Company also provides management services to Hearst in order to allow Hearst to fulfill its obligations under a program service and time brokerage agreement between Hearst and the permittee of KCWB-TV in Kansas City, Missouri (the "Missouri LMA"). For the year ended December 31, 1997, on a pro forma basis after giving effect to the consummation of the Hearst Transaction, the Company's total revenues and broadcast cash flow were $387.8 million and $175.8 million, respectively. Under the order of the Federal Communications Commission (the "FCC") approving the Hearst Transaction, because of signal overlaps the Company must divest two of its television stations (WNAC-TV in Providence, Rhode Island, and WDTN-TV in Dayton, Ohio) and has filed applications with the FCC for the transfer of ownership of such stations. The Company has entered into an agreement with STC Broadcasting, Inc. and related entities (collectively, "STC") to accomplish a tax-deferred exchange of such stations for three stations currently owned or to be acquired by STC. See "Recent Developments--Station Swaps." 2 The following table sets forth certain information for each of the Company's owned and managed television stations:
Percentage of U.S. Market Network Television Market Rank(1) Station Affiliation Channel Households(2) --------------------- ------------- ------- ----------- ------- ------------- *Boston, MA 6 WCVB ABC 5 2.22% *Tampa, FL(3) 15 WWWB WB 32 1.47% *Pittsburgh, PA 19 WTAE ABC 4 1.16% *Baltimore, MD 23 WBAL NBC 11 1.01% Cincinnati, OH 30 WLWT NBC 5 0.81% *Kansas City, MO 31 KMBC ABC 9 0.81% *Kansas City, MO(3) 31 KCWB UPN 29 *** *Milwaukee, WI 32 WISN ABC 12 0.81% *West Palm Beach, FL(3) 43 WPBF ABC 12 0.61% Oklahoma City, OK 44 KOCO ABC 5 0.61% Providence, RI(4)(5) 49 WNAC FOX 64 0.57% *Dayton, OH(4) 53 WDTN ABC 4 0.52% Honolulu, HI 71 KITV ABC 4 0.39% Jackson, MS 90 WAPT ABC 16 0.30% Fort Smith/ 116 KHBS/ ABC/ 40/ 0.22% Fayetteville, AR KHOG ABC 29 ------ Total 11.51% =====
- ---------- * Denotes a station owned or operated by the Company as a consequence of the Hearst Transaction. (1) Market rank is based on the relative size of the DMA among the 211 generally recognized DMAs in the U.S., based on Nielsen estimates for the 1997-98 season. (2) Based on Nielsen estimates for the 1997-98 season. (3) WWWB-TV and WPBF-TV are managed by the Company under a management agreement with Hearst. In addition, the Company provides certain management services to Hearst in order to allow Hearst to fulfill its obligations under the Missouri LMA with KCWB. (4) WNAC-TV's (Providence, RI) broadcast signal overlaps with WCVB-TV's (Boston, MA) broadcast signal, and WDTN-TV's (Dayton, OH) broadcast signal overlaps with WLWT-TV's (Cincinnati, OH) broadcast signal, Under FCC rules, a single entity cannot own stations with overlapping signals. The Company has entered into an agreement pursuant to which it will divest WNAC and WDTN. See "Recent Developments--Station Swaps." (5) Subject to a Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. The Company has an option to acquire WWWB-TV and Hearst's interests and option with respect to KCWB-TV (together with WWWB-TV, the "Option Properties"), as well as a right of first refusal until approximately August 2000 with respect to WPBF-TV (if such station is proposed by Hearst to be sold to a third party). The option period for each Option Property commences in February 1999 and terminates in August 2000 and the purchase price is the fair market value of the station as determined by the parties, or an independent third-party appraisal, subject to certain specified parameters. If Hearst elects to sell an Option Property prior to the commencement of, or during, the option period, the Company will have a right of first refusal to acquire such Option Property. The exercise of the option and the right of first refusal will be by action of the independent directors of the Company, and any option exercise may be withdrawn by the Company after receipt of the third-party appraisal. Network Affiliation Agreements and Relationships Each of the Stations is affiliated with a major network pursuant to a network affiliation agreement. Each affiliation agreement provides the affiliated Station with the right to broadcast all programs transmitted by the network with which the Station is affiliated. In return, the network has the right to sell a substantial majority of the advertising time during such broadcasts. In exchange for every hour that a Station broadcasts network programming, the network pays the Station a specified network compensation payment, which varies with the time of day. Typically, prime-time programming generates the highest hourly network compensation payments. Ten of the Stations have network affiliation agreements with ABC, two of the Stations have agreements with NBC, one of the Stations has an agreement with Fox, one of the Stations has an agreement with WB and one of the Stations has an agreement with UPN. Generally, the term of each affiliation agreement with ABC is two years, renewable for successive two-year periods, and each affiliation agreement is subject to cancellation by either party 3 upon six months notice to the other party. In the case of WTAE, the affiliation agreement is not subject to cancellation on six months notice, and the term of the affiliation agreement will be successively renewed unless either party gives the other notice of non-renewal six months prior to the end of the then current term. In the case of KITV, the affiliation agreement is not expressly renewable but is effective through January 2005. In the case of WAPT, the affiliation agreement is for a term of 10 years (through March 5, 2005). In the case of WPBF, the affiliation agreement is not subject to successive renewal periods. In 1994 negotiations commenced to renew the ABC affiliation agreements relating to the ABC affiliates acquired in the Hearst Transaction to provide for, among other things, 10-year terms and increased compensation. Such agreements are still in the process of negotiation and documentation has not yet been finalized, although the Company is receiving its increased compensation. The term of the NBC affiliation agreement with WBAL is a period of seven years and is subject to successive three-year renewals unless either party gives the other notice of non-renewal 12 months prior to the end of the then current term. The NBC affiliation agreement for WLWT is for an initial term of six years (through August 28, 2000) and is renewable for successive four-year terms unless either party gives notice of intent not to renew at least six months prior to the end of the initial or any successive term. The UPN affiliation with KCWB is for a term through August 31, 2008. The WB network affiliation agreement is subject to successive two-year renewal periods based upon a renewal notice issued by WB, and is not subject to early cancellation unless the network ceases operations or is substantially restructured. Unlike affiliates of ABC or NBC, WB affiliates may be required to pay the network compensation based upon ratings generated by the station in return for the broadcast rights to the network's programming. The Fox affiliation agreement for WNAC may be terminated by Fox upon 90 days advance notice and provides that the network may terminate the agreement for WNAC upon 60 days notice if the network or an entity related to the network acquires a television broadcast station licensed within the Station's market. Each network has the right to terminate its affiliation agreement in the event of a material breach of such agreement by a station and in certain other circumstances. Although the Company does not expect that its network affiliation agreements will be terminated and expects to continue to be able to renew its network affiliation agreements, no assurance can be given that such agreements will not be terminated or that renewals will be obtained on as favorable terms or at all. Recent Developments In addition to the Hearst Transaction, the Company recently consummated or commenced the following transactions: Common Stock Offering and Debt Offerings. On November 12, 1997, the Company completed an underwritten public offering of 4,232,000 shares (giving effect to the exercise of the Underwriter's over-allotment option) of Series A Common Stock, par value $.01 per share, at $27.00 per share (the "Common Stock Offering"). The Series A Common Stock is traded on the Nasdaq National Market under the symbol "HATV." On November 13, 1997, the Company completed an underwritten public offering of $300 million aggregate principal amount of 7% Senior Notes due 2007 and 7 1/2% Debentures due 2027 (the "1997 Debt Offering"). On January 13, 1998, the Company completed an underwritten public offering of the $200 million aggregate principal amount of 7% Senior Notes due 2018 (the "1998 Debt Offering," and together with the 1997 Debt Offering, the "Debt Offerings"). The aggregate net proceeds of approximately $593.0 million from the Common Stock Offering and the Debt Offerings were used to repay outstanding indebtedness. Subordinated Notes. On December 29, 1997, the Company completed the redemption of $45 million principal amount of the then outstanding $150 million principal amount of 9 3/4% Senior Subordinated Notes due 2005, which the Company issued in October 1995 (the "Subordinated Notes"). On March 13, 1998, the Company completed a tender offer and capital solicitation and repurchased approximately $102 million of the remaining $105 million principal amount of Subordinated Notes. Station Swaps. On February 18, 1998 the Company, through a wholly-owned subsidiary, entered into an Asset Exchange Agreement with STC, pursuant to which the Company agreed to exchange its television stations WDTN-TV in Dayton, Ohio, and WNAC-TV in Providence, Rhode Island, in addition to the Company's interest in certain contracts with television station WPRI-TV in Providence, Rhode Island for STC's television stations KSBW-TV, serving the Salinas-Monterey, California television market, and WPTZ-TV and WNNE-TV, serving the Burlington, Vermont-Plattsburgh, New York television market. The Company also agreed to pay STC up to 4 approximately $21.4 million in cash, an amount based on the difference between the 1997 broadcast cash flows of the stations the Company acquired and those of the stations the Company sold. In completing the transaction, the Company is complying with an FCC order requiring that it divest WDTN-TV and WNAC-TV due to a signal overlap with its stations in Cincinnati and Boston, respectively. The transaction was structured as a tax-deferred exchange of assets pursuant to Section 1031 of the Internal Revenue Code. Closing of the transaction is subject to consummation of STC's acquisition of WPTZ-TV and WNNE-TV from Sinclair Broadcast Group, Inc., review by the Department of Justice and the Federal Communications Commission, receipt of certain other consents and satisfaction of customary closing conditions. The Commercial Television Broadcasting Industry General. Commercial television broadcasting began in the United States on a regular basis in the 1940s. Currently, a limited number of channels are available for broadcasting in any one geographic area, and a license to operate a television station must be granted by the FCC. Television stations that broadcast over the VHF band (channels 2-13) of the spectrum generally have some competitive advantage over television stations that broadcast over the UHF band (channels above 13) of the spectrum because the former usually have better signal coverage and operate at a lower transmission cost. The improvement of UHF transmitters and receivers, the complete elimination from the marketplace of VHF-only receivers and the expansion of cable television systems, however, have reduced to some extent the VHF signal advantage. All television stations in the country are grouped by Nielsen, a national audience measuring service, into 211 generally recognized television markets that are ranked in size according to various formulae based upon actual or potential audience. Each market is designated as an exclusive geographic area consisting of all counties in which the home-market commercial stations receive the greatest percentage of total viewing hours. These specific geographic markets are referred to by Nielsen as "designated market areas" ("DMAs"). Nielsen periodically publishes data on estimated audiences for the television stations in the various 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 households using television actually viewing the stations (the station's "share"). Nielsen provides such data on the basis of total television households and selected demographic grouping 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 utilized. Historically, three major broadcast networks--ABC, NBC and CBS--dominated broadcast television. In recent years, however, Fox effectively has evolved into the fourth major network, even though it produces seven hours less of prime time programming than the other major networks. In addition, UPN and WB Network have been launched as television networks. Stations that operate without network affiliations are referred to as "independent" stations. All of the Stations are affiliated with networks. The affiliation by a station with one of the four major networks has a significant impact on the composition of the station's programming, revenues, expenses and operations. A typical affiliate of a major network receives the majority of each day's programming 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 sold during the airing of network programs. The network then sells this advertising time for its own account. The affiliate retains the revenues from time sold during breaks in and between network programs and during programs produced by the affiliate or purchased from non-network sources. In acquiring programming to supplement programming supplied by the affiliated network, network affiliates compete primarily with other affiliates and independent stations 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 otherwise would have been offered to local television stations. In addition, a television station may acquire programming though barter arrangements. Under barter arrangements, a national program distributor may receive advertising time in exchange for the programming it supplies, with the station paying either a reduced fee or no fee for such programming. 5 A fully independent station, unlike a network-affiliated station, purchases or produces all of the programming that it broadcasts, resulting in generally higher programming costs. The independent station, however, may retain its entire inventory of advertising time and all of the revenues obtained therefrom. Television station revenues are derived primarily from local, regional and national advertising and, to a much lesser extent, from network compensation and revenues from studio or tower rental and commercial production activities. Advertising rates are set 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 also are 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 that an advertiser may be targeting. Because broadcast television stations rely on advertising revenues, they are sensitive to cyclical changes in the economy. The size of advertisers' budgets, which are affected by broad economic trends, affect the broadcast industry in general and the revenues of individual broadcast television stations. The advertising revenues of the 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. Additionally, advertising revenues in even-numbered years benefit from advertising placed by candidates for political offices, and demand for advertising time in Olympic broadcasts. Proposals have been advanced in Congress to require television broadcast stations to provide advertising time to political candidates at no charge, which would eliminate in whole or in part advertising revenues from political candidates. Furthermore, FCC Chairman William Kennard has indicated that the FCC may commence a proceeding to examine free or reduced-rate political airtime initiatives. 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 local markets. Beginning in the 1980s, this level of dominance began to change, as the FCC authorized more local stations and marketplace choices expanded with the growth of independent stations and cable television services. Cable television systems were first installed in significant numbers in the 1970s and were initially used primarily 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 equivalent to any of the major broadcast networks and, collectively, the broadcast originated signals still constitute the majority of viewing in most cable homes. The advertising share of cable networks has increased during the 1970s, 1980s, and 1990s as a result of the growth in cable penetration (the percentage of television households that are connected to a cable system). Notwithstanding such increases in cable viewership and advertising, over-the-air broadcasting remains the dominant distribution system for mass market television advertising. 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 material to a television station's competitive position included signal coverage and assigned frequency. Further advances in technology may increase competition for household audiences and advertisers. Video compression techniques, now in use with direct broadcast satellites and in development for cable and wireless cable, are expected to permit greater numbers of channels to be carried within existing bandwidth. These compression techniques, as well as other technological developments, are applicable to all video delivery systems, including over-the-air broadcasting, and 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 technological changes will have on the broadcast television industry or the future results of the Stations. The television broadcasting industry continually is faced with such technological change and innovation, the possible rise in popularity of competing entertainment and communications media and governmental restrictions 6 or actions of federal regulatory bodies, including the FCC and the Federal Trade Commission, any of which could have a material effect on the Stations. The 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 Stations is supplied by the network with which each such station is affiliated. In time periods in which the network provides programming, the Stations are primarily dependent upon the performance of the network programs in attracting viewers. Each Station competes in non- network time periods based on the performance of its programming during such time periods, using a combination of self-produced news, public affairs and other entertainment programming, including news and syndicated programs, that such station believes will be attractive to viewers. The Stations compete for television viewership share against local network-affiliated and independent stations, as well as against cable and alternate methods of television transmission. These other transmission methods can increase competition for a station by bringing into its market distant broadcasting signals not otherwise available to the station's audience and also by serving as a distribution system for non-broadcast programming originated on the cable system. Other sources of competition for the Stations include home entertainment systems (including video cassette recorder and playback systems, videodiscs and television game devices), the Internet, multipoint distribution systems, multichannel multipoint distribution systems, wireless cable, satellite master antenna television systems and some low power, in-home satellite services. The Stations also face competition from high-powered direct broadcast satellite services, such as PrimeStar and DIRECTV, which transmit programming directly to homes equipped with special receiving antennas. The Stations compete with these services both on the basis of service and product performance (quality of reception and number of channels that may be offered) and price (the relative cost to utilize these systems compared to broadcast television viewing). Programming is a significant factor in determining the overall profitability of any television broadcast station. Competition for non-network programming involves negotiating with national program distributors or syndicators that sell first-run and off-network packages of programming. The Stations compete against in-market broadcast stations for exclusive access to off-network reruns (such as Home Improvement) and first-run product (such as the Oprah Winfrey Show). Cable systems generally do not compete with local stations for programming, although various national cable networks from time to time have acquired programs that otherwise would have been offered to local television stations. Advertising rates are based upon the size of the market in which a station operates, a program's popularity among the viewers 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, the aggressiveness and knowledgeability of sales forces and the development of projects, features and programs that tie advertiser messages to programming. Advertising rates also are determined by a station's overall ability to attract viewers in its market, as well as the station's ability to attract viewers among particular demographic groups that an advertiser may be targeting. Broadcast television stations compete for advertising revenues with other broadcast television stations and with the print media, radio stations and cable system operators serving the same market. Additional competitors for advertising revenues include a variety of other media, including direct marketing. Since greater amounts of advertising time are available for sale by independent stations, independent stations typically achieve a greater proportion of television market advertising revenues relative to their share of the market's audience. Public broadcasting outlets in most communities compete with commercial broadcasters for viewers but not for advertising dollars. Technology. The FCC has adopted rules that will allow television broadcasters to provide digital television ("DTV") to consumers. The FCC also adopted a table of allotments for DTV, which will provide eligible existing broadcasters with a second channel on which to provide DTV service. The allotment plan is based on a core spectrum of channels 2-51. Ultimately, the FCC plans to recover the frequencies outside of the core spectrum to be used for other purposes. Recently, the FCC announced that it will reallocate channels 60-69. Four channels will be reallocated to fixed and mobile services for public safety use and the remaining six channels to the fixed, mobile 7 and broadcasting services. These licenses are to be assigned through competitive bidding. The FTC will decide at a later date the use of the remaining spectrum recovered outside of the core DTV spectrum. Broadcasters that obtain a DTV channel outside of the core spectrum may ultimately be required to move to a new channel at the time the analog channels are recovered. Television broadcasters will be allowed to use their DTV channels according to their best business judgment. Such uses can include multiple standard definition program channels, data transfer, subscription video, interactive materials and audio signals, although broadcasters will be required to provide a free digital video programming service that is at least comparable to today's analog service. Broadcasters will not be required to air "high definition" programming or, initially, to simulcast their analog programming on the digital channel. Affiliates of ABC, CBS, NBC and FOX in the top 10 television markets will be required to be on the air with a digital signal by May 1, 1999. Affiliates of those networks in markets 11-30 will be required to be on the air with a digital signal by November 1, 1999, and remaining commercial broadcasters within five years. The Company has begun to file applications for authority to operate digital stations. The applications for KITV (and satellite stations KMAU and KHVO) have been granted, while the application of WLWT is pending. The FCC stated that broadcasters will remain public trustees and that it will issue a notice to determine the extent of broadcasters' future public interest obligations. Existing analog and DTV broadcast operations outside the core spectrum, such as WNAC, are fully protected during a transition period, which is targeted for completion in the year 2006. The Company will incur significant costs in the conversion to DTV. The Company is unable to predict the extent or timing of consumer demand for any such DTV services. Digital Conversion Timetable
FCC Mandated Timetable for Market Analog Construction of Station (Affiliation) Rank(1) Channel DTV Channel DTV Facilities - ----------------------------------------------- ---------------- -------------- ------------------- ---------------- WCVB, Boston, MA (ABC) 6 5 20 May 1, 1999* WWWB, Tampa, FL (WB)(2) 15 32 19 May 1, 2002 WTAE, Pittsburgh, PA (ABC) 19 4 51 November 1, 1999 WBAL, Baltimore, MD (NBC) 23 11 59 November 1, 1999 WLWT, Cincinnati, OH (NBC) 30 5 35 November 1, 1999 WISN, Milwaukee, WI (ABC) 32 12 34 May 1, 2002 KMBC, Kansas City, MO (ABC) 31 9 14 May 1, 2002 KCWB, Kansas City, MO (WB)(2) 31 29 31 May 1, 2002 KOCO, Oklahoma City, OK (ABC) 43 5 16 May 1, 2002 WPBF, West Palm Beach, FL (ABC)(2) 44 25 16 May 1, 2002 WNAC, Providence, RI (FOX)(3)(4) 49 64 54 May 1, 2002 WDTN, Dayton, OH (ABC)(3) 53 2 46 May 1, 2002 KITV, Honolulu, HI (ABC) 71 4 40 May 1, 2002 WAPT, Jackson, MS (ABC) 90 16 21 May 1, 2002 WPTZ, Plattsburgh, NY (NBC)(3) 91 5 14 May 1, 2002 WNNE, Hartford, VT (NBC)(3) 91 31 25 May 1, 2002 KHBS, Fort Smith, AR (ABC) 116 40 21 May 1, 2002 KHOG, Fayetteville, AR (ABC) 116 29 15 May 1, 2002 KSBW, Monterey, CA (NBC)(3) 122 8 43 May 1, 2002
- ---------- * Station has voluntarily committed to an 18-month construction schedule. (1) Market rank is based on the relative size of the DMA among the 211 generally recognized DMAs in the U.S., based on Nielsen estimates for the 1997-98 season. (2) WWWB-TV and WPBF-TV are managed by the Company under the Management Agreement with Hearst. In addition, the Company provides certain management services to Hearst in order to allow Hearst to fulfill its obligations under Program Services and Time Brokerage Agreement with KCWB-TV, Inc. the permittee of KCWB. (3) WNAC-TV's (Providence RI) broadcast signal overlaps with WCVB-TV's (Boston, MA) broadcast signal, and WDTN-TV's (Dayton, OH) broadcast signal overlaps with WLWT-TV's (Cincinnati, OH) broadcast signal. Under FCC rules, a single entity cannot own stations with overlapping signals. The Company has entered into an agreement pursuant to which it will divest WNAC and WDTN in exchange for WPTZ, WNNE and KSBW. See "Recent Developments--Station Swaps." (4) Subject to a Joint Marketing and Programming Agreement with Clear Channel Communications, Inc. 8 Federal Regulation of Television Broadcasting Television broadcasting is subject to the jurisdiction of the FCC under 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 actions, to issue, renew, revoke and modify broadcasting licenses; assign frequency bands; determine stations' frequencies, locations and power; regulate the equipment used by station; adopt other regulations to carry out the provisions of the Communications Act; impose penalties for violation of such regulations; and, impose fees for processing applications and other administrative functions. The Communications Act prohibits the assignment of a license or the transfer of control of a licensee without prior approval of the FCC. The sale of WNAC and WDTN and the acquisition of KSBW, WPTZ and WNNE remain subject to FCC approval. Members of the public will have an opportunity to file petitions to deny or other comments concerning the transaction. Under the Communications Act, the FCC also regulates certain aspects of the operation of cable television systems and other electronic media that compete with broadcast stations. The process for renewal of broadcast station licenses as set forth under the Communications Act has undergone significant change as a result of the Telecommunications Act. Prior to the passage of the Telecommunications Act, television broadcasting licenses generally were granted or renewed for a period of five years upon a finding by the FCC that the "public interest, convenience and necessity" would be served thereby. Under the Telecommunications Act, the statutory restriction on the length of broadcast licenses has been amended to allow the FCC to grant broadcast licenses for terms of up to eight years. The Telecommunications Act requires renewal of a broadcast license if the FCC finds that (i) the station has served the public interest, convenience and necessity; (ii) there have been no serious violations of either the Communications Act or the FCC's rules and regulations by the licensee; and, (iii) there have been no other serious violations that taken together constitute a pattern of abuse. In making its determination, the FCC may consider petitions to deny by cannot consider whether the public interest would be better served by a person other than the renewal applicant. Under the Telecommunications Act, competing applications for the same frequency may be accepted only after the FCC has denied an incumbent's application for renewal of license. The main station licenses of KMBC, WISN, WDTN, WLWT, KHBS (including satellite station KHOG), WAPT, WPBF, WWWB, WBAL, WTAE, WPTZ, WNAC, WCVB, WNNE, KITV (including its satellite stations KMAU and KHVO), KSBW and KOCO, will expire on February 1, 2006, December 1, 2005, October 1, 2005, October 1, 2005, June 1, 2005, June 1, 2005, February 1, 2005, February 1, 2005, October 1, 2004, August 1, 1999, June 1, 1999, April 1, 1999, April 1, 1999, April 1, 1999, February 1, 1999, December 1, 1998 and June 1, 1998, respectively. An application for renewal of the license for KOCO is pending at the FCC. Petitions to deny the KOCO renewal application will be due on or before May 1, 1998. KCWB operates pursuant to a Special Temporary Authorization ("STA"), which may, in the discretion of the FCC, be renewed at six month intervals. An application for extension of the STA is pending at the FCC. The Company is not aware of any facts or circumstances that would prevent the renewal of the licenses or authorizations for the stations at the end of their respective terms or the renewal of KCWB's STA. The Communications Act, FCC rules and regulations and the Telecommunications Act also regulate broadcast ownership. The FCC has promulgated rules that, among other matters, limit the ability of individuals and entities to own or have an official position or ownership interest above a certain level (an "attributable" interest) in broadcast stations as well as other specified mass media entities. On a local basis, FCC rules currently allow an individual entity to have an attributable interest in only one television station in a market. As WCVB is considered to be in the same market as WNNE for the purposes of this rule, the application seeking the FCC's consent to the acquisition of WNNE contains a request for a temporary waiver of the rules pending conclusion of an FCC rulemaking proceeding considering changes to the rule. Although the Company believes that the temporary waiver will be granted, there can be no assurances that the rule will ultimately be changed in a manner that will allow the Company to maintain control of both stations on a permanent basis. Furthermore, FCC rules, the Communications Act or both generally restrict or prohibit the ability of an individual or entity to have an attributable interest, or cross-ownership, in a television station and in a radio station, daily newspaper or cable television system that is located in the same local market area served by the television station. Hearst has an attributable interest in the Company's broadcast stations and owns daily newspapers in various local markets. The FCC has instituted proceedings for the 9 possible relaxation of certain of its rules regulating television station ownership, certain types of cross-ownership and the standards used to determine what types of interests are considered to be attributable under its rules. Among the proposals under consideration is whether to deem as attributable certain television local marketing agreements and, if deemed attributable, the extent to which currently effective agreements of this type should be exempted from any new FCC rules. Such attribution could implicate local television ownership rules that currently prohibit an entity from having an attributable interest in two stations serving the same market and could have a material effect on the Joint Marketing and Programming Agreement between the Company and Clear Channel relating to WNAC, and the Programming Services and Time Brokerage Agreement between the Company and the licensee of KCWB. If the FCC's ultimate regulatory decision were to disfavor the continued validity of such joint operation agreements or LMAs, then these agreements, in the worst case scenario, might be required to be terminated. In addition, pursuant to the Telecommunications Act, the FCC has eliminated the 12-station national limit for TV station ownership and increased the national audience reach limitation from 25% to 35%. Further, legislation recently introduced in Congress could, if enacted, repeal or modify the newspaper/television cross-ownership rule provision and a petition recently has been filed requesting that the FCC initiate a rulemaking proceeding to determine whether the FCC's newspaper/television cross-ownership rule should be eliminated. Moreover, the FCC will review the newspaper, television and all other cross-ownership rules as part of the biennial review process mandated by the Telecommunications Act. Under that process, the FCC must determine whether, because of increased competition, any regulation no long serves the public interest. Elimination of the rule could enable the Company to acquire television stations in markets in which Hearst owns daily newspapers. There can be no assurances, however, that the legislation will be enacted or that either the biennial review process or the proposed FCC rulemaking proceeding, if initiated, will result in elimination of the rule. The Communications Act restricts the ability of foreign entities or individuals to own or hold certain interests in broadcast licenses. The Telecommunications Act, however, eliminated the restrictions on aliens serving as directors or officers of broadcast licensees or as directors or officers of entities holding interests in broadcast licensees. The FCC has adopted rules, effective January 1, 1998, that will require, over a phase-in period of 8 to 10 years, the closed captioning of video signals. Petitions for reconsideration of the rules have been filed. The FCC is considering the institution of a TV ratings system as mandated by the Telecommunications Act. The FCC has reduced significantly its past regulation of broadcast stations, including elimination of formal ascertainment requirements and guidelines concerning amounts of certain types of programming and commercial matter that may be broadcast. There are, however, FCC rules and policies, and rules and policies of other federal agencies, that regulate matters such as network-affiliate relations, cable systems' carriage of syndicated and network programming on distant stations, political advertising practices, obscene and indecent programming, equal employment opportunity, application procedures and other areas affecting the business or operations of broadcast stations. The FCC has also adopted rules to implement the Children's Television Act of 1990, which, among other matters, limits the permissible amount of commercial matter in children's programs and requires each television station to present "educational and informational" children's programming. The FCC also has adopted renewal processing guidelines that effectively require television stations to broadcast an average of three hours per week of children's educational programming. The FCC also has adopted regulations to implement certain provisions of the 1992 Cable Act, which regulates, among other matters, signal carriage, retransmission consent and equal employment opportunity requirements. Certain provisions of the 1992 Cable Act are the subject of pending judicial review proceedings. The Telecommunications Act modified the 1992 Cable Act in several important respects. In addition to matters relating to broadcast ownership, the Telecommunications Act, among other things, repealed the cross-ownership ban between cable and telephone entities and the FCC's video dialtone rules, the limitations on cross-ownership of broadcast network and cable entities and the statutory prohibition of TV/cable cross-ownership. These provision, among others, allow for significant involvement in the future by telephone companies in providing video services. On March 31, 1997, the United States Supreme Court, in a 5-4 decision, upheld the constitutionality of the must-carry provisions of the 1992 Cable Act. As a result, the regulations promulgated by the FCC to implement the must-carry provision remain in effect. Under those rules, cable operators generally are required to devote up to one-third of their activated channel capacity to the carriage of local commercial television stations. The FCC has 10 announced that it will conduct a rulemaking to determine whether the must-carry provision will apply to broadcasters' digital television signals. The foregoing does not purport to be a complete summary of all of the provisions of the Communications Act, the Telecommunications Act, the 1992 Cable Act or the related regulations and policies of the FCC. 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 litigations, and the Company cannot predict the outcome of any such litigation or the impact on its business or the business of the Company. Employees As of December 31, 1998, the Company had approximately 1,445 full-time employees and 172 part-time employees. A total of approximately 593 employees are represented by four unions (the American Federation of Television and Radio Artists, the International Brotherhood of Electrical Workers, the International Alliance of Theatrical Stage Employees, and the Directors Guild of America). The Company has not experienced any significant labor problems, and it believes that its relations with its employees are satisfactory. ITEM 2. PROPERTIES The Company's principal executive offices are located at 888 Seventh Avenue, New York, New York 10106. Each Station's real properties generally include owned or leased offices, studios, transmitter sites and antenna sites. Typically, offices and main studios are located together, while transmitters and antenna sites are in a separate location that is more suitable for optimizing signal strength and coverage. Set forth below are the Stations' principal facilities as of December 31, 1997. In addition to the property listed below, the Company and the Stations also lease other property primarily for communications equipment.
Owned or Approximate Expiration Station/Property Location Use Leased Size of Lease - ---------------------------------- --------------------------------- ----------- ------------------ ------------------- Corporate NY Office Leased 4,612 sq. ft. month-to-month LA Office Leased 3,191 sq. ft. 1998 San Antonio Office Leased 3,674 sq. ft. 1999 WLWT Office and studio Leased 60,000 sq. ft. 1999 Cincinnati, OH Tower and transmitter Owned 4.2 acres -- Office and studio Owned 54,000 sq. ft. -- Office and studio Owned 12,585 sq. ft. -- KOCO Office and studio Owned 28,000 sq. ft. -- Oklahoma City, OK Tower and transmitter Owned 85 acres -- WNAC Tower and transmitter Owned 33 acres -- Rehobeth, MA KITV Office and studio Owned 33,000 sq. ft. -- Honolulu, HI Tower and transmitter Leased 130 sq. ft. 2006 Tower and transmitter Leased 300 sq. ft. 2006 Tower and transmitter Leased 1 acre month-to-month WAPT Office and studio Owned 8,600 sq. ft. -- Jackson, MS Tower and transmitter Owned 25 acres --
11
Owned or Approximate Expiration Station/Property Location Use Leased Size of Lease - ---------------------------------- --------------------------------- ----------- ------------------ ------------------- KHBS Office and studio Owned 35,000 sq. ft. -- Fort Smith/Fayetteville, Office and studio Leased 15,000 sq. ft. -- AR Tower and transmitter Leased -- -- Tower and transmitter Owned 26 acres -- WCVB Office and studio Leased 91,602 sq. ft. 2003 Boston, MA Office and studio Leased 5,337 sq. ft. month-to-month Office and studio Leased 8,628 sq. ft. month-to-month Tower and transmitter 44 acres 1999 WTAE Office and studio Owned 68,033 sq. ft. -- Pittsburgh, PA Tower and transmitter Owned 37 acres -- WBAL Office and studio Owned 65,000 sq. ft. -- Baltimore, MD Tower and transmitter Partnership 3.5 acres -- WISN Office and studio Owned 88,000 sq. ft. -- Milwaukee, WI Tower and transmitter Owned 5.5 acres -- KMBC Office and studio Leased 53,749 sq. ft. 2001 Kansas City, MO Office and studio Leased 4,765 sq. ft. 2009 Tower and transmitter Owned 11.6 acres -- WDTN Office and studio Owned 43,500 sq. ft. -- Dayton, OH Tower and transmitter Owned 25.29 acres --
ITEM 3. LEGAL PROCEEDINGS From time to time, the Company becomes involved in various claims and lawsuits that are incidental to its business. In the opinion of the Company, there are no legal proceedings pending against the Company or any of its subsidiaries that are likely to have a material adverse effect on the Company's consolidated financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Series A Common Stock is quoted on the Nasdaq National Market under the symbol "HATV." Prior to the consummation of the Hearst Transaction, shares of Series A Common Stock were traded on the Nasdaq National Market under the symbol "ARGL." The Company's Series B Common Stock, 100% of which is held by a subsidiary of Hearst, is not publicly traded. The table below sets forth, for the calendar quarters indicated, the high and low sales prices of the Series A Common Stock of Argyle prior to the consummation of the Hearst Transaction 12 on August 29, 1997, and of the Company's Series A Common Stock subsequent to the consummation of the Hearst Transaction, in each case as reported in The Wall Street Journal. Price Range of Series A Common Stock ------------------------------------ Fiscal 1996 High Low - ----------- ---- --- First Quarter 23 17 Second Quarter 27 19 1/2 Third Quarter 29 1/4 22 Fourth Quarter 28 3/4 23 3/4 Fiscal 1997 - ----------- First Quarter 29 1/8 23 7/8 Second Quarter 25 1/2 22 1/2 Third Quarter 30 5/8 24 7/8 Fourth Quarter 32 5/8 26 1/4 On March 6, 1998, the closing price for the Company's Series A Common Stock on the Nasdaq National Market was $36-3/8 (as reported in The Wall Street Journal), and the approximate number of shareholders of record of the Series A Common Stock at the close of business on such date was 156. The Company has not paid any dividends on its Series A Common Stock or its Series B Common Stock since inception and does not expect to pay any dividends on either class in the immediate future. The Company's Credit Facility with The Chase Manhattan Bank limits the ability of the Company to pay dividends under certain conditions. The Company issued 100% of the Series B Common Stock to Hearst as part of the Hearst Transaction and related transactions. Of the shares of Series B Common Stock, the Company issued 38,611,002 shares on August 29, 1997 and 2,687,646 shares on December 30, 1997. The Company issued the Series B Stock pursuant to the exemption from registration contained in Section 4(2) of the Securities Act. The Company issued the Series B Common Stock to Hearst as consideration for the contribution of the assets and properties of Hearst's broadcast group and $275 million of Hearst's long-term debt. All of the outstanding shares of Series B Common Stock are required to be held by Hearst or a Permitted Transferee (as defined below). All such shares are currently held by Hearst Broadcasting, Inc., a wholly owned subsidiary of Hearst. No holder of shares of Series B Common Stock may transfer any such shares to any person other than to (i) Hearst; (ii) any corporation into which Hearst is merged or consolidated or to which all or substantially all of Hearst's assets are transferred; or (iii) any entity controlled by Hearst (each a "Permitted Transferee"). Series B Common Stock, however, may be converted at any time into Series A Common Stock and freely transferred, subject to the terms and conditions of the Company's Amended and Restated Certificate of Incorporation and to applicable securities laws limitations. If at any time the Permitted Transferees first hold in the aggregate less than 20% of all shares of the Company's Common Stock that are then issued and outstanding, then each issued and outstanding share of Series B Common Stock automatically will be converted into one fully-paid and nonassessable share of Series A Common Stock, and the Company will not be authorized to issue any additional shares of Series B Common Stock. Notwithstanding any other provision to the contrary, no holder of Series B Common Stock shall (i) transfer any shares of Series B Common Stock; (ii) convert Series B Common Stock; or (iii) be entitled to receive any cash, stock, other securities or other property with respect to or in exchange for any shares of Series B Common Stock in connection with any merger or consolidation or sale or conveyance of all or substantially all of the property or business of the Company as an entity, unless all necessary approvals of the FCC as required by the Communications Act, and the rules and regulations thereunder have been obtained or waived. 13 ITEM 6. SELECTED FINANCIAL DATA The selected financial data should be read in conjunction with the historical and pro forma financial statements and notes thereto included elsewhere herein and in "Management's Discussion and Analysis of Financial Condition and Results of Operations." The historical financial data for the years ended December 31, 1993 and 1994 have been derived from the audited combined financial statements of WZZM, WAPT and WNAC (collectively, the "Northstar Stations" and "Northstar historical") acquired by Argyle Television, Inc. (the "Predecessor Company" and "Argyle") effective January 4, 1995. The historical financial data for the years ended December 31, 1995 and 1996 and the eight months ended August 31, 1997, have been derived from the audited consolidated financial statements of the Predecessor Company. The historical financial data for the four months ended December 31, 1997, have been derived from the audited consolidated financial statements of Hearst-Argyle Television, Inc. (the "Company"). The pro forma consolidated financial data for the year ended December 31, 1997 has been prepared as if the Gannett Swap and the Hearst Transaction had been completed at the beginning of the year presented. Such pro forma data is not necessarily indicative of the actual results that would have occurred nor of results that may occur.
Predecessor Company The Company Years Ended December 31, Eight Months Four Months --------------------------------------------- Ended Ended The Company Northstar Historical Predecessor Company August 31 December 31 Pro forma --------- ---------- ------------------- --------- --------- --------- 1993 1994 1995 1996 1997(a) 1997(b) 1997(c) --------- --------- -------- --------- --------- --------- --------- (In thousands, except per share and ratio data) Statement of operations data: Total revenues $ 28,440 $ 34,538 $ 46,944 $ 73,294 $ 51,826 $ 146,440 $ 387,782 Station operating expenses 14,295 16,430 23,603 37,639 27,610 59,993 168,443 Amortization of program rights 3,876 3,600 3,961 4,725 2,833 14,652 42,978 Depreciation and amortization 2,884 3,126 12,294 23,965 16,955 12,150 36,240 --------- --------- --------- --------- --------- --------- --------- Station operating income 7,385 11,382 7,086 6,965 4,428 59,645 140,121 Corporate expenses 1,174 1,103 2,324 4,285 2,700 3,518 11,000 Non-cash compensation expense -- -- 675 675 3,518 -- -- --------- --------- --------- --------- --------- --------- --------- Operating income (loss) 6,211 10,279 4,087 2,005 (1,790) 56,127 129,121 Interest expense, net 5,885 4,745 12,052 16,566 12,749 15,830 38,377 --------- --------- --------- --------- --------- --------- --------- Income (loss) from continuing Operations before income taxes 326 5,534 (7,965) (14,561) (14,539) 40,297 90,744 Income taxes 301 170 -- -- -- 16,419 37,732 --------- --------- --------- --------- --------- --------- --------- Income (loss) from continuing operations 25 5,364 (7,965) (14,561) (14,539) 23,878 53,012 Cumulative effect of a change in Accounting principle(d) (213) -- -- -- -- -- -- Extraordinary item(e) -- (774) (7,842) -- -- (16,212) -- --------- --------- --------- --------- --------- --------- --------- Net income (loss) $ (188) $ 4,590 $ (15,807) $ (14,561) $ (14,539) $ 7,666 $ 53,012 ========= ========= Less preferred stock dividends(f) -- (829) (711) (711) (1,422) --------- --------- --------- --------- --------- Earnings (loss) applicable to common stockholders $ (15,807) $ (15,390) $ (15,250) $ 6,955 $ 51,590 ========= ========= ========= ========= ========= Basic: Income (loss) from continuing operations before extraordinary item per common share $ (1.25) $ (1.37) $ (1.34) $ 0.48 $ 0.96 ========= ========= ========= ========= ========= Income (loss) from continuing operations per common share $ (2.47) $ (1.37) $ (1.34) $ 0.14 $ 0.96 ========= ========= ========= ========= ========= Number of shares used in per share calculation 6,388 11,246 11,347 48,628 53,828 ========= ========= ========= ========= ========= Diluted: Income (loss) from continuing operations before extraordinary item per common share $ (1.25) $ (1.37) $ (1.34) $ 0.48 $ 0.96 ========= ========= ========= ========= ========= Income (loss) from continuing operations per common share $ (2.47) $ (1.37) $ (1.34) $ 0.14 $ 0.96 ========= ========= ========= ========= ========= Number of shares used in per share calculation 6,388 11,246 11,347 48,752 53,873 ========= ========= ========= ========= =========
14
Predecessor Company The Company Years Ended December 31, Eight Months Four Months --------------------------------------------- Ended Ended The Company Northstar Historical Predecessor Company August 31 December 31 Pro forma --------- ---------- ------------------- --------- --------- --------- 1993 1994 1995 1996 1997(a) 1997(b) 1997(c) --------- --------- -------- --------- --------- --------- --------- (In thousands, except per share and ratio data) Other data: Broadcast cash flow(g) $ 9,868 $ 14,223 $ 20,440 $ 31,889 $ 21,182 $ 71,345 $ 175,834 Broadcast cash flow margin(h) 34.7% 41.2% 43.5% 43.5% 40.9% 48.7% 45.3% Operating cash flow(i) $ 8,694 $ 13,120 $ 18,116 $ 27,604 $ 18,482 $ 67,827 $ 164,834 Operating cash flow margin(j) 30.6% 38.0% 38.6% 37.7% 35.7% 46.3% 42.5% After-tax cash flow(k) N/A N/A $ 4,329 $ 9,404 $ 2,416 $ 36,028 $ 89,252 Capital expenditures $ 1,136 $ 701 $ 3,762 $ 6,633 $ 12,138 $ 18,268 N/A Program payments $ 4,277 $ 3,885 $ 2,901 $ 3,766 $ 3,034 $ 15,102 $ 43,505 Balance sheet data (at year end): Cash and cash equivalents $ 93 $ 1,313 $ 2,206 $ 949 N/A $ 12,759 $ 12,759 Total assets 76,015 78,575 291,141 328,608 N/A 1,044,109 1,044,109 Total debt (including current portion) 63,235 42,670 150,000 171,500 N/A 490,000 500,000 Stockholders' equity (deficit)(l) (3,440) 24,513 116,293 129,152 N/A 326,654 326,654
See footnotes on the following page. Notes To Selected Financial Data (a) Includes the results of operations of Argyle Television, Inc., the results of operations of WZZM and WGRZ for January 1997 only, KITV, WAPT, Argyle's share of the Clear Channel Venture and KHBS/KHOG (the "Arkansas Stations") for the full period presented and WLWT and KOCO from February 1 through August 31, 1997. (b) Includes the results of operations of Hearst-Argyle Television, Inc., which includes WLWT, KOCO, KITV, WAPT, KHBS, the Company's share of the Clear Channel Venture (collectively, the "Argyle Stations"), WCVB, WTAE, WISN, WBAL, KMBC and WDTN (collectively, the "Hearst Broadcast Group") and the management fee derived by the Company from WWWB, WPBF, KCWB and WBAL-radio ("the Managed Stations") for the full period presented. (c) Includes the results of operations of the Argyle Stations, Hearst Broadcast Group and the management fee derived by the Company from the Managed Stations on a combined pro forma basis as if the Hearst Transaction and the Gannett Swap had occurred at the beginning of the period presented. (d) Represents the cumulative effect of the adoption of SFAS No. 109, Accounting for Income Taxes. (e) Represents the write-offs of unamortized financing costs and premiums paid upon early extinguishment of certain Company debt. (f) Gives effect to dividends on the Preferred Stock issued in connection with the acquisition of the Arkansas Stations. (g) Broadcast cash flow is defined as station operating income (loss), plus depreciation and amortization and write down of intangible assets, plus amortization of program rights, minus program payments. Broadcast cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. Broadcast cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (h) Broadcast cash flow margin is broadcast cash flow divided by total revenues, expressed as a percentage. (i) Operating cash flow is defined as operating income (loss), plus depreciation and amortization, write down of intangible assets, and amortization of program rights, minus program payments, plus non-cash compensation expense. Operating cash flow is presented here not as a measure of operating results, but rather as a measure of debt service ability. Operating cash flow does not purport to represent cash provided by operating activities and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (j) Operating cash flow margin is operating cash flow divided by total revenues, expressed as a percentage. (k) After-tax cash flow is defined as income (loss) before extraordinary item plus depreciation and amortization. After-tax cash flow does not present a measure of operating results and does not purport to represent cash provided by operating activities. After-tax cash flow should not be considered in isolation or as a substitute 15 for measures of performance prepared in accordance with generally accepted accounting principles. This measure may not be comparable to similarly titled measures used by other companies. (l) The Company has not paid any dividends on its Common Stock since inception. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations On August 29, 1997 (September 1, 1997 for accounting purposes), Argyle consummated an agreement with The Hearst Corporation ("Hearst") to combine the Hearst Broadcast Group (WCVB, WBAL, WTAE, WISN, WDTN and KMBC) with and into Argyle to form Hearst-Argyle Television, Inc. (the "Company") (the "Hearst Transaction"). In addition, the Company agreed to provide management services with respect to WWWB, WPBF, KCWB and WBAL-radio (the "Managed Stations"), three of which stations are owned by Hearst and the other of which Hearst provides certain services to under a local marketing agreement, in exchange for a management fee. (See Notes 3 and 12 to the consolidated financial statements). In January 1995, Argyle acquired three television stations -- WZZM, WNAC and WAPT. Argyle acquired KITV in June 1995 and WGRZ in December 1995. In June 1996, Argyle acquired KHBS and its satellite KHOG (the "Arkansas Stations"). On July 1, 1996, Argyle entered into a Joint Marketing and Programming Agreement (the "Clear Channel Venture") with Clear Channel Communications, Inc. involving WNAC and WPRI, the CBS affiliate in Providence, Rhode Island, owned by Clear Channel Communications, Inc. On January 31, 1997, Argyle swapped WZZM and WGRZ under the terms of an agreement (the "Gannett Swap") for WLWT and KOCO with Gannett Co., Inc. ("Gannett"). (See Note 3 to the consolidated financial statements.) The following discussion of results of operations does not include the full-year pro forma effects of the Hearst Transaction. Results of operations for the year ended December 31, 1997 include: (i) WZZM and WGRZ for January; (ii) KITV, WAPT, the Arkansas Stations, and the Company's share of broadcast cash flows from the Clear Channel Venture for the entire period presented; (iii) WLWT and KOCO from February through December; (iv) the Hearst Broadcast Group from September through December; and, (v) fees derived by the Company from the Managed Stations from September through December. Results of operations for the year ended December 31, 1996 include: (i) WZZM, WAPT, KITV, and WGRZ for the entire period presented; (ii) the Arkansas Stations from June through December; (iii) Argyle's share of broadcast cash flows from the Clear Channel Venture from July through December; and, (iv) WNAC from January through June. Results of operations for the year ended December 31, 1995 include: (i) WZZM, WAPT and WNAC for the entire period presented; (ii) KITV from June 15 through December 31; and (iii) WGRZ for December, only. As a result of the Hearst Transaction, the consolidated financial statements for the period subsequent to the Hearst Transaction are presented on a different basis of accounting than those for the period prior to the Hearst Transaction and, therefore, are not directly comparable. 16
Years Ended December 31, ------------------------------------ 1995 1996 1997 --------- --------- --------- (In thousands) Total revenues $ 46,944 $ 73,294 $ 198,266 Station operating expenses 23,603 37,639 87,603 Amortization of program rights 3,961 4,725 17,485 Depreciation and amortization of intangibles 12,294 23,965 29,105 --------- --------- --------- Station operating income 7,086 6,965 64,073 Corporate general and administrative expenses 2,324 4,285 6,218 Non-cash compensation expense 675 675 3,518 --------- --------- --------- Operating income 4,087 2,005 54,337 Interest expense, net 12,052 16,566 28,579 --------- --------- --------- Income (loss) before taxes and extraordinary item (7,965) (14,561) 25,758 Income taxes -- -- (16,419) --------- --------- --------- Income (loss) before extraordinary item (7,965) (14,561) 9,339 Extraordinary item, early retirement of debt (7,842) -- (16,212) --------- --------- --------- Net loss $ (15,807) $ (14,561) $ (6,873) ========= ========= =========
Set forth below are the principal types of television revenues and related agency and national sales representative commissions for the Company's twelve stations on a pro forma combined full-year basis for the periods indicated and the percentage contribution of each to the total revenues. The information included in the table below does not include certain pro forma adjustments reflected in pro forma financial statements set forth elsewhere herein.
Combined Years Ended December 31, ---------------------------------------------------------------------------------- 1995 % 1996 % 1997 % --------------- ----------- ---------------- ----------- ---------------- ------ (In thousands) Revenues: Local/Regional(a) $ 220,064 60.8% $ 218,299 59.2% $ 239,301 62.1% National(b) 165,707 45.8 163,310 44.3 166,100 43.1 Network Compensation(c) 21,203 5.9 21,440 5.8 22,129 5.7 Political(d) 3,580 1.0 18,995 5.1 3,022 0.8 Barter(e) 7,987 2.2 7,338 2.0 12,891 3.4 Other 8,587 2.4 7,192 1.9 10,757 2.8 Agency and Sales Representative Commissions(f) (65,512) (18.1) (67,529) (18.3) (68,956) (17.9) --------- --------- --------- --------- --------- --------- Total Revenues $ 361,616 100% $ 369,045 100% $ 385,244 100% ========= ========= =========
- ---------- (a) Represents sale of advertising time to local and regional advertisers. (b) Represents sale of advertising time to national advertisers. (c) Represents payment by the networks for broadcasting network programming. (d) Represents sale of advertising time to political advertisers. (e) Represents value of commercial time exchanged for syndicated programs and commercial time exchanged for goods and services (trade outs). (f) Represents commissions paid to local and national advertising agencies and to national sales representatives. 17 Year Ended December 31, 1997 (The Company) Compared to Year Ended December 31, 1996 (Predecessor Company) Total revenues. Total revenues in the year ended December 31, 1997 were $198.3 million, as compared to $73.3 million in the year ended December 31, 1996, an increase of $125.0 million or 170.5%. The increase was primarily attributable to the Hearst Transaction which added $113.6 million to 1997 total revenues. In addition, the incremental revenues resulting from Gannett Swap were $8.5 million and the full-year inclusion of the Arkansas Stations added $4.1 million to 1997 total revenues. These revenue gains were offset by the net effects of the Clear Channel Venture, which accounted for a $1.3 million decrease in recorded total revenues, because only the Company's share of the Clear Channel Venture broadcast cash flows is included in total revenues. Station operating expenses. Station operating expenses in the year ended December 31, 1997 were $87.6 million, as compared to $37.6 million in the year ended December 31, 1996, an increase of $50.0 million or 133%. The increase was primarily attributable to the Hearst Transaction, which added $42.7 million to station operating expenses during 1997. In addition, the incremental station operating expenses resulting from the Gannett Swap were $4.2 million and the full-year inclusion of the Arkansas Stations added $3.5 million to 1997 station operating expenses. This was offset by the Clear Channel Venture, which accounted for a $1.3 million decrease in station operating expenses as a result of WNAC expenses being eliminated, and only the Company's share of the Clear Channel Venture broadcast cash flows being included in total revenues. Amortization of program rights. Amortization of program rights in the year ended December 31, 1997 was $17.5 million, as compared to $4.7 million in the year ended December 31, 1996, an increase of $12.8 million or 272.3%. The increase was primarily attributable to the Hearst Transaction, which added $13.2 million to amortization of program rights during 1997. Depreciation and amortization. Depreciation and amortization of intangible assets was $29.1 million in the year ended December 31, 1997, as compared to $24.0 million in the year ended December 31, 1996, an increase of $5.1 million or 21.3%. The increase was primarily attributable to the Hearst Transaction, which added $5.2 million to depreciation and amortization of intangibles during 1997. In addition, the increase was attributable to the additional depreciation and amortization resulting from the step-up to fair market value of the Argyle Stations fixed and intangible assets. This step-up was recorded in connection with The Hearst Transaction and accounted for approximately $1.4 million of the increase in depreciation and amortization expense. Station operating income. Station operating income in the year ended December 31, 1997 was $64.1 million, as compared to $7.0 million in the year ended December 31, 1996, an increase of $57.1 million or 815.7%. The station operating income increase was primarily attributable to the Hearst Transaction. Corporate general and administrative expenses. Corporate general and administrative expenses were $6.2 million for the year ended December 31, 1997, as compared to $4.3 million for the year ended December 31, 1996, an increase of $1.9 million or 44.2%. The increase was primarily attributable to the increase in corporate staff following the Hearst Transaction and other costs associated with the Hearst Transaction. Non-cash compensation expense. Non-cash compensation expense of $3.5 million during 1997, represents stock option expense recorded in compliance with SFAS No. 123. As a result of the Hearst Transaction, all stock options outstanding were vested and either were cancelled in exchange for consideration or rolled-over into the 1997 Stock Option Plan. Because of this, the SFAS No. 123 expense, which would have been recorded over time, was recorded in August 1997. See Note 10 to the consolidated financial statements. Interest expense, net. Interest expense, net was $28.6 million in the year ended December 31, 1997, as compared to $16.6 million in the year ended December 31, 1996, an increase of $12.0 million or 72.3%. This increase in interest expense was primarily attributable to a larger outstanding debt balance in 1997 than in 1996, which was the result of the Hearst Transaction and the Gannett Swap. Interest expense, net for the 1996 year was reduced by $1.1 million as a result of the change in fair market value of interest rate protection agreements since 18 December 31, 1995 recorded in compliance with SFAS No. 119. Interest rate protection agreements were accounted for using hedge accounting during 1997. Income taxes. Income tax expense was $16.4 million for the year ended December 31, 1997. This represents federal and state taxes as calculated on the Company's net income before taxes and extraordinary item for the four month's ended December 31, 1997. The Company incurred losses for all prior periods presented and therefore, did not record any federal or state income tax benefit. Extraordinary item. The Company recorded an extraordinary item of $16.2 million net of the related income tax benefit, in 1997. This extraordinary item resulted from a refinancing of the Company's $275.0 million private placement debt (assumed in connection with the Hearst Transaction) and $45.0 million of the Company's senior subordinated notes in December 1997. The extraordinary item includes the write-off of the pro rata portion of the unamortized financing costs associated with the senior subordinated notes and the payment of a premium for both refinancings. Net loss. Net loss was $6.9 million in the year ended December 31, 1997, as compared to $14.6 million in the year ended December 31, 1996, a decrease of $7.7 million or 52.7%. This decrease was attributable to the items discussed above. Broadcast Cash Flow. Broadcast cash flow was $92.5 million in the year ended December 31, 1997, as compared to $31.9 million in the year ended December 31, 1996, an increase of $60.6 million or 190%. The broadcast cash flow increase resulted from the Hearst Transaction, inclusion of the Arkansas Stations for the entire 1997 year, and the effect of the Gannett Swap. Broadcast cash flow margin increased to 46.7% in 1997 from 43.5% in 1996. Year Ended December 31, 1996 (Predecessor Company) Compared to Year Ended December 31, 1995 (Predecessor Company) Total revenues. Total revenues in the year ended December 31, 1996 were $73.3 million, as compared to $46.9 million in the year ended December 31, 1995, an increase of $26.4 million or 56.3%. The acquisition of KITV during June 1995, WGRZ during December 1995 and KHBS during June 1996 resulted in an approximately $26.9 million increase in total revenues. In addition, WZZM experienced an increase of $2.6 million in total revenues, which was due to an increase in trade and barter revenues and an increase in local revenues and national political revenues. These revenue gains were offset by the net effects of the Clear Channel Venture, which accounted for a $3.1 million decrease in recorded total revenues, because only the Company's share of the Clear Channel Venture broadcast cash flows is included in total revenues. Station operating expenses. Station operating expenses in the year ended December 31, 1996 were $37.6 million, as compared to $23.6 million in the year ended December 31, 1995, an increase of $14.0 million or 59.3%. The acquisition of KITV during June 1995, WGRZ during December 1995 and KHBS during June 1996 resulted in an approximate $15.3 million increase in station operating expenses. In addition, WZZM experienced a $1.0 million increase in trade and barter expenses, which was offset by a decrease in other operating expenses at WZZM and WAPT of $0.3 million. This was offset by the Clear Channel Venture, which accounted for a $2.0 million decrease in station operating expenses as a result of WNAC expenses being eliminated, and only the Company's share of the Clear Channel Venture broadcast cash flows being included in total revenues. Amortization of program rights. Amortization of program rights in the year ended December 31, 1996 was $4.7 million, as compared to $4.0 million in the year ended December 31, 1995, an increase of $0.7 million or 17.5%. The acquisition of KITV during June 1995, WGRZ during December 1995 and KHBS during June 1996 resulted in an approximate $1.2 million increase in amortization of program rights. This was offset by the Clear Channel Venture, which accounted for a $0.5 million decrease in amortization of program rights as a result of WNAC amortization being eliminated, and only the Company's share of the Clear Channel Venture broadcast cash flows being included in total revenues. 19 Depreciation and amortization. Depreciation and amortization of intangible assets was $24.0 million in the year ended December 31, 1996, as compared to $12.3 million in the year ended December 31, 1995, an increase of $11.7 million or 95.1%. The acquisition of KITV during June 1995, WGRZ during December 1995 and KHBS during June 1996 and the write-up of fixed assets and intangible assets to fair market value at their respective dates of acquisition resulted in an approximately $10.5 million increase in depreciation and amortization expense. In addition, there was an increase in amortization of approximately $0.7 million related to the Clear Channel Venture in 1996. Station operating income. Station operating income in the year ended December 31, 1996 was $7.0 million, as compared to $7.1 million in the year ended December 31, 1995, a decrease of $0.1 million or 1.4%. The station operating income decrease was primarily attributable to a disproportionate increase in depreciation and amortization as compared to the increase in total revenues. Corporate general and administrative expenses. Corporate general and administrative expenses were $4.3 million for the year ended December 31 1996, as compared to $2.3 million for the year ended December 31, 1995, an increase of $2.0 million or 87.0%. The increase was primarily attributable to incentive compensation, expenses associated with transaction activities, the acquisition of KITV and WGRZ during 1995, and incremental expenses associated with being a new company during 1995 and becoming a public company following the Company's initial public offering of its common stock in October 1995. Non-cash compensation expense. Non-cash compensation expense of $0.7 million during both 1996 and 1995 represents stock option expense recorded in compliance with SFAS No. 123. Interest expense, net. Interest expense, net was $16.6 million in the year ended December 31, 1996, as compared to $12.1 million in the year ended December 31, 1995, an increase of $4.5 million or 37.2%. This increase in interest expense was primarily attributable to a larger outstanding debt balance in 1996 than in 1995, which was the result of the acquisitions and related financings of the Arkansas Stations, the Clear Channel Venture and the issuance of the Senior Subordinated Notes in October 1995. Interest income was $1.0 million in the year ended December 31, 1995. This represents the interest earned on cash temporarily invested prior to the acquisition of WGRZ. Interest income in the year ended December 31, 1996 was $0.08 million. Extraordinary item. The Company incurred an extraordinary loss of $7.8 million in 1995. This extraordinary loss resulted from a refinancing of the Company's senior bank debt in June 1995 and in October 1995. These refinancing resulted in a write-off of all unamortized financing costs associated with the senior bank debt incurred in connection with the acquisition of the Northstar Stations in January 1995 and KITV in June 1995. Net loss. Net loss was $14.6 million in the year ended December 31, 1996, as compared to $15.8 million in the year ended December 31, 1995, a decrease of $1.2 million. The decrease was attributable to the items discussed above. Broadcast Cash Flow. Broadcast cash flow was $31.9 million in the year ended December 31, 1996, as compared to $20.4 million in the year ended December 31, 1995, an increase of $11.5 million or 56.4%. The broadcast cash flow increase resulted primarily from the acquisition of KITV during June 1995, WGRZ during December 1995 and KHBS during June 1996. Broadcast cash flow margin remained constant between years at 43.5%. Liquidity and Capital Resources Upon completion of the Hearst Transaction on August 29, 1997, the Company retired its existing credit agreement (the "Old Credit Agreement") and entered into a $1 billion credit facility with Chase Manhattan Bank (the "Credit Facility"). As of December 31, 1997, there was $85.0 million outstanding under the Credit Facility. The Company may borrow amounts under the Credit Facility from time to time for additional acquisitions, capital expenditures and working capital, subject to the satisfaction of certain conditions on the date of borrowing. 20 On November 12, 1997 the Company sold 4,000,000 shares (plus 232,000 shares of the underwriters' over-allotment option) of Series A Common Stock at $27 per share. On November 13, 1997, the Company issued $125,000,000 aggregate principal amount of 7.0% Senior Notes due 2007 and $175,000,000 aggregate principal amount of 7.5% Senior Notes due 2027 (collectively, the "Senior Notes"). The Company used the proceeds from the equity and debt offerings (collectively, the "Offerings") to pay down existing debt. During December 1997, the Company refinanced its $275.0 million Private Placement Debt, assumed in the Hearst Transaction, using proceeds from the Offerings and advances under the Credit Facility. In addition, the Company refinanced $45.0 million of its Senior Subordinated Notes (the "Notes") pursuant to provisions of the indenture during December 1997. This refinancing was funded by advances under the Credit Facility. The Company will refinance the remaining Notes during 1998. (See Note 16 to the consolidated financial statements) Capital expenditures were $6.6 million in 1996 and $30.4 million in 1997. The Company invested approximately $15.8 million in 1997 related to the construction of a new all-digital studio and station facility for KITV. In addition, the Company invested approximately $8.5 million in its new station facility at WLWT. The Company anticipates that its primary sources of cash, those being current cash balances, operating cash flow and amounts available under the Credit Facility, will be sufficient to finance the operating and working capital requirements of its stations, the Company's debt service requirements and anticipated capital expenditures for the Company for both the next 12 months and the foreseeable future thereafter. Impact on Inflation The impact of inflation on the Company's operations has not been significant to date. There can be no assurance, however, that a high rate of inflation in the future would not have an adverse impact on the Company's operating results. Forward-Looking Statements This report contains certain forward-looking statements concerning the Company's operations, economic performance and financial condition. These statements are based upon a number of assumptions and estimates which are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and reflect future business decisions which are subject to change. Some of the assumptions may not materialize and unanticipated events may occur which can affect the Company's results. Year 2000 The Company has evaluated the potential impact of the situation commonly referred to as the "Year 2000 problem." The Year 2000 problem, which is common to most corporations, concerns the inability of information systems, primarily computer software programs, to properly recognize and process date sensitive information related to the year 2000. Preliminary assessment indicates that solutions will involve a mix of modifying existing systems, retiring obsolete systems and confirming vendor compliance. There can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted and would not have an adverse effect on the Company's systems. The Company will utilize both internal and external resources to test and reprogram or replace its software for Year 2000 compliance. The Company currently does not anticipate any significant incremental capital expenditures associated with the Year 2000 problem. However, Year 2000 assessments will continue and capital expenditure estimates could change. New Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), and SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 131 establishes standards for reporting certain financial and descriptive information for reportable segments on the same basis that is used internally for evaluating segment performance and the allocation of resources 21 to segments. SFAS 130 establishes standards for presenting nonshareholder related items that are excluded from net income and reported as components of stockholders' equity, such as foreign currency translation. These statements are effective for fiscal years beginning after December 15, 1997. In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, "Employers' Disclosures About Pensions and Other Postretirement Benefits", which becomes effective for the Company's 1998 consolidated financial statements. SFAS No. 132 standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain previously required disclosures. The adoption, of these statements will not have a material effect on the Company's consolidated financial statements. 22 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS Page ---- Hearst-Argyle Television, Inc. Report of Deloitte & Touche LLP ............................................ 24 Report of Ernst & Young LLP ................................................ 25 Consolidated Balance Sheets as of December 31, 1996 (Predecessor Company) and 1997 .......................................................... 26 Consolidated Statements of Operations for the Years Ended December 31, 1995 and 1996 and the Eight Months Ended August 31, 1997 (Predecessor Company) and the Four Months Ended December 31, 1997 ....................... 28 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995 and 1996 and the Eight Months Ended August 31, 1997 (Predecessor Company) and the Four Months Ended December 31, 1997. ......... 29 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and 1996 and the Eight Months Ended August 31, 1997 (Predecessor Company) and the Four Months Ended December 31, 1997 ....................... 30 Notes to Consolidated Financial Statements ................................. 32 23 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Hearst-Argyle Television, Inc. We have audited the accompanying consolidated balance sheet of Hearst-Argyle Television, Inc. (successor to Argyle Television, Inc. the "Predecessor Company") (collectively referred to as the "Company") as of December 31, 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for the period September 1, 1997 (Date of Acquisition) to December 31, 1997 and as to the Predecessor Company the related statements of operations, stockholders' equity and cash flows for the period January 1, 1997 to August 31, 1997. Our audit also included the financial statement schedule listed in Item 14. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1997, and the results of its operations and its cash flows for the period September 1, 1997 to December 31, 1997 (period after the change in control referred to in Note 3 to the consolidated financial statements), and with respect to the Predecessor Company for the period January 1, 1997 to August 31, 1997 (period up to the change in control referred to in Note 3 to the consolidated financial statements) in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As more fully discussed in Note 3 to the consolidated financial statements, the Predecessor Company was acquired in a business combination accounted for as a purchase. As a result of the acquisition, the consolidated financial statements for the period subsequent to the acquisition are presented on a different basis of accounting than those for the periods prior to the acquisition and, therefore, are not directly comparable. Deloitte & Touche LLP New York, New York February 26, 1998 (March 9, 1998 as to Note 16) 24 INDEPENDENT AUDITORS' REPORT Board of Directors of Argyle Television, Inc. We have audited the accompanying consolidated balance sheet of Argyle Television, Inc. as of December 31, 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 1996. Our audits also included the Financial Statement Schedule listed in the Index at Item 14a. 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 audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Argyle Television, Inc. at December 31, 1996, and consolidated results of its operations and its cash flows for each of the two 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. As discussed in Note 2 to the financial statements, in 1995 the Company changed its method of accounting for stock-based compensation. Ernst & Young LLP February 12, 1997 San Antonio, Texas 25 HEARST-ARGYLE TELEVISION, INC. Consolidated Balance Sheets
December 31, 1996 December 31, 1997 -------------------- ----------------- (Predecessor Company) (In thousands) Assets Current assets: Cash and cash equivalents $ 949 $ 12,759 Accounts receivable, net of allowance for Doubtful accounts of $169 and $2,204 in 1996 and 1997, respectively 14,936 89,988 Barter program rights 5,912 3,996 Program rights 3,934 31,741 Deferred income taxes -- 5,975 Related party receivable -- 3,695 Other 1,895 7,070 Net assets held for sale -- 72,019 --------- ----------- Total current assets 27,626 227,243 --------- ----------- Property, plant and equipment: Land, building and improvements 17,135 31,901 Broadcasting equipment 21,126 120,747 Office furniture, equipment and other 5,524 19,233 Construction in progress 2,357 16,128 --------- ----------- 46,142 188,009 Less accumulated depreciation (6,929) (90,205) --------- ----------- Property, plant and equipment, net 39,213 97,804 --------- ----------- Intangible assets, net 231,856 661,326 --------- ----------- Other assets: Deferred acquisition and financing costs, net of accumulated amortization of $1,050 and $2,952 in 1996 and 1997, respectively 5,788 27,796 Barter program rights, noncurrent 5,333 1,315 Program rights, noncurrent 3,580 2,196 Other 15,212 26,429 --------- ----------- Total other assets 29,913 57,736 --------- ----------- Total assets $ 328,608 $ 1,044,109 ========= ===========
See notes to consolidated financial statements. 26 HEARST-ARGYLE TELEVISION, INC. Consolidated Balance Sheets
December 31, 1996 December 31, 1997 -------------------- ----------------- (Predecessor Company) (In thousands except share data) Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,001 $ 616 Accrued liabilities 5,612 31,579 Barter program rights payable 6,776 4,008 Program rights payable 4,251 31,761 Other 868 3,904 --------- ----------- Total current liabilities 18,508 71,868 --------- ----------- Barter program rights payable 5,333 1,269 Program rights payable 3,610 3,654 Long-term debt 171,500 490,000 Deferred income taxes -- 150,274 Other liabilities 505 390 --------- ----------- Total noncurrent liabilities 180,948 645,587 --------- ----------- Stockholders' equity: Series A preferred stock, 10,938 shares issued and outstanding 1 1 Series B preferred stock, 10,938 shares issued and outstanding 1 1 Series A common stock, par value $.01 per share, 35,000,000 shares authorized, 3,846,914 shares issued and outstanding in 1996 and 100,000,000 shares authorized, 12,529,154 shares issued and outstanding in 1997 38 125 Series B common stock, par value $.01 per share, 200,000 shares authorized, 200,000 shares issued and outstanding in 1996 and 100,000,000 shares authorized, 41,298,648 shares issued and outstanding in 1997 2 413 Series C common stock, par value $.01 per share, 14,800,000 shares authorized, 7,300,000 shares issued and outstanding in 1996 73 -- Additional paid-in capital 159,454 363,404 Retained deficit (30,417) (37,290) --------- ----------- Total stockholders' equity 129,152 326,654 --------- ----------- Total liabilities and stockholders' equity $ 328,608 $ 1,044,109 ========= ===========
See notes to consolidated financial statements. 27 HEARST-ARGYLE TELEVISION, INC. Consolidated Statements of Operations
Eight Months Four Months Years Ended December 31, Ended Ended 1995 1996 August 31, 1997 December 31, 1997 ---------- ---------- --------------- ----------------- (Predecessor Company) (In thousands, except per share data) Total revenues $ 46,944 $ 73,294 $ 51,826 $ 146,440 Station operating expenses 23,603 37,639 27,610 59,993 Amortization of program rights 3,961 4,725 2,833 14,652 Depreciation and amortization 12,294 23,965 16,955 12,150 -------- -------- -------- --------- Station operating income 7,086 6,965 4,428 59,645 Corporate general and administrative expenses 2,324 4,285 2,700 3,518 Non-cash compensation expense 675 675 3,518 -- -------- -------- -------- --------- Operating income (loss) 4,087 2,005 (1,790) 56,127 Interest expense, net 12,052 16,566 12,749 15,830 -------- -------- -------- --------- Earnings (loss) before income taxes and extraordinary item (7,965) (14,561) (14,539) 40,297 Income taxes -- -- -- 16,419 -------- -------- -------- --------- Income (loss) before extraordinary item (7,965) (14,561) (14,539) 23,878 Extraordinary item, loss on early retirement of debt, net of income tax benefit in 1997 (7,842) -- -- (16,212) -------- -------- -------- --------- Net income (loss) (15,807) (14,561) (14,539) 7,666 Less preferred stock dividends -- (829) (711) (711) -------- -------- -------- --------- Earnings (loss) applicable to common stockholders $(15,807) $(15,390) $(15,250) $ 6,955 ======== ======== ======== ========= Earnings (loss) per common share - Basic: Before extraordinary item $ (1.25) $ (1.37) $ (1.34) $ 0.48 Extraordinary item (1.22) -- -- (0.34) -------- -------- -------- --------- Net income (loss) $ (2.47) $ (1.37) $ (1.34) $ 0.14 ======== ======== ======== ========= Number of common shares used in the calculation 6,388 11,246 11,347 48,628 ======== ======== ======== ========= Earnings (loss) per common share - Diluted: Before extraordinary loss $ (1.25) $ (1.37) $ (1.34) $ 0.48 Extraordinary item (1.22) -- -- (0.34) -------- -------- -------- --------- Net income (loss) $ (2.47) $ (1.37) $ (1.34) $ 0.14 ======== ======== ======== ========= Number of common shares used in the calculation 6,388 11,246 11,347 48,752 ======== ======== ======== =========
See notes to consolidated financial statements. 28 HEARST-ARGYLE TELEVISION, INC. Consolidated Statements of Stockholders' Equity
Additional Preferred Common Stock Paid-In Retained Stock Series A Series B Series C Capital Deficit Total ----- --------- -------- -------- ------- ------- ----- (In thousands, except share data) Balances at January 1, 1995 $ - $ -- $ -- $ -- $ 1 $ (49) $ (48) Issuance of 199,900 shares of voting common stock for cash* - -- 2 -- 1,997 -- 1,999 Issuance of 7,300,000 shares of Series C common stock for cash - -- -- 73 72,927 -- 73,000 Issuance of 3,619,260 shares of Series A common stock for cash - 36 -- -- 56,281 -- 56,317 Capital contribution of equipment - -- -- -- 158 -- 158 Compensation element of stock options - -- -- -- 675 -- 675 Net loss - -- -- -- -- (15,807) (15,807) ------ ------ ------ ------ --------- -------- --------- Balances at December 31, 1995 - 36 2 73 132,039 (15,856) 116,294 Issuance of stock in connection with the Acquisition of the Arkansas Stations: Series A common stock - 227,654 shares; Series A preferred stock - 10,938 shares; Series B preferred stock - 10,938 shares 2 2 -- -- 27,569 -- 27,573 Compensation element of stock options - -- -- -- 675 -- 675 Dividends paid on preferred stock - -- -- -- (829) -- (829) Net loss - -- -- -- -- (14,561) (14,561) ------ ------ ------ ------ --------- -------- --------- Balances at December 31, 1996 2 38 2 73 159,454 (30,417) 129,152 Compensation element of stock options - -- -- -- 3,518 -- 3,518 Net loss - -- -- -- -- (14,539) (14,539) Dividends paid on preferred stock - -- -- -- (711) -- (711) ------ ------ ------ ------ --------- -------- --------- Balances at August 31, 1997 (Predecessor Company) 2 38 2 73 162,261 (44,956) 117,420 Net income - -- -- -- -- 7,666 7,666 Issuance of stock in connection with The Hearst Transaction: Shares issued: Series A common stock - 8,277,054 shares; Series B common stock - 41,298,648 shares; Shares redeemed: Series A common stock - 11,346,900 shares; - 44 411 (73) 93,673 -- 94,055 Issuance of 4,252,100 shares series A common stock for cash - 43 -- -- 108,181 -- 108,224 Dividends paid on preferred stock - -- -- -- (711) -- (711) ------ ------ ------ ------ --------- -------- --------- Balances at December 31, 1997 $ 2 $ 125 $ 413 $ -- $ 363,404 $(37,290) $ 326,654 ====== ====== ====== ====== ========= ======== =========
* Converted into Series B Common Stock during 1995. See notes to consolidated financial statements. 29 HEARST-ARGYLE TELEVISION, INC. Consolidated Statements of Cash Flows
Eight Months Four Months Years Ended December 31, Ended Ended 1995 1996 August 31, 1997 December 31, 1997 ----------- --------- --------------- ----------------- (Predecessor Company) (In thousands) Operating Activities Net income (loss) $ (15,807) $(14,561) $(14,539) $ 7,666 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary item, loss on early retirement of debt 7,842 -- -- 26,584 Depreciation 2,333 4,672 3,766 3,781 Amortization of intangible assets 9,961 19,293 13,189 8,369 Amortization of deferred financing costs 839 899 434 635 Amortization of program rights 3,961 4,725 2,833 14,652 Program payments (2,901) (3,766) (3,034) (15,102) Deferred income taxes -- -- -- 9,691 Provisions for doubtful accounts 70 235 -- 538 Compensation element of stock options 675 675 3,518 -- Fair value adjustments of interest rate protection 1,039 (1,151) (327) -- agreements Changes in operating assets and liabilities: Accounts receivable (3,193) (1,900) (450) (17,416) Other assets 237 67 5,793 694 Accounts payable and accrued liabilities 3,377 (1,179) 8,262 (4,436) Other liabilities (1,574) (1,066) (5,759) 2,467 --------- -------- -------- --------- Net cash provided by operating activities 6,859 6,943 13,686 38,123 Investing Activities Payment relating to the Hearst Transaction -- -- -- (110,076) Clear Channel Venture Payment -- (13,527) -- -- Acquisition of stations (233,739) (5,889) (23,016) -- Purchases of property, plant, and equipment: Special projects/buildings -- (2,274) (5,633) (14,964) Digital (770) (268) (2,608) (1,698) Maintenance (2,992) (4,091) (3,897) (1,606) Partial payment on relocation of studio -- (840) -- -- Acquisition costs -- (1,856) (1,894) -- --------- -------- -------- --------- Net cash used in investing activities (237,501) (28,745) (37,048) (128,344)
See notes to consolidated financial statements 30 HEARST-ARGYLE TELEVISION, INC. Consolidated Statements of Cash Flows
Eight Months Four Months Years Ended December 31, Ended Ended 1995 1996 August 31, 1997 December 31, 1997 ------------------ ------------------- ------------------ ------------------ (Predecessor Company) (In thousands) Financing Activities Financing costs and other $ (13,924) $ (126) $ (6,279) $ (19,868) Issuance of common stock, net 131,316 -- -- 108,934 Issuance of Senior Notes -- -- -- 300,000 Repayment of Private Placement Debt -- -- -- (295,895) Repayment of Senior Subordinated Notes -- -- -- (49,387) Proceeds from issuance of Senior Subordinated Notes 150,000 -- -- -- Dividends paid on preferred stock -- (829) (711) (711) Proceeds from issuance of long-term debt 170,250 31,500 88,000 185,000 Payment of long-term debt (204,796) (10,000) (54,500) (155,000) --------------- --------------- --------------- --------------- Net cash provided by financing activities 232,846 20,545 26,510 73,073 --------------- --------------- --------------- --------------- Increase (decrease) in cash and cash equivalents 2,204 (1,257) 3,148 (17,148) Cash and cash equivalents at beginning of period 2 2,206 949 29,907 --------------- --------------- --------------- --------------- Cash and cash equivalents at end of period $ 2,206 $ 949 $ 4,097 $ 12,759 =============== =============== =============== =============== Supplemental Cash Flow Information: Capital contribution of equipment $ 158 Business acquired in purchase transaction: Fair market value of assets acquired $ 282,930 $ 38,259 $ 23,030 $ 610,762 Liabilities assumed (14,644) (4,773) (14) (332,903) Note payable issued to seller (34,547) -- -- -- Issuance of preferred stock -- (21,876) -- -- Issuance of common stock -- (5,721) -- (166,783) --------------- --------------- --------------- --------------- Net cash paid for acquisitions $ 233,739 $ 5,889 $ 23,016 $ 111,076 =============== =============== =============== ===============
See notes to consolidated financial statements. 31 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements 1. Nature of Operations Hearst-Argyle Television, Inc. (successor to Argyle Television, Inc., the Predecessor Company, collectively referred to as the "Company") owns and operates twelve network-affiliated television stations in geographically diverse markets in the United States and provides management services to three network-affiliated television stations and two radio stations (the "Managed Stations"). Nine of the stations are affiliates of the American Broadcasting Companies (ABC), two stations are affiliates of the National Broadcasting Company, Inc. (NBC), and one station is an affiliate of the Fox Broadcasting Company (Fox). The Company operates in one main business segment, commercial television broadcasting. See Note 3. 2. Summary of Accounting Policies and Use of Estimates The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation. As more fully discussed in Note 3, the Predecessor Company was acquired in a business combination accounted for as a purchase. As a result of the acquisition, the consolidated financial statements for the period subsequent to the acquisition are presented on a different basis of accounting than those for the periods prior to the acquisition and, therefore, are not directly comparable. Cash Equivalents All highly liquid investments with maturities of three months or less when purchased are considered to be cash equivalents. Accounts Receivable Concentration of credit risk with respect to accounts receivable is limited due to the large number of geographically diverse customers, individually small balances and short payment terms. Program Rights Program rights and the corresponding contractual obligations are recorded when the license period begins and the programs are available for use. Costs are amortized based on the number of showings or license period. Program rights and the corresponding contractual obligations are classified as current or long-term based on estimated usage and payment terms, respectively. Program rights are reviewed periodically for impairment and, if necessary, adjusted to estimated net realizable value. No significant adjustments have been recorded in the accompanying consolidated statements of operations. Barter and Trade Transactions Barter transactions represent the exchange of commercial air time for programming. Trade transactions represent the exchange of commercial air time for merchandise or services. Barter transactions are generally recorded at the fair market value of the commercial air time relinquished. Trade transactions are generally recorded at the fair market value of the merchandise or services received. Barter program rights and payables are recorded for barter transactions based upon the availability of the broadcast property. Revenue is recognized on barter and trade transactions when the commercials are broadcast; expenses are recorded when the merchandise or service received is utilized. Barter and trade revenues for the years ended December 31, 1995 and 1996, the eight months ended August 31, 1997 and the four months ended December 31, 1997 were approximately $5,484,000, $6,923,000, $3,062,000, and $6,580,000 respectively, and are included in total revenues. Barter and trade expenses for the years 32 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 2. Summary of Accounting Policies and Use of Estimates (continued) ended December 31, 1995 and 1996, the eight months ended August 31, 1997 and the four months ended December 31, 1997 were $5,420,000, $7,011,000, $2,955,000 and $6,596,000, respectively, and are included in station operating expenses. Property, Plant and Equipment Property, plant and equipment is recorded at cost. Depreciation is calculated on the straight-line method over the estimated useful lives as follows: buildings - 25 to 39 years; broadcasting equipment - five to seven years; office furniture, equipment and other - five years. Leasehold improvements are amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Intangible Assets Intangible assets are recorded at cost. Amortization is calculated on the straight-line method over the estimated lives as follows: FCC licenses, network affiliation agreements, and goodwill - 40 years; other intangible assets 3-40 years. The recoverability of the carrying values of the excess of the purchase price over the net assets acquired and intangible assets is evaluated quarterly to determine if an impairment in value has occurred. An impairment in value will be considered to have occurred when it is determined that the undiscounted future operating cash flows generated by the acquired businesses are not sufficient to recover the carrying values of such intangible assets. If it has been determined that an impairment in value has occurred, the excess of the purchase price over the net assets acquired and intangible assets would be written down to an amount which will be equivalent to the present value of the estimated future operating cash flows to be generated by the acquired businesses. Income Taxes Subsequent to August 29, 1997, the Company is included in the consolidated federal income tax return of The Hearst Corporation ("Hearst"). The Company files separate income tax returns in states where a consolidated return is not permitted. Pursuant to the regulations under the Internal Revenue Code, the Company's pro rata share of the consolidated federal income tax liability of Hearst is allocated to the Company on a separate return basis. In accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", deferred income tax assets and liabilities are measured based upon the difference between the financial accounting and tax basis of assets and liabilities. Earnings Per Share The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share ("SFAS 128") in 1997. SFAS 128 replaced primary earnings per share ("EPS") with basic EPS and fully diluted EPS with diluted EPS. Basic EPS is calculated by dividing net income (loss) less preferred stock dividends by weighted average common shares outstanding. Diluted EPS is calculated similarly, except that it includes the dilutive effect of shares issuable under the Company's stock option plan (see Note 10). SFAS 128 also requires previously reported earnings per share to be restated to conform with the provisions of this statement. All per share amounts included in the footnotes are the same for basic and diluted earnings per share unless otherwise noted. The adoption of SFAS 128 did not have a material effect on the Company's consolidated financial statements. New Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), and SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 33 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 2. Summary of Accounting Policies and Use of Estimates (continued) 130"). SFAS 131 establishes standards for reporting certain financial and descriptive information for reportable segments on the same basis that is used internally for evaluating segment performance and the allocation of resources to segments. SFAS 130 establishes standards for presenting nonshareholder related items that are excluded from net income and reported as components of stockholders' equity, such as foreign currency translation. These statements are effective for fiscal year beginning after December 15, 1997. In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, "Employers' Disclosures About Pensions and Other Postretirement Benefits", which becomes effective for the Company's 1998 consolidated financial statements. SFAS No. 132 standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain previously required disclosures. The adoption, of these statements will not have a material effect on the Company's consolidated financial statements. Stock-Based Compensation During the fourth quarter of 1995, the Company adopted SFAS Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), in accounting for its employee stock options and elected to use the fair value method in accounting for its stock-based compensation plan. The effect of adopting SFAS No. 123 was an increase to the 1995 net loss by $474,569. Subsequent to the Hearst Transaction, to conform accounting policies, the Company has elected to account for employee stock-based compensation under APB No. 25 and related interpretations. Under APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Interest Rate Agreements The Company enters into interest-rate swap agreements to modify the interest characteristics of its outstanding debt. Each interest-rate swap agreement is designated with all or a portion of the principal balance and term of a specific debt obligation. These agreements involve the exchange of amounts based on a fixed interest rate for amounts based on variable interest rates over the life of the agreement without an exchange of the notional amount upon which the payments are based. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment to interest expense related to the debt. The related amount payable to or receivable from counterparties is included in other liabilities or assets. Gains and losses on terminations of interest-rate swap agreements are deferred as an adjustment to the carrying amount of the outstanding debt and amortized as an adjustment to interest expense related to the debt over the remaining term of the original contract life of the terminated swap agreement. In the event of the early extinguishment of a designated debt obligation, any realized or unrealized gain or loss from the swap would be recognized in income coincident with the extinguishment. Any swap agreements that are not designated with outstanding debt or notional amounts of interest-rate swap agreements in excess of the principal amounts of the underlying debt obligations are recorded as an asset or liability at fair value, with changes in fair value recorded as an adjustment to interest expense. (See Note 5) The Company purchases interest-rate cap agreements that are designed to limit its exposure to increasing interest rates. The interest-rate cap of these agreements exceeds the current market levels at the time they are entered into. The interest rate indices specified by the agreements have been and are expected to be highly correlated with the interest rates the Company incurs on its borrowings. Payments to be received as a result of the specified interest rate index exceeding the cap rate are accrued in other assets and are recognized as a reduction to interest expense. The cost of these agreements is included in other assets and amortized to interest expense ratably during the life of the agreement. Upon termination of an interest-rate cap agreement, any gain is deferred in other liabilities and amortized over the remaining term of the original contractual life of the agreement as a reduction to interest expense. 34 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 2. Summary of Accounting Policies and Use of Estimates (continued) Any notional amounts of agreements in excess of borrowings expected to be outstanding during their terms would be marked to market, with changes in market value recorded as an adjustment to interest expense. Deferred Acquisition and Financing Costs Acquisition costs are capitalized and will be included in the purchase price of the acquired stations. Financing costs are deferred and are amortized using the interest method over the term of the related debt when funded. Use of Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. 3. Acquisitions The Company is the successor to the combined operations of Argyle Television, Inc. ("Argyle" and "Predecessor Company") and the television broadcast group of The Hearst Corporation ("Hearst") pursuant to a merger transaction that was consummated on August 29, 1997, effective September 1, 1997 for accounting purposes (the "Hearst Transaction"). In that transaction, Hearst (the accounting acquiror) contributed its television broadcast group and related broadcast operations (the "Hearst Broadcast Group") to Argyle and merged a wholly-owned subsidiary of Hearst with and into Argyle, with Argyle as the surviving corporation (renamed "Hearst-Argyle Television, Inc."). As a result of the Hearst Transaction, Hearst currently owns approximately 41.3 million shares of the Company's Series B Common Stock, comprising approximately 77% of the total outstanding common stock of the Company. For accounting purposes, Hearst has been deemed to be the acquiror of Argyle. Accordingly, the assets and liabilities of Argyle have been adjusted to the extent acquired by Hearst to their estimated fair values based upon preliminary purchase price allocation. The net assets of the Hearst Broadcast Group have been reflected at their historical cost basis. In August 1994, the Company entered into an acquisition agreement with NTG, Inc. relating to the acquisition of WZZM, Grand Rapids, Michigan; WNAC, Providence, Rhode Island; and, WAPT, Jackson, Mississippi (the "Northstar Stations"). On January 4, 1995, the Company acquired the Northstar Stations for approximately $108 million in cash. In addition, the Company agreed to certain working capital adjustments and to assume certain state income tax liabilities of $1.7 million. Fees and expenses associated with the acquisition approximated $2.5 million. During January 1995, the Company entered into an asset purchase agreement with Tak Communications, Inc., debtor in possession, relating to the acquisition of WGRZ, Buffalo, New York (the "Buffalo Station"); and KITV, Honolulu; KMAU, Wailuku; KHVO, Hilo; and, TV Translator K51BB, Lihue, Hawaii (the "Hawaii Stations") in two closings for an aggregate consideration of $146 million. On June 13, 1995, the Company acquired the Hawaii Stations for approximately $16.5 million in cash and a note issued to the seller for $34.5 million, which was paid in December 1995. Fees and expenses associated with this acquisition were approximately $800,000. 35 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 3. Acquisitions (continued) On December 5, 1995, the Company acquired the Buffalo Station for $91 million in cash. Under the terms of the acquisition agreement, the Company also made a supplemental payment to the seller of $4 million in cash as a result of the closing of both the Hawaii Stations and the Buffalo Station. Such additional consideration has been allocated to the assets acquired in the purchases of the Hawaii Stations and the Buffalo Station. Fees and expenses associated with the Buffalo acquisition were approximately $3.0 million. During 1996, there was a change in the Buffalo Station purchase price valuation, which affected equipment and FCC license by approximately $1.3 million. On June 11, 1996, the Company acquired KHBS, Fort Smith, Arkansas, and its S-2 satellite KHOG, Fayetteville, Arkansas, (the "Arkansas Stations"). As consideration, the Company issued 227,654 shares of the Company's Series A Common Stock, 10,938 shares of the Company's Series A Preferred Stock and 10,938 shares of the Company's Series B Preferred Stock valued at approximately $27.6 million. The Company also paid approximately $5.9 million in cash for certain real estate, a non-competition covenant and affiliated debt associated with this acquisition. During the last part of 1996, there was a change in the Arkansas Stations purchase price valuation, which affected intangibles and other liabilities by approximately $2.3 million. In November 1996, Argyle entered into a definitive agreement (the "Gannett Swap") with Gannett Co., Inc. ("Gannett") to swap the Company's WZZM and WGRZ for Gannett's WLWT, the NBC affiliate in Cincinnati, Ohio, and KOCO, the ABC affiliate in Oklahoma City, Oklahoma. In connection with this transaction, Argyle agreed to pay Gannett $20 million in additional consideration, funded by borrowings under Argyle's Bank Credit Agreement dated October 27, 1995 ("Old Credit Agreement"). This transaction closed on January 31, 1997. These transactions were accounted for as a purchase and, accordingly, the purchase price and related acquisition costs have been allocated to the acquired assets and liabilities based upon their preliminarily determined fair market values. The excess of the purchase price over the net fair market value of the tangible assets acquired and the liabilities assumed was allocated to identifiable intangible assets including FCC licenses and network affiliation agreements and goodwill. The final asset and liability fair values may differ from those set forth in the accompanying consolidated balance sheet at December 31, 1997; however, the changes, if any, are not expected to have a material effect on the consolidated financial statements of the Company. The consolidated financial statements include the results of operations of the acquired stations since the date of the acquisition. Effective July 1, 1996, the Company entered into a Joint Marketing and Programming Agreement (the "Clear Channel Venture") with Clear Channel Communications, Inc. ("Clear Channel") involving WNAC and WPRI, the CBS affiliate in Providence, Rhode Island, owned by Clear Channel. Under the agreement, Clear Channel will program certain air time, including news programming, on WNAC and will manage the sale of commercial air time on both stations for an initial period of 10 years. The Company and Clear Channel each will receive 50% of the broadcast cash flows generated by the two stations subject to certain adjustments. The Company's share of the Clear Channel Venture broadcast cash flows is included in total revenues. In connection with this agreement, the Company paid Clear Channel approximately $13 million, which is included in other non-current assets and is being amortized using the straight line method over the initial term of the contract. Giving effect to the Hearst Transaction and the Gannett Swap discussed above, unaudited pro forma results of operations reflect combined historical results for WCVB, WTAE, WBAL, KMBC, WISN, WDTN, WAPT, KITV, WLWT, KOCO, the Arkansas Stations and the Company's share of the combined broadcast cash flows from the Clear Channel Venture and fees for providing management services to the Managed Stations pursuant to a management agreement (See Note 12), as if all acquisitions and financings (the Credit Facility and the Offerings) occurred as of January 1, 1996, are as follows: 36 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 1996 1997 ----------- ----------- (In thousands, except per share data) Total revenues $ 370,249 $ 387,782 Earnings from continuing operations applicable to common stockholders $ 43,627 $ 51,590 Earnings per common share - basic $ 0.81 $ 0.96 ============= ============= - diluted $ 0.81 $ 0.96 ============================== ============= ============= Pro forma number of shares used in calculations - basic 53,828 53,828 ============= ============= - diluted 53,863 53,873 ============= =============
The above pro forma results are presented in response to applicable accounting rules relating to business acquisitions and are not necessarily indicative of the actual results that would be achieved had each of the stations been acquired at the beginning of the periods presented, nor are they indicative of future results of operations. 4. Intangible Assets Intangible assets at December 31, consisted of the following: 1996 1997 ------------- ------------- (In thousands) FCC Licenses $ 126,009 $ 385,768 Cost in excess of net assets acquired -- 202,315 Network affiliation agreement 121,272 15,425 Advertiser client base asset -- 122,828 Favorable studio and office space -- 23,638 Other 12,764 24,228 ------------- ------------- 260,045 774,202 Accumulated amortization (28,189) (112,876) ------------- ------------- Intangible assets, net $ 231,856 $ 661,326 ============= ============= 5. Long-Term Debt Long-term debt at December 31, consists of the following: 1996 1997 ------------ ------------- (In thousands) Old Credit Agreement dated October 27, 1995: Revolving credit facility $ 21,500 $ -- Credit Facility dated August 29, 1997: Revolving credit facility -- 85,000 Senior Notes -- 300,000 Senior Subordinated Notes 150,000 105,000 ------------- ------------- Long-term debt $ 171,500 $ 490,000 ============= ============= Credit Facility Upon consummation of the Hearst Transaction, the Company entered into a $1 billion credit facility (the "Credit Facility") with the Chase Manhattan Bank ("Chase"). The Credit Facility will mature on December 31, 2004 (the 37 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 5. Long-Term Debt (continued) "Maturity Date"). On December 31, 1999 (the "Conversion Date"), outstanding principal indebtedness under the Credit Facility up to $750 million will be converted into a five-year term loan (the "Term Loan"). The outstanding principal balance of the Term Loan on the Conversion Date (the "Initial Term Loan Balance") is to be repaid in quarterly installments on the following schedule for the years indicated: 2000-2.5% of the Initial Term Loan Balance per quarter; 2001-3.75% of the Initial Term Loan Balance per quarter; 2002-5% of the Initial Term Loan Balance per quarter; 2003-6.25% of the Initial Term Loan Balance per quarter; and, 2004-7.5% of the Initial Term Loan Balance per quarter. On the Conversion Date and through the Maturity Date, Chase will also provide a $250 million revolving credit facility (the "Revolving Facility") to the Company. As of December 31, 1997, the Company had $915 million available under the Credit Facility. The Credit Facility is unsecured, but the Company provided a negative pledge that it will not grant to any third party a security interest in its assets and the stock of its subsidiaries. Outstanding principal balances under the Credit Facility (including, after the Conversion Date, borrowings under the Term Loan and the Revolving Facility) will bear interest at the "applicable margin" plus either, at the Company's option, LIBOR or the "alternate base rate." The "applicable margin" will vary depending on the ratio of the Company's total debt to operating cash flow ("leverage ratio"). The "alternate base rate" is the higher of (i) Chase's prime rate; (ii) 1% plus the secondary market rate for three month certificates of deposit; or, (iii) 0.5% plus the rates on overnight federal funds transactions with members of the Federal Reserve System. The Company will also be required to pay an annual commitment fee based on the unused portion of the Credit Facility and the applicable margin ranging from 0.1875% to 0.1250% (but after the Conversion Date, only on the unused portion of the Revolving Facility). The Credit Facility contains certain financial and other covenants and restrictions on the Company that, among other things, (i) limit the Company's ratio of total debt to operating cash flow to not greater than 5.5 through December 30, 1999; 5.0 from December 31, 1999 through December 30, 2000; 4.5 from December 31, 2000 through December 30, 2001; and 4.0 from December 31, 2001 through the Maturity Date; (ii) require the Company to maintain a ratio of operating cash flow to interest expense of not less than 2.0 through December 31, 1999, and not less than 2.5 thereafter; (iii) require the Company to maintain a ratio of operating cash flow to "fixed charges" (generally, interest expense, scheduled repayments of principal, taxes and capital expenditures) of not less than 1.15; (iv) restrict the amount of operating cash flow from businesses other than the broadcast business to 25% or less of the Company's total operating cash flow; and, (v) at such times when the ratio of total debt to operating cash flow is greater than or equal to 4.0, restrict the payment of dividends and the repurchase of stock to the sum of (x) $100 million; (y) proceeds from future stock issuances; and, (z) one-third of cash provided by operations in excess of fixed charges. The Credit Facility will also provide that all outstanding balances will become due and payable at such time as Hearst's (and certain of its affiliates') equity ownership in the Company becomes less than 35% of the total equity of the Company and Hearst and such affiliates no longer have the right to elect a majority of the members of the Company's Board. On August 29, 1997, Argyle's Old Credit Agreement was retired and related deferred financing fees were written-off and included as a cost of the Hearst Transaction. Private Placement Debt As part of the Hearst Transaction, the Company assumed $275 million of Hearst Private Placement Debt. The Company repaid the Private Placement Debt and a related "make-whole" premium of approximately $20.9 million during December 1997. 38 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 5. Long-Term Debt (continued) Senior Subordinated Notes In October 1995, Argyle issued $150,000,000 of senior subordinated notes (the "Notes"). The Notes are due in 2005 and bear interest at 9 3/4% payable semi-annually. The Notes are general unsecured obligations of the Company. In addition, the indenture governing the Notes imposes various conditions, restrictions and limitations on the Company and its subsidiaries. During December 1997, the Company repaid $45 million of the Notes at a premium of approximately $4.4 million using proceeds from the Senior Notes Offering. In addition, the Company wrote-off the pro-rata share of deferred financing fees related to the Notes which were repaid. The write-off of deferred financing fees relating to the Notes and the make-whole premium relating to the Private Placement Debt and the premium relating to the Notes, aggregating approximately $26.6 million pre-tax, were classified as an extraordinary item in the accompanying statement of operations for the period ended December 31, 1997. Senior Notes On November 7, 1997 the Company issued $125 million principal amount of 7.00% Senior Notes Due 2007, priced at 99.616% of par, and $175 million principal amount of 7.50% Debentures Due 2027, priced at 98.823% of par (collectively, "the Senior Notes"). The Senior Notes are unsubordinated and unsecured obligations of the Company. In addition, the indenture governing the Senior Notes imposes various conditions, restrictions and limitations on the Company and its subsidiaries. Proceeds from the Senior Notes offering were used to repay existing indebtedness of the Company. See Private Placement Debt and Senior Subordinated Notes, above. Interest Rate Risk Management Under the terms of the Old Credit Agreement, the Company was required to enter into interest rate protection agreements to modify the interest characteristics of a portion (approximately 50%) of its outstanding borrowings thereunder from a floating rate to a fixed rate. The Company wrote two options that gave the option holder the right to enter into two interest rate swap agreements with the Company during May and June 1996. Premiums for these two options were $1,000,477. The option holder exercised these options in May and June 1996, effectively fixing the Company's interest rate at approximately 7% on $35 million of its borrowings until June 1999. Additional information regarding these interest rate protection agreements in effect at December 31, 1997 follows: Notional Average Average Estimated Amount Receive Rate Pay Rate Fair Value ------ ------------ -------- ---------- Interest rate swap agreements: Fixed rate agreement $20,000,000 LIBOR 7.01% $(339,135) Fixed rate agreement $15,000,000 LIBOR 6.98% $(254,122) The Company is exposed to credit risk in the event of nonperformance by counterparties to its interest rate swap agreements. Credit risk is limited by entering into such agreements with primary dealers only; therefore, the Company does not anticipate that nonperformance by counterparties will occur. Notwithstanding this, the Company's treasury department monitors counterparty credit ratings at least quarterly through reviewing independent credit 39 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 5. Long-Term Debt (continued) agency reports. Both current and potential exposure are evaluated, as necessary, by obtaining replacement cost information from alternative dealers. Potential loss to the Company from credit risk on these agreements is limited to amounts receivable, if any. The Company enters into these agreements solely to hedge its interest rate risk. The Company entered into various forward treasury lock agreements (Treasury Lock Agreements) during August 1997 in connection with the offering of $300 million Senior Notes. The Treasury Lock Agreements were settled simultaneous with the closing of the Senior Notes on November 12, 1997. The average coupon rate and treasury yield was 6.375% and 6.648%, respectively. The Company paid the related institutions approximately $13.0 million, which was capitalized in Deferred Acquisition and Financing Costs in the consolidated balance sheet, and is being amortized over the life of the Senior Notes.
Eight Months Four Months Years Ended December 31, Ended Ended 1995 1996 August 31, 1997 December 31, 1997 -------- ------------------- --------------- ----------------- (Predecessor Company) (In thousands) Interest expense net, consists of the following: Interest on borrowings: Bank credit agreements $ 6,571 $ 2,231 $ 2,935 $ 2,089 Senior Subordinated Notes 2,645 14,580 9,750 4,851 Private Placement Debt -- -- -- 7,325 Senior Notes -- -- -- 2,917 Amortization of deferred financings costs and other 1,544 988 434 635 Hawaii Note 839 -- -- -- -------- -------------- -------- --------- 11,599 17,799 13,119 17,817 Interest rate swap agreements: Changes in fair value for agreements with optional amounts in excess of outstanding borrowings 452 436 (328) 176 Termination fee 440 -- -- -- Options related to interest rate swap agreements: Changes in fair value 586 (1,587) -- -- -------- -------------- -------- --------- Total interest expense 13,077 16,648 12,791 17,993 Interest income 1,025 82 42 2,163 -------- -------------- -------- --------- Total interest expense, net $ 12,052 $ 16,566 $ 12,749 $ 15,830 ======== ============== ======== =========
40 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 6. Earnings Per Share ("EPS")
For the Four Months Ended December 31, 1997 ------------------------------------------- (In thousands, except per share data) Income Shares Per-Share (Numerator) (Denominator) Amount ----------- ------------- ------ Income before extraordinary item $ 23,878 Less: preferred stock dividends (711) --------- Basic EPS Earnings before extraordinary item applicable to common stockholders $ 23,167 48,628 $ 0.48 ====== Effect of Dilutive Securities Assumed exercise of stock options -- 124 --------- -------- Diluted EPS Earnings before extraordinary item applicable to common stockholders plus assumed conversions $ 23,167 48,752 $ 0.48 ========= ======== ======
The Series A Preferred Stock convertible into Series A Common Stock at a conversion price of $35 per share, and certain common stock options, were outstanding as of December 31, 1997 but were not included in the computation of diluted EPS because the conversion price or exercise price was greater than the average market price of the common shares during the calculation period. For all other periods presented, the loss per share has been determined based on the loss before extraordinary item after preferred stock dividends divided by the weighted average number of common shares outstanding. 7. Income Taxes The provision (benefit) for income taxes relating to income before extraordinary item for the four months ended December 31, 1997, consists of the following: Current: State and local $ 2,177 Federal (64) ----------- 2,113 Deferred: Federal 14,306 ----------- Provision for income taxes $ 16,419 =========== The effective income tax rate for the four months ended December 31, 1997 varied from the statutory U.S. Federal income tax rate due to the following: Statutory U.S. Federal income tax 35.0% State income taxes, net of Federal tax benefit 4.6 Other non-deductible business expenses 1.1 ---- Effective income tax rate 40.7% ==== 41 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 7. Income Taxes (continued) As a result of the losses incurred by the Predecessor for the years ended December 31, 1995 and 1996, no U.S. Federal income tax expense or benefit has been recorded. Deferred tax liabilities and assets at December 31 consist of the following:
1996 1997 --------- ----------- (In thousands) Deferred tax liabilities: Accelerated depreciation $ 1,624 $ 8,937 Accelerated funding of pension benefit obligation -- 10,578 Other 750 2,086 Difference between book and tax basis of intangible assets 8,466 142,812 --------- ----------- Total deferred tax liabilities 10,840 164,413 --------- ----------- Deferred tax assets: Allowance for doubtful accounts, not currently deductible -- 1,721 Accrued expenses 689 4,254 Other -- 5,962 Operating loss carryforwards 11,071 8,177 --------- ----------- Total deferred tax assets 11,760 20,114 Valuation allowance for deferred tax assets (920) -- --------- ----------- Net deferred tax assets 10,840 20,114 --------- ----------- Net deferred tax assets/liabilities $ -- $ 144,299 ========= ===========
The Company has a net operating loss carryforward for federal income tax purposes of approximately $19,438,000, which expires in 2010. 8. Common Stock In connection with the Hearst Transaction, the Company's Certificate of Incorporation was amended and restated pursuant to which, among other things, (i) the Company's authorized common stock was increased from 50 million to 200 million shares; (ii) the Company's existing Series B Common Stock and Series C Common Stock was reclassified as and changed into an equal number of shares of Series A Common Stock; (iii) a Series B Common Stock was authorized and thereafter issued to Hearst in connection with the transaction; and, (iv) the Company's existing Series A Preferred Stock and Series B Preferred Stock received voting rights. The Company has 200 million shares of authorized common stock, par value $.01 per shares, with 100 million shares designated as Series A Common Stock and 100 million shares designated Series B Common Stock. Except as otherwise described below, the issued and outstanding shares of Series A Common Stock and Series B Common Stock vote together as a single class on all matters submitted to a vote of stockholders, with each issued and outstanding share of Series A Common Stock and Series B Common Stock entitling the holder thereof to one vote on all such matters. With respect to any election of directors, (i) the holders of the shares of Series A Common Stock are entitled to vote separately as a class to elect two members of the Company's Board of Directors (the "Series A Directors") and (ii) the holders of the shares of the Company's Series B Common Stock are entitled to 42 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 8. Common Stock (continued) vote separately as a class to elect the balance of the Company's Board of Directors (the "Series B Directors"); provided, however, that the number of Series B Directors shall not constitute less than a majority of the Company's Board of Directors. All of the outstanding shares of Series B Common Stock are held by a subsidiary of Hearst. No holder of shares of Series B Common Stock may transfer any such shares to any person other than to (i) Hearst; (ii) any corporation into which Hearst is merged or consolidated or to which all or substantially all of Hearst's assets are transferred; or, (iii) any entity controlled or consolidated or to which all or substantially all of Hearst's assets are transferred; or, (iii) any entity controlled by Hearst (each a "Permitted transferee"). Series B Common Stock, however, may be converted at any time into Series A Common Stock and freely transferred, subject to the terms and conditions of the Company's Certificate of Incorporation and to applicable securities laws limitations. On November 12, 1997, the Company sold an aggregate of 4 million shares of Series A Common Stock, par value $.01 per share at $27 per share. In connection with the offering, the underwriters exercised an over-allotment option and were sold another 232,000 shares at $27 per share. The aggregate proceeds from the offering net of expenses was $108.0 million. On December 29, 1997, the Company issued approximately 2.7 million shares of Series B Common Stock to Hearst (the "Adjustment Shares") in connection with the Hearst Transaction relating to net working capital at the date of acquisition (in excess of $30 million for the Hearst Broadcast group) and the purchase of surplus pension fund assets. 9. Preferred Stock The Company has one million shares of authorized preferred stock, par value $.01 per share. Under the Company's Certificate of Incorporation, the Company has two issued and outstanding series of preferred stock, Series A Preferred Stock and Series B Preferred Stock (collectively, the "Preferred Stock"). Each series of Preferred Stock has 10,938 shares issued and outstanding at December 31, 1997. The Preferred Stock has a cash dividend feature whereby each share accrues $65 per share annually, to be paid quarterly. The Series A Preferred Stock is convertible at the option of the holders, at any time, into Series A Common Stock at a conversion price of (i) on or before December 31, 2000, $35; (ii) during the calendar year ended December 31, 2001, the product of 1.1 times $35; and, (iii) during each calendar year after December 31, 2001, the product of 1.1 times the preceding year's conversion price. The Company has the option to redeem all or a portion of the Series A Preferred Stock at any time after June 11, 2001 at a price equal to $1,000 per share plus any accrued and unpaid dividends. The holders of Series B Preferred Stock have the option to convert such Series B Preferred Stock into shares of Series A Common Stock at any time after June 11, 2001 at the average of the closing prices for the Series A Common Stock for each of the 10 trading days prior to such conversion date. The Company has the option to redeem all or a portion of the Series B Preferred Stock at any time on or after June 11, 2001, at a price equal to $1,000 per share plus any accrued and unpaid dividends. 10. Stock Options 1997 Stock Option Plan The Company's Board of Directors approved the amendment and restatement of the Company's second amended and restated 1994 Stock Option Plan and adopted such plan as the resulting 1997 Stock Option Plan (the "Plan"). The amendment increases the number of shares reserved for issuance under the Plan to 3 million shares of Series A Common Stock. The stock options are granted with exercise prices at quoted market value at time of issuance. 43 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 10. Stock Options (continued) Options cliff-vest after 3 years commencing on the effective date of the grant and a portion of the options vest either after 9 years or in one-third increments upon attainment of certain market price goals of the Company's stock. All options granted pursuant to the Plan will expire no later than 10 years from the date of grant. Old Stock Option Plan The Company has a stock based compensation plan under which options to purchase Series C Common Stock up to a maximum of 12% of the Company's fully diluted, as defined, common stock may be granted to directors and key employees. Options are granted at a price not less than the fair market value of the stock at the date of grant; vest either with the passage of time or upon the attainment of performance goals; and expire 10 years from the date of grant. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumption: dividends-none; forfeitures-time vesting none, performance vesting 30%; expected volatility - 33%, zero prior to the Company's initial public offering; risk free interest rate - 5.25%; and expected life - 5 years. The resulting fair value is charged to expense over the service period with a corresponding increase in additional paid in capital. During 1995 and 1996, and for the eight months ended August 31, 1997, the Company charged to expense approximately $675,000 and $3,518,000, respectively related to stock based compensation. A summary of the status of the Company's Plan as of December 31, 1995, 1996 and 1997, and changes during the years ending on those dates is presented below:
1995 1996 1997 ------------------------------ ------------------------------ ----------------------------- Weighted Avg. Weighted Avg. Weighted Avg. Options Exercise Price Options Exercise Price Options Exercise Price ------- -------------- ------- -------------- ------- -------------- Outstanding- beginning of year -- -- 1,314,765 $12.15 1,338,172 $12.74 Granted 1,321,015 $12.03 74,532 $22.05 1,843,215 $26.75 Exercised -- -- -- -- (20,150) $10.45 Cancelled -- -- -- -- (1,168,247) $12.35 Forfeited (6,250) $10.00 (51,125) $11.13 (2,250) $10.00 ----------- ----------- ----------- Outstanding-end of the year 1,314,765 $12.15 1,338,172 $12.74 1,990,740 $25.85 =========== =========== =========== Exercisable at end of the year 432,505 $10.45 469,813 $11.04 207,125 $17.77 =========== =========== ===========
The following table summarizes information about stock options outstanding at December 31, 1997:
Range of Number Outstanding Weighted Average Weighted Average Exercise Prices at 12/31/97 Remaining Contractual Life Exercise Price --------------- ------------------ -------------------------- ---------------- $10.00-$29.00 1,990,740 9.5 years $17.77
SFAS No. 123 provides for a fair-value based method of accounting for employee options and measures compensation expense using an option valuation model that takes into account, as of the grant date, the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the expected term of the option which was used by the Company prior to the Hearst Transaction. Subsequent to the Hearst Transaction, the Company has elected to account for employee stock-based compensation under APB No. 25 and related interpretations. Under APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. 44 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 10. Stock Options (continued) Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model for options granted in 1995, 1996 and 1997. The following assumptions were used for the four months ended December 31, 1997: risk-free interest rates of 5.5%, dividend yields of 0.0%, volatility factors of the expected market price of the Company's common stock of 27%, and the expected life of the option of 5 and 7 years. The range of fair value of options granted during the four months ended December 31, 1997 were $9.26-$12.34. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of SFAS No. 123 pro forma disclosures, the estimated fair value of the options is amortized to expense over the option's vesting period. The Company's pro forma information for the four months ended December 31, 1997 is as follows: (In thousands, except per share data) Pro forma net income........................................... $6,602 Pro forma earnings applicable to common stockholders........... $5,891 Pro forma basic and diluted earnings per common share.......... $ 0.12 The Company has reserved 3.0 million shares of common stock for future issuances in connection with the Plan at December 31, 1997. 11. Net Assets Held for Sale Upon completion of the Hearst Transaction, the Company owns television stations in two areas (Boston and Providence, and Dayton and Cincinnati) with overlapping service contours in violation of the FCC's local ownership rules. The FCC's rules prohibit the ownership of two stations in the same geographic area whose service contours overlap. To comply with these rules, the Company will be required to divest one station in each of the aforementioned areas. Included in the caption Net Assets Held for Sale on the accompanying audited consolidated balance sheet as of December 31, 1997, are the net assets of the stations located in Providence and Dayton at their carrying values. The Company expects to complete the exchange of these assets during the third quarter of 1998. See Note 16. 12. Related Party Transactions The Predecessor Company entered into separate agreements with one of its shareholders, Argyle Television Investors, L.P., and the shareholder's general partner, ATI General Partner, L.P. (the "Partnerships"), under which Argyle provided to the Partnerships personnel, office, property, services, expertise, systems and other assets and amenities. In consideration for such, the partnerships were required to reimburse the Company for expenses and costs allocated to providing these services to the Partnerships. During the years ended December 31, 1995 and 1996, and for the eight months ended August 31, 1997, the Company recognized total reimbursements of approximately $840,000, $893,000 and $568,000, respectively, under these agreements. Such reimbursements were offset against corporate general and administrative expenses in the accompanying consolidated statements of operations. Subsequent to the 45 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 12. Related Party Transactions (continued) Hearst Transaction such Partnerships are no longer shareholders of the Company, and these agreements are no longer in effect. During 1995, a related party contributed to the Company equipment with a value of $157,998. The related party did not receive any consideration for the contributed equipment. In connection with the acquisition of the Northstar Stations, the Hawaii Stations and the Buffalo Station, the Company incurred approximately $13.9 million in financing costs in 1995, a substantial portion of which were fees paid under the Company's credit agreements. Affiliates of certain of the banks in the credit agreement bank group were partners in a partnership that owned shares of the Company's non-voting common stock. In June 1995, the Company entered into an agreement (the "Buffalo Management Agreement") to provide interim management services to the Buffalo Station pending closing of the acquisition of the Buffalo Station. Subject to the seller's supervision, control and approval, the Company provided to the Buffalo Station, pursuant to the Buffalo Management Agreement, a number of management services, including recruitment and training of personnel, direction of advertising sales efforts, implementation of billing and collection practices, maintenance of accounting practices, negotiation of contracts and maintenance and acquisition of equipment. In consideration for the Company's services, the seller paid the Company $450,000 per month (half of which was paid into escrow pending the closing of the acquisition of the Buffalo Station). At the closing of the acquisition of the Buffalo Station on December 5, 1995, the Buffalo Management Agreement was terminated and that portion of the management fee placed in escrow was released to the Company. The Company recognized $2.7 million in management fees in 1995, which are included in total revenues in the accompanying statement of operations (associated expenses are included in station operating expenses). The Company has entered into a series of agreements with Hearst including a Management Agreement (whereby the Company provides certain management services, such as sales, news, programming and financial and accounting management services, with respect to certain Hearst owned or operated television and radio stations); an Option Agreement (whereby Hearst has granted the Company an option to acquire certain Hearst owned or operated television stations, as well as a right of first refusal with respect to another television station if Hearst proposes to sell such station within 36 months of its acquisition); a Studio Lease Agreement (whereby Hearst leases from the Company certain premises for Hearst's radio broadcast stations); a Tax Sharing Agreement (whereby Hearst and the Company have established the sharing of federal, state and local taxes after the Company became part of the consolidated tax return of Hearst); a Name License Agreement (whereby Hearst permits the Company to use the Hearst name in connection with the Hearst-Argyle name and operation of its business); and a Services Agreement (whereby Hearst provides the company certain administrative services such as accounting, financial, legal, tax, insurance, data processing and employee benefits). The Company recorded revenues of approximately $700,000 relating to the Management Agreement and expenses of approximately $900,000 relating to the Services Agreement, during the four months ended December 31, 1997. The Company believes that the terms of all these agreements are reasonable to both sides; there can be no assurance, however, that more favorable terms would not be available from third parties. 46 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 13. Commitments The Company has obligations to various program syndicators and distributors in accordance with current contracts for the rights to broadcast programs. Future payments as of December 31, 1997, scheduled under contracts for programs available are as follows (in thousands): 1998 $35,769 1999 3,417 2000 1,112 2001 394 ------- $40,692 ======= The Company has various agreements relating to non-cancelable operating leases with an initial term of one year or more (some of which contain renewal options), future program rights not available for broadcast at December 31, 1997, and employment contracts for key employees. Future minimum payments under terms of these agreements as of December 31, 1997 are as follows: Employment Operating Program and Talent Leases Rights Contracts ------ ------ --------- (In thousands) 1998 $ 2,357 $20,427 $24,983 1999 1,711 44,110 18,011 2000 1,555 20,715 7,891 2001 1,351 3,877 2,573 2002 and thereafter 3,643 908 968 ------- ------- ------- $10,617 $90,037 $54,426 ======= ======= ======= Rent expense for operating leases for the years ended December 31, 1995 and 1996, the eight months ended August 31, 1997 and the four months ended December 31, 1997 was approximately $308,000, $532,000, $416,000 and $1,297,000, respectively. In the normal course of business, the Company is subject to various claims and lawsuits. In the opinion of the Company's management, liabilities, if any, arising from these matters will not have a significant effect on the Company's consolidated financial statements. 14. Pension and Employee Savings Plans Effective August 29, 1997, the Company assumed the obligations of the noncontributory defined benefit plans (the "Pension Plans") of the non-union and certain union employees of the Hearst Broadcast Group and purchased the excess of the plans, fair values of pension plans assets for shares of the Company's Series B common stock (see Note 8). Benefits under the Pension Plans are generally based on years of credited service, age at retirement and average of the highest five consecutive year's compensation. The cost of the Pension Plans is computed on the basis of the Project Unit Credit Actuarial Cost Method. Past service cost is amortized over the expected future service periods of the employees. Beginning January 1, 1998, the Company plans to provide a noncontributory defined benefit plan to the Company's remaining non-union employees who are not included in the Pension Plans at December 31, 1997. 47 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 14. Pension and Employee Savings Plan (continued) The net pension cost (benefit) for the Company's Pension Plans for the four months ended December 31, 1997 in which the Company's non-union employees participate are as follows: 1997 ----------------- (In thousands) Service cost $ 736 Interest cost 891 Return on plan assets: Actual (3,179) Deferred 1,234 Amortization of the unrecognized net asset (40) Other (57) ------- Net pension benefit $ (415) ======= The following schedule presents a reconciliation of the funded status at December 31, 1997: Assets Exceed Accumulated Accumulated Benefits Benefits Exceed Assets ------------- ------------- (In thousands) Actuarial present value of benefit obligation: Vested $(27,235) $(1,216) Nonvested (1,359) (51) -------- ------- Accumulated benefit obligation $(28,594) $(1,267) ======== ======= Plan assets at fair value $ 72,532 $ 362 Projected benefit obligation (36,227) (5,155) -------- ------- Plan assets in excess of (less than) the projected benefit obligation 36,305 (4,793) Unrecognized net asset (766) (22) Unrecognized net (gain) loss (9,879) 1,250 Unrecognized minimum liability 505 2,461 -------- ------- Deferred (accrued) pension cost $ 26,165 $(1,104) ======== ======= The deferred pension costs are included in Other Assets on the accompanying consolidated balance sheet at December 31, 1997. Assumptions used for computing the projected benefit obligation at December 31, 1997 are as follows: Discount rate 7.00% Rate of compensation 5.50% Long-term rate of return on plan assets 9.00% The various plans' assets consist primarily of stocks, bonds and cash equivalents. The Company's qualified employees may contribute from 1% to 18% of their compensation up to certain dollar limits to a 401(k) savings plan. The Company matches one-quarter of the employee contribution up to 6% of the employee's compensation. The Company contributions to this plan for the years ended December 31, 1995 and 1996, the eight months ended August 31, 1997 and the four months ended December 31, 1997 were approximately $68,000, $186,000, $146,000, and $348,000, respectively. During February 1997, the Company's compensation committee 48 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 14. Pension and Employee Savings Plan (continued) approved an increase in the Company's match. The match increased from one-quarter to one-half of the employee contributions up to 6% of each employee's compensation, effective July 1, 1997. 15. Fair Value of Financial Instruments The carrying amounts and the estimated fair values of the Company's financial instruments for which it is practicable to estimate fair value are as follows (in thousands):
December 31, 1996 1997 ----------------------------- ----------------------------- Carrying Value Fair Value Carrying Value Fair Value -------------- ---------- -------------- ---------- Old Credit Agreement dated October 27, 1995: Revolving credit facility $21,500 $21,853 $ -- $ -- Credit Facility dated August 29, 1997: Revolving credit facility -- -- 85,000 83,557 Senior Subordinated Notes 150,000 139,039 105,000 126,475 Senior Notes -- -- 300,000 311,551 Series A Preferred Stock* 10,938 11,321 10,938 12,371 Series B Preferred Stock* 10,938 9,604 10,938 10,019 Interest rate swaps -- (849) -- (593)
* Including Additional Paid-In Capital amount. The fair values of the Senior Notes and Preferred Stock were determined based on the quoted market prices, the revolving credit facility was estimated using discounted cash flow analysis based on current incremental borrowing rates for similar types of borrowing arrangements. The fair value of the interest rate swap agreements was determined using discounted cash flow models For instruments including cash and cash equivalents, accounts receivable and accounts payable the carrying amount approximates fair value because of the short maturity of these instruments. In accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" the Company believes it is not practicable to estimate the current fair value of the amounts due to Hearst because of the related party nature of the transactions. 16. Subsequent Events On January 13, 1998, the Company issued $200,000,000 aggregate principal amount of 7.0% Senior Notes due 2018. The net proceeds from this issuance will be used to reduce borrowings under the Credit Facility and fund the tender offer to repurchase $105,000,000 of the Notes outstanding at December 31, 1997, as discussed below. On February 10, 1998, the Company commenced a tender offer and consent solicitation for its Notes. The total consideration for each $1,000 principal amount of Notes tendered pursuant to the offer will be the price that would result from a yield to November 1, 2000, the earliest stated redemption date, equal to the sum of (i) the yield on the U.S. Treasury Note due October 31, 2000 plus (ii) 25 basis points. On March 9, 1998, the Company announced the price will be $1,115.53 per $1,000 principal amount of Notes (or $117,130,650 for all the Notes). This includes accrued and unpaid interest through the expected date of payment, March 13, 1998. On February 19, 1998, the Company announced that it agreed to exchange its WDTN and WNAC stations with STC Broadcasting, Inc. for KSBW, the NBC affiliate serving the Monterey - Salinas, CA, television market, and WPTZ/WNNE, the NBC affiliates serving the Burlington, VT - Plattsburgh, NY, television market. In addition, the 49 HEARST-ARGYLE TELEVISION, INC. Notes to Consolidated Financial Statements (Continued) 16. Subsequent Events (continued) Company will pay STC Broadcasting, Inc. approximately $20 million. The Company anticipates the transaction will close during the third quarter of 1998. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Information called for by Item 9 was previously reported under Item 4 of the Company's Current Reports on Form 8-K filed with the Securities and Exchange Commission on October 17, 1997 and October 20, 1997, which portions are incorporated herein by reference. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information called for by Item 10 is set forth under the headings "Executive Officers of the Company" and "Election of Directors" in the Company's Proxy Statement relating to the 1998 Annual Meeting of Stockholders (the "1998 Proxy Statement"), which is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information called for by Item 11 is set forth under the heading "Executive Compensation and Other Matters" in the 1998 Proxy Statement, which is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information called for by Item 12 is set forth under the heading "Principal Stockholders" in the 1998 Proxy Statement, which is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information called for by Item 13 is set forth under the heading "Certain Relationships and Related Transactions" in the 1998 Proxy Statement, which is incorporated herein by reference. 50 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K. (a) Financial Statements, Schedules and Exhibits (1) The financial statements listed in the Table of Contents for Item 8 hereof are filed as part of this report. (2) The financial statement schedules required by Regulation S-X are included as part of this report or are included in the information provided in the Notes to Consolidated Financial Statements, which are filed as part of this report. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS HEARST-ARGYLE TELEVISION, INC.
Additions Balance at Charged to Charged to Balance at Beginning of Costs and Other Accounts Deductions End of Description Period Expenses Describe Describe Period ----------- ------ -------- -------- -------- ------ (In thousands) Year Ended December 31, 1995: Allowance for uncollectable accounts $ -- $ 70 $ 63(1) $ -- $ 133 Year Ended December 31, 1996: Allowance for uncollectable accounts $ 133 $ 235 $ -- $ (199)(2) $ 169 Eight Months Ended August 31, 1997 $ 169 $ -- $ 113(1) $ (106)(2) $ 176 Four Months Ended December 31, 1997: Allowance for uncollectable accounts $ 1,673 $ 538 $ 317(1) $ (324)(2) $ 2,204
- ---------- (1) Amounts acquired in acquisitions. (2) Net write-offs of accounts receivable. Note: The required information regarding the valuation allowance for deferred tax assets is included in Note 6 to the Company's Consolidated Financial Statements. (b) Reports on Form 8-K (1) Current Report on Form 8-K filed October 17, 1997 reporting the change in the Company's certifying accountants to Deloitte & Touche and the results of the elections by holders of options on Argyle Series A Common Stock in connection with the Merger. No financial statements were filed on this report. (2) Current Report on Form 8-K/A filed October 20,1997 filing a letter from E&Y stating that E&Y agreed with certain disclosures made by the Company in connection with the termination of E&Y and the engagement of Deloitte & Touche. No financial statements were filed on this report. (3) Current Report on Form 8-K filed on November 13, 1997 announcing the completion of the Common Stock Offering and the 1997 Debt Offering. No financial statement were filed on this report. (c) Exhibits The following documents are filed or incorporated by reference as exhibits to this report. 51 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 2.1 Amended and Restated Agreement and Plan of Merger, dated as of March 26, 1997, among The Hearst Corporation, HAT Merger Sub. Inc., HAT Contribution Sub, Inc. and Argyle (incorporated by reference to Exhibit 2.1 of the Company's Registration Statement on Form S-4 (File No. 333-32487)). 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Appendix C of the Company's Registration Statement on Form S-4 (file No. 333-32487)). 3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 4.2 of the Company's Form 8-A/A dated September 5, 1997). 4.1 Form of Indenture relating to the Senior Subordinated Notes due 2005 (including form of security) (incorporated by reference to Exhibit 4.1 of Argyle's Form 10-K for the fiscal year ending December 31, 1996). 4.2 First Supplemental Indenture dated as of June 1, 1996 among KHBS Argyle Television, Inc. and Arkansas Argyle Television, Inc. and United States Trust Company of New York (incorporated by reference to Argyle's Current Report on Form 8-K dated June 11, 1996). 4.3 Second Supplemental Indenture dated as of August 29, 1997 among KMBC Hearst- Argyle Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-Argyle Television, Inc., WISN Hearst-Argyle Television, Inc., WTAE Hearst-Argyle Television, Inc. and United States Trust Company of New York (incorporated by reference to Exhibit 4.8 of the Company's Registration Statement on Form S-3 (File No. 333-32487)). 4.4 Third Supplemental Indenture dated as of February 26, 1998 among the Company, Hearst-Argyle Television Stations, Inc., KMBC Hearst-Argyle Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-Argyle Television, Inc., WISN Hearst- Argyle Television, Inc., WTAE Hearst-Argyle Television, Inc., WAPT Hearst-Argyle Television, Inc., KITV Hearst-Argyle Television, Inc., KHBS Hearst-Argyle Television, Inc., Ohio/Oklahoma Hearst-Argyle Television, Inc., Jackson Hearst-Argyle Television, Inc., Hawaii Hearst-Argyle Television, Inc., Arkansas Hearst-Argyle Television, Inc. and United States Trust Company of New York. 4.5 Form of Note for Senior Subordinated Notes due 2005 (included in Exhibit 4.1). 4.6 Indenture, dated as of November 13, 1997, between the Company and Bank of Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K dated November 13, 1997). 4.7 First Supplemental Indenture, dated as of November 13, 1997, between the Company and Bank of Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K dated November 13, 1997). 4.8 Global Note representing $125,000,000 of 7% Senior Notes Due November 15, 2007 (incorporated by reference to Exhibit 4.3 of the Company's Current Report on Form 8-K dated November 13, 1997). 52 Exhibit No. Description ----------- ----------- 4.9 Global Note representing $175,000,000 of 7 1/2% Debentures Due November 15, 2027 (incorporated by reference to Exhibit 4.4 of the Company's Current report on Form 8-K dated January 13, 1998). 4.10 Second Supplemental Indenture, dated as of January 13, 1998, between the Company and Bank of Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.3 of the Company's Current report on Form 8-K dated January 13, 1998). 4.11 Specimen of the stock certificate for the Company's Series A Common Stock, $.01 par value per share (incorporated by reference to Exhibit 4.3 of the Company's Forms 8A/A dated September 5, 1997). 4.12 Form of Registration Rights Agreement among the Company and the Holders (incorporated by reference to Exhibit B to Exhibit 2.1 of the Company's Registration Statement on Form S-4 (File No. 333-32487)). 10.1 Amended and Restated Employment Agreement of Ibra Morales (incorporated by reference to Exhibit 10.3(c) of the Company's Registration Statement on Form S-1 (File No. 33-96029). 10.2 Amended and Restated Employment Agreement of Harry T. Hawks (incorporated by reference to Exhibit 10.3(d) of Argyle's Registration Statement on Form S-1 (File No. 33-96029). 10.3 1997 Stock Option Plan (incorporated by reference to Appendix E of the Company's Registration Statement on Form S-4 (File No. 333-22487)). 10.4 Affiliation Agreement among Multimedia, Inc., Multimedia Entertainment, Inc. (re: WLWT) and NBC (incorporated by reference to Exhibit 10.8(a) of the Company's Form 10-K for the fiscal year ending December 31, 1996). 10.5 Affiliation Agreement between combined Communications Corporation of Oklahoma, Inc. (re: KOCO) and ABC (incorporated by reference to Exhibit 10.8(b) of the Company's Form 10-K for the fiscal year ending December 31, 1996). 10.6 Affiliation Agreement between Providence Argyle Television, Inc. (re: WNAC) and Fox Broadcasting Company, dated December 9, 1994, as amended, and Amendment/NFL Package Agreement (incorporated by reference to Exhibit 10.5(c) of the Company's Registration Statement on Form S-1 (File No. 33-96029)). 10.7 Affiliation Agreement between Tak Communications, Inc. (re: KITV) and ABC, dated November 4, 1994 and Satellite Television Affiliation Agreements, dated November 9, 1994 (incorporated by reference to Exhibit 10.5(d) of the Company's Registration Statement on Form S-1 (File No. 33-96029)). 10.8 Form of Affiliation Agreement between Jackson Argyle Television, Inc. (re: WAPT) and ABC (incorporated by reference to Exhibit 10.5(e) of the Company's Registration Statement on Form S-1 (File No. 33-96029)). 53 Exhibit No. Description ----------- ----------- 10.9 Affiliation Agreements between Sigma Broadcasting, Inc. (re: KHBS and KHOG) and ABC (incorporated by reference to the Company's Current Report on Form 8-K dated June 11, 1996). 10.10 Primary Television Affiliation Agreement for television Station KMBC, dated April 26, 1988, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.11 Primary Television Affiliation Agreement for television Station WCVB, dated November 21, 1989, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.12 Primary Television Affiliation Agreement for television Station WISN, dated November 2, 1990, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.13 Primary Television Affiliation Agreement for television Station WTAE, dated July 14, 1989, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.14 Television Affiliation Agreement for Television Broadcasting Station WBAL-TV, dated January 2, 1995, by and between National Broadcasting Company, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.15 Amendment to the Television Affiliation Agreement for Television Broadcasting Station WBAL-TV, dated January 2, 1995, by and between National Broadcasting Company, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.6 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.16 Form of Amended and Restated Tax Sharing Agreement (incorporated by reference to Exhibit of the Company's Form 10-K for the fiscal year ending December 31, 1996). 10.17 Change of Control Agreement between the Company and Dean H. Blythe (incorporated by reference to Exhibit 10.12 of the Company's Form 10-K for the fiscal year ending December 31, 1996). 10.18 Amendment No. 1 to Amended and Restated Employment of Ibra Morales dated July 31, 1996 (incorporated by reference to Exhibit 10.25 of the Company's Registration Statement on Form S-4 (File No. 333-32487)). 10.19 Employment Agreement, dated as of August 12, 1997, between Hearst-Argyle Television, Inc. and Bob Marbut (incorporated by reference to Exhibit 10.1 of Company's Current Report on Form 8-K filed October 17, 1997). 54 Exhibit No. Description ----------- ----------- 10.20 Management Services Agreement, dated as of August 29, 1997, between The Hearst Corporation and the Company (incorporated by reference to Exhibit 10.2 of Company's Current Report on Form 8-K filed October 17, 1997). 10.21 Option Agreement, dated as of August 29, 1997, between The Hearst Corporation and the Company (incorporated by reference to Exhibit 10.3 of Company's Current Report on Form 8-K filed October 17, 1997). 10.22 Studio Lease Agreement, dated as of August 29, 1997, between The Hearst Corporation and the Company (incorporated by reference to Exhibit 10.4 of Company's Current Report on Form 8-K filed October 17, 1997). 10.23 Services Agreement, dated as of August 29, 1997, between The Hearst Corporation and the Company (incorporated by reference to Exhibit 10.5 of Company's Current Report on Form 8-K filed October 17, 1997). 10.24 Credit Agreement between the Company, the Subsidiary Guarantors party thereto and The Chase Manhattan Bank, as administrative agent, dated August 29, 1997 (the "Credit Agreement"). 10.25 Amendment No. 1 to the Credit Agreement dated as of October 31, 1997. 10.26 Amendment No. 2 to the Credit Agreement dated as of January 30, 1998. 10.27 Asset Exchange Agreement between Hearst-Argyle Stations, Inc., STC Broadcasting, Inc., STC Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont Subsidiary, Inc., dated February 18, 1998. 10.28 Guaranty, given as of February 18, 1998 by the Company to STC Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont Subsidiary, Inc. 16.1 Letter from Ernst & Young LLP to the Securities and Exchange Commission pursuant to Item 304(a)(3) of Reg. S-K (incorporated by reference to Exhibit 16.1 of the Company's 8-K/A dated October 20, 1997). 21 List of Subsidiaries of The Company. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Deloitte & Touche LLP. 24.1 Powers of Attorney (contained on signature page hereto). 27.1 Financial Data Schedule. 27.2 1997 Restated Financial Data Schedule. 27.3 1996 Restated Financial Data Schedule. 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. HEARST-ARGYLE TELEVISION, INC. By:/s/ Dean H. Blythe --------------------- Name: Dean H. Blythe Title: Secretary 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 Company in the capacities indicated on March 27, 1998. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors and officers of HEARST-Argyle Television, Inc. hereby constitutes and appoints Dean H. Blythe and Harry T. Hawks, or either of them, his or her true and lawful attorney-in-fact and agent, for him or her and in his or her name, place and stead, in any and all capacities, with full power to act alone, to sign any and all amendments to this Report, and to file each such amendment to this Report, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. Name Title /s/ Bob Marbut Co-Chief Executive Officer and Chairman of the Board - ------------------------- (principal executive officer) Bob Marbut /s/ John G. Conomikes (President, Co-Chief Executive Officer and Director - ------------------------- (principal executive officer) John G. Conomikes /s/ David J. Barrett Executive Vice President, Chief Operating Officer and - ------------------------- Director David J. Barrett /s/ Harry T. Hawks Senior Vice President and Chief Financial Officer - ------------------------- (principal financial officer) Harry T. Hawks /s/ Teresa Lopez Controller and Assistant Secretary (principal - ------------------------- accounting officer) Teresa Lopez /s/ Frank A. Bennack, Jr. Director - ------------------------- Frank A. Bennack, Jr. /s/ Victor F. Ganzi Director - ------------------------- Victor F. Ganzi /s/ George R. Hearst Director - ------------------------- George R. Hearst /s/ William R. Hearst III Director - ------------------------- William R. Hearst III /s/ Gilbert C. Maurer Director - ------------------------- Gilbert C. Maurer /s/ David Pulver Director - ------------------------- David Pulver /s/ Virginia H. Randt Director - ------------------------- Virginia H. Randt /s/ Caroline L. Williams Director - ------------------------- Caroline L. Williams EXHIBIT INDEX Exhibit No. Description ----------- ----------- 2.1 Amended and Restated Agreement and Plan of Merger, dated as of March 26, 1997, among The Hearst Corporation, HAT Merger Sub. Inc., HAT Contribution Sub, Inc. and Argyle (incorporated by reference to Exhibit 2.1 of the Company's Registration Statement on Form S-4 (File No. 333-32487)). 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Appendix C of the Company's Registration Statement on Form S-4 (file No. 333-32487)). 3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 4.2 of the Company's Form 8-A/A dated September 5, 1997). 4.1 Form of Indenture relating to the Senior Subordinated Notes due 2005 (including form of security) (incorporated by reference to Exhibit 4.1 of Argyle's Form 10-K for the fiscal year ending December 31, 1996). 4.2 First Supplemental Indenture dated as of June 1, 1996 among KHBS Argyle Television, Inc. and Arkansas Argyle Television, Inc. and United States Trust Company of New York (incorporated by reference to Argyle's Current Report on Form 8-K dated June 11, 1996). 4.3 Second Supplemental Indenture dated as of August 29, 1997 among KMBC Hearst- Argyle Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-Argyle Television, Inc., WISN Hearst-Argyle Television, Inc., WTAE Hearst-Argyle Television, Inc. and United States Trust Company of New York (incorporated by reference to Exhibit 4.8 of the Company's Registration Statement on Form S-3 (File No. 333-32487)). 4.4 Third Supplemental Indenture dated as of February 26, 1998 among the Company, Hearst-Argyle Television Stations, Inc., KMBC Hearst-Argyle Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-Argyle Television, Inc., WISN Hearst- Argyle Television, Inc., WTAE Hearst-Argyle Television, Inc., WAPT Hearst-Argyle Television, Inc., KITV Hearst-Argyle Television, Inc., KHBS Hearst-Argyle Television, Inc., Ohio/Oklahoma Hearst-Argyle Television, Inc., Jackson Hearst-Argyle Television, Inc., Hawaii Hearst-Argyle Television, Inc., Arkansas Hearst-Argyle Television, Inc. and United States Trust Company of New York. 4.5 Form of Note for Senior Subordinated Notes due 2005 (included in Exhibit 4.1). 4.6 Indenture, dated as of November 13, 1997, between the Company and Bank of Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K dated November 13, 1997). 4.7 First Supplemental Indenture, dated as of November 13, 1997, between the Company and Bank of Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K dated November 13, 1997). 4.8 Global Note representing $125,000,000 of 7% Senior Notes Due November 15, 2007 (incorporated by reference to Exhibit 4.3 of the Company's Current Report on Form 8-K dated November 13, 1997). Exhibit No. Description ----------- ----------- 4.9 Global Note representing $175,000,000 of 7 1/2% Debentures Due November 15, 2027 (incorporated by reference to Exhibit 4.4 of the Company's Current report on Form 8-K dated January 13, 1998). 4.10 Second Supplemental Indenture, dated as of January 13, 1998, between the Company and Bank of Montreal Trust Company, as trustee (incorporated by reference to Exhibit 4.3 of the Company's Current report on Form 8-K dated January 13, 1998). 4.11 Specimen of the stock certificate for the Company's Series A Common Stock, $.01 par value per share (incorporated by reference to Exhibit 4.3 of the Company's Forms 8A/A dated September 5, 1997). 4.12 Form of Registration Rights Agreement among the Company and the Holders (incorporated by reference to Exhibit B to Exhibit 2.1 of the Company's Registration Statement on Form S-4 (File No. 333-32487)). 10.1 Amended and Restated Employment Agreement of Ibra Morales (incorporated by reference to Exhibit 10.3(c) of the Company's Registration Statement on Form S-1 (File No. 33-96029). 10.2 Amended and Restated Employment Agreement of Harry T. Hawks (incorporated by reference to Exhibit 10.3(d) of Argyle's Registration Statement on Form S-1 (File No. 33-96029). 10.3 1997 Stock Option Plan (incorporated by reference to Appendix E of the Company's Registration Statement on Form S-4 (File No. 333-22487)). 10.4 Affiliation Agreement among Multimedia, Inc., Multimedia Entertainment, Inc. (re: WLWT) and NBC (incorporated by reference to Exhibit 10.8(a) of the Company's Form 10-K for the fiscal year ending December 31, 1996). 10.5 Affiliation Agreement between combined Communications Corporation of Oklahoma, Inc. (re: KOCO) and ABC (incorporated by reference to Exhibit 10.8(b) of the Company's Form 10-K for the fiscal year ending December 31, 1996). 10.6 Affiliation Agreement between Providence Argyle Television, Inc. (re: WNAC) and Fox Broadcasting Company, dated December 9, 1994, as amended, and Amendment/NFL Package Agreement (incorporated by reference to Exhibit 10.5(c) of the Company's Registration Statement on Form S-1 (File No. 33-96029)). 10.7 Affiliation Agreement between Tak Communications, Inc. (re: KITV) and ABC, dated November 4, 1994 and Satellite Television Affiliation Agreements, dated November 9, 1994 (incorporated by reference to Exhibit 10.5(d) of the Company's Registration Statement on Form S-1 (File No. 33-96029)). 10.8 Form of Affiliation Agreement between Jackson Argyle Television, Inc. (re: WAPT) and ABC (incorporated by reference to Exhibit 10.5(e) of the Company's Registration Statement on Form S-1 (File No. 33-96029)). Exhibit No. Description ----------- ----------- 10.9 Affiliation Agreements between Sigma Broadcasting, Inc. (re: KHBS and KHOG) and ABC (incorporated by reference to the Company's Current Report on Form 8-K dated June 11, 1996). 10.10 Primary Television Affiliation Agreement for television Station KMBC, dated April 26, 1988, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.11 Primary Television Affiliation Agreement for television Station WCVB, dated November 21, 1989, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.12 Primary Television Affiliation Agreement for television Station WISN, dated November 2, 1990, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.13 Primary Television Affiliation Agreement for television Station WTAE, dated July 14, 1989, by and between Capital Cities/ABC, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.14 Television Affiliation Agreement for Television Broadcasting Station WBAL-TV, dated January 2, 1995, by and between National Broadcasting Company, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.15 Amendment to the Television Affiliation Agreement for Television Broadcasting Station WBAL-TV, dated January 2, 1995, by and between National Broadcasting Company, Inc. and The Hearst Corporation (incorporated by reference to Exhibit 10.6 of the Company's Quarterly Report for the quarter ended September 30, 1997). 10.16 Form of Amended and Restated Tax Sharing Agreement (incorporated by reference to Exhibit of the Company's Form 10-K for the fiscal year ending December 31, 1996). 10.17 Change of Control Agreement between the Company and Dean H. Blythe (incorporated by reference to Exhibit 10.12 of the Company's Form 10-K for the fiscal year ending December 31, 1996). 10.18 Amendment No. 1 to Amended and Restated Employment of Ibra Morales dated July 31, 1996 (incorporated by reference to Exhibit 10.25 of the Company's Registration Statement on Form S-4 (File No. 333-32487)). 10.19 Employment Agreement, dated as of August 12, 1997, between Hearst-Argyle Television, Inc. and Bob Marbut (incorporated by reference to Exhibit 10.1 of Company's Current Report on Form 8-K filed October 17, 1997). Exhibit No. Description ----------- ----------- 10.20 Management Services Agreement, dated as of August 29, 1997, between The Hearst Corporation and the Company (incorporated by reference to Exhibit 10.2 of Company's Current Report on Form 8-K filed October 17, 1997). 10.21 Option Agreement, dated as of August 29, 1997, between The Hearst Corporation and the Company (incorporated by reference to Exhibit 10.3 of Company's Current Report on Form 8-K filed October 17, 1997). 10.22 Studio Lease Agreement, dated as of August 29, 1997, between The Hearst Corporation and the Company (incorporated by reference to Exhibit 10.4 of Company's Current Report on Form 8-K filed October 17, 1997). 10.23 Services Agreement, dated as of August 29, 1997, between The Hearst Corporation and the Company (incorporated by reference to Exhibit 10.5 of Company's Current Report on Form 8-K filed October 17, 1997). 10.24 Credit Agreement between the Company, the Subsidiary Guarantors party thereto and The Chase Manhattan Bank, as administrative agent, dated August 29, 1997 (the "Credit Agreement"). 10.25 Amendment No. 1 to the Credit Agreement dated as of October 31, 1997. 10.26 Amendment No. 2 to the Credit Agreement dated as of January 30, 1998. 10.27 Asset Exchange Agreement between Hearst-Argyle Stations, Inc., STC Broadcasting, Inc., STC Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont Subsidiary, Inc., dated February 18, 1998. 10.28 Guaranty, given as of February 18, 1998 by the Company to STC Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont Subsidiary, Inc. 16.1 Letter from Ernst & Young LLP to the Securities and Exchange Commission pursuant to Item 304(a)(3) of Reg. S-K (incorporated by reference to Exhibit 16.1 of the Company's 8-K/A dated October 20, 1997). 21 List of Subsidiaries of The Company. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Deloitte & Touche LLP. 24.1 Powers of Attorney (contained on signature page hereto). 27.1 Financial Data Schedule. 27.2 1997 Restated Financial Data Schedule. 27.3 1996 Restated Financial Data Schedule. EX-4.4 2 THIRD SUPPLEMENTAL INDENTURE EXHIBIT 4.4 HEARST-ARGYLE TELEVISION, INC., as Issuer, and THE SUBSIDIARIES OF HEARST-ARGYLE TELEVISION, INC., as Guarantors, and UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee ---------------- THIRD SUPPLEMENTAL INDENTURE Dated as of February 26, 1998 ---------------- $105,000,000 9 3/4% Senior Subordinated Notes Due 2005 THIS THIRD SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of February 26, 1998, is among HEARST-ARGYLE TELEVISION, INC., a Delaware corporation formerly named Argyle Television, Inc. (the "Company"), its Subsidiaries (as more specifically identified on the signature pages hereof, the "Guarantors"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York bank and trust company, as trustee (the "Trustee"). RECITALS The Company, such of the Guarantors as were then subsidiaries of the Company and the Trustee entered into an indenture dated as of October 27, 1995 (the "Indenture") providing for the issuance by the Company of $150 million in principal amount of its 9 3/4% Senior Subordinated Notes (the "Securities") as provided in the Indenture, the payment of which Securities was guaranteed by such Guarantors in the manner provided in the Guarantees set forth in the Indenture. The Indenture was supplemented by that certain First Supplemental Indenture dated as of June 1, 1996, wherein two additional Subsidiaries, being KHBS Argyle Television, Inc. (now named KHBS Hearst-Argyle Television, Inc.) and Arkansas Argyle Television, Inc. (now named Arkansas Hearst-Argyle Television, Inc.) executed a Guarantee and became Guarantors. In January 1997, WGRZ Argyle Television, Inc., Grand Rapids Argyle Television, Inc., and Buffalo Argyle Television, Inc., each a Subsidiary and a Guarantor, merged with and into WZZM Argyle Television, Inc., also a Subsidiary and a Guarantor, which was then renamed Ohio/Oklahoma Argyle Television, Inc. and is now named Ohio/Oklahoma Hearst-Argyle Television, Inc. On August 29, 1997, Providence Argyle Television, Inc., a Subsidiary and a Guarantor, merged with and into WNAC Argyle Television, Inc., also a Subsidiary and a Guarantor, with the surviving corporation being renamed Hearst-Argyle Television Stations, Inc. Also on August 29, 1997, the Indenture was supplemented by that certain Second Supplemental Indenture dated as of August 29, 1997, wherein five additional Subsidiaries, being KMBC Hearst-Argyle Television, Inc., WBAL Hearst-Argyle Television, Inc., WCVB Hearst-Argyle Television, Inc., WISN Hearst-Argyle Television, Inc. and WTAE Hearst-Argyle Television, Inc., each executed Guarantees and became Guarantors. On December 29, 1997, $45 million in principal amount of the Securities was redeemed pursuant to the Company's right of redemption set forth in Section 1101(b) of the Indenture. The Company has offered, upon the terms and subject to the conditions set forth in the Offer to Purchase and Consent Solicitation Statement dated February 10, 1998 and the related Consent and Letter of Transmittal dated February 10, 1998 (collectively, the "Tender Offer Documents"), to purchase for cash any and all of the outstanding Securities. The Company, with the consent of the Holders of at least a majority in aggregate principal amount of the Outstanding Securities, desires to further supplement the Indenture for the purpose of eliminating substantially all the restrictive covenants contained therein. NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the mutual covenants contained herein and in the Indenture and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE ----------- DEFINITIONS Section 101. General. Capitalized terms that are used but not defined ------- herein shall have the meanings ascribed to them in the Indenture. Section 102. Elimination. Pursuant to Section 902 of the Indenture, Section ----------- 101 (captioned "Definitions") is hereby amended to delete the following terms and the corresponding definitions thereof: "Acquired Indebtedness" "Asset Swap" "Average Life to Stated Maturity" "Consolidated Interest Expense" "Consolidated Net Income" "Cumulative Consolidated Interest Expense" "Cumulative Operating Cash Flow" "Debt to Operating Cash Flow Ratio" "Disinterested Director" "Operating Cash Flow" "Permitted Investment" "Permitted Payment" "Qualified Capital Stock" "Restricted Payments" "Tax Sharing Agreement" THIRD SUPPLEMENTAL INDENTURE - Page 2 ARTICLE TWO ----------- ELIMINATION OF CERTAIN EVENTS OF DEFAULT Section 201. Elimination. Pursuant to Section 902 of the Indenture, Article ----------- Five of the Indenture (captioned "REMEDIES"), being Sections 501 through 516 thereof, inclusive, is hereby amended as follows: a. Section 501(c) of the Indenture is hereby amended by deleting the text of Section 501(c) in its entirety and substituting therefor the following: " (i) there shall be a default in the performance, or breach, of any covenant or agreement of the Company or any Guarantor under this Indenture or any Guarantee (other than a default in the performance, or breach, of a covenant or agreement which is specifically dealt with in clauses (a) or (b) of this Section 501 or in subclause (ii) of this clause (c) of this Section 501) and such default or breach shall continue for a period of 30 days after written notice has been given, by certified mail, (x) to the Company by the Trustee or (y) to the Company and the Trustee by the Holders of at least 25% in the aggregate principal amount of the Outstanding Securities, specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (ii) there shall have been a default in the performance or breach of the provisions of Article Eight;" b. Section 501(d) of the Indenture is hereby amended by deleting the text of Section 501(d) in its entirety and substituting therefor the following: "Intentionally Omitted;" c. Section 501(f) of the Indenture is hereby amended by deleting the text of Section 501(f) in its entirety and substituting therefor the following: "Intentionally Omitted;" d. Section 501(g) of the Indenture is hereby amended by deleting the text of Section 501(g) in its entirety and substituting therefor the following: "Intentionally Omitted;" ARTICLE THREE ------------- ELIMINATION OF RESTRICTIVE COVENANTS Section 301. Elimination. Pursuant to Section 902 of the Indenture, Article ----------- Ten of the Indenture (captioned "COVENANTS"), being Sections 1001 through 1021 thereof, inclusive, is hereby amended as follows: THIRD SUPPLEMENTAL INDENTURE - Page 3 a. Section 1008 of the Indenture is hereby amended by deleting the text of Section 1008 in its entirety and substituting therefor the following: "Intentionally Omitted." b. Section 1009 of the Indenture is hereby amended by deleting the text of Section 1009 in its entirety and substituting therefor the following: "Intentionally Omitted." c. Section 1010 of the Indenture is hereby amended by deleting the text of Section 1010 in its entirety and substituting therefor the following: "Intentionally Omitted." d. Section 1011 of the Indenture is hereby amended by deleting the text of Section 1011 in its entirety and substituting therefor the following: "Intentionally Omitted." e. Section 1012 of the Indenture is hereby amended by deleting the text of Section 1012 in its entirety and substituting therefor the following: "Intentionally Omitted." f. Section 1013 of the Indenture is hereby amended by deleting the text of Section 1013 in its entirety and substituting therefor the following: "Intentionally Omitted." g. Section 1014 of the Indenture is hereby amended by deleting the text of Section 1014 in its entirety and substituting therefor the following: "Intentionally Omitted." h. Section 1015 of the Indenture is hereby amended by deleting the text of Section 1015 in its entirety and substituting therefor the following: "Intentionally Omitted." i. Section 1016 of the Indenture is hereby amended by deleting the text of Section 1016 in its entirety and substituting therefor the following: "Intentionally Omitted." j. Section 1017 of the Indenture is hereby amended by deleting the text of Section 1017 in its entirety and substituting therefor the following: "Intentionally Omitted." k. Section 1018 of the Indenture is hereby amended by deleting the text of Section 1018 in its entirety and substituting therefor the following: "Intentionally Omitted." l. Section 1019 of the Indenture is hereby amended by deleting the text of Section 1019 in its entirety and substituting therefor the following: "Intentionally Omitted." THIRD SUPPLEMENTAL INDENTURE - Page 4 m. Section 1020(a) of the Indenture is hereby amended by deleting the text of Section 1020(a) in its entirety and substituting therefor the following: "The Company shall furnish to the Trustee, not less often than annually, a brief certificate signed by two executive officers of the Company, at least one of whom is the principal executive officer, principal financial officer or principal accounting officer of the Company, as to their knowledge of the Company's and each Guarantor's compliance with all conditions and covenants under this Indenture." n. Section 1021 of the Indenture is hereby amended by deleting the phrase "Sections 1006 through 1012, 1014 and 1017 through 1020" in the first sentence and substituting therefor the phrase "Sections 1006, 1007 and 1020". ARTICLE FOUR ------------ MISCELLANEOUS Section 401. Effect of Supplemental Indenture. This Supplemental Indenture -------------------------------- supplements the Indenture and shall be subject to all the terms thereof. Except as supplemented hereby, the Indenture shall continue in full force and effect. Section 402. Confirmation and Preservation of Indenture. The Indenture as ------------------------------------------ supplemented by this Supplemental Indenture is in all respects confirmed and preserved. Section 403. Conflict With Trust Indenture Act. If any provision of this --------------------------------- Supplemental Indenture limits, qualifies or conflicts with any provision of the Trust Indenture Act of 1939, as amended (the "Act"), that is required under the Act to be part of and govern any provision of this Supplemental Indenture, the provisions of the Act shall control. If any provision of this Supplemental Indenture modifies or excludes any provision of the Act that may be so modified or excluded, such provision of the Act shall be deemed to apply to the Indenture as so modified or excluded by this Supplemental Indenture, as the case may be. Section 404. Severability. If any provision in this Supplemental Indenture ------------ shall be invalid, illegal or otherwise unenforceable, then the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 405. Counterparts. This Supplemental Indenture may be executed in ------------ any number of counterparts, each of which, when so executed and delivered, shall be an original; such counterparts shall together constitute but one and the same instrument. THIRD SUPPLEMENTAL INDENTURE - Page 5 Section 406. Effectiveness. This Supplemental Indenture shall be effective ------------- as of the opening of business on the Payment Date (as defined in the Tender Offer Documents). Section 407. Recitals. The recitals contained herein shall be taken as the -------- statements of the Company. The Trustee assumes no responsibility for their correctness. The Trustee makes no representations or warranties as to the validity or sufficiency of this Supplemental Indenture. Section 408. Governing Law. This Supplemental Indenture shall be governed ------------- by and construed in accordance with the laws of the jurisdiction that governs the Indenture and its construction. [The rest of this page has been intentionally left blank.] THIRD SUPPLEMENTAL INDENTURE - Page 6 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the day and year first above written. HEARST-ARGYLE TELEVISION, INC. HEARST-ARGYLE TELEVISION STATIONS, INC. WAPT HEARST-ARGYLE TELEVISION, INC. KITV HEARST-ARGYLE TELEVISION, INC. KHBS HEARST-ARGYLE TELEVISION, INC. KMBC HEARST-ARGYLE TELEVISION, INC. WBAL HEARST-ARGYLE TELEVISION, INC. WCVB HEARST-ARGYLE TELEVISION, INC. WISN HEARST-ARGYLE TELEVISION, INC. WTAE HEARST-ARGYLE TELEVISION, INC. OHIO/OKLAHOMA HEARST-ARGYLE TELEVISION, INC. JACKSON HEARST-ARGYLE TELEVISION, INC. HAWAII HEARST-ARGYLE TELEVISION, INC. ARKANSAS HEARST-ARGYLE TELEVISION, INC. All By: /s/ Harry T. Hawks ------------------------------------- Name: Harry T. Hawks Title: Senior Vice President Attest: /s/ Dean H. Blythe -------------------------- Name: Dean H. Blythe Title: Secretary UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: --------------------------------- Name: ------------------------- Title: ------------------------ Attest: ------------------------ Name: ------------------- Title: ------------------ THIRD SUPPLEMENTAL INDENTURE - Page 7 STATE OF New York (S) (S) COUNTY OF New York (S) This instrument was acknowledged before me on February 26, 1998 by Harry T. Hawks, Senior Vice President of each of HEARST-ARGYLE TELEVISION, INC., HEARST-ARGYLE TELEVISION STATIONS, INC., WAPT HEARST-ARGYLE TELEVISION, INC., KITV HEARST-ARGYLE TELEVISION, INC., KHBS HEARST-ARGYLE TELEVISION, INC., KMBC HEARST-ARGYLE TELEVISION, INC., WBAL HEARST-ARGYLE TELEVISION, INC., WCVB HEARST-ARGYLE TELEVISION, INC., WISN HEARST-ARGYLE TELEVISION, INC., WTAE HEARST-ARGYLE TELEVISION, INC., OHIO/OKLAHOMA HEARST-ARGYLE TELEVISION, INC., JACKSON HEARST-ARGYLE TELEVISION, INC., HAWAII HEARST-ARGYLE TELEVISION, INC. and ARKANSAS HEARST-ARGYLE TELEVISION, INC., on behalf of each said corporation. Given under my hand and official seal this 26th day of February, 1998. /s/ Kevin J. McCauley --------------------------------------- Signature Notary in and for the State of New York. [NOTARY SEAL APPEARS HERE] THIRD SUPPLEMENTAL INDENTURE - Page 8 STATE OF New York (S) (S) COUNTY OF New York (S) This instrument was acknowledged before me on February 26, 1998 by Dean H. Blythe, Secretary of each of HEARST-ARGYLE TELEVISION, INC., HEARST-ARGYLE TELEVISION STATIONS, INC., WAPT HEARST-ARGYLE TELEVISION, INC., KITV HEARST-ARGYLE TELEVISION, INC., KHBS HEARST-ARGYLE TELEVISION, INC., KMBC HEARST-ARGYLE TELEVISION, INC., WBAL HEARST-ARGYLE TELEVISION, INC., WCVB HEARST-ARGYLE TELEVISION, INC., WISN HEARST-ARGYLE TELEVISION, INC., WTAE HEARST-ARGYLE TELEVISION, INC., OHIO/OKLAHOMA HEARST-ARGYLE TELEVISION, INC., JACKSON HEARST-ARGYLE TELEVISION, INC., HAWAII HEARST-ARGYLE TELEVISION, INC. and ARKANSAS HEARST-ARGYLE TELEVISION, INC., on behalf of each said corporation. Given under my hand and official seal this 26th day of February, 1998. /s/ Kevin J. McCauley ----------------------------------------- Signature Notary in and for the State of New York. STATE OF (S) [NOTARY SEAL APPEARS HERE] (S) COUNTY OF (S) This instrument was acknowledged before me on February 26, 1998 by _________________, ______________________ of UNITED STATES TRUST COMPANY OF NEW YORK, a New York bank and trust company, and on behalf of said bank and trust company. Given under my hand and official seal this 26th day of February, 1998. ----------------------------------------- Signature Notary in and for the State of _________. THIRD SUPPLEMENTAL INDENTURE - Page 9 STATE OF (S) (S) COUNTY OF (S) This instrument was acknowledged before me on February 26, 1998 by Dean H. Blythe, Secretary of each of HEARST-ARGYLE TELEVISION, INC., HEARST-ARGYLE TELEVISION STATIONS, INC., WAPT HEARST-ARGYLE TELEVISION, INC., KITV HEARST-ARGYLE TELEVISION, INC., KHBS HEARST-ARGYLE TELEVISION, INC., KMBC HEARST-ARGYLE TELEVISION, INC., WBAL HEARST-ARGYLE TELEVISION, INC., WCVB HEARST-ARGYLE TELEVISION, INC., WISN HEARST-ARGYLE TELEVISION, INC., WTAE HEARST-ARGYLE TELEVISION, INC., OHIO/OKLAHOMA HEARST-ARGYLE TELEVISION, INC., JACKSON HEARST-ARGYLE TELEVISION, INC., HAWAII HEARST-ARGYLE TELEVISION, INC. and ARKANSAS HEARST-ARGYLE TELEVISION, INC., on behalf of each said corporation. Given under my hand and official seal this 26th day of February, 1998. ------------------------------------------ Signature Notary in and for the State of __________. STATE OF Texas (S) (S) COUNTY OF Dallas (S) This instrument was acknowledged before me on February 26, 1998 by [NAME APPEARS HERE], AUTHORIZED SIGNATORY of UNITED STATES TRUST COMPANY OF NEW YORK, a New York bank and trust company, and on behalf of said bank and trust company. Given under my hand and official seal this 26th day of February, 1998. [SIGNATURE APPEARS HERE] ------------------------------------------ Signature Notary in and for the State of Texas. THIRD SUPPLEMENTAL INDENTURE - Page 9 EX-10.24 3 CREDIT AGREEMENT EXHIBIT 10.24 [Conformed Copy] 33117-001-00 ================================================================================ CREDIT AGREEMENT dated as of August 29, 1997 between ARGYLE TELEVISION, INC. (to be renamed HEARST-ARGYLE TELEVISION, INC. following the Merger Transactions referred to herein) The SUBSIDIARY GUARANTORS Party Hereto The LENDERS Party Hereto THE CHASE MANHATTAN BANK, as Administrative Agent and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent ------------------- $1,000,000,000 ------------------- ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms................................................. 1 SECTION 1.02. Classification of Loans and Borrowings........................ 28 SECTION 1.03. Terms Generally............................................... 28 SECTION 1.04. Accounting Terms; GAAP........................................ 29 ARTICLE II THE CREDITS SECTION 2.01. The Commitments............................................... 30 SECTION 2.02. Loans and Borrowings.......................................... 31 SECTION 2.03. Requests for Borrowings....................................... 32 SECTION 2.04. Swingline Loans............................................... 33 SECTION 2.05. Letters of Credit............................................. 35 SECTION 2.06. Funding of Borrowings......................................... 39 SECTION 2.07. Interest Elections............................................ 40 SECTION 2.08. Termination and Reduction of the Commitments.................. 41 SECTION 2.09. Repayment of Loans; Evidence of Debt.......................... 43 SECTION 2.10. Prepayment of Loans........................................... 45 SECTION 2.11. Fees.......................................................... 49 SECTION 2.12. Interest...................................................... 51 SECTION 2.13. Alternate Rate of Interest.................................... 51 SECTION 2.14. Increased Costs............................................... 52 SECTION 2.15. Break Funding Payments........................................ 53 SECTION 2.16. Taxes......................................................... 54 SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs... 55 SECTION 2.18. Mitigation Obligations; Replacement of Lenders................ 57 ARTICLE III GUARANTEE SECTION 3.01. The Guarantee................................................. 58 SECTION 3.02. Obligations Unconditional..................................... 59 SECTION 3.03. Reinstatement................................................. 60 SECTION 3.04. Subrogation................................................... 60 SECTION 3.05. Remedies...................................................... 60 SECTION 3.06. Instrument for the Payment of Money........................... 60
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Page ---- SECTION 3.07. Continuing Guarantee 60 SECTION 3.08. Rights of Contribution 61 SECTION 3.09. General Limitation on Guarantee Obligations.. 61 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Organization; Powers.......................................... 62 SECTION 4.02. Authorization; Enforceability................................. 62 SECTION 4.03. Governmental Approvals; No Conflicts.......................... 62 SECTION 4.04. Financial Condition; No Material Adverse Change............... 63 SECTION 4.05. Properties.................................................... 64 SECTION 4.06. Litigation and Environmental Matters.......................... 64 SECTION 4.07. Compliance with Laws and Agreements........................... 65 SECTION 4.08. Investment and Holding Company Status......................... 65 SECTION 4.09. Taxes......................................................... 65 SECTION 4.10. ERISA......................................................... 65 SECTION 4.11. Disclosure.................................................... 66 SECTION 4.12. Use of Credit................................................. 66 SECTION 4.13. Material Agreements and Liens With Respect to Indebtedness.... 66 SECTION 4.14. Capitalization................................................ 67 SECTION 4.15. Subsidiaries and Investments.................................. 67 SECTION 4.16. Station Licenses.............................................. 68 SECTION 4.17. Merger Agreement.............................................. 69 ARTICLE V CONDITIONS SECTION 5.01. Effective Date................................................ 69 SECTION 5.02. Each Credit Event............................................. 71 ARTICLE VI AFFIRMATIVE COVENANTS SECTION 6.01. Financial Statements and Other Information.................... 72 SECTION 6.02. Notices of Material Events.................................... 74 SECTION 6.03. Existence; Conduct of Business................................ 75 SECTION 6.04. Payment of Obligations........................................ 75 SECTION 6.05. Maintenance of Properties; Insurance.......................... 75 SECTION 6.06. Books and Records; Inspection Rights.......................... 75 SECTION 6.07. Compliance with Laws.......................................... 76
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Page ---- SECTION 6.08. Use of Proceeds and Letters of Credit......................... 76 SECTION 6.09. Certain Obligations Respecting Subsidiaries................... 76 ARTICLE VII NEGATIVE COVENANTS SECTION 7.01. Indebtedness.................................................. 78 SECTION 7.02. Liens......................................................... 79 SECTION 7.03. Fundamental Changes........................................... 80 SECTION 7.04. Lines of Business............................................. 83 SECTION 7.05. Investments................................................... 83 SECTION 7.06. Restricted Payments........................................... 85 SECTION 7.07. Transactions with Affiliates.................................. 85 SECTION 7.08. Restrictive Agreements........................................ 86 SECTION 7.09. Modifications of Certain Documents............................ 87 SECTION 7.10. Certain Financial Covenants................................... 87 ARTICLE VIII EVENTS OF DEFAULT................................... 88 ARTICLE IX THE ADMINISTRATIVE AGENT ............................... 91 ARTICLE X MISCELLANEOUS SECTION 10.01. Notices...................................................... 93 SECTION 10.02. Waivers; Amendments.......................................... 94 SECTION 10.03. Expenses; Indemnity; Damage Waiver........................... 95 SECTION 10.04. Successors and Assigns....................................... 96 SECTION 10.05. Survival..................................................... 99 SECTION 10.06. Counterparts; Integration; Effectiveness..................... 99 SECTION 10.07. Severability................................................. 100 SECTION 10.08. Right of Setoff.............................................. 100 SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process... 100 SECTION 10.10. WAIVER OF JURY TRIAL......................................... 101 SECTION 10.11. Headings..................................................... 101 SECTION 10.12. Treatment of Certain Information; Confidentiality............ 101
-iii- SCHEDULE I - Commitments SCHEDULE II - Material Agreements and Liens with Respect to Indebtedness SCHEDULE III - Litigation and Environmental Matters SCHEDULE IV - Subsidiaries and Investments SCHEDULE V - Station Licenses SCHEDULE VI - Certain Equity Rights EXHIBIT A - Form of Assignment and Acceptance EXHIBIT B - Form of Guarantee Assumption Agreement EXHIBIT C - Form of Opinion of Counsel to the Obligors EXHIBIT D - Form of Opinion of Special Communications Counsel EXHIBIT E - Form of Opinion of Special New York Counsel to The Chase Manhattan Bank -iv- -1- CREDIT AGREEMENT dated as of August 29, 1997, between ARGYLE TELEVISION, INC. (to be renamed HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein), the SUBSIDIARY GUARANTORS party hereto, the LENDERS party hereto and THE CHASE MANHATTAN BANK, as Administrative Agent. Pursuant to an Amended and Restated Agreement and Plan of Merger dated as of March 26, 1997 by and among The Hearst Corporation, HAT Merger Sub, Inc., HAT Contribution Sub, Inc., and Argyle Television, Inc., the parties thereto have agreed to effect the Merger Transactions (as hereinafter defined) providing, inter alia, for the transfer to Argyle Television, Inc. of the Hearst ----- ---- Stations (as hereinafter defined), and related obligations and liabilities. In that connection, Argyle Television, Inc. has requested that the Lenders extend credit to it (by means of loans and letters of credit) in an aggregate amount up to $1,000,000,000 (which may, in the circumstances herein provided, be increased to $1,250,000,000) to finance the cash portion of the Merger Transactions, to pay for fees and expenses relating thereto, to finance acquisitions, to refinance existing indebtedness of Argyle Television, Inc. (including certain indebtedness assumed in connection with the Merger Transactions), to repurchase outstanding shares of its capital stock and for the general corporate purposes of Argyle Television, Inc. and its subsidiaries. The Lenders are willing to extend such credit upon the terms and conditions hereof and, accordingly, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the ------------- following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to --- whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" shall have the meaning assigned to such term in Section ----------- 7.03(c)(iv). "Acquisition Related Compensation Expenses" means, with respect to any ----------------------------------------- acquisition, (i) severance payments made to terminated employees in connection with such acquisition, (ii) stay bonuses paid in connection with such acquisition and (iii) costs and fees related to hiring and relocating new employees in connection with such acquisition, including payments to employee search firms. "Additional Permitted Indebtedness" means Indebtedness of the Borrower --------------------------------- incurred or assumed in accordance with the provisions of Section 7.01(g). -2- "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing ------------------ for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means The Chase Manhattan Bank, in its capacity -------------------- as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire ---------------------------- in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person --------- that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Alternate Base Rate" means, for any day, a rate per annum equal to ------------------- the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Applicable Margin" means, with respect to any ABR Loan (including any ----------------- Swingline Loan) or Eurodollar Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "ABR Loans", "Eurodollar Loans" or "Commitment Fee", as the case may be, based upon the Leverage Ratio as at the last day of the fiscal quarter most recently ended as to which the Borrower has either delivered financial statements pursuant to Section 6.01, or (in the case of the fourth fiscal quarter in any fiscal year) as to which the Borrower has otherwise delivered financial statements as at the end of and for such fiscal quarter (or, prior to the delivery of the first of such statements after the Effective Date, upon the Leverage Ratio set forth in the certificate of a Financial Officer delivered pursuant to Section 5.01(i)): -3- ======================================================= Leverage ABR Eurodollar Commitment Ratio: Loans Loans Fee - ------------------------------------------------------- Greater than 5.00x 0.00% 0.625% 0.1875% - ------------------------------------------------------- Greater than 4.50x but less than or equal to 5.00x 0.00% 0.500% 0.1500% - ------------------------------------------------------- Greater than 4.00x but less than or equal to 4.50x 0.00% 0.400% 0.1250% - ------------------------------------------------------- Less than or equal to 4.00x 0.00% 0.325% 0.1250% ======================================================= Each change in the "Applicable Margin" based upon any change in the Leverage Ratio shall become effective for purposes of the accrual of interest and commitment fees hereunder (including in respect of all then-outstanding Loans and Commitments) on the date three Business Days after the delivery to the Administrative Agent of the financial statements of the Borrower and its Consolidated Subsidiaries for the most recently ended fiscal quarter pursuant to Section 6.01, and shall remain effective for such purpose until three Business Days after the next delivery of such financial statements to the Administrative Agent hereunder, provided that, notwithstanding the foregoing, the Applicable -------- Margin shall be the highest rates provided for in the above schedule for any period during which either (i) an Event of Default shall have occurred and be continuing or (ii) the Borrower shall be in default of its obligation to deliver financial statements for any fiscal quarter by the times specified in Section 6.01 (but upon the cure or waiver of any such Event of Default or default, this proviso shall no longer be applicable until another such Event of Default or default shall occur). "Applicable Percentage" means, with respect to any Lender, the --------------------- percentage of the total Revolving Commitments represented by such Lender's Revolving Commitment. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments. "Argyle Stations" means, collectively, the Cincinnati Station, the --------------- Providence Station, and television broadcast stations KITV-TV in Honolulu, Hawaii (and its various satellite stations), WAPT-TV in Jackson, Mississippi, KHBS-TV in Ft. Smith, Arkansas, KHOG-TV in Fayetteville, Arkansas, and KOCO-TV in Oklahoma City, Oklahoma. "Assessment Rate" means, for any day, the annual assessment rate in --------------- effect on such day that is payable by a member of the Bank Insurance Fund classified as -4- "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States; provided that if, as a result of any change in any -------- law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders. "Assignment and Acceptance" means an assignment and acceptance entered ------------------------- into by a Lender and an assignee (with the consent of the party or parties whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Available Revolving Credit" means, at any date, the aggregate unused -------------------------- amount of the Revolving Credit Commitments hereunder (after giving effect to any pending Borrowings or prepayments as to which notice shall have been given hereunder) to the extent that (on a pro forma basis) such Revolving Credit Commitments could have been utilized through Borrowings hereunder for general working capital purposes during the period of four fiscal quarters most recently ended for which financial statements are available hereunder. "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate ------------ multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. "Basic Documents" means, collectively, the Loan Documents, the Merger --------------- Agreement, the Private Placement Documents and Tax Sharing Agreement. "Basket Investments" has the meaning assigned to such term in Section ------------------ 7.05(h). "Board" means the Board of Governors of the Federal Reserve System of ----- the United States of America. "Borrower" means Argyle Television, Inc. (to be renamed Hearst-Argyle -------- Television, Inc. following the Merger Transactions), a Delaware corporation. "Borrowing" means (a) Loans of the same Class and Type, made, --------- converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Swingline Loan. "Borrowing Request" means a request by the Borrower for a Borrowing in ----------------- accordance with Section 2.03. -5- "Bridge Debt" means Indebtedness of Cash Sub in an aggregate principal ----------- amount equal to $200,000,000 incurred immediately prior to the Merger Transactions, which Indebtedness is to be assumed by the Borrower in connection with the Merger Transactions. "Broadcast Cash Flow" means, for any period, the sum (determined on a ------------------- consolidated basis without duplication in accordance with GAAP) for the Borrower and its Consolidated Subsidiaries, of EBITDA for such period, calculated before Corporate Overhead for such period. "Business Day" means any day that is not a Saturday, Sunday or other ------------ day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, -------- the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Expenditures" means, for any period, expenditures (including -------------------- the aggregate amount of Capital Lease Obligations incurred during such period) made by the Borrower or any of its Consolidated Subsidiaries to acquire or construct fixed assets, plant and equipment (including renewals, improvements and replacements, but excluding repairs) during such period computed in accordance with GAAP; provided that any such expenditures made in connection -------- with any Acquisition shall not constitute Capital Expenditures. "Capital Lease Obligations" of any Person means the obligations of ------------------------- such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Cash Sub" means HAT Contribution Sub, Inc., a Delaware corporation. -------- "Casualty Event" means, with respect to any property of the Borrower -------------- or any of its Consolidated Subsidiaries, any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, such property for which the Borrower or any of its Consolidated Subsidiaries receives insurance proceeds, or proceeds of a condemnation award or other compensation. "Change of Control" means that (a) an aggregate of at least 35% of the ----------------- outstanding shares of capital stock of the Borrower shall cease to be owned beneficially by (i) Hearst and (ii) all "Permitted Transferees" under and as defined in the Certificate of Incorporation of the Borrower as in effect immediately after the Merger Transactions and (b) Hearst and such "Permitted Transferees", collectively, shall cease to be able to elect a majority of the members of the Board of Directors of the Borrower (or such greater number -6- of the members of such Board of Directors as shall be necessary, under the Certificate of Incorporation and by-laws of the Borrower, to approve all actions requiring approval of such Board of Directors assuming full attendance by all members of such Board of Directors at a meeting thereof). "Change in Law" means (a) the adoption of any law, rule or regulation ------------- after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Lender (or, for purposes of Section 2.14(b), by any lending office of such Lender or by such Lender's or the Issuing Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority with which, if the same does not have the force of law, such Lender believes in good faith that it would be disadvantageous not to comply, in each case made or issued after the date of this Agreement. "Cincinnati Station" means television broadcast station WLWT-TV, ------------------ Cincinnati, Ohio. "Class", when used in reference to any Loan or Borrowing, refers to ----- whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Incremental Facility Loans, Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment or Incremental Facility Commitment. "Code" means the Internal Revenue Code of 1986, as amended from time ---- to time. "Commitment" means a Revolving Commitment or Incremental Facility ---------- Commitment, or any combination thereof (as the context requires). "Consolidated Subsidiary" means any Subsidiary of the Borrower other ----------------------- than a Designated Subsidiary. "Control" means the possession, directly or indirectly, of the power ------- to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. ----------- ---------- "Conversion Date" means the Quarterly Date falling on or nearest to --------------- December 31, 1999. "Corporate Overhead" means, for any period, all amounts paid or ------------------ incurred by the Borrower and its Consolidated Subsidiaries (determined on a consolidated basis) during -7- such period in respect of all items of general corporate overhead and administrative expenses and the like including, without duplication, (x) all amounts payable by the Borrower or any of its Consolidated Subsidiaries to any of its Affiliates during such period in respect of items that would constitute general corporate overhead or administrative expense of the Borrower if paid or incurred by the Borrower and (y) all Management Fees. "Dayton Station" means television broadcast station WDTN-TV in Dayton, -------------- Ohio. "Debt Service" means, for any period, the sum, for the Borrower and ------------ its Consolidated Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) the amount, if any, by which the aggregate principal amount of Incremental Facility Loans outstanding hereunder at the beginning of such period shall exceed the aggregate amount of the Incremental Facility Commitments scheduled to be in effect at the end of such period after giving effect to any reductions of such Commitments scheduled to occur during such period pursuant to Section 2.08 plus (b) all ---- regularly scheduled payments or regularly scheduled mandatory prepayments of principal of any other Indebtedness (including the Term Loans and the principal component of any payments in respect of Capital Lease Obligations, but excluding any prepayments pursuant to Section 2.10) made during such period plus (c) all ---- Interest Expense for such period. "Default" means any event or condition which constitutes an Event of ------- Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Designated Subsidiary" means any Subsidiary designated as a --------------------- "Designated Subsidiary" pursuant to Section 6.09(b). "Disclosed Matters" means the actions, suits and proceedings and the ----------------- environmental matters disclosed in Schedule III. The disclosure of information in any schedule or exhibit to this Agreement shall not constitute an admission by the Borrower that such information is material for any purpose, including applicable securities laws. "Disposition" means any sale, assignment, transfer or other ----------- disposition of any property (whether now owned or hereafter acquired) by the Borrower or any of its Consolidated Subsidiaries to any other Person excluding any sale, assignment, transfer or other disposition of (x) any property sold or disposed of in the ordinary course of business and on ordinary business terms, (y) any Investment permitted under Section 7.05(f) and (z) the Dayton Station and the Providence Station. The term "Disposition" shall include the entering into by the Borrower or any of its Consolidated Subsidiaries of any LMA Arrangement that in economic effect is functionally equivalent to the sale of a Station (without limiting the obligation of the Borrower and its Consolidated Subsidiaries to first -8- obtain the consent of the Required Lenders to such LMA Arrangement pursuant to Section 10.02, if required hereunder). "Disposition Investment" means, with respect to any Disposition, any ---------------------- promissory notes or other evidences of indebtedness or Investments received by the Borrower or any of its Consolidated Subsidiaries in connection with such Disposition. "Dividend Payment" means dividends (in cash, property or obligations) ---------------- on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any shares of any class of stock of the Borrower or of any warrants, options or other rights to acquire the same (or, other than in respect of employee compensation arrangements entered into in the ordinary course of business, to make any payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market or equity value of the Borrower or any of its Subsidiaries), but excluding (x) dividends payable solely in shares of common stock of the Borrower or (y) the cash payment by the Borrower to its stockholders pursuant to a "Cash Election" (as that term is defined in the Merger Agreement) so long as the aggregate amount of all such cash payments shall not exceed $160,000,000 and shall be paid on or prior to September 12, 1997. "dollars" or "$" refers to lawful money of the United States of ------- - America. "EBITDA" means, for any period, the sum, determined without ------ duplication, for the Borrower and its Consolidated Subsidiaries, of (a) net revenue (defined as gross operating revenue, including network compensation and production revenues, plus rental income minus the sum of barter and trade ---- ----- revenue, agency and advertising commissions and sales representative fees) minus ----- (b) operating expenses (determined as provided in the next sentence) minus (c) ----- Film Cash Payments minus (d) Corporate Overhead. In calculating "EBITDA": ----- (i) "operating expenses" shall be determined exclusive of barter and trade expenses, depreciation and amortization (including amortization in respect of Film Obligations and barter expenses), Interest Expense, any non-cash charges (including non-cash pension expenses and any write-offs of programming rights), Acquisition Related Compensation Expenses, LMA Purchase Price Payments, income taxes accrued for the relevant period, and any Capital Expenditures, and "net revenue" and "operating expenses" shall both be determined exclusive of (x) any payments made or received under Hedging Agreements, (y) extraordinary and non-recurring gains or losses, and any gains or losses from the sale of assets and (z) any non-cash stock option expense or non-cash stock option gain in respect of options for the capital stock of the Borrower issued to any of its or its Subsidiaries' officers, directors or employees; -9- (ii) performance bonuses shall be treated as an "operating expense" only in the period in which such bonuses are paid, whether or not such bonuses are accrued during or in respect of such period; (iii) for all purposes of this Agreement (other than for purposes of EBITDA as used in the definition of Excess Cash Flow), any Film Cash Payment to the extent consisting of an up-front payment made with respect to a Film Obligation incurred during such period, shall not be deducted in determining EBITDA for such period but shall instead (x) in the event such contract has a term of twelve months or less, be amortized over the term of such contract and (y) in the event such contract has a term of more than twelve months, be amortized over the term of such contract (or, if shorter, the pay period of such contract), and in the case of both (x) and (y), only the portion of such Film Cash Payment so amortized during such period shall be deducted in determining EBITDA for such period; and (iv) if during any period for which EBITDA is being determined the Borrower or any Consolidated Subsidiary shall have acquired any new Station or Stations (including the Hearst Stations), then, for all purposes of this Agreement (other than for purposes of the definition of Excess Cash Flow, for which purpose actual EBITDA for the relevant period shall be used), EBITDA shall be determined on a pro forma basis for such period as if the relevant acquisition had been made or consummated on the first day of such period. "Effective Date" means the date on which the conditions specified in -------------- Section 5.01 are satisfied (or waived in accordance with Section 10.02). "Environmental Laws" means all laws, rules, regulations, codes, ------------------ ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise ----------------------- (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Issuance" means (a) any issuance or sale by the Borrower after --------------- the Effective Date of (i) any of its capital stock, (ii) any warrants or options exercisable in respect -10- of its capital stock (other than any warrants or options issued to directors, officers or employees of the Borrower or any of its Consolidated Subsidiaries, pursuant to employee benefit plans established in the ordinary course of business and any capital stock of the Borrower issued upon the exercise of such warrants or options) or (iii) any other security or instrument representing an equity interest (or the right to obtain any equity interest) in the Borrower or (b) the receipt by the Borrower whether directly (or indirectly through one or more of its Consolidated Subsidiaries) after the Effective Date of any capital contribution (whether or not evidenced by any equity security issued by the Borrower). "Equity Rights" means, with respect to any Person, any subscriptions, ------------- options, warrants, commitments, preemptive rights or agreements of any kind (including any stockholders' or voting trust agreements) for the issuance, sale, registration or voting of, or securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person. "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time. "ERISA Affiliate" means any trade or business (whether or not --------------- incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section ----------- 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or of a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. -11- "Eurodollar", when used in reference to any Loan or Borrowing, refers ---------- to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article ---------------- VIII. "Excess Cash Flow" means, for any period, the sum, determined without ---------------- duplication, for the Borrower and its Consolidated Subsidiaries, of (a) EBITDA for such period minus (b) Fixed Charges for such period plus (c) cash receipts ----- ---- during such period in respect of any extraordinary or non-recurring gains to the extent not required pursuant to Section 2.10(b)(ii) to be applied to the prepayment of the Loans (and/or to provide cover for Letter of Credit Liabilities) and reductions of the Commitments (or minus cash payments during ----- such period in respect of any extraordinary or non-recurring losses) minus (d) ----- Acquisition Related Compensation Expenses for such period. "Excluded Taxes" means, with respect to the Administrative Agent, any -------------- Lender, the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender's failure or inability to comply with Section 2.16(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.16(a). "Existing Credit Agreement" means the Amended and Restated Credit ------------------------- Agreement dated as of June 13, 1995 between the Borrower, each of the subsidiaries of the Borrower named therein, the lenders named therein, The Chase Manhattan Bank (successor to The Chase Manhattan Bank (National Association)) as administrative agent for said lenders, and Bank of Montreal, Banque Paribas and Union Bank as co-agents (as modified and supplemented and in effect on the Effective Date). "FCC" means the Federal Communications Commission or any governmental --- authority substituted therefor. "Federal Funds Effective Rate" means, for any day, the weighted ---------------------------- average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds -12- brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Film Cash Payments" means, for any period, the sum (determined on a ------------------ consolidated basis and without duplication in accordance with GAAP) of all payments by the Borrower and its Consolidated Subsidiaries made or scheduled to be made during such period in respect of Film Obligations. "Film Obligations" means obligations in respect of the purchase, use, ---------------- license or acquisition of programs, programming materials, films and similar assets used in connection with the business and operation of the Borrower and its Consolidated Subsidiaries. "Financial Officer" means the chief financial officer, principal ----------------- accounting officer, treasurer or controller of the Borrower. "Fixed Charges" means, for any period, the sum, for the Borrower and ------------- its Consolidated Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) the aggregate amount of Debt Service for such period, plus ---- (b) the aggregate amount of taxes (excluding deferred taxes) paid or payable in respect of the income or profit of the Borrower and its Subsidiaries for such period plus ---- (c) the aggregate amount of all Capital Expenditures made during such period (such aggregate amount of Capital Expenditures to be deemed to be equal to the lesser of (x) actual Capital Expenditures for such period and (y) $15,000,000, provided that the amount of actual Capital Expenditures in -------- excess of $15,000,000 in such period, shall not be excluded from the calculation of "Fixed Charges" unless and to the extent that, at the time of calculation, the Borrower has Available Revolving Credit), plus ---- (d) commitment fees and letter of credit fees paid during such period pursuant to this Agreement plus ---- (e) Dividend Payments and Management Fees paid in cash during such period. In calculating "Fixed Charges" for any period, if any portion of such period shall occur prior to an Acquisition of any Station, Fixed Charges shall be calculated as if such Station had been acquired by the Borrower and its Consolidated Subsidiaries at the beginning of such period. -13- "Fixed Charges Ratio" means, as at any date, the ratio of (a) EBITDA ------------------- for the period of four consecutive fiscal quarters ending on or most recently ended prior to such date to (b) Fixed Charges for such period. "Foreign Lender" means any Lender that is organized under the laws of -------------- a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Fort Smith Preferred Stock" means, collectively, shares of Series A -------------------------- Preferred Stock of the Borrower (in an aggregate face amount up to but not exceeding $12,500,000) and shares of Series B Preferred Stock of the Borrower (in an aggregate face amount up to but not exceeding $12,500,000). "GAAP" means generally accepted accounting principles in the United ---- States of America. "Governmental Authority" means the government of the United States of ---------------------- America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" shall mean a guarantee, an endorsement, a contingent --------- agreement to purchase or to furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, the Indebtedness, other obligations, net worth, working capital or earnings of any Person, or a guarantee of the payment of dividends or other distributions upon the stock or equity interests of any Person, or an agreement to purchase, sell or lease (as lessee or lessor) Property, products, materials, supplies or services primarily for the purpose of enabling a debtor to make payment of such debtor's obligations or an agreement to assure a creditor against loss, and including causing a bank or other financial institution to issue a letter of credit or other similar instrument for the benefit of another Person, but excluding (i) endorsements for collection or deposit in the ordinary course of business and (ii) typical and customary indemnification obligations, and representations and warranties, made in connection with the purchase or sale of property or the issuance of securities. The terms "Guarantee" and "Guaranteed" --------- ---------- used as a verb shall have a correlative meaning. "Guarantee Assumption Agreement" means a Guarantee Assumption ------------------------------ Agreement substantially in the form of Exhibit B by an entity that, pursuant to Section 6.09(c) is required to become a "Subsidiary Guarantor" hereunder in favor of the Administrative Agent. -14- "Hazardous Materials" means all explosive or radioactive substances or ------------------- wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hearst" means The Hearst Corporation, a Delaware corporation. ------ "Hearst Stations" means, collectively, the Dayton Station and --------------- television broadcast stations KMBC-TV in Kansas City, Kansas, WBAL-TV in Baltimore, Maryland, WCVB-TV in Boston, Massachusetts, WISN-TV in Milwaukee, Wisconsin, and WTAE-TV in Pittsburgh, Pennsylvania. "Hedging Agreement" means any interest rate protection agreement, ----------------- foreign currency exchange agreement, commodity price protection agreement, equity derivative or other interest or currency exchange rate or commodity price hedging arrangement. "Incremental Facility Availability Period" means the period from and ---------------------------------------- including the Effective Date to but excluding the Quarterly Date falling on or nearest to December 31, 1998. "Incremental Facility Commitment" of any Series means, with respect to ------------------------------- each Lender, the commitment, if any, of such Lender to make Incremental Facility Loans of such Series, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The amount of each Lender's Incremental Facility Commitment of any Series shall be determined in accordance with the provisions of Section 2.01(c). The aggregate amount of the Incremental Facility Commitments of all Series shall not exceed $250,000,000. "Incremental Facility Commitment Reduction Date" means, with respect ---------------------------------------------- to the Incremental Facility Loans, each Quarterly Date during the period commencing March 31, 2001, through and including the Maturity Date. "Incremental Facility Lenders" means, in respect of any Series of ---------------------------- Incremental Facility Loans, a Lender with an Incremental Facility Commitment of such Series or, if the Incremental Facility Commitments of such Series have terminated or expired, a Lender with outstanding Incremental Facility Loans of such Series. "Incremental Facility Loans" means the Loans provided for by Section -------------------------- 2.01(c), which may be ABR Loans and/or Eurodollar Loans. -15- "Indebtedness" shall mean, for any Person, the sum (determined on a ------------ consolidated basis without duplication in accordance with GAAP), of the following: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; and (f) Indebtedness of others Guaranteed by such Person; provided that, -------- such term shall not in any event include (v) contingent consideration payable in connection with an Acquisition where, as of the date of determination, the contingency requiring payment of such consideration is unlikely to occur (except that in any event any such contingent consideration required to be carried as a liability on a balance sheet of the Borrower and its Subsidiaries, or required to be disclosed in a footnote to such balance sheet, shall constitute Indebtedness), (w) obligations under Hedging Agreements, (x) Film Obligations, (y) obligations in respect of letters of credit or surety bonds issued in connection with fiduciary or fidelity obligations of or with respect to such Person in the ordinary course of business or (z) obligations in respect of shares of Fort Smith Preferred Stock. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Taxes" means Taxes other than Excluded Taxes. ----------------- "Information Memorandum" means the Confidential Information Memorandum ---------------------- dated June, 1997, prepared in connection with the syndication to the Lenders of the Commitments under this Agreement. "Interest Coverage Ratio" means, as at any date of determination ----------------------- thereof, the ratio of (a) EBITDA for the period of four fiscal quarters ending on or most recently ended prior to such date to (b) Interest Expense for such period. "Interest Election Request" means a request by the Borrower to convert ------------------------- or continue a Borrowing in accordance with Section 2.07. -16- "Interest Expense" shall mean, for any period, the sum, for the ---------------- Borrower and its Consolidated Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all interest in respect of Indebtedness (including the interest component of any payments in respect of Capital Lease Obligations but excluding any capitalized financing fees) accrued or capitalized during such period (whether or not actually paid during such period) plus (b) the net amount payable (or minus the ---- ----- net amount receivable) under Hedging Agreements during such period (whether or not actually paid or received during such period). Notwithstanding the foregoing, if as at any date (a "calculation date") fewer than four complete ---------------- consecutive fiscal quarters have elapsed subsequent to the Effective Date, Interest Expense shall be calculated only for the portion of such period commencing on the Effective Date and ending on the calculation date, and then shall be annualized by multiplying the amount of such Interest Expense by a fraction, the numerator of which is 365 and the denominator of which is the number of days during the period commencing on the day immediately following the Effective Date through and including the calculation date. Notwithstanding the foregoing provisions of this definition, "Interest Expense" for any period shall not include any dividends paid in respect of the Fort Smith Preferred Stock during such period. "Interest Payment Date" means (a) with respect to any ABR Loan, each --------------------- Quarterly Date, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid. "Interest Period" means, with respect to any Eurodollar Borrowing, the --------------- period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, three or six months (or, with the consent of each Lender, nine months) thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a -------- Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. -17- "Investment" means, for any Person: (a) the acquisition (whether for ---------- cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any agreement to make any such acquisition (including any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such sale); (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person), but excluding any such advance, loan or extension of credit having a term not exceeding 90 days arising in connection with the sale of programming or advertising time by such Person in the ordinary course of business; (c) the entering into of any Guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (d) the entering into of any Hedging Agreement. "Issuing Lender" means The Chase Manhattan Bank, in its capacity as -------------- the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(j). "LC Disbursement" means a payment made by the Issuing Lender pursuant --------------- to a Letter of Credit. "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn ----------- amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time. "Lenders" means the Persons listed on Schedule I and any other Person ------- that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. Unless the context otherwise requires, the term "Lenders" includes each Swingline Lender. "Letter of Credit" means any letter of credit issued pursuant to this ---------------- Agreement. "Letter of Credit Documents" means, with respect to any Letter of -------------------------- Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be modified and supplemented and in effect from time to time. -18- "Leverage Ratio" means, at any date, the ratio of (a) the sum, for the -------------- Borrower and its Consolidated Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) of the aggregate amount of all Indebtedness as at such date to (b) EBITDA for the period of four consecutive fiscal quarters ending on or most recently ended prior at such date. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any --------- Interest Period, the rate appearing on Page 3750 of the Dow Jones Markets Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the LIBO Rate with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of ---- trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "LMA Arrangement" means, with respect to any Person that owns any --------------- television broadcasting station, (i) any so-called "local marketing agreements" or any other arrangements with any other television broadcasting station (other than with the Borrower or another Consolidated Subsidiary with respect to one of the Stations) whereby the parties agree to function cooperatively in terms of programming, advertising, sales, management, consulting or similar services; or (ii) any so-called "time brokerage agreements" or any other agreements or arrangements under which any Station shall (A) sell broadcast time to any other television broadcasting station (other than to any other Station) which programs such broadcast time and sells its own commercial advertising announcements during such broadcast time or (B) purchase broadcast time on any other television broadcasting station (other than on any other Station) for the purpose of programming such broadcast time and selling its commercial advertisements during such time. -19- "LMA Purchase Price Payments" means any payment under an LMA --------------------------- Arrangement that constitutes an Acquisition to the extent such payment constitutes all or a portion of the purchase or acquisition price (whether or not deferred) of the assets or the air time or both of the television station subject to such LMA Arrangement. "Loan Documents" means, collectively, this Agreement and the Letter of -------------- Credit Documents. "Loans" means the loans made by the Lenders to the Borrower pursuant ----- to this Agreement. "Management Fees" means, for any period, any amounts paid or incurred --------------- by the Borrower or any of its Consolidated Subsidiaries to any of its Affiliates (excluding to the Borrower and its Consolidated Subsidiaries) on account of fees, salaries, administrative expenses and other compensation (including on account of any regular, special or accrued bonuses), provided that "Management -------- Fees" for any period shall not include any non-cash stock option expense (or be reduced by any non-cash stock option gain) in respect of options for the capital stock of the Borrower issued to any of its or its Subsidiaries' officers, directors or employees. "Margin Stock" means "margin stock" within the meaning of Regulations ------------ G, T, U and X. "Material Adverse Effect" means a material adverse effect on (a) the ----------------------- business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and its Consolidated Subsidiaries taken as a whole (excluding adverse changes to prospects as a result of changes affecting the television broadcasting industry generally), (b) the ability of any Obligor to perform any of its obligations under this Agreement or any of the other Loan Documents to which it is a party or (c) the rights of or benefits available to the Lenders under this Agreement or any of the other Loan Documents. "Material Indebtedness" means Indebtedness (other than the Loans and --------------------- Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Consolidated Subsidiaries in an aggregate principal amount exceeding $15,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of any Person ---------------- in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Person would be required to pay if such Hedging Agreement were terminated at such time. "Maturity Date" means, the Quarterly Date falling on or nearest to ------------- December 31, 2004. -20- "Merger Agreement" means the Amended and Restated Agreement and Plan ---------------- of Merger dated as of March 26, 1997 by and among Hearst, Merger Sub, Cash Sub and the Borrower. "Merger Sub" means HAT Merger Sub, Inc., a Delaware corporation. ---------- "Merger Transactions" means, collectively, the following transactions ------------------- contemplated by the Merger Agreement, each of which is to take place substantially simultaneously on the Effective Date in the following order: (a) the restatement of the Certificate of Incorporation of the Borrower in the form attached to the Merger Agreement as Exhibit A; (b) the contribution by Cash Sub to the Borrower of $200,000,026.50 and the contribution by Hearst to the Borrower of the Hearst Stations and "Hearst Broadcasting Productions" (as such term is defined in the Merger Agreement); (c) in consideration for the contributions described in the foregoing clause (b), (x) the assumption by the Borrower of the Bridge Debt, the Private Placement Debt and the obligations and liabilities of Hearst relating to the Hearst Stations (including "Hearst Broadcasting Productions" as such term is defined in the Merger Agreement), and the assumption by the respective Subsidiaries of the Borrower to whom the Hearst Stations (and "Hearst Broadcasting Productions") are being transferred of such obligations and liabilities and (y) the issuance by the Borrower to Hearst of 38,611,000 shares (subject to a working capital adjustment) of the Borrower's Series B Common Stock and by the Borrower to Cash Sub of one share of the Borrower's Series B Common Stock; and (d) the merger of Merger Sub with and into the Borrower, with the Borrower being the surviving corporation and with the outstanding shares of capital stock of the constituent corporations to be converted, or canceled in exchange for cash, in the manner and to the extent provided in Article III of the Merger Agreement. "Multiemployer Plan" means a multiemployer plan as defined in Section ------------------ 4001(a)(3) of ERISA. "Net Cash Proceeds" means: ----------------- (a) in the case of any Casualty Event, the aggregate amount of cash proceeds of insurance, condemnation awards and other compensation received by the Borrower and its Consolidated Subsidiaries in respect of such Casualty Event net of (i) reasonable expenses incurred by the Borrower and its Consolidated Subsidiaries in connection therewith and (ii) contractually required repayments of Indebtedness to the -21- extent secured by a Lien on such property and any income and transfer taxes payable by the Borrower or any of its Consolidated Subsidiaries in respect of such Casualty Event; and (b) in the case of any Disposition, the aggregate amount of all cash payments received by the Borrower and its Consolidated Subsidiaries directly or indirectly in connection with such Disposition, whether at the time of such Disposition or after such Disposition under deferred payment arrangements or Investments entered into or received in connection with such Disposition (including Disposition Investments); provided that -------- (i) Net Cash Proceeds shall be net of (A) the amount of any legal, title, transfer, accounting and recording tax expenses, commissions and other fees and expenses payable by the Borrower and its Consolidated Subsidiaries in connection with such Disposition and (B) any Federal, state and local income or other taxes estimated to be payable by the Borrower and its Consolidated Subsidiaries as a result of such Disposition, but only to the extent that such estimated taxes are in fact paid to the relevant Federal, state or local governmental authority within fifteen months of the date of such Disposition; and (ii) Net Cash Proceeds shall be net of any repayments by the Borrower or any of its Consolidated Subsidiaries of Indebtedness to the extent that (A) such Indebtedness is secured by a Lien on the property that is the subject of such Disposition and (B) the transferee of (or holder of a Lien on) such property requires that such Indebtedness be repaid as a condition to the purchase of such property. "Obligor" means the Borrower and each Subsidiary Guarantor. ------- "Other Taxes" means any and all present or future stamp or documentary ----------- taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "PBGC" means the Pension Benefit Guaranty Corporation referred to and ---- defined in ERISA and any successor entity performing similar functions. "Permitted Encumbrances" means: ---------------------- (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 6.04; -22- (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 6.04; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, tenders, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (l) of Article VIII; and (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary. "Permitted Investments" means: --------------------- (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's Ratings Group or from Moody's Investors Services, Inc.; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 270 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof (or organized under the laws of any other jurisdiction if such bank has a long- term senior debt rating of A or better) which has a combined capital and surplus and undivided profits of not less than $500,000,000; -23- (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) of this definition and entered into with a financial institution satisfying the criteria described in clause (c) of this definition; and (e) interest in any money market mutual fund offered by The Chase Manhattan Bank and/or Morgan Guaranty Trust Company of New York registered under the Investment Company Act of 1940, as amended, the portfolio of which is limited primarily to obligations described in the foregoing clauses (a), (b), (c) and (d) so long as such fund has total assets of at least $1,000,000,000 and is rated AAAm-G or better or AAA or better by Standard & Poor's Ratings Group or Moody's Investors Services, Inc., respectively. "Person" means any natural person, corporation, limited liability ------ company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a ---- Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced ---------- from time to time by The Chase Manhattan Bank as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Principal Payment Dates" means the Quarterly Dates falling on or ----------------------- nearest to March 31, June 30, September 30 and December 31 of each year, commencing with December 31, 2000, through and including December 31, 2004. "Private Placement Debt" means the Indebtedness of Hearst in respect ---------------------- of its 7.87% Series A Senior Notes due 2001, its 8.01% Series B Senior Notes due 2002 and its 8.04% Series C Senior Notes due 2003, in an aggregate original principal amount of $275,000,000, which Notes were issued by Hearst pursuant to the several separate Note Purchase Agreements, each dated as of December 22, 1992, between Hearst and the "Purchasers" referred to therein, which Indebtedness is to be assumed by the Borrower in connection with the Merger Transactions. "Private Placement Debt Documents" means, collectively, the Notes -------------------------------- evidencing the Private Placement Debt and several separate Note Purchase Agreements pursuant to which the Private Placement Debt was issued. -24- "Providence Station" means television broadcast station WNAC-TV in ------------------ Providence, Rhode Island. "Purchase Price" means, with respect to any Acquisition under Section -------------- 7.03(c)(iv) hereof, an amount equal to the sum (without duplication) of (i) the aggregate consideration, whether cash, property or securities (including any Indebtedness incurred pursuant to Section 7.01(f) or 7.01(g)), paid or delivered by the Borrower and its Consolidated Subsidiaries in connection with such Acquisition plus (ii) the aggregate amount of liabilities of the acquired ---- business (net of current assets of the acquired business) that would be reflected on a balance sheet (if such were to be prepared) of the Borrower and its Consolidated Subsidiaries after giving effect to such Acquisition, provided -------- that the term "Purchase Price" shall in any event exclude transaction fees and expenses associated with the respective Acquisition). "Quarterly Dates" means the last Business Day of March, June, --------------- September and December in each year, the first of which shall be the first such day after the date hereof. "Register" has the meaning set forth in Section 10.04. -------- "Registration Statement" means the registration statement on Form S-4 ---------------------- (together with all amendments, schedules and exhibits thereto) filed by the Borrower with the Securities and Exchange Commission with respect to Hearst- Argyle Television Inc.'s Series A Common Stock to be issued in connection with the Merger Transactions. "Related Parties" means, with respect to any specified Person, such --------------- Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Incremental Facility Lenders" means, with respect to any ------------------------------------- Series of Incremental Facility Loans at any time, Lenders having Incremental Facility Loans and unused Incremental Facility Commitments of such Series representing more than 50% of the sum of the total Incremental Facility Loans of such Series and unused Incremental Facility Commitments of such Series at such time. "Required Lenders" means, at any time, Lenders having Revolving ---------------- Exposures, Term Loans, Incremental Facility Loans and unused Commitments representing more than 50% of the sum of the total Revolving Exposures, outstanding Term Loans and Incremental Facility Loans and unused Commitments at such time. "Required Revolving Lenders" means, at any time, Revolving Lenders -------------------------- having Revolving Exposures and unused Commitments representing more than 50% of the sum of the total Revolving Exposures and unused Commitments at such time. -25- "Required Term Lenders" means Lenders having Term Loans representing --------------------- more than 50% of the sum of the total Term Loans at such time. "Restricted Debt Payment" means any purchase, redemption, retirement ----------------------- or acquisition for value, or the setting apart of any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement or other acquisition of, or any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, the Senior Subordinated Notes or any Additional Permitted Indebtedness, provided that the term -------- "Restricted Debt Payment" shall not include (x) the repurchase of the Senior Subordinated Notes resulting from a "change of control event" in connection with the Merger Transactions, (y) regularly scheduled payments of principal or interest in respect of the Senior Subordinated Notes or (z) regularly scheduled payments of principal or interest in respect of Additional Permitted Indebtedness, in the case of each of the foregoing clauses (y) and (z), to the extent required pursuant to the instruments evidencing the Senior Subordinated Notes or such Additional Permitted Indebtedness, as the case may be. "Restricted Payments" means, collectively, any Dividend Payment and ------------------- any Restricted Debt Payment. "Revolving Availability Period" means the period from and including ----------------------------- the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. "Revolving Commitment" means, with respect to each Lender, the -------------------- commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The amount of each Lender's Revolving Commitment as of the date hereof is set forth on Schedule I, and (after giving effect to any assignment of any Commitment permitted under Section 10.04) in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The aggregate original amount of the Lenders' Revolving Commitments is $1,000,000,000. "Revolving Exposure" means, with respect to any Lender at any time, ------------------ the sum of the outstanding principal amount of such Lender's Revolving Loans and its LC Exposure and Swingline Exposure at such time. "Revolving Lenders" means a Lender with a Revolving Commitment or, if ----------------- the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure. "Revolving Loan" means a Loan made pursuant to Section 2.01(a). -------------- -26- "Senior Subordinated Notes" means the 9 3/4% Senior Subordinated Notes ------------------------- due 2005 issued by the Borrower pursuant to an Indenture dated as of October 27, 1995, between the Borrower and United States Trust Company of New York, as trustee. "Series" has the meaning set forth in Section 2.01(c). ------ "Station Licenses" means all authorizations, licenses or permits ---------------- issued by the FCC and granted or assigned to the Borrower or any Consolidated Subsidiary thereof, or under which the Borrower or any Consolidated Subsidiary thereof has the right to operate any Station, together with any extensions or renewals thereof. "Stations" means the television broadcasting stations from time to -------- time owned by the Borrower or any of its Consolidated Subsidiaries. Immediately after giving effect to the Merger, the Stations will consist of the Argyle Stations and the Hearst Stations. "Statutory Reserve Rate" means, for any day, a fraction (expressed as ---------------------- a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and in effect on such day to which the Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. The Statutory Reserve Rate as of the date hereof is zero. "Subsidiary" means, with respect to any Person (the "parent") at any ---------- ------ date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise specified, "Subsidiary" means a subsidiary of the Borrower. -27- "Subsidiary Guarantor" means each of the Subsidiaries of the Borrower -------------------- identified under the caption "SUBSIDIARY GUARANTORS" on the signature pages hereto and each Subsidiary of the Borrower that becomes a "Subsidiary Guarantor" after the date hereof pursuant to Section 6.09(c). "Swingline Exposure" means, at any time, the aggregate principal ------------------ amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time. "Swingline Lender" means The Chase Manhattan Bank and Morgan Guaranty ---------------- Trust Company of New York, each in its capacity as lender of Swingline Loans hereunder, as the case may be. "Swingline Loan" means a Loan made pursuant to Section 2.04. -------------- "Tax Sharing Agreement" means the Tax Sharing Agreement between Hearst --------------------- and the Borrower to be executed in connection with the Merger Transactions, a form of which is attached as Exhibit 9.02(f) to the Merger Agreement. "Taxes" means any and all present or future taxes, levies, imposts, ----- duties, deductions, charges or withholdings imposed by any Governmental Authority. "Term Loan" means the portion of the Revolving Loans converted --------- pursuant to Section 2.01(b). "Three-Month Secondary CD Rate" means, for any day, the secondary ------------------------------ market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Transactions" means the execution, delivery and performance by each ------------ Obligor of this Agreement and the other Basic Documents to which such Obligor is intended to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder. -28- "Type", when used in reference to any Loan or Borrowing, refers to ---- whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Wholly Owned Subsidiary" means, with respect to any Person, any ----------------------- corporation, partnership or other entity of which all of the equity securities, Equity Rights or other ownership interests (other than, in the case of a corporation, directors' qualifying shares) are directly or indirectly owned or controlled by such Person or one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person. "Withdrawal Liability" means liability to a Multiemployer Plan as a -------------------- result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes -------------------------------------- of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., an "ABR Revolving Loan"); each Series of Incremental Facility Loans shall be deemed a separate Class of Loans hereunder. Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., an "ABR Revolving Borrowing"); each Series of Incremental Facility Borrowings and Incremental Facility Commitments shall be deemed a separate Borrowing and Commitment hereunder. SECTION 1.03. Terms Generally. The definitions of terms herein shall --------------- apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. -29- SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly ---------------------- provided herein, all terms of an accounting or financial nature shall be construed in accordance with, or derived by reference to, GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative -------- Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. References in this Agreement to the determination of items "in accordance with GAAP" means that such items shall be derived by reference ----------------------- to, and with the relevant components of such items being determined in accordance with, GAAP even though (as is the case with terms such as "pro forma", "Broadcast Cash Flow" and "Film Cash Payments") such terms may not have a meaning under GAAP. Pursuant to the Tax Sharing Agreement the Borrower and Hearst have agreed as to the amounts that the Borrower and its Subsidiaries will be obligated to pay to Hearst in respect of Federal income taxes. So long as the Borrower and its Subsidiaries shall be included in consolidated Federal income tax returns filed by Hearst pursuant to the Tax Sharing Agreement, whenever making determinations under this Agreement of the amount of Federal income taxes payable during any period (or the amount of refunds in respect of such taxes receivable during any period) by the Borrower and its Subsidiaries, the amount of such taxes payable or receivable shall be deemed to be equal to the amounts payable or receivable, as the case may be, in respect of such taxes under the Tax Sharing Agreement without reference to whether Hearst and its Subsidiaries as an affiliated group shall in fact pay any amounts in respect of Federal income taxes (or receive any amounts in respect of refunds of Federal income taxes) during the relevant period. To enable the ready and consistent determination of compliance with the covenants set forth in Article VII, the Borrower will not change the last day of its fiscal year from December 31 of each year, or the last days of the first three fiscal quarters in each of its fiscal years from March 31, June 30 and September 30 of each year, respectively. -30- ARTICLE II THE CREDITS SECTION 2.01. The Commitments. --------------- (a) Revolving Loans. Subject to the terms and conditions set forth --------------- herein, each Lender agrees to make Revolving Loans to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in (i) such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment or (ii) the total Revolving Exposures exceeding the total Revolving Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. (b) Conversion Date. On the Conversion Date (so long as on such date --------------- the aggregate then-outstanding amount of the Revolving Commitments is at least equal to $250,000,000), a portion of the Revolving Loans equal to the lesser of (a) the aggregate then-outstanding principal amount of the Revolving Loans and (b) the excess, if any, of (i) the aggregate then-outstanding amount of the Revolving Commitments over (ii) $250,000,000, shall be automatically converted into Term Loans, and the Revolving Commitments shall be reduced to $250,000,000, provided that in no event shall the aggregate principal amount of Revolving - -------- Loans so converted into Term Loans be less than $50,000,000 (and, if the amount that would otherwise be so converted shall be less than $50,000,000, the Revolving Commitments shall instead be reduced to the sum of (x) $250,000,000 plus (y) such amount that would otherwise have been converted into Term Loans - ---- but for this proviso). Term Loans, once repaid, may not be reborrowed. (c) Incremental Facility Loans. In addition to borrowings of -------------------------- Revolving Loans, at any time during the Incremental Facility Availability Period the Borrower may from time to time request the Lenders offer to enter into commitments to make additional revolving loans to the Borrower hereunder, which commitment of any Lender shall not be less than $10,000,000 and not greater than $250,000,000. In the event that one or more of the Lenders offer, in their sole discretion, to enter into such commitments, and such Lenders and the Borrower agree as to the amount of such commitments that shall be allocated to the respective Lenders making such offers and the fees (if any) to be payable by the Borrower in connection therewith, such Lenders shall become obligated to make Incremental Facility Loans under this Agreement in an amount equal to the amount of their respective Incremental Facility Commitments. The Incremental Facility Loans to be made pursuant to any such agreement between the Borrower and one or more Lenders in response to any such request by the Borrower shall be deemed to be a separate "Series" of Incremental Facility Loans for all purposes of this ------ Agreement. Anything herein to the contrary notwithstanding, (i) the minimum aggregate principal amount of Incremental Facility Commitments entered into pursuant to any such request (and, accordingly, the minimum aggregate principal amount of -31- any Series of Incremental Facility Loans) shall be $25,000,000 and (ii) the aggregate principal amount of all Commitments and Borrowings of Incremental Facility Loans shall not exceed $250,000,000. Following agreement by the Borrower and one or more of the Lenders as provided above, subject to the terms and conditions set forth herein, each Incremental Facility Lender of any Series agrees to make Incremental Facility Loans of such Series to the Borrower from time to time during the period from and including the date of such agreement to but not including the Maturity Date, in an aggregate principal amount up to but not exceeding the amount of the Incremental Facility Commitment of such Series of such Incremental Facility Lender. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Incremental Facility Loans of any Series as the Borrower shall from time to time select. SECTION 2.02. Loans and Borrowings. -------------------- (a) Obligation of Lenders. Each Loan shall be made as part of a --------------------- Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the -------- Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Type of Loans. Subject to Sections 2.04 and 2.13, each Borrowing ------------- shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not -------- affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement, except that if the designation of any such foreign branch or Affiliate shall result in any costs, reductions or taxes which would not otherwise have been applicable, such Lender shall not be entitled to compensation for such costs, reductions or taxes unless it shall in good faith have determined such designation to be necessary or advisable to avoid any material disadvantage to it. (c) Minimum Amounts. At the commencement of each Interest Period for --------------- any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount of $5,000,000 or a larger multiple of $1,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount equal to $1,000,000 or a larger multiple of $1,000,000; provided that an ABR Borrowing -------- may be in an aggregate amount that is equal to the entire unused balance of the total Commitments of the applicable Class or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(f). Swingline Loans shall be in an aggregate amount equal to at least $500,000 or a larger multiple of $100,000. Borrowings of more than one Type and Class may be outstanding at -32- the same time; provided that there shall not at any time be more than a total of -------- 12 Eurodollar Borrowings outstanding. (e) Conversion or Continuation of Eurodollar Loans. Notwithstanding ---------------------------------------------- any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue as a Eurodollar Loan: (i) any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date; or (ii) any Term Loan, or Incremental Facility Loan of any Series, if the Interest Period therefor would commence before and end after any Principal Payment Date (in the case of a Term Loan) or Incremental Facility Commitment Reduction Date (in the case of any Series of Incremental Facility Loan) unless, after giving effect thereto, the aggregate principal amount of the Term Loans having Interest Periods that end after such Principal Payment Date, or Incremental Facility Loans of such Series having Interest Periods that end after such Incremental Facility Commitment Reduction Date, shall be equal to or less than the aggregate principal amount of the Term Loans or Incremental Facility Loans of such Series, as applicable, permitted to be outstanding after giving effect to the payments of principal required to be made on such Principal Payment Date or Incremental Facility Commitment Reduction Date, as the case may be. SECTION 2.03. Requests for Borrowings. To request a Borrowing (other ----------------------- than in respect of a Borrowing comprised of a Swingline Loan, as to which the provisions of Section 2.04 shall apply), the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an -------- ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(f) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) whether the requested Borrowing is to be a Revolving Borrowing or Incremental Facility Borrowing (including, if applicable, the respective Series of Incremental Facility to which such Borrowing relates); (ii) the aggregate amount of the requested Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; -33- (v) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (vi) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Swingline Loans. --------------- (a) Agreement to Make Swingline Loans. Subject to the terms and --------------------------------- conditions set forth herein, each Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $20,000,000 or (ii) the total Revolving Exposures exceeding the total Revolving Commitments; provided that neither Swingline Lender shall be required -------- to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans. Swingline Loans made hereunder shall constitute utilization of the Revolving Commitments and shall reduce the availability of such Revolving Commitments on a dollar-for-dollar basis. (b) Interest Rates. Swingline Loans shall be ABR Loans, except that -------------- a Swingline Lender and the Borrower may agree that the interest rate in respect of a Swingline Loan made by such Swingline Lender be at an alternative rate of interest (and with such applicable margins and prepayment premiums) as may from time to time be offered by such Swingline Lender to the Borrower in its sole discretion; provided that upon any sale pursuant to Section 2.04(d) of -------- participations in any Swingline Loan the interest on which is determined by reference to such an alternative rate, such Swingline Loans shall automatically be converted into an ABR Loan. (c) Notice of Swingline Loans by Borrower. To request a Swingline ------------------------------------- Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 12:00 noon, New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan and the respective Swingline Lender from which the Borrower wishes to make such Borrowing. The -34- Administrative Agent will promptly advise the respective Swingline Lender of any such notice received from the Borrower. A Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Administrative Agent or such Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f), by remittance to the Issuing Lender) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan. (d) Participations by Lenders in Swingline Loans. A Swingline Lender -------------------------------------------- may by written notice given to the Administrative Agent (with a copy to the Borrower) not later than 10:00 a.m., New York City time, on any Business Day require the Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans of such Swingline Lender outstanding. Such notice to the Administrative Agent shall specify the aggregate amount of Swingline Loans in which Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Lender, specifying in such notice such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above in this paragraph, to pay to the Administrative Agent, for the account of the respective Swingline Lender, such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of ------- -------- the Lenders), and the Administrative Agent shall promptly pay to the respective Swingline Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to such Swingline Lender. Any amounts received by a Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by such Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph and to the respective Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof. -35- SECTION 2.05. Letters of Credit. ----------------- (a) General. Subject to the terms and conditions set forth herein, ------- in addition to the Loans provided for in Section 2.01, the Borrower may request the Issuing Lender to issue, at any time and from time to time during the Revolving Availability Period, Letters of Credit for its own account in such form as is acceptable to the Issuing Lender in its reasonable determination. Letters of Credit issued hereunder shall constitute utilization of the Revolving Commitments. (b) Notice of Issuance, Amendment, Renewal or Extension. To request --------------------------------------------------- the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (d) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Lender, the Borrower also shall submit a letter of credit application on the Issuing Lender's standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (c) Limitations on Amounts. A Letter of Credit shall be issued, ---------------------- amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the aggregate LC Exposure of the Issuing Lender (determined for these purposes without giving effect to the participations therein of the Lenders pursuant to paragraph (e) of this Section) shall not exceed $50,000,000 and (ii) the total Revolving Exposures shall not exceed the total Revolving Commitments. (d) Expiration Date. Each Letter of Credit shall expire at or prior --------------- to the close of business on the earlier of (i) the date 12 months after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, 12 months after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date. (e) Participations. By the issuance of a Letter of Credit (or an -------------- amendment to a Letter of Credit increasing the amount thereof) by the Issuing Lender, and without any further -36- action on the part of the Issuing Lender or the Lenders, the Issuing Lender hereby grants to each Lender, and each Lender hereby acquires from the Issuing Lender, a participation in such Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Lender, such Lender's Applicable Percentage of each LC Disbursement made by the Issuing Lender promptly upon the request of the Issuing Lender at any time from the time of such LC Disbursement until such LC Disbursement is reimbursed by the Borrower or at any time after any reimbursement payment is required to be refunded to the Borrower for any reason. Each such payment shall be made in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis ------- mutandis, to the payment obligations of the Lenders), and the Administrative - -------- Agent shall promptly pay to the Issuing Lender the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to the next following paragraph, the Administrative Agent shall distribute such payment to the Issuing Lender or, to the extent that the Lenders have made payments pursuant to this paragraph to reimburse the Issuing Lender, then to such Lenders and the Issuing Lender as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Lender for any LC Disbursement shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement. (f) Reimbursement. If the Issuing Lender shall make any LC ------------- Disbursement in respect of a Letter of Credit, the Borrower shall reimburse the Issuing Lender in respect of such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on (i) the Business Day that the Borrower receives notice of such LC Disbursement, if such notice is received prior to 10:00 a.m., New York City time, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time, provided that, if such LC Disbursement is not less than -------- $100,000 the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. -37- If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender's Applicable Percentage thereof. (g) Obligations Absolute. The Borrower's obligation to reimburse LC -------------------- Disbursements as provided in paragraph (f) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, or any term or provision therein, (ii) any draft or 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, (iii) payment by the Issuing Lender under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit, and (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the Borrower's obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Lender, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit by the Issuing Lender or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Lender; provided that the foregoing -------- shall not be construed to excuse the Issuing Lender from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Lender's gross negligence or wilful misconduct when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that: (i) the Issuing Lender may accept documents that it believes in good faith appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit; (ii) the Issuing Lender shall have the right, in its sole discretion, to decline to accept such documents and to decline to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit; and -38- (iii) this sentence shall establish the standard of care to be exercised by the Issuing Lender when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing). (h) Disbursement Procedures. The Issuing Lender shall, within a ----------------------- reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Lender shall promptly after such examination notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not - -------- relieve the Borrower of its obligation to reimburse the Issuing Lender and the Lenders with respect to any such LC Disbursement. (i) Interim Interest. If the Issuing Lender shall make any LC ---------------- Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans; provided that, -------- if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (f) of this Section, then Section 2.12(d) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Lender, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (f) of this Section to reimburse the Issuing Lender shall be for the account of such Lender to the extent of such payment. (j) Replacement of the Issuing Lender. The Issuing Lender may be --------------------------------- replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Lender and the successor Issuing Lender. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Lender. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Lender pursuant to Section 2.11(b). From and after the effective date of any such replacement, (i) the successor Issuing Lender shall have all the rights and obligations of the replaced Issuing Lender under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Lender" shall be deemed to refer to such successor or to any previous Issuing Lender, or to such successor and all previous Issuing Lenders, as the context shall require. After the replacement of an Issuing Lender hereunder, the replaced Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. -39- (k) Cash Collateralization. If either (i) an Event of Default shall ---------------------- occur and be continuing and the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing more than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, or (ii) the Borrower shall be required to provide cover for LC Exposure pursuant to Sections 2.09 and 2.10, the Borrower shall immediately deposit into an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to, in the case of an Event of Default, the LC Exposure as of such date plus any accrued and unpaid interest thereon and, in the case of cover pursuant to Section 2.10, the amount required under Section 2.10, provided that the obligation to deposit such cash -------- collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (i) or (j) of Article VIII. Such deposit shall be held by the Administrative Agent as collateral for the LC Exposure under this Agreement. (l) Existing Letters of Credit. Pursuant to Section 2.10(a) of the -------------------------- Existing Credit Agreement, the Issuing Lender may from time to time have issued "Revolving Letters of Credit" (as defined therein). Each of the parties hereto agrees that any such "Revolving Letter of Credit" that shall be outstanding on the Effective Date shall constitute, on and after the Effective Date, a Letter of Credit for all purposes of this Agreement. SECTION 2.06. Funding of Borrowings. --------------------- (a) Funding by Lenders. Each Lender shall make each Loan to be made ------------------ by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in -------- Section 2.04. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request; provided that ABR Revolving Borrowings made to finance the reimbursement of an - -------- LC Disbursement as provided in Section 2.05(f) shall be remitted by the Administrative Agent to the Issuing Lender. (b) Presumption by Administrative Agent. Unless the Administrative ----------------------------------- Agent shall have received notice from a Lender prior to the proposed 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 on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to -40- the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.07. Interest Elections. ------------------ (a) Elections by Borrower. Each Borrowing initially shall be of the --------------------- Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. (b) Notice of Elections. To make an election pursuant to this ------------------- Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Information in Election Notices. Each telephonic and written ------------------------------- Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies (including, if applicable, the respective Series of Incremental Facility Loans to which such Interest Election Request relates) and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; -41- (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Notice by Administrative Agent to Lenders. Promptly following ----------------------------------------- receipt of an Interest Election Request, the Administrative Agent shall advise each relevant Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) Presumptions if no Notice. If the Borrower fails to deliver a ------------------------- timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.08. Termination and Reduction of the Commitments. -------------------------------------------- (a) Scheduled Termination. Unless previously terminated, (i) the --------------------- Revolving Commitments shall terminate on the Maturity Date and (ii) the Incremental Facility Commitments shall terminate on the Maturity Date. (b) Voluntary Termination or Reduction. The Borrower may at any time ---------------------------------- terminate, or from time to time reduce, the Commitments of any Class (including the Commitments of any Series of Incremental Facility Loans); provided that (i) -------- each reduction of the Commitments of any Class pursuant to this Section shall be in an amount that is $5,000,000 or a larger multiple of $1,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the total Revolving Exposures would exceed the total Revolving Commitments. (c) Notice of Termination or Reduction. The Borrower shall notify ---------------------------------- the Administrative Agent of any election to terminate or reduce the Commitments of any Class -42- under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by - -------- the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. (d) Effect of Termination or Reduction. Any termination or reduction ---------------------------------- of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. (e) Conversion Date Reduction of Revolving Commitments. The -------------------------------------------------- Revolving Commitments shall be automatically reduced on the Conversion Date in the manner and to the extent provided in Section 2.01(b). (f) Reduction of Incremental Facility Commitments. The aggregate --------------------------------------------- amount of the Incremental Facility Commitments of each Series will be automatically reduced to zero on the Maturity Date. In addition, the aggregate amount of the Incremental Facility Commitments of each Series shall be automatically reduced at the close of business on each Incremental Facility Commitment Reduction Date set forth in column (A) below by an amount (subject to reduction as provided below) equal to the percentage of the original aggregate principal amount of the Incremental Facility Commitments of such Series set forth in column (B) below opposite such Incremental Facility Commitment Reduction Date: (A) (B) Incremental Facility Incremental Facility Commitment Reduction Commitments Reduced by the Date Falling on or Percentages of Original Incremental Nearest to: Facility Commitments (%) ---------- ------------------------ March 31, 2001 6.25% June 30, 2001 6.25% September 30, 2001 6.25% December 31, 2001 6.25% March 31, 2002 6.25% June 30, 2002 6.25% September 30, 2002 6.25% December 31, 2002 6.25% -43- March 31, 2003 6.25% June 30, 2003 6.25% September 30, 2003 6.25% December 31, 2003 6.25% March 31, 2004 6.25% June 30, 2004 6.25% September 30, 2004 6.25% December 31, 2004 6.25% Each reduction in Incremental Facility Commitments of any Series pursuant to paragraph (b) of this Section shall be applied as follows: first, such ----- reduction shall be applied to the first installment set forth in the schedule above for the calendar year immediately following the calendar year in which such reduction occurs and, second, after such first installment shall have been ------ reduced in full, such reduction shall be applied to the remaining installments set forth in the schedule above ratably in accordance with the respective amounts thereof. SECTION 2.09. Repayment of Loans; Evidence of Debt. ------------------------------------ (a) Repayment. The Borrower hereby unconditionally promises to pay --------- the Loans outstanding hereunder as follows: (i) to the Administrative Agent for the account of each Lender the outstanding principal amount of each Revolving Loan of such Lender on the Maturity Date, (ii) to the Administrative Agent for the account of each Lender the outstanding principal amount of each Term Loan of such Lender on each Principal Payment Date set forth below in an amount equal to the percentage of the original principal amount of such Term Loan on the Conversion Date set forth opposite such Principal Payment Date: Percentage of Aggregate Principal Principal Payment Date Amount Outstanding ---------------------- ------------------ March 31, 2000 2.50% June 30, 2000 2.50% September 30, 2000 2.50% December 31, 2000 2.50% -44- March 31, 2001 3.75% June 30, 2001 3.75% September 30, 2001 3.75% December 31, 2001 3.75% March 31, 2002 5.00% June 30, 2002 5.00% September 30, 2002 5.00% December 31, 2002 5.00% March 31, 2003 6.25% June 30, 2003 6.25% September 30, 2003 6.25% December 31, 2003 6.25% March 31, 2004 7.50% June 30, 2004 7.50% September 30, 2004 7.50% December 31, 2004 7.50%, (iii) to the Administrative Agent for the account of each Incremental Facility Lender the outstanding principal amount of each Incremental Facility Loan of such Lender on the Maturity Date and (iv) to each Swingline Lender the outstanding principal amount of each Swingline Loan made by such Swingline Lender on the earlier of the Maturity Date and the first date after such Swingline Loan is made that is the last day of a calendar month and that is at least two Business Days after such Swingline Loan is made. (b) Manner of Repayment. Prior to any repayment or prepayment of any ------------------- Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be paid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such payment; provided that each -------- payment of Borrowings shall be applied to pay any outstanding ABR Term Borrowings before any other Borrowings. If the Borrower fails to make a timely selection of the Borrowing or Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay any outstanding ABR Term Borrowings and, second, to other Borrowings in the order of the remaining duration of their respective Interest Periods (the Borrowing with the shortest remaining Interest Period to be paid first). Each payment of a Borrowing shall be applied ratably to the Loans included in such Borrowing. (c) Maintenance of Loan Accounts by Lenders. Each Lender shall --------------------------------------- maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the -45- Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (d) Maintenance of Loan Accounts by Administrative Agent. The ---------------------------------------------------- Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof (including, in the case of Incremental Facility Loans, the respective Series thereof) and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (e) Effect of Loan Accounts. The entries made in the accounts ----------------------- maintained pursuant to paragraph (c) or (d) of this Section shall be prima facie ----- ----- evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain - -------- such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (f) Promissory Notes. Any Lender may request that Loans of any Class ---------------- made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.10. Prepayment of Loans. ------------------- (a) Optional Prepayments. The Borrower shall have the right at any -------------------- time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (e) of this Section 2.10. Each prepayment of Term Loans pursuant to this paragraph (a) shall be applied as follows: first, such prepayment shall be applied to the first installment set ----- forth in the schedule in Section 2.09(a)(ii) for the calendar year immediately following the calendar year in which such prepayment occurs and, second, after ------ such first installment shall have been prepaid in full, such prepayment shall be applied to the remaining installments set forth in said schedule ratably in accordance with the respective amounts thereof. -46- (b) Mandatory Prepayments -- Casualty Events and Sales of Assets. ------------------------------------------------------------ The Borrower shall make prepayments of the Loans (and reduce the Commitments) hereunder as follows: (i) Casualty Events. Upon the date twelve months following the --------------- receipt by the Borrower or any of its Consolidated Subsidiaries of the proceeds of insurance, condemnation award or other compensation in respect of any Casualty Event affecting any property of the Borrower or any of its Consolidated Subsidiaries (or upon such earlier date as the Borrower or such Consolidated Subsidiary, as the case may be, shall have determined not to repair or replace the property affected by such Casualty Event), the Borrower shall prepay the Loans (and/or provide cover for LC Exposure as specified in Section 2.05(k)), and the Commitments shall be subject to automatic reduction, in an aggregate amount, if any, equal to 100% of the Net Cash Proceeds of such Casualty Event not theretofore applied to the repair or replacement of such property, such prepayment and reduction to be effected in each case in the manner and to the extent specified in clause (iii) of this Section 2.10(b). (ii) Sale of Assets. Without limiting the obligation of the -------------- Borrower to obtain the consent of the Required Lenders to any Disposition not otherwise permitted hereunder, the Borrower agrees, on or prior to the occurrence of any Disposition, to deliver to the Administrative Agent a statement certified by a Financial Officer, in form and detail reasonably satisfactory to the Administrative Agent, of the estimated amount of the Net Cash Proceeds of such Disposition that will (on the date of such Disposition) be received by the Borrower or any of its Consolidated Subsidiaries in cash and, unless the Borrower shall elect to reinvest such Net Cash Proceeds as provided below, the Borrower will prepay the Loans hereunder (and provide cover for LC Exposure as specified in Section 2.05(k)), and the Commitments hereunder shall be subject to automatic reduction, as follows: (x) upon the date of such Disposition, in an aggregate amount equal to 100% of such estimated amount of the Net Cash Proceeds of such Disposition, to the extent received by the Borrower or any of its Consolidated Subsidiaries in cash on the date of such Disposition; and (y) thereafter, quarterly, on the date of the delivery by the Borrower to the Administrative Agent pursuant to Section 6.01 of the financial statements for any quarterly fiscal period or fiscal year, to the extent the Borrower or any of its Consolidated Subsidiaries shall receive Net Cash Proceeds during the quarterly fiscal period ending on the date of such financial statements in cash under deferred payment arrangements or Disposition Investments entered into or received in connection with any Disposition, an amount equal to (A) 100% of the aggregate amount of such Net Cash Proceeds minus (B) any ----- transaction expenses associated with Dispositions and not previously deducted in the -47- determination of Net Cash Proceeds plus (or minus, as the case may be) ---- ----- (C) any other adjustment received or paid by the Borrower or any of its Consolidated Subsidiaries pursuant to the respective agreements giving rise to Dispositions and not previously taken into account in the determination of the Net Cash Proceeds of Dispositions, provided -------- that if prior to the date upon which the Borrower would otherwise be required to make a prepayment under this subclause (y) with respect to any quarterly fiscal period the aggregate amount of such Net Cash Proceeds (after giving effect to the adjustments provided for in this subclause (y)) shall exceed $25,000,000, then the Borrower shall within three Business Days make a prepayment under this subclause (y) in an amount equal to such required prepayment. Prepayments of Loans (and cover for LC Exposure) and reductions of Commitments shall be effected in each case in the manner and to the extent specified in clause (iii) of this Section 2.10(b). Notwithstanding the foregoing, the Borrower shall not be required to make a prepayment (or provide cover), and the Commitments shall not be reduced, pursuant to this Section 2.10(b)(ii) with respect to the Net Cash Proceeds from any Disposition in the event that the Borrower advises the Administrative Agent at the time a prepayment is required to be made under the foregoing subclauses (x) or (y) that it intends to reinvest such Net Cash Proceeds into replacement assets pursuant to one or more Capital Expenditures or Acquisitions permitted hereunder, so long as the Net Cash Proceeds from any Disposition are in fact so reinvested within 350 days of such Disposition (it being understood that, in the event more than one Disposition shall occur, such Net Cash Proceeds shall be deemed to be applied in the same order in which such Dispositions occurred and, accordingly, any such Net Cash Proceeds not so reinvested within 350 days shall be forthwith applied to the prepayment of Loans (and cover for LC Exposure as specified in Section 2.05(k)) and reductions of Commitments as provided in clause (iii) of this Section 2.10(b). Anything herein to the contrary notwithstanding, the Borrower shall not be required to make any prepayment pursuant to this Section 2.10(b)(ii) (and the provisions of this Section 2.10(b)(ii) shall accordingly be inapplicable) to the extent that after giving effect to any Disposition the Leverage Ratio is less than 4.00 to 1. (iii) Application. Upon the occurrence of any of the events ----------- described in the above clauses of this Section 2.10(b), the amount of the required prepayment shall be applied to the reduction of the Revolving Commitments and Incremental Facility Commitments of each Series, and to the prepayment of the Term Loans, in each case ratably in accordance with the respective then-outstanding aggregate amounts of such Commitments and Loans (and to the extent that, after giving effect to any such reduction of Revolving Commitments, the aggregate Revolving Exposure shall exceed -48- the Revolving Commitments, to the simultaneous prepayment of Revolving Loans and/or cover for LC Exposure as specified in Section 2.05(k) and to the extent that, after giving effect to any such reduction of Incremental Facility Commitments of any Series, the Incremental Facility Loans of such Series shall exceed the Incremental Facility Commitments of such Series, to the simultaneous prepayment of Incremental Facility Loans of such Series), such reduction of Commitments and prepayments to be applied, (x) in the case of such prepayment of Term Loans, first to the ----- prepayment of the first installment set forth in the schedule in Section 2.09(a)(ii) for the calendar year immediately following the calendar year in which such prepayment occurs and, second, after such ------ first installment shall have been prepaid in full, to the prepayment of the remaining installments set forth in said schedule ratably in accordance with the respective amounts thereof and (y) in the case of such reduction of Incremental Facility Commitments of any Series, first, to the reduction of the first ----- installment set forth in the schedule in Section 2.08(f) for the calendar year immediately following the calendar year in which such reduction occurs and, second, after such first installment shall have ------ been reduced in full, to the reduction of the remaining installments set forth in said schedule ratably in accordance with the respective amounts thereof. Notwithstanding the foregoing, to the extent that the aggregate amount of any of the required prepayments contemplated by this paragraph (b) shall be in excess of the amount of the ABR Loans of any Class outstanding on the date of such prepayment, only the portion of the amount of such prepayment of such Class as is equal to the amount of such ABR Loans shall be immediately prepaid and at the election of the Borrower, the balance of such required prepayment shall be either (i) deposited with the Administrative Agent to be held as collateral security for the Loans of such Class and applied to the prepayment of the Eurodollar Loans of such Class on the last day(s) of the then next-expiring Interest Period(s) for Eurodollar Loans in the order in which such Interest Period(s) shall expire (or immediately if any Event of Default shall occur and be continuing), or (ii) made immediately, together with any amounts owing to the Lenders under Section 2.15. (c) Mandatory Prepayments -- Outstandings Exceeding Commitments. The ----------------------------------------------------------- Borrower shall prepay the Revolving Loans (and/or provide cover for LC Exposure as specified in Section 2.05(k)) in the event that the aggregate amount of the Revolving Exposure shall at any time exceed the aggregate amount of the Revolving Commitments. In addition, the Borrower shall prepay the Incremental Facility Loans of any Series in the event that the aggregate amount of the Incremental Facility Loans of such Series shall at any time exceed the aggregate amount of the Incremental Facility Commitments of such Series. -49- (d) Mandatory Prepayments -- Change of Control. In the event that ------------------------------------------ any "Change of Control" shall occur in respect of the Senior Subordinated Notes, or any similar event shall occur in respect of any Additional Permitted Indebtedness, in either case at a time when the aggregate outstanding principal amount of the respective Indebtedness affected thereby is in excess of $25,000,000, and as a result thereof the Borrower shall be required to offer to repurchase, redeem or prepay any portion of the Senior Subordinated Notes or such Additional Permitted Indebtedness, the Borrower shall prepay the Loans (and/or provide cover for LC Exposure as specified in Section 2.05(k)), and the Commitments shall be automatically reduced to zero. (e) Notices. The Borrower shall notify the Administrative Agent ------- (and, in the case of prepayment of a Swingline Loan, the respective Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, two Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if a -------- notice of prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12. SECTION 2.11. Fees. ---- (a) Commitment Fee. The Borrower shall pay to the Administrative -------------- Agent for account of each Lender a commitment fee, which shall accrue at the Applicable Margin on the daily average unutilized amount of such Lender's Incremental Facility Commitment and Revolving Commitment (for which purpose the aggregate amount of any LC Exposure shall be deemed to be a pro rata (based on the Revolving Commitments) utilization of each Lender's Revolving Commitment and the aggregate principal amount of any Swingline Loans shall be deemed to be a utilization of the respective Swingline Lender's Revolving Commitment), for the period from and including the date hereof to but not including the earlier of the date such Commitment is terminated and the Maturity Date. Accrued -50- commitment fees shall be payable on each Quarterly Date and on the earlier of the date the relevant Commitments are terminated and the Maturity Date, as the case may be. (b) Letter of Credit Fees. The Borrower agrees to pay (i) to the --------------------- Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at a rate per annum equal to the Applicable Margin used to determine interest on Eurodollar Revolving Loans on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Lender a fronting fee, which shall accrue at the rate of 3/16 of 1% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Lender's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including each Quarterly Date shall be payable on the third Business Day following such Quarterly Date, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on -------- the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Lender pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (c) Administrative Agent Fees. The Borrower agrees to pay to the ------------------------- Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent (it being understood that if the Administrative Agent shall resign or be removed, a ratable portion of any fees theretofore paid to the Administrative Agent for the period during which such resignation or removal shall occur shall be promptly paid by the Administrative Agent to the Borrower to the extent the Borrower is required to pay fees for the balance of such period to a replacement Administrative Agent). (d) Payment of Fees. All fees payable hereunder shall be paid on the --------------- dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Lender, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Except as otherwise expressly provided in paragraph (c) above, fees paid shall not be refundable under any circumstances. -51- SECTION 2.12. Interest. -------- (a) ABR Borrowings. The Loans comprising each ABR Borrowing (other -------------- than Swingline Loans, as to which paragraph (c) below shall apply) shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin. (b) Eurodollar Borrowings. The Loans comprising each Eurodollar --------------------- Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin. (c) Swingline Borrowings. Each Swingline Loan shall bear interest at -------------------- a rate per annum equal to the Alternative Base Rate plus the Applicable Margin, or at such alternate rate of interest as may be applicable thereto as contemplated by Section 2.04(b). (d) Default Interest. Notwithstanding the foregoing, if any ---------------- principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration, by mandatory prepayment or otherwise, such overdue amount (or, in case the amount in default is principal of a Loan, all amounts outstanding hereunder) shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the ---- rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in ---- paragraph (a) of this Section. (e) Payment of Interest. Accrued interest on each Loan shall be ------------------- payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that -------- (i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the Maturity Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Borrowing prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (f) Computation. All interest hereunder shall be computed on the ----------- basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is 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 in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.13. Alternate Rate of Interest. If prior to the -------------------------- commencement of any Interest Period for a Eurodollar Borrowing: -52- (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) if such Borrowing is of a particular Class of Loans (including of a particular Series of Incremental Facility Loans), the Administrative Agent is advised by the Required Revolving Lenders, Required Term Lenders or Required Incremental Facility Lenders of such Series, as the case may be, that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans of such Class included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing, provided that a Lender and the -------- Borrower may agree that, in lieu of the interest rate on such affected Borrowing being calculated by reference to the Alternative Base Rate while such circumstances shall continue, such interest rate shall instead be at an alternative rate of interest (and with such applicable margins and prepayment premiums) as may from time to time be offered by such Lender to the Borrower in its sole discretion. SECTION 2.14. Increased Costs. --------------- (a) Increased Costs Generally. If any Change in Law shall: ------------------------- (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Lender; or (ii) impose on any Lender or the Issuing Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; and the result of any of the foregoing shall be to increase the cost to such Lenders of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Lender of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such -53- additional amount or amounts as will compensate such Lender or the Issuing Lender, as the case may be, for such additional costs incurred or reduction suffered. (b) Capital Requirements. If any Lender or the Issuing Lender -------------------- determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Lender's capital or on the capital of such Lender's or the Issuing Lender's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender or the Issuing Lender or such Lender's or the Issuing Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Lender's policies and the policies of such Lender's or the Issuing Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender or such Lender's or the Issuing Lender's holding company for any such reduction suffered. (c) Certificates from Lenders. A certificate of a Lender or the ------------------------- Issuing Lender setting forth the amount or amounts necessary to compensate such Lender or the Issuing Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section, and setting forth in reasonable detail the manner in which such amount or amounts have been determined, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Delay in Requests. Failure or delay on the part of any Lender or ----------------- the Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Lender's right to demand such compensation; provided that the Borrower shall not be required to -------- compensate a Lender or the Issuing Lender pursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender or the Issuing Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such -------- ------- increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.15. Break Funding Payments. In the event of (a) the ---------------------- payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.10(b) and is revoked in accordance herewith), or (d) the assignment of any -54- Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.18, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.16. Taxes. ----- (a) Payments Free of Taxes. Any and all payments by or an account of ---------------------- any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any -------- Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Lender (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 and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) Payment of Other Taxes by Borrower. In addition, the Borrower ---------------------------------- shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Indemnification by Borrower. The Borrower shall indemnify the --------------------------- Administrative Agent, each Lender and the Issuing Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the Issuing Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or -55- legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Lender, shall be conclusive absent manifest error. (d) Receipt for Payments. As soon as practicable after any payment -------------------- of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Foreign Lenders. Any Foreign Lender that is entitled to an --------------- exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set- ------------------------------------------------------ offs. - ---- (a) Payments by Obligors. Each Obligor shall make each payment -------------------- required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or under Section 2.14, 2.15 or 2.16, or otherwise) or under any other Loan Document (except to the extent otherwise provided therein) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, except as otherwise expressly provided in the relevant Loan Document, and except payments to be made directly to the Issuing Lender or a Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.14, 2.15, 2.16 and 10.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder or under any other Loan Document (except to the extent otherwise provided therein) shall be made in dollars. -56- (b) Application if Payments Insufficient. If at any time ------------------------------------ insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, then such funds as shall actually have been received shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) Pro Rata Treatment. Except to the extent otherwise provided ------------------ herein: (i) each borrowing of Loans of a particular Class (including of a particular Series of Incremental Facility Loans) from the Lenders under Section 2.01 shall be made from the relevant Lenders, each payment of commitment fee under Section 2.11 in respect of Commitments of a particular Class (including of a particular Series of Incremental Facility Loans) shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitments of a particular Class (including of a particular Incremental Facility of Term Loans) under Section 2.08 shall be applied to the respective Commitments of such Class of the relevant Lenders, pro rata according to the amounts of their respective Commitments of such Class; (ii) Eurodollar Loans of any Class (including of a particular Series of Incremental Facility Loans) having the same Interest Period shall be allocated pro rata among the relevant Lenders according to the amounts of their Commitments or such Class (in the case of the making of Loans) or their respective Loans of such Class (in the case of conversions and continuations of Loans); (iii) each payment or prepayment by the Borrower of principal of Loans of a particular Class (including of a particular Series of Incremental Facility Loans) shall be made for account of the relevant Lenders pro rata in accordance with the respective unpaid principal amounts of the Loans of such Class held by them; (iv) each payment by the Borrower of interest on Loans of a particular Class (including of a particular Series of Incremental Facility Loans) shall be made for account of the relevant Lenders pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders; and (v) each payment by the Borrower of participation fees in respect of Letters of Credit shall be made for the account of the Revolving Lenders pro rata in accordance with the amount of participation fees then due and payable to the Revolving Lenders. (d) Sharing of Payments by Lenders. If any Lender shall, by ------------------------------ exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon then due than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent -57- necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations -------- are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Obligor pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Obligor consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Obligor rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Obligor in the amount of such participation. (e) Presumptions of Payment. Unless the Administrative Agent shall ----------------------- have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate. (f) Certain Deductions by Administrative Agent. If any Lender shall ------------------------------------------ fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(e) or (f), 2.06(b) or 2.17(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.18. Mitigation Obligations; Replacement of Lenders. ---------------------------------------------- (a) Designation of Different Lending Office. If any Lender requests --------------------------------------- compensation under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall, at Borrower's request, use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its -58- rights and obligations hereunder to another of its offices, branches or affiliates, if, in the good faith judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Replacement of Lenders. If any Lender requests compensation ---------------------- under Section 2.14, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior -------- written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Lender and each Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III GUARANTEE SECTION 3.01. The Guarantee. The Subsidiary Guarantors hereby ------------- jointly and severally guarantee to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans made by the Lenders to the Borrower and all other amounts from time to time owing to the Lenders or the Administrative Agent by the Borrower under this Agreement and by any Obligor under any of the other Loan Documents, and all obligations of the Borrower or any of its Subsidiaries to any Lender in respect of any Hedging Agreement, in each case strictly in accordance with the -59- terms thereof (such obligations being herein collectively called the "Guaranteed ---------- Obligations"). The Subsidiary Guarantors hereby further jointly and severally - ----------- agree that if the Borrower shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. SECTION 3.02. Obligations Unconditional. The obligations of the ------------------------- Subsidiary Guarantors under Section 3.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower under this Agreement or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section that the obligations of the Subsidiary Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Subsidiary Guarantors hereunder, which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Subsidiary Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any lien or security interest granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected. The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against the Borrower -60- under this Agreement or any other agreement or instrument referred to herein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. SECTION 3.03. Reinstatement. The obligations of the Subsidiary ------------- Guarantors under this Article shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Subsidiary Guarantors jointly and severally agree that they will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. SECTION 3.04. Subrogation. Each Subsidiary Guarantor hereby waives ----------- all rights of subrogation or contribution, whether arising by contract or operation of law (including any such right arising under the Bankruptcy Code) or otherwise by reason of any payment by it pursuant to the provisions of this Article and further agrees with the Borrower for the benefit of each of its creditors (including each Lender and the Administrative Agent) that any such payment by it shall constitute a contribution of capital by such Subsidiary Guarantor to the Borrower (or an investment in the equity capital of the Borrower by such Subsidiary Guarantor). SECTION 3.05. Remedies. The Subsidiary Guarantors jointly and -------- severally agree that, as between the Subsidiary Guarantors and the Lenders, the obligations of the Borrower under this Agreement may be declared to be forthwith due and payable as provided in Article VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in Article VIII) for purposes of Section 3.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Subsidiary Guarantors for purposes of Section 3.01. SECTION 3.06. Instrument for the Payment of Money. Each Subsidiary ----------------------------------- Guarantor hereby acknowledges that the guarantee in this Article constitutes an instrument for the payment of money, and consents and agrees that any Lender or the Administrative Agent, at its sole option, in the event of a dispute by such Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. SECTION 3.07. Continuing Guarantee. The guarantee in this Article is -------------------- a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. -61- SECTION 3.08. Rights of Contribution. The Subsidiary Guarantors ---------------------- hereby agree, as between themselves, that if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor under this Section shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Subsidiary Guarantor under the other provisions of this Article and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For purposes of this Section, (i) "Excess Funding Guarantor" means, in ------------------------ respect of any Guaranteed Obligations, a Subsidiary Guarantor that has paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations, (ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the amount - --------------- paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Subsidiary -------------- Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the aggregate present fair saleable value of all properties of such Subsidiary Guarantor (excluding any shares of stock of any other Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of such Subsidiary Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Subsidiary Guarantor hereunder and any obligations of any other Subsidiary Guarantor that have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which the aggregate fair saleable value of all properties of all of the Subsidiary Guarantors exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Borrower and the Subsidiary Guarantors hereunder and under the other Loan Documents) of all of the Subsidiary Guarantors, determined (A) with respect to any Subsidiary Guarantor that is a party hereto on the Effective Date, as of the Effective Date, and (B) with respect to any other Subsidiary Guarantor, as of the date such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder. SECTION 3.09. General Limitation on Guarantee Obligations. In any ------------------------------------------- action or proceeding involving any state corporate law, or any state or Federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Subsidiary Guarantor under Section 3.01 would otherwise, taking into account the provisions of Section 3.08, be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 3.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any other Person, be automatically -62- limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders that: SECTION 4.01. Organization; Powers. Each of the Borrower and its -------------------- Consolidated Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 4.02. Authorization; Enforceability. The Transactions are ----------------------------- within each Obligor's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by each Obligor and constitutes, and each of the other Basic Documents to which it is a party when executed and delivered by such Obligor and the other parties thereto will constitute, a legal, valid and binding obligation of such Obligor, enforceable against each Obligor in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). SECTION 4.03. Governmental Approvals; No Conflicts. The Transactions ------------------------------------ (a) do not require any material consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Consolidated Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Consolidated Subsidiaries or assets, or give rise to a right thereunder to require any payment to be made by any such Person (other than that an offer to repurchase the Senior Subordinated Notes shall be made as provided in the Indenture with respect thereto as a result of the Merger Transactions and other than consents required with respect to the Merger Transactions under leases and other contracts, but not including any agreement relating to any Indebtedness, entered into in the ordinary course of business and as to which the failure to obtain such consent, individually or in the aggregate, could not reasonably be expected to -63- result in a Material Adverse Effect) and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Consolidated Subsidiaries. SECTION 4.04. Financial Condition; No Material Adverse Change. ----------------------------------------------- (a) The Borrower has heretofore delivered, or made available, to the Lenders the following financial statements as set forth in the Registration Statement: (i) the audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Borrower and its Subsidiaries as of and for the fiscal years ended December 31, 1995 and December 31, 1996, respectively, reported on by Ernst & Young LLP, independent public accountants; (ii) the unaudited condensed consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of the Borrower and its Subsidiaries as of and for the three-month period ended March 31, 1997; (iii) the respective financial statements of Northstar Television of Grand Rapids, Inc., Northstar Television of Jackson, Inc. and Northstar Television of Providence, Inc, of Multimedia Entertainment, Inc. (d.b.a. WLWT-TV) and of Selected Gannett Television Stations, in each case as set forth in the Registration Statement; (iv) the audited combined balance sheets and related statements of operations and cash flows of the Hearst Broadcast Group of Hearst as of and for the fiscal years ended December 31, 1995 and December 31, 1996, respectively, reported on by Deloitte & Touche LLP, independent public accountants; (v) the unaudited combined balance sheets and related statements of operations and cash flows of the Hearst Broadcast Group of Hearst as of and for the three-month period ended March 31, 1997; and (vi) the unaudited pro forma combined condensed balance sheet and the related statements of operations for the fiscal year ended December 31, 1996, prepared under the assumption that the Merger Transactions had occurred at the beginning of such fiscal year. Such financial statements present fairly, in all material respects, the actual or pro forma (as the case may be) financial position and the actual or pro forma (as the case may be) results of operations and cash flows of the respective entities as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clauses (ii), (iv) and (v) above. (b) Since December 31, 1996, there has been no material adverse change in the business, condition (financial or otherwise), operations, properties or prospects (excluding -64- adverse changes to prospects as a result of changes affecting the television broadcasting industry generally) of the Borrower and its Subsidiaries, taken as a whole, and during the period since December 31, 1996 and prior to the Effective Date, there has been no material adverse change in the business, condition (financial or otherwise), operations, properties or prospects (excluding adverse changes to prospects as a result of changes affecting the television broadcasting industry generally) of the Hearst Broadcast Group of Hearst, taken as a whole. SECTION 4.05. Properties. ---------- (a) Each of the Borrower and its Consolidated Subsidiaries has (and, after giving effect to the Merger Transactions, will have) good title to, or valid leasehold interests in, all its real and personal property material to its business, subject only to Liens permitted by Section 7.02 and except for minor defects in title or interests that do not interfere with their ability to conduct their business as currently conducted or to utilize such properties for their intended purposes. (b) Each of the Borrower and its Consolidated Subsidiaries owns or is licensed to use (and, after giving effect to the Merger Transactions, will own or be licensed to use) all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Consolidated Subsidiaries does not (and, after giving effect to the Merger Transactions, will not) infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 4.06. Litigation and Environmental Matters. ------------------------------------ (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority now pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Consolidated Subsidiaries (or that will, after giving effect to the Merger Transactions, affect the Borrower or any of its Consolidated Subsidiaries) (i) as to which there is a reasonable likelihood of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or the Transactions (other than the possible assertion of statutory dissenters' rights described in the Registration Statement). (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Consolidated Subsidiaries (i) has failed (or, after giving effect to the Merger Transactions, will have failed) to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become (or, after giving effect to the Merger Transactions, will have become) subject to any Environmental Liability, (iii) has -65- received (or, after giving effect to the Merger Transactions, will have received) notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. SECTION 4.07. Compliance with Laws and Agreements. Each of the ----------------------------------- Borrower and its Consolidated Subsidiaries is (and, after giving effect to the Merger Transactions, will be) in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 4.08. Investment and Holding Company Status. Neither the ------------------------------------- Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 4.09. Taxes. Effective as of the close of business on the ----- Effective Date, the Borrower and its Subsidiaries will be members of an affiliated group of corporations filing consolidated returns for Federal income tax purposes, of which Hearst is the "common parent" (within the meaning of Section 1504 of the Code) of such group. There is no tax sharing, tax allocation or similar agreement (other than the Tax Sharing Agreement) to which the Borrower or any of its Subsidiaries is subject that is currently in effect providing for the manner in which tax payments owing by the members of such affiliated group (whether in respect of Federal, state or foreign income or other taxes) are allocated among the members of the group. The Borrower has filed (either directly or indirectly through Hearst) all Tax returns and reports required to have been filed and has paid (either directly or indirectly through Hearst) all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Person has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 4.10. ERISA. No ERISA Event has occurred or is reasonably ----- expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for -66- purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans, in either case by an amount that could reasonably be expected to result in a Material Adverse Effect. SECTION 4.11. Disclosure. The Borrower has disclosed to the Lenders ---------- (i) all agreements, instruments and corporate or other restrictions to which it or any of its Consolidated Subsidiaries is (or, after giving effect to the Merger Transactions, will be) subject, and (ii) all other matters known to it, that, in the case of either of the foregoing clauses (i) or (ii), individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other written information (including the Information Memorandum) furnished by or on behalf of the Obligors to the Lender in connection with the negotiation of this Agreement and the other Loan Documents or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, when taken as a whole, in the light of the circumstances under which they were made, not misleading; provided that, with -------- respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time in light of circumstances in effect on the date prepared, it being understood that such projections do not constitute a representation or warranty as to the future performance of the Borrower and that actual results may vary from such projections. SECTION 4.12. Use of Credit. Neither the Borrower nor any of its ------------- Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock. SECTION 4.13. Material Agreements and Liens With Respect to --------------------------------------------- Indebtedness. - ------------ (a) Part A of Schedule II is a complete and correct list of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Borrower or any of its Consolidated Subsidiaries outstanding on the date hereof (or that will be outstanding on the Effective Date after giving effect to the Merger Transactions) the aggregate principal or face amount of which equals or exceeds (or may equal or exceed) $10,000,000, and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Part A of Schedule II. (b) Part B of Schedule II is a complete and correct list of each Lien securing Indebtedness of any Person outstanding on the date hereof (or that will be outstanding on the Effective Date after giving effect to the Merger Transactions) the aggregate principal or face -67- amount of which equals or exceeds (or may equal or exceed) $10,000,000 and covering any property of the Borrower or any of its Consolidated Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by each such Lien and the property covered by each such Lien is correctly described in Part B of Schedule II. SECTION 4.14. Capitalization. On the Effective Date (after giving -------------- effect to the Merger Transactions), the authorized capital stock of the Borrower will consist of an aggregate of 201,000,000 shares consisting of (i) 200,000,000 shares of Common Stock, par value $.01 per share, of which 100,000,000 will be designated as Series A Common Stock and 100,000,000 will be designated as Series B Common Stock and (ii) 1,000,000 shares of preferred stock, of which 12,500 shares will be designated as Series A Preferred Stock and 12,500 shares will be designated as Series B Preferred Stock. Except as disclosed in the Registration Statement or in Schedule VI, as of the date hereof, there are no outstanding obligations of the Borrower or any of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital stock of the Borrower nor are there any outstanding obligations of the Borrower or any of its Subsidiaries to make payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to the fair market value or equity value of the Borrower or any of its Subsidiaries. SECTION 4.15. Subsidiaries and Investments. ---------------------------- (a) As at the date hereof (in the case of all Subsidiaries of the Borrower on the Effective Date after giving effect to the Merger Transactions), and as at the most recent date such Schedule shall be supplemented pursuant to Section 7.03(c)(iv) (in the case of any Subsidiary formed or acquired pursuant to any Acquisition), set forth in Part A of Schedule IV is a complete and correct list of all of the Subsidiaries of the Borrower (excluding any Subsidiary that shall have been sold, or the existence of which shall have been terminated, in accordance with a transaction permitted hereunder), together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person (other than the holders of shares of stock of the Borrower) holding ownership interests in such Subsidiary and (iii) the nature of the ownership interests held by each such Person and the percentage of ownership of such Subsidiary represented by such ownership interests. As at the date hereof, except as disclosed in Part A of Schedule IV, (x) each of the Borrower and its Subsidiaries owns, free and clear of Liens, and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in Part A of Schedule IV, (y) all of the issued and outstanding capital stock of each such Person organized as a corporation is validly issued, fully paid and nonassessable and (z) there are no outstanding Equity Rights with respect to such Person (excluding for these purposes any letters of intent entered into with respect to the sale of the Dayton Station or the Providence Station). (b) Set forth in Part B of Schedule IV is a complete and correct list of all Investments (other than Investments disclosed in Part A of Schedule IV) held by the Borrower or any of its Subsidiaries in any Person on the date hereof (or that will be held by the Borrower and its Subsidiaries on the Effective Date after giving effect to the Merger -68- Transactions) and, for each such Investment, (x) the identity of the Person or Persons holding such Investment and (y) the nature of such Investment. Except as disclosed in Part B of Schedule IV, each of the Borrower and its Subsidiaries owns, free and clear of all Liens, all such Investments. (c) Except for the Senior Subordinated Notes, none of the Consolidated Subsidiaries of the Borrower is on the date hereof (or will be on the Effective Date after giving effect to the Merger Transactions) subject to any indenture, agreement, instrument or other arrangement of the type described in Section 7.08. SECTION 4.16. Station Licenses. As at the date hereof (in the case ---------------- of all Stations to be owned by the Borrower and its Consolidated Subsidiaries on the Effective Date after giving effect to the Merger Transactions), and as at the most recent date such Schedule shall be supplemented pursuant to Section 7.03(c)(iv) (in the case of any Station acquired pursuant to any Acquisition): (a) Schedule V accurately and completely lists all Station Licenses (other than non-material incidental microwave relay and remote transmitter licenses) granted or assigned to the Borrower or any Consolidated Subsidiary, or under which the Borrower and its Consolidated Subsidiaries have the right to operate such Station. The Station Licenses listed on said Schedule V with respect to any Station include all material authorizations, licenses and permits issued by the FCC that are required or necessary for the operation of such Station, and the conduct of the business of the Borrower and its Consolidated Subsidiaries with respect to such Station. (b) The Station Licenses listed in said Schedule V are validly issued in the name of, or the FCC has consented to the assignment of or transfer of control of such Station Licenses to, the Borrower or one or more of its Subsidiaries. (c) Each such Station License is in full force and effect, and the Borrower and its Consolidated Subsidiaries have fulfilled and performed in all material respects all of their obligations with respect thereto and have full power and authority to operate thereunder, and all consents of the FCC to the assignment of, or transfer of control of, the principal broadcasting licenses and any other material Station Licenses in connection with the Merger Transactions have been approved by orders of the FCC which orders (to the extent that any pre-grant objections have been filed) have become final (i.e. no longer subject to further judicial or administrative review). (d) All operating assets, rights and other property relating to, and material to the operations of, any Station, are owned (or are available for use under lease, license or other arrangements entered into with third parties) by the Borrower or one or more of its Subsidiaries. -69- SECTION 4.17. Merger Agreement. The Borrower has heretofore ---------------- delivered to the Administrative Agent a complete copy (including all modifications, waivers and supplements thereto, and exhibits and schedules) of the Merger Agreement. ARTICLE V CONDITIONS SECTION 5.01. Effective Date. The obligations of the Lenders to make -------------- Loans, and of the Issuing Lender to issue Letters of Credit hereunder, shall not become effective until the date on which the Administrative Agent shall have received each of the following documents, each of which shall be satisfactory to the Administrative Agent (and to the extent specified below, to each Lender) in form and substance (or such condition shall have been waived in accordance with Section 10.02): (a) Executed Counterparts. From each party hereto either (i) a --------------------- counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) Opinions of Counsel to the Obligors. Favorable written opinions ----------------------------------- (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of (i) Locke Purnell Rain Harrell (A Professional Corporation), counsel for the Obligors, substantially in the form of Exhibit C and (ii) Wiley, Rein & Fielding and Brooks, Pierce, McLendon, Humphrey & Leonard, special communications counsel for the Borrower, covering the matters set forth in Exhibit D, and in each case covering such other matters relating to the Borrower, this Agreement or the Transactions as the Required Lenders shall reasonably request. Each Obligor hereby requests such counsel to deliver such opinions. (c) Opinion of Special New York Counsel to The Chase Manhattan Bank. --------------------------------------------------------------- An opinion, dated the Effective Date, of Milbank, Tweed, Hadley & McCloy, special New York counsel to The Chase Manhattan Bank, substantially in the form of Exhibit E (and The Chase Manhattan Bank hereby instructs such counsel to deliver such opinion to the Lenders). (d) Corporate Documents. Such documents and certificates as the ------------------- Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Obligor, the authorization of the Transactions and any other legal matters relating to the Obligors, this Agreement or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel. -70- (e) Officer's Certificate. A certificate, dated the Effective Date --------------------- and signed by the President, a Vice President or a Financial Officer, confirming compliance with the conditions set forth in the lettered clauses of the first sentence of Section 5.02. (f) Repayment of Existing Indebtedness. Evidence that the principal ---------------------------------- of and interest on, and all other amounts owing in respect of, the Indebtedness (including any contingent or other amounts payable in respect of letters of credit) in respect of the Existing Credit Agreement and the Bridge Debt or indicated on Schedule II that is to be repaid on the Effective Date shall have been (or shall be simultaneously) paid in full, that any commitments to extend credit under the agreements or instruments relating to such Indebtedness shall have been canceled or terminated and that all Guarantees in respect of, and all Liens securing, any such Indebtedness shall have been released (or arrangements for such release satisfactory to the Administrative Agent shall have been made). (g) Station Licenses, Etc. Evidence that all of the principal --------------------- broadcasting licenses and any other material Station Licenses appearing in Schedule V for each Station shall have been validly issued in the name of, or the FCC has consented to the assignment of or the transfer of control of such Station Licenses to, the Borrower or one or more of its Subsidiaries, and shall be in full force and effect, and all consents to such assignments and transfers of control will have been approved by orders of the FCC, which orders (to the extent pre-grant objections have been filed) have become final (i.e. no longer subject to further judicial or administrative review). (h) Merger Transactions. Evidence that (x) the Merger Transactions ------------------- shall have been (or shall be simultaneously) consummated in all material respects in accordance with the terms of the Merger Agreement (except for any modifications, supplements or waivers thereof, or written consents or determinations made by the parties thereto, that shall be satisfactory to the Required Lenders or that shall not result in a Material Adverse Effect), and (y) the percentage of the aggregate outstanding stockholders of the Borrower that have reserved their statutory dissenters' rights as described in the Registration Statement shall not exceed 5%, and the Administrative Agent shall have received a certificate of a Financial Officer to the effect of the foregoing clauses (x) and (y), and to the effect that attached thereto are true and complete copies of the documents delivered in connection with the closing of the Merger Transactions pursuant to the Merger Agreement. (i) Leverage Ratio. A certificate of a Financial Officer setting -------------- forth a calculation of the Leverage Ratio as at the Effective Date, after giving effect to the Merger Transactions. (j) Private Placement Debt. Evidence that the holders of the Private ---------------------- Placement Debt shall have consented to (or the Private Placement Debt Documents otherwise have been amended to permit) the Merger Transactions and this Agreement (including -71- to the provisions of Section 2.05(k)) and that the Private Placement Debt Documents shall have been modified in connection therewith in a manner in form and substance satisfactory to the Required Lenders. (k) Other Documents. Such other documents as the Administrative --------------- Agent or any Lender or special New York counsel to The Chase Manhattan Bank may reasonably request. The obligation of any Lender to make its initial extension of credit hereunder is also subject to the payment by the Borrower of such fees as the Borrower shall have agreed to pay to any Lender or the Administrative Agent in connection herewith, including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to The Chase Manhattan Bank, in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Loan Documents and the extensions of credit hereunder (to the extent that statements for such fees and expenses have been delivered to the Borrower). The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Lender to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) on or prior to 3:00 p.m., New York City time, on September 16, 1997 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 5.02. Each Credit Event. The obligation of each Lender to ----------------- make a Loan on the occasion of any Borrowing, and of the Issuing Lender to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions: (a) the representations and warranties of the Borrower set forth in this Agreement, and of each Obligor in each of the other Loan Documents to which it is a party, shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, unless such representation or warranty is expressly stated to have been made as of a specific date (such as the date hereof or the Effective Date), in which case such representation and warranty shall be true and correct on and as of such specific date; and (b) at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing. -72- Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in the preceding sentence. ARTICLE VI AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed or covered, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Financial Statements and Other Information. The ------------------------------------------ Borrower will furnish to the Administrative Agent and each Lender: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, consolidated statements of operations, stockholders' equity and cash flows of the Borrower and its Subsidiaries and of the Borrower and its Consolidated Subsidiaries (and, separately stated, of each Designated Subsidiary) for such fiscal year and the related consolidated balance sheets of the Borrower and its Subsidiaries and of the Borrower and its Consolidated Subsidiaries (and, separately stated, of each Designated Subsidiary) as at the end of such fiscal year, setting forth in each case in comparative (or, for periods prior to any Acquisition, comparative historical) form the corresponding consolidated (or, in the case of a Designated Subsidiary, separately stated) figures for the preceding fiscal year, and accompanied (i) in the case of said consolidated statements and balance sheet of the Borrower and its Subsidiaries, by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP, consistently applied (except as noted pursuant to paragraph (c) below), (ii) in the case of said consolidated statements and balance sheet of the Borrower and its Consolidated Subsidiaries, by a report of independent certified public accountants of recognized national standing, which report shall state that said consolidated financial statements have been reviewed by such accountants, and (iii) in the case of said consolidated statements and balance sheet of the Borrower and its Consolidated Subsidiaries (and separate statements and -73- balance sheets for a Designated Subsidiary), by a certificate of a Financial Officer, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Consolidated Subsidiaries (and, in the case of each Designated Subsidiary, said separately stated financial statements fairly present the respective results of operations of such Designated Subsidiary), in each case in accordance with (except, in the case of the consolidated financial statements of the Borrower and its Consolidated Subsidiaries for the exclusion therefrom of the Designated Subsidiaries) GAAP, consistently applied (except as noted pursuant to paragraph (c) below), as at the end of, and for, such fiscal year; (b) as soon as available and in any event within 60 days after the end of each of the first three quarterly fiscal periods of each fiscal year of the Borrower, consolidated statements of operations, stockholders' equity and cash flows of the Borrower and its Subsidiaries and of the Borrower and its Consolidated Subsidiaries (and, separately stated, of each Designated Subsidiary) for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheets of the Borrower and its Subsidiaries and of the Borrower and its Consolidated Subsidiaries (and, separately stated, of each Designated Subsidiary) as at the end of such period, setting forth in each case in comparative (or for periods prior to any Acquisition, comparative historical) form the corresponding consolidated (or, in the case of a Designated Subsidiary, separately stated) figures for the corresponding periods in the preceding fiscal year (except that, in the case of balance sheets, such comparison shall be to the last day of the prior fiscal year), accompanied by a certificate of a Financial Officer, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of, as the case may be, the Borrower and its Subsidiaries and the Borrower and its Consolidated Subsidiaries (or of such Designated Subsidiary, as the case may be), in each case in accordance with (except, in the case of the consolidated financial statements of the Borrower and its Consolidated Subsidiaries, for the exclusion therefrom of the Designated Subsidiaries) GAAP, consistently applied (except as noted pursuant to paragraph (c) below), as at the end of, and for, such period (subject to normal year-end audit adjustments); (c) concurrently with any delivery of financial statements under clause (a) or (b) of this Section, a certificate of a Financial Officer (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 7.01, 7.06 and 7.10 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 4.04 that affects (or in the future is reasonably likely to affect) in any material respect the presentation of financial information with respect to the Borrower and its Subsidiaries -74- required hereunder and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) of this Section, a statement of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any default by the Borrower under Section 7.10 (insofar as such Section relates to accounting matters) (which statement may be limited by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any of its Subsidiaries with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its stockholders generally or to holders of any class of Indebtedness generally, as the case may be; (f) promptly upon their becoming available, copies of any and all periodic or special reports filed by the Borrower or any of its Consolidated Subsidiaries with the FCC or with any other Federal, state or local governmental authority, if such reports indicate any material adverse change in the business, operations, affairs or condition of the Borrower and its Consolidated Subsidiaries, taken as a whole, or if copies thereof are requested by any Lender or the Administrative Agent, and copies of any and all notices and other communications from the FCC or from any other Federal, state or local governmental authority with respect to the Borrower, any of its Consolidated Subsidiaries or any Station that raises any matters that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any of its Consolidated Subsidiaries, or compliance with the terms of this Agreement and the other Loan Documents, as the Administrative Agent or any Lender may reasonably request. SECTION 6.02. Notices of Material Events. The Borrower will furnish -------------------------- to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any of its Affiliates that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; -75- (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 6.03. Existence; Conduct of Business. The Borrower will, and ------------------------------ will cause each of its Consolidated Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit -------- any merger, consolidation, liquidation or dissolution permitted under Section 7.03. SECTION 6.04. Payment of Obligations. The Borrower will, and will ---------------------- cause each of its Consolidated Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Consolidated Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 6.05. Maintenance of Properties; Insurance. The Borrower ------------------------------------ will, and will cause each of its Consolidated Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations, provided -------- that the Borrower will in any event maintain (with respect to itself and each of its Consolidated Subsidiaries) casualty insurance and insurance against claims for damages with respect to defamation, libel, slander, privacy or other similar injury to person or reputation (including misappropriation of personal likeness), in such amounts as are then customary for Persons engaged in the same or similar business similarly situated. SECTION 6.06. Books and Records; Inspection Rights. The Borrower ------------------------------------ will, and will cause each of its Consolidated Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its -76- Consolidated Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 6.07. Compliance with Laws. The Borrower will, and will -------------------- cause each of its Consolidated Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority, including, but not limited to, Environmental Laws applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 6.08. Use of Proceeds and Letters of Credit. The proceeds of ------------------------------------- the Loans will be used to finance the cash portion of the Merger Transactions, to pay for fees and expenses relating thereto, to finance acquisitions pursuant to Section 7.03(c), to refinance existing indebtedness of the Borrower (including the Senior Subordinated Notes, indebtedness under the Existing Credit Agreement, the Bridge Debt and the Private Placement Debt), to repurchase outstanding shares of capital stock of the Borrower (to the extent permitted hereunder) and for general corporate purposes of the Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations G, U and X. SECTION 6.09. Certain Obligations Respecting Subsidiaries. ------------------------------------------- (a) Wholly Owned Subsidiaries. Subject to paragraph (b) below, the ------------------------- Borrower will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that each of its Consolidated Subsidiaries is a Wholly Owned Subsidiary. (b) Designated Subsidiaries. Notwithstanding the provisions of ----------------------- paragraph (a) above, the Borrower may at any time after the date hereof designate any Subsidiary (other than a Subsidiary holding any Station Licenses or the operating assets of any Stations) as a "Designated Subsidiary" for purposes of this Agreement, by delivering to the Administrative Agent a certificate of a senior officer of the Borrower (and the Administrative Agent shall promptly deliver a copy thereof to each Lender following receipt) identifying such Subsidiary, stating that such Subsidiary shall be treated as a "Designated Subsidiary" for all purposes hereof and certifying that, after giving effect to such designation, the Borrower will be in compliance with the provisions of this Agreement applicable to such Designated Subsidiary (including the provisions of Section 7.05(f) with respect to the type of business in which a Designated Subsidiary shall be involved and the limitations upon the aggregate amount of Investments in Designated Subsidiaries therein specified), and such designation will not result in a Default hereunder. In the event of any such designation of a Subsidiary that is at the time a Subsidiary Guarantor hereunder, the Administrative Agent agrees (to the extent such designation complies with the requirements of the immediately preceding sentence) to release such Subsidiary from its Guarantee hereunder, and in that connection to execute and deliver -77- (at the expense of the Borrower) such instruments as the Borrower shall reasonably request to effect such release. Any Subsidiary of a Designated Subsidiary shall be deemed to be a "Designated Subsidiary". The Borrower may at any time rescind the designation of any Subsidiary as a "Designated Subsidiary" for purposes of this Agreement, by delivering to the Administrative Agent (which shall promptly forward a copy thereof to each Lender) a certificate of a Financial Officer identifying such Subsidiary, stating that such Subsidiary shall no longer be treated as a "Designated Subsidiary" for purposes hereof and certifying that, after giving effect to such rescission, the Borrower will be in compliance with the provisions of this Agreement applicable to Consolidated Subsidiaries (and, without limiting the generality of the foregoing, upon such rescission and as a condition thereto, the Borrower agrees to comply with the requirements of paragraph (c) below with respect to such Subsidiary). (c) Subsidiary Guarantors. The Borrower will take such action, and --------------------- will cause each of its Subsidiaries to take such action, from time to time as shall be necessary to ensure that all Consolidated Subsidiaries of the Borrower are "Subsidiary Guarantors" hereunder. Without limiting the generality of the foregoing, in the event that the Borrower or any of its Subsidiaries shall form or acquire any new Subsidiary that shall constitute a Consolidated Subsidiary hereunder (including any Subsidiary of the Borrower that shall become a Subsidiary of the Borrower in connection with any Acquisition, but excluding any new Subsidiary that is a Designated Subsidiary), the Borrower and its Subsidiaries will cause such new Subsidiary to (i) become a "Subsidiary Guarantor" hereunder pursuant to a Guarantee Assumption Agreement, and (ii) deliver such proof of corporate action, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by each Obligor pursuant to Section 5.01 on the Effective Date or as the Administrative Agent shall have reasonably requested. ARTICLE VII NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed or covered, the Borrower covenants and agrees with the Lenders that: -78- SECTION 7.01. Indebtedness. The Borrower will not, nor will it ------------ permit any of its Consolidated Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness hereunder; (b) Indebtedness existing on the date hereof and set forth in Part A of Schedule II (including Indebtedness relating to the Hearst Stations assumed in connection with the Merger Transactions, but excluding, following the making of the initial Loans hereunder, the Indebtedness to be repaid with the proceeds of such Loans, as indicated on Schedule II), together with any extensions, renewals, refinancings or replacements of any such Indebtedness so long as the principal thereof is not increased and such Indebtedness, as so extended, renewed, refinanced or replaced, would constitute Indebtedness that could be incurred in compliance with Section 7.01(g); (c) Indebtedness of any Consolidated Subsidiary to the Borrower or any other Consolidated Subsidiary; (d) Guarantees by the Borrower of Indebtedness of any Consolidated Subsidiary and by any Consolidated Subsidiary of Indebtedness of the Borrower or any other Consolidated Subsidiary; (e) Indebtedness of the Borrower and its Subsidiaries in respect of the deferred payment of insurance premiums up to an aggregate principal amount not exceeding $10,000,000 at any one time outstanding; (f) Indebtedness of any Person that becomes a Consolidated Subsidiary after the Effective Date; provided that such Indebtedness exists at the -------- time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Consolidated Subsidiary; (g) additional Indebtedness of the Borrower (and of its Consolidated Subsidiaries in respect of a Guarantee of such Indebtedness), incurred after the Effective Date (or assumed in connection with an Acquisition), provided that -------- (i) the stated maturity date with respect to such Indebtedness shall be at least six months after the Maturity Date, (ii) no principal payments with respect to such Indebtedness shall be stated to be due prior to the Maturity Date (other than in respect of a Change of Control or similar event), except that if such Indebtedness is pari passu in right of payment ---- ----- with the obligations of the Obligors hereunder (i.e. not subordinated in right of payment to such obligations), such Indebtedness may provide for principal payments prior to the Maturity Date, so long as the -79- weighted average life to maturity of such Indebtedness (determined in accordance with GAAP) is not earlier than the weighted average life to maturity of the Loans hereunder, (iii) all covenants with respect to such Indebtedness shall be no more restrictive then the covenants set forth in this Agreement and the Borrower shall be in compliance with such covenants, (iv) such Indebtedness is not secured by any Lien on property of the Borrower or any Consolidated Subsidiary, (v) any Guarantee by a Consolidated Subsidiary of such Indebtedness shall provide that such Guarantee shall be released in the event that such Consolidated Subsidiary is to be sold by the Borrower, and (vi) at the time of such incurrence, and after giving effect thereto, no Default shall have occurred and be continuing and the Borrower shall be in pro forma compliance with Section 7.10 (the determination of such pro forma compliance to be calculated, as at the end of and for the period of four fiscal quarters most recently ended prior to the date of such incurrence for which financial statements of the Borrower and its Consolidated Subsidiaries are available, under the assumption that such incurrence shall have occurred at the beginning of the applicable period) and the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer showing such calculations in reasonable detail to demonstrate such compliance; and (h) other secured Indebtedness in an aggregate principal amount not exceeding $25,000,000 and other Indebtedness in an aggregate principal amount not exceeding $100,000,000, in either case at any time outstanding. SECTION 7.02. Liens. The Borrower will not, nor will it permit any ----- of its Consolidated Subsidiaries to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower or any of its Consolidated Subsidiaries existing on the date hereof and set forth in Part B of Schedule II (including Liens relating to the Hearst Stations assumed in connection with the Merger Transactions, but excluding, following the making of the initial Loans hereunder, Liens securing Indebtedness to be repaid with the proceeds of such Loans, as indicated on Schedule II); provided that (i) no such Lien shall extend to any other -------- -80- property or asset of the Borrower or any of its Consolidated Subsidiaries and (ii) such Lien shall secure only those obligations which it secures on the date hereof; (c) any Lien existing on any property or asset of any Person that becomes a Consolidated Subsidiary after the Effective Date prior to the time such Person becomes a Consolidated Subsidiary; provided that (i) such -------- Lien is not created in contemplation of or in connection with such Person becoming a Consolidated Subsidiary, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Consolidated Subsidiary, (iii) such Lien shall secure only those obligations which it secures on the date such Person becomes a Consolidated Subsidiary and (iv) the aggregate amount of Indebtedness or other obligations secured thereby shall not exceed $25,000,000; and (d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Consolidated Subsidiary; provided that (i) -------- such security interests secure Indebtedness permitted by clause (h) of Section 7.01, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets, (iv) such security interests shall not apply to any other property or assets of the Borrower or any Consolidated Subsidiary and (v) the aggregate amount of Indebtedness or other obligations secured thereby shall not exceed $25,000,000. SECTION 7.03. Fundamental Changes. ------------------- (a) Mergers and Consolidations. The Borrower will not, nor will it -------------------------- permit any of its Consolidated Subsidiaries to, enter into any transaction of merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that, subject to Section -------- 7.04, and so long as after giving effect thereto no Default shall have occurred and be continuing hereunder, (i) any Consolidated Subsidiary of the Borrower may merge into or consolidate with the Borrower or any Subsidiary Guarantor so long as the Borrower or a Subsidiary Guarantor is the continuing or surviving party, (ii) any Consolidated Subsidiary of the Borrower may liquidate or dissolve into the Borrower or any Subsidiary Guarantor and (iii) the Borrower and its Consolidated Subsidiaries may enter into the transactions permitted under clauses (B), (C) or (D) of paragraph (b) below, and under clause (iv) of paragraph (c) below. (b) Dispositions. The Borrower will not, nor will it permit any of ------------ its Consolidated Subsidiaries to, sell, transfer, lease or otherwise dispose of all or any substantial part of its assets, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Consolidated Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or another Consolidated Subsidiary and (ii) the Borrower and any of its Consolidated Subsidiaries may sell, transfer, -81- lease, exchange or dispose of (in one transaction or in a series of transactions and, in the case of clauses (B), (C) and (D) below, in any form, including by way of a merger or consolidation the effect of which is to result in the disposition of the respective Station): (A) any part of its assets in the ordinary course of business and on ordinary business terms, (B) the Dayton Station and the Providence Station, (C) any one or more Stations, so long as the Broadcast Cash Flow attributed to all Stations sold or exchanged pursuant to this clause (C) (but not pursuant to clause (B)) during any fiscal year shall not exceed 25% of the Broadcast Cash Flow for such fiscal year nor 50% of the Broadcast Cash Flow for any period five consecutive fiscal years (Broadcast Cash Flow, for purposes hereof, to be determined under the assumption that none of the sales otherwise permitted under this clause (C) had occurred during such fiscal year or five fiscal year period and that the Broadcast Cash Flow of any Station sold during such period remained unchanged after such sale), and (D) any non-broadcast assets acquired by the Borrower and its Consolidated Subsidiaries. (c) Acquisitions. The Borrower will not, nor will it permit any of ------------ its Consolidated Subsidiaries to, acquire any business or property from, or capital stock of, or be a party to any acquisition of, any Person except: (i) purchases of equipment, programming rights and other property to be sold or used in the ordinary course of business; (ii) Investments permitted under Section 7.05; (iii) Capital Expenditures; and (iv) the Borrower and its Consolidated Subsidiaries may, pursuant to a merger or consolidation, a purchase of stock or assets or entering into an LMA Arrangement (any such transaction being herein called an "Acquisition"), acquire after the date hereof (or, in the case of an LMA ----------- Arrangement, acquire the right to operate) additional television broadcasting stations (any such station that is the subject of any Acquisition being hereinafter referred to as an "Acquired Station"), and ---------------- additional broadcast industry related assets, so long as: (A) in the case of any Acquisition (other than of one or more television broadcasting stations), the aggregate Purchase Price of any single such Acquisition shall not exceed $100,000,000 and of all such Acquisitions after the Effective Date shall not exceed $200,000,000; -82- (B) except if such Acquisition constitutes an LMA Arrangement, the assignment or transfer of control of the Station Licenses with respect to such Acquired Station shall have been approved by an order or orders of the FCC, which order or orders (to the extent that any pre-grant objections have been filed) shall have become final (i.e. no longer subject to further judicial or administrative review); (C) immediately prior to such Acquisition and after giving effect thereto, (1) no Default shall have occurred and be continuing and (2) the Borrower shall be in pro forma compliance with Section 7.10 (the determination of such pro forma compliance to be calculated, as at the end of and for the period of four fiscal quarters most recently ended prior to the date of such Acquisition for which financial statements of the Borrower and its Consolidated Subsidiaries are available, under the assumption that such Acquisition shall have occurred at the beginning of the applicable period) and the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer showing such calculations in reasonable detail to demonstrate such compliance; (D) in connection with such Acquisition the Borrower shall have delivered to the Administrative Agent environmental surveys and assessments prepared by a firm of licensed engineers in form and substance reasonably satisfactory to the Administrative Agent reflecting that the assets or Subsidiary being acquired in such Acquisition is not subject to any material environmental liabilities; (E) the Borrower shall have delivered evidence satisfactory to the Administrative Agent that the Borrower and its Consolidated Subsidiaries will not become liable, contingently or otherwise, in respect of any material tax or material ERISA liability of the respective seller (or the entity owning the Acquired Station or broadcast industry related assets) as a result of such Acquisition; and (F) concurrently with the consummation of such Acquisition, the Borrower shall have supplemented Schedules IV and V in order that such Schedules accurately reflect any additional Consolidated Subsidiaries formed or acquired pursuant to such Acquisition and accurately identify the respective Station Licenses (other than non-material incidental microwave relay and remote transmitter Licenses) of any Acquired Station. -83- SECTION 7.04. Lines of Business. ----------------- (a) Business Activities. The Borrower will not at any time permit ------------------- less than 75% of EBITDA to be derived from the television and radio broadcast business (it being understood that the broadcast production business, as conducted on the date hereof by "Hearst Broadcasting Productions" (as such term is defined in the Merger Agreement), shall not be deemed to be the television and radio broadcast business). (b) Network Affiliation. The Borrower will cause any Station that is ------------------- subject to an affiliation agreement with one of National Broadcasting Company, Inc., Fox Broadcasting Company, CBS, Inc. or American Broadcasting Companies, Inc. (each, a "Major Network") to maintain such agreement in full force and ------------- effect, provided that (i) the Borrower may permit such Station to become subject -------- to any new or substitute affiliation agreement with such or any other Major Network and (ii) the Borrower may permit any one or more of such affiliation agreements to expire or be terminated so long as the percentage of the aggregate Broadcast Cash Flow of the Borrower and its Consolidated Subsidiaries during the term of this Agreement attributable to Stations that cease to be so affiliated shall not exceed 20%. With respect to any Station that is not subject to an affiliation agreement with a Major Network, including any Station that is currently affiliated with the Warner Brothers Network or the United Paramount Network (each, an "Emerging Network"), the Borrower may permit such Station (i) ---------------- to cease to be party to any affiliation agreement, (ii) to become a party to an affiliation agreement with a Major Network (in which event such Station shall not become subject to the immediately preceding sentence) or (iii) to become a party to an affiliation agreement with the other Emerging Network or any similar emerging network. (c) LMA Arrangements. The Borrower will not permit the aggregate ---------------- percentage of EBITDA for any period of four consecutive fiscal quarters that is attributable to Stations subject to LMA Arrangements to exceed 20% of the aggregate EBITDA for such period. (d) License Subsidiaries. In the event that the Required Lenders -------------------- shall deem the same to be necessary after the occurrence and during the continuance of an Event of Default, the Borrower will create one or more Subsidiaries to which the Station Licenses of each of the Stations of the Borrower will be transferred (and will effect such transfer, and will deliver evidence thereof and of all necessary FCC approvals to the Administrative Agent within 180 days after such request). SECTION 7.05. Investments. The Borrower will not, nor will it permit ----------- any of its Consolidated Subsidiaries to, make or permit to remain outstanding any Investments except: (a) Investments outstanding on the date hereof and identified in Part B of Schedule IV; -84- (b) operating deposit accounts with banks; (c) Permitted Investments; (d) Investments by the Borrower and its Consolidated Subsidiaries in the Borrower and its Consolidated Subsidiaries; (e) Hedging Agreements entered into in the ordinary course of the Borrower's financial planning and not for speculative purposes; (f) Investments (not including, however, Guarantees of obligations) by the Borrower and its Consolidated Subsidiaries in Designated Subsidiaries or other entities that are, in either case, involved in a business related to the business of the Borrower and its Consolidated Subsidiaries, so long as the amount of such Investments shall not exceed $250,000,000 at any one time outstanding; (g) Investments constituting Acquisitions permitted under Section 7.03; and (h) so long as at the time thereof, and after giving effect thereto, no Default shall have occurred and be continuing, the Borrower may make additional Investments (each a "Basket Investment") as follows: ----------------- (i) if after giving effect to such Basket Investment the Leverage Ratio shall be greater than 4.00 to 1, the Borrower may make any Basket Investment (the "Current Basket Investment") so long as the ------------------------- aggregate amount of all Basket Investments and Restricted Payments made during the period commencing on the Effective Date through and including the date upon which the Current Basket Investment is to be made shall not exceed the sum of (w) $100,000,000 plus (x) the net ---- cash proceeds from all Equity Issuances after the Effective Date plus ---- (y) the aggregate amount of Net Cash Proceeds from Dispositions not required to be applied to the prepayment of Loans, or the reduction of Commitments, pursuant to Section 2.10(b)(ii) plus (z) 33-1/3% of the ---- cumulative amount of Excess Cash Flow for the period commencing on the Effective Date through and including the fiscal quarter most recently ended prior to the date of the Current Basket Investment for which financial statements are available; and (ii) if after giving effect to such Basket Investment the Leverage Ratio shall be less than or equal to 4.00 to 1, the Borrower may make Basket Investments in any amount. A Basket Investment permitted by Section 7.05(h) at the time of its making may remain outstanding at a subsequent time notwithstanding that additional Basket Investments could not be made at such subsequent time. The aggregate amount of an Investment at any one time -85- outstanding for purposes of clauses (f) and (h) above, shall be deemed to be equal to (A) the aggregate amount of cash, together with the aggregate fair market value of property, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such Investment minus (B) the aggregate ----- amount of dividends, distributions or other payments received in cash in respect of such Investment; the amount of an Investment shall not in any event be reduced by reason of any write-off of such Investment. SECTION 7.06. Restricted Payments. The Borrower will not, nor will ------------------- it permit any of its Consolidated Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except that, so long as at the time thereof, and after giving effect thereto, no Default shall have occurred and be continuing, the Borrower may make Restricted Payments as follows: (a) if after giving effect to such Restricted Payment the Leverage Ratio shall be greater than 4.00 to 1, the Borrower may make any Restricted Payment (the "Current Restricted Payment") so long as the aggregate amount -------------------------- of all Restricted Payments and Basket Investments made during the period commencing on the Effective Date through and including the date upon which the Current Restricted Payment is to be made shall not exceed the sum of (w) $100,000,000 plus (x) the net cash proceeds from all Equity Issuances ---- after the Effective Date plus (y) the aggregate amount of Net Cash Proceeds ---- from Dispositions not required to be applied to the prepayment of Loans, or the reduction of Commitments, pursuant to Section 2.10(b)(ii) plus (z) 33- ---- 1/3% of the cumulative amount of Excess Cash Flow for the period commencing on the Effective Date through and including the fiscal quarter most recently ended prior to the date of the Current Restricted Payment for which financial statements are available; and (b) if after giving effect to such Restricted Payment the Leverage Ratio shall be less than or equal to 4.00 to 1, the Borrower may make Restricted Payments in any amount. Nothing herein shall be deemed to prohibit the payment of dividends by any Subsidiary of the Borrower to the Borrower or to any other Subsidiary of the Borrower. SECTION 7.07. Transactions with Affiliates. The Borrower will not, ---------------------------- nor will it permit any of its Consolidated Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except the following: (a) transactions at prices and on terms and conditions not less favorable to the Borrower or such Consolidated Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, -86- (b) transactions between or among the Borrower and its Wholly Owned Subsidiaries (other than Designated Subsidiaries) not involving any other Affiliate, (c) any Restricted Payment permitted by Section 7.06 or any Investment permitted by Section 7.05, (d) the options on certain television stations granted by Hearst in favor of the Borrower and described in Exhibit 9.01(i) of the Merger Agreement, (e) arrangements between Hearst and the Borrower, with respect to payroll, insurance, data processing, employee benefits, tax services, accounting, corporate, financial, legal and other administrative items that are on terms and conditions not less favorable to the Borrower than those arrangements historically existing between Hearst and the Hearst Stations and reflected in the projections set forth in the Information Memorandum, it being understood that an increase in payments to Hearst based upon an increase in the size of the business of the Borrower and its Subsidiaries (resulting in an increase in payroll, insurance, data processing, employee benefits, tax services, accounting, corporate, financial, legal and other administrative items), (f) the Tax Sharing Agreement, and (g) the transactions, plans and agreements described under the heading "Interests of Certain Persons in the Hearst Transactions; Affiliate Transactions" in the Registration Statement. SECTION 7.08. Restrictive Agreements. The Borrower will not, and ---------------------- will not permit any of its Consolidated Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Consolidated Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Consolidated Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Consolidated Subsidiary or to Guarantee Indebtedness of the Borrower or any other Consolidated Subsidiary; provided that (i) the foregoing shall not -------- apply to restrictions and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply to restrictions and conditions existing pursuant to the Senior Subordinated Notes (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Consolidated Subsidiary pending such sale, provided such restrictions and conditions apply only to the Consolidated Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (v) clause (a) of the foregoing shall not -87- apply to customary provisions in leases and other contracts restricting the assignment thereof and (vi) clauses (a) and (b) of the foregoing shall not apply to any Indebtedness that is pari passu in right of payment with the obligations ---- ----- of the Obligors hereunder (i.e. not subordinated in right of payment to such obligations). SECTION 7.09. Modifications of Certain Documents. Without the prior ---------------------------------- consent of the Administrative Agent (to be given upon the approval of the Required Lenders), the Borrower will not consent to any modification, supplement or waiver of (i) any of the provisions of any agreement, instrument or other document evidencing or relating to Additional Permitted Indebtedness or the Senior Subordinated Notes (or the Indenture pursuant to which the Senior Subordinated Notes have been issued) or (ii) the Merger Agreement in a manner that, in either case, would be materially adverse to the Lenders. SECTION 7.10. Certain Financial Covenants. --------------------------- (a) Leverage Ratio. The Borrower will not permit the Leverage Ratio -------------- to exceed the following respective ratios at any time during the following respective periods: Period Ratio ------ ----- From the Effective Date through December 30, 1999 5.50 to 1 From December 31, 1999 through December 30, 2000 5.00 to 1 From December 31, 2000 through December 30, 2001 4.50 to 1 From December 31, 2001 and at all times thereafter 4.00 to 1 (b) Interest Coverage Ratio. The Borrower will not permit the ----------------------- Interest Coverage Ratio to be less than (i) 2.00 to 1 as at the last day of any fiscal quarter ending on or before the fiscal quarter ending December 31, 1999 and (ii) 2.50 to 1 as at the last day of any fiscal quarter thereafter. (c) Fixed Charges Ratio. The Borrower will not permit the Fixed ------------------- Charges Ratio to be less than 1.15 to 1 as at the last day of any fiscal quarter. -88- ARTICLE VIII EVENTS OF DEFAULT If any of the following events ("Events of Default") shall occur: ----------------- (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or (after notice from any Lender or the Administrative Agent) any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or under any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days; (c) any representation or warranty made or deemed made by or on behalf of any Obligor in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof, shall prove to have been incorrect when made or deemed made in any material respect; or any representation or warranty made by or on behalf of Hearst in the Merger Agreement shall prove to have been incorrect when made in any material respect; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 6.02, 6.03 (with respect to the Borrower's existence), 6.08 or 6.09 or in Article VII; (e) any Obligor shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article) or any other Loan Document and such failure shall continue unremedied for a period of 30 or more days after notice thereof from the Administrative Agent (given at the request of any Lender) is received by the Borrower; (f) the Borrower or any of its Consolidated Subsidiaries shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or -89- without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to -------- the offer to repurchase the Senior Subordinated Notes as a result of the Merger Transactions or to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Obligor or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Obligor or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) any Obligor shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Obligor or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) any Obligor shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $25,000,000 shall be rendered against any Obligor or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Obligor to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the reasonable judgment of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; -90- (m) a reasonable basis shall exist for the assertion against the Borrower or any of its Subsidiaries, or any predecessor in interest of the Borrower or any of its Subsidiaries or Affiliates, of (or there shall have been asserted against the Borrower or any of its Subsidiaries) any claims or liabilities, whether accrued, absolute or contingent, based on or arising from the generation, storage, transport, handling or disposal of Hazardous Materials by the Borrower or any of its Subsidiaries, Affiliates or predecessors that, in the reasonable judgment of the Required Lenders, are reasonably likely to be determined adversely to the Borrower or any of its Subsidiaries, and the amount thereof (either individually or in the aggregate) is reasonably likely to have a Material Adverse Effect (insofar as such amount is payable by the Borrower or any of its Consolidated Subsidiaries but after deducting any portion thereof that is reasonably expected to be paid by other creditworthy Persons jointly and severally liable therefor); (n) a Change of Control shall occur; or (o) the principal broadcasting licenses of any Station, or any other material authorizations, licenses or permits issued by the FCC, shall be revoked or canceled or expire by their terms and not be renewed, or shall be modified in a manner materially adverse to the Borrower or the respective Consolidated Subsidiary operating such Station; then, and in every such event (other than an event with respect to any Obligor described in clause (i) or (j) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Obligors accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Obligor; and in case of any event with respect to any Obligor described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Obligors accrued hereunder, shall automatically become due and payable, without -91- presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Obligor. ARTICLE IX THE ADMINISTRATIVE AGENT Each of the Lenders and the Issuing Lender hereby irrevocably appoints the Administrative Agent as its agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein and in the other Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the -92- satisfaction of any condition set forth in Article V or elsewhere herein or therein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for an Obligor), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Lender and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Lender, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor (and, as provided in Section 2.11(c), the retiring Administrative Agent shall make available to the Borrower a ratable portion of any fees theretofore paid to the Administrative Agent for the period during which the resignation or removal of such retiring Administrative Agent shall occur to the extent the Borrower is required to pay fees for the balance of such period to the successor Administrative Agent). After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. -93- Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Except as otherwise provided in Section 10.02(b) with respect to this Agreement, the Administrative Agent may, with the prior consent of the Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Loan Documents. ARTICLE X MISCELLANEOUS SECTION 10.01. Notices. Except in the case of notices and other ------- communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower or any Subsidiary Guarantor, to it c/o Hearst- Argyle Television, Inc. at 888 7th Avenue, New York, New York 10019, Attention of Harry T. Hawks (Telecopy No. 212-765-9639); (b) if to the Administrative Agent, to The Chase Manhattan Bank, 1 Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention Loan and Agency Services Group (Telecopy No. (212) 552-5658), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of Mitchell Gervis (Telecopy No. 212-270-4584); (c) if to the Issuing Lender, to it at The Chase Manhattan Bank, Trade Services, 55 Water Street, Room 1710, New York, New York 10041, Attention of Roshdy Botros, Assistant Manager (Telecopy No. 212-638-8200); and (d) if to a Lender (including any Lender in its capacity as a Swingline Lender), to it at its address (or telecopy number) set forth in its Administrative Questionnaire. -94- Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.02. Waivers; Amendments. ------------------- (a) No Deemed Waivers; Remedies Cumulative. No failure or delay by -------------------------------------- the Administrative Agent, the Issuing Lender or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Lender and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Obligor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Lender may have had notice or knowledge of such Default at the time. (b) Amendments. Neither this Agreement nor any provision hereof may ---------- be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided -------- that no such agreement shall (i) increase any Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of any reduction or expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (d) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of the term "Required Incremental Facility Lenders", "Required Lenders", "Required Revolving Lenders" or "Required Term Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, or (vi) except as otherwise provided herein, release any Subsidiary Guarantor from any of its guarantee obligations under Article III without the written consent of each Lender; and provided further that (x) no such agreement -------- ------- shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Lender or either Swingline Lender -95- hereunder without the prior written consent of the Administrative Agent, the Issuing Lender or such Swingline Lender, as the case may be and (y) any modification or supplement of Article III shall require the consent of each Subsidiary Guarantor. Anything in this Agreement to the contrary notwithstanding, (A) no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling the Borrower to satisfy a condition precedent to the making of a Revolving Loan, or Incremental Facility Loans of any Series, shall be effective against the Revolving Lenders or Incremental Facility Lenders of such Series, as the case may be, for purposes of the Revolving Commitments or Incremental Facility Commitments of such Series unless the Required Revolving Lenders or Required Incremental Facility Lenders of such Series, as applicable, shall have concurred with such waiver or modification and (B) upon the sale, transfer or other disposition of any Subsidiary Guarantor hereunder in a transaction permitted under Section 7.03 (or to which the Required Lenders shall have consented), the Administrative Agent is authorized and instructed to enter into an amendment to this Agreement releasing such Subsidiary Guarantor from its Guarantee under Article III. SECTION 10.03. Expenses; Indemnity; Damage Waiver. ---------------------------------- (a) Costs and Expenses. The Borrower shall pay (i) all reasonable ------------------ out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all out-of-pocket expenses incurred by the Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out- of-pocket expenses incurred by the Administrative Agent, the Issuing Lender or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Lender or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including in connection with any workout, restructuring or negotiations in respect thereof. (b) Indemnification by Borrower. The Borrower shall indemnify the --------------------------- Administrative Agent, the Issuing Lender and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") ---------- against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated -96- hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to - -------- the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) Reimbursement by Lenders. To the extent that the Borrower fails ------------------------ to pay any amount required to be paid by it to the Administrative Agent, the Issuing Lender or either Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Issuing Lender or such Swingline Lender, as the case may be, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, - -------- liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Lender or such Swingline Lender in its capacity as such. (d) Waiver of Consequential Damages, Etc. To the extent permitted by ------------------------------------ applicable law, no Obligor shall assert, and each Obligor hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. (e) Payments. All amounts due under this Section shall be payable -------- promptly after written demand therefor. SECTION 10.04. Successors and Assigns. ---------------------- (a) Assignments Generally. The provisions of this Agreement shall be --------------------- binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Obligor may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Obligor without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Lender and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. -97- (b) Assignments by Lenders. Any Lender may assign to one or more ---------------------- assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it); provided that -------- (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Lender and each Swingline Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment(s), the amount of the Commitment(s) of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment of the Loans, LC Exposure or Commitments of any Class shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement in respect of such Class, (iv) the assignor and the assignee to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower otherwise required under this - -------- ------- paragraph shall not be required if an Event of Default under clause (i) or (j) of Article VIII has occurred and is continuing. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such -98- Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) Maintenance of Register by Administrative Agent. The ----------------------------------------------- Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be -------- conclusive, and the Borrower, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Lender and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Effectiveness of Assignments. Upon its receipt of a duly ---------------------------- completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Participations. Any Lender may, without the consent of the -------------- Borrower, the Administrative Agent, the Issuing Lender or either Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under - ------------ this Agreement and the other Loan Documents (including all or a portion of its Commitments and the Loans owing to it); provided that (i) such Lender's -------- obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such agreement or instrument may provide that such -------- Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. -99- (f) Limitations on Rights of Participants. A Participant shall not ------------------------------------- be entitled to receive any greater payment under Section 2.14 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.16(e) as though it were a Lender, provided that in no event shall the Borrower be required to pay a -------- greater sum to such Participant than it would have been required to pay to the Lender from which such Participant acquired such participation. (g) Pledges. Any Lender may at any time pledge or assign a security ------- interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security -------- interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. (h) No Assignments to Obligors or Affiliates. Anything in this ---------------------------------------- Section 10.04 to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan or LC Exposure held by it hereunder to the Borrower or any of its Affiliates or Subsidiaries without the prior consent of each Lender. SECTION 10.05. Survival. All covenants, agreements, representations -------- and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Lender or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect so long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16, 3.03 and 10.03 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.06. Counterparts; Integration; Effectiveness. This ---------------------------------------- Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties -100- relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.07. Severability. Any provision of this Agreement held to ------------ be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.08. Right of Setoff. If an Event of Default shall have --------------- occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of any Obligor against any of and all the obligations of any Obligor now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of -------------------------------------------------- Process. - ------- (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Each Obligor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Issuing Lender or -101- any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Obligor or its properties in the courts of any jurisdiction. (c) Each Obligor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. 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 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY -------------------- WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.11. Headings. Article and Section headings and the Table -------- of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.12. Treatment of Certain Information; Confidentiality. ------------------------------------------------- (a) Treatment of Certain Information. The Borrower acknowledges that -------------------------------- from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and the Borrower hereby authorizes each Lender to share any information delivered to such Lender by the Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such subsidiary or affiliate for the purpose of using the same in connection with such services. -102- (b) Confidentiality. Each of the Administrative Agent, the Issuing --------------- Lender and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Issuing Lender or any Lender on a nonconfidential basis from a source other than an Obligor. For the purposes of this Section, "Information" means all information received from any Obligor ----------- relating to any Obligor or its business, other than any such information that is available to the Administrative Agent, the Issuing Lender or any Lender on a nonconfidential basis prior to disclosure by an Obligor; provided that, in the -------- case of information received from an Obligor after the date hereof, such information is clearly identified at the time of delivery as confidential. Unless specifically prohibited by applicable law or court order, each Lender and the Administrative Agent shall, prior to disclosure thereof, notify the Borrower of any request for disclosure of any such non-public information (A) by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) or (B) pursuant to legal process (including agency subpoenas). Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. -103- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. ARGYLE TELEVISION, INC. (to be renamed HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein) By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer SUBSIDIARY GUARANTORS --------------------- ARKANSAS ARGYLE TELEVISION, INC. (to be renamed ARKANSAS HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein) By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer -104- HAWAII ARGYLE TELEVISION, INC. (to be renamed HAWAII HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein) By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer JACKSON ARGYLE TELEVISION, INC. (to be renamed JACKSON HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein) By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer -105- OHIO/OKLAHOMA ARGYLE TELEVISION, INC. (to be renamed OHIO/OKLAHOMA HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein) By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer HEARST-ARGYLE STATIONS, INC By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer WAPT ARGYLE TELEVISION, INC. (to be renamed WAPT HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein) By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer KITV ARGYLE TELEVISION, INC. (to be renamed KITV HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein) By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer -106- KHBS ARGYLE TELEVISION, INC. (to be renamed KHBS HEARST-ARGYLE TELEVISION, INC., following the Merger Transactions referred to herein) By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer KMBC HEARST-ARGYLE TELEVISION, INC By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer WBAL HEARST-ARGYLE TELEVISION, INC By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer WCVB HEARST-ARGYLE TELEVISION, INC By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer -107- WISN HEARST-ARGYLE TELEVISION, INC By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer WTAE HEARST-ARGYLE TELEVISION, INC By /s/ Harry T. Hawks ---------------------------------------- Name: Harry T. Hawks Title: Chief Financial Officer, Assistant Secretary & Treasurer -108- LENDERS ------- THE CHASE MANHATTAN BANK, individually, as Swingline Lender and as Administrative Agent By /s/ Mitchell J. Gervis ---------------------------------------- Name: Mitchell J. Gervis Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK, individually, as Swingline Lender and as Documentation Agent By /s/ Adam J. Silver ---------------------------------------- Name: Adam J. Silver Title: Associate BANK OF MONTREAL By: /s/ W. T. Calder --------------------------------------- Name: W. T. Calder Title: Director, Head of Financing THE BANK OF NEW YORK By: /s/ Brendan T. Nedzi --------------------------------------- Name: Brendan T. Nedzi Title: Senior Vice President BANQUE PARIBAS By: /s/ Lynne S. Randall --------------------------------------- Name: Lynne S. Randall Title: Director By: /s/ Salo Aizenberg --------------------------------------- Name: Salo Aizenberg Title: Vice President -109- TORONTO DOMINION (TEXAS), INC. By: /s/ Frederic Hawley -------------------------------------- Name: Frederic Hawley Title: Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ Sonia L. Isaacs -------------------------------------- Name: Sonia L. Isaacs Title: Vice President CAISSE NATIONALE DE CREDIT AGRICOLE By: /s/ R. Craig Welch -------------------------------------- Name: R. Craig Welch Title: First Vice President THE DAI-ICHI KANGYO BANK, LTD. By: /s/ Frank A. Bertelle -------------------------------------- Name: Frank A. Bertelle Title: Assistant Vice President WACHOVIA BANK, N.A. By: /s/ John A. Robertson -------------------------------------- Name: John A. Robertson Title: Senior Vice President -110- THE BANK OF NOVA SCOTIA By: /s/ Margot C. Bright --------------------------------------- Name: Margot C. Bright Title: Authorized Signatory FIRST HAWAIIAN BANK By: /s/ Bruce E. Helberg --------------------------------------- Name: Bruce E. Helberg Title: Assistant Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Toshihiro Hayashi --------------------------------------- Name: Toshihiro Hayashi Title: Senior Vice President THE SANWA BANK LIMITED By: /s/ Paul Judicke --------------------------------------- Name: Paul Judicke Title: Vice President SUNTRUST BANK, CENTRAL FLORIDA, N.A. By: /s/ Janet P. Sammons --------------------------------------- Name: Janet P. Sammons Title: Vice President -111- THE TOYO TRUST & BANKING COMPANY, LTD. By: /s/ T. Mikumo ------------------------------ Name: T. Mikumo Title: Vice President MICHIGAN NATIONAL BANK By: /s/ Stephane E. Lubin ------------------------------ Name: Stephane E. Lubin Title: Relationship Manager SCHEDULE I Commitments [See definitions of "Lenders" and "Revolving Commitment" in Section 1.01] Revolving Commitment Lenders - -------------------- ------- $180,000,000.00 The Chase Manhattan Bank $145,000,000.00 Morgan Guaranty Trust Company of New York $ 75,000,000.00 Bank of Montreal $ 75,000,000.00 The Bank of New York $ 75,000,000.00 Banque Paribas $ 75,000,000.00 Toronto Dominion (Texas), Inc. $ 75,000,000.00 Union Bank of California, N.A. $ 50,000,000.00 Caisse Nationale de Credit Agricole $ 50,000,000.00 The Dai-Ichi Kangyo Bank, Ltd. $ 50,000,000.00 Wachovia Bank, N.A. $ 25,000,000.00 The Bank of Nova Scotia $ 25,000,000.00 First Hawaiian Bank $ 25,000,000.00 The Mitsubishi Trust and Banking Corporation $ 25,000,000.00 The Sanwa Bank Limited $ 25,000,000.00 SunTrust Bank, Central Florida, N.A. $ 15,000,000.00 The Toyo Trust & Banking Company, Ltd. $ 10,000,000.00 Michigan National Bank Schedule I to Credit Agreement ------------------------------ SCHEDULE II Material Agreements and Liens with Respect to Indebtedness ---------------------------------------------------------- [See Section 4.13, Section 5.01(f), Section 7.01(b) and Section 7.02(b)] Part A - Material Agreements -------------------
DESCRIPTION AGGREGATE PRINCIPAL ----------- AMOUNT OUTSTANDING ----------------------- Amended and Restated Credit Agreement dated as of June 13, 1995 between Maximum principal the Borrower, each of the subsidiaries of the Borrower named therein (the amount of $215,000,000 "Existing Loan Subsidiaries"), the lenders named therein, The Chase Manhattan of which $48,000,000 Bank (successor to The Chase Manhattan Bank (National Association)) as was outstanding as of administrative agent for said lenders, and Bank of Montreal, Banque Paribas 8/25/97 and Union Bank as co-agents (as modified, amended and restated and (To be paid in full supplemented and in effect on the Effective Date) (the "Existing Credit on the Effective Date) --------------- Agreement"). - ---------- Indenture dated as of October 27, 1995, as supplemented, between the $150,000,000 - --------- Borrower and the United States Trust Company of New York, as trustee, pursuant to which the Borrower issued its 9 3/4% Senior Subordinated Notes due 2005. Condominium Purchase Agreement entered into in February 1996 between the $ 7,414,400 - ------------------------------ Borrower and an affiliate of The Meyers Corporation ("Meyers") for the ------ purchase of space in a project being developed by Meyers. This space is to become the new facility for the Borrower's KITV-TV. Under the Condominium Purchase Agreement, the Borrower is obligated to make payments to Meyers totaling $9,268,000, $7,414,400 of which will become payable at closing under the Condominium Purchase Agreement. In connection with this project, the Borrower has also entered into certain other agreements for the finish-out and equipment of this facility, obligating the Borrower to expend approximately an additional $1,400,000, which amount will be paid during the fourth quarter of 1997 and the first two quarters of 1998. Assignment, Assumption and Modification Agreement dated as of August 29, $275,000,000 - ------------------------------------------------- 1997 among Hearst, the Borrower, Metropolitan Life Insurance Company ("MetLife") and The Prudential Insurance Company of America ("Prudential") pursuant to which the Borrower has (i) entered into the Amended and Restated Note Purchase Agreement, dated as of August 29, 1997 (the "Note Purchase ------------- Agreement"), among the Borrower, MetLife and Prudential, and (ii) executed - --------- the 7.87% Series A Senior Note due 2001, the 8.01% Series B Senior Notes due 2002 and the 8.04% Series C Senior Note due 2003 issued pursuant to the Note Purchase Agreement. Demand Promissory Note dated as of August 29, 1997 made by HAT - ---------------------- 200,000,000 Contribution Sub, Inc. and payable to the order of The Chase Manhattan Bank, (To be paid in full which was assumed by the Borrower pursuant to the assumption provision set on the Effective Date) forth therein.
Schedule II to Credit Agreement ------------------------------- -2- Part B - Liens ----- Although substantially all of the assets of the Borrower and the Existing Loan Subsidiaries were pledged or mortgaged as collateral under the Existing Credit Agreement, all of such liens and security interests are intended to be released on the Effective Date. The Bridge Debt will be secured by the cash proceeds thereof; the security interest will be released upon repayment of the Bridge Debt on the Effective Date. Schedule II to Credit Agreement ------------------------------- SCHEDULE III Litigation and Environmental Matters ------------------------------------ [See definition of "Disclosed Matters" in Section 1.01] Litigation - ---------- None. Environmental Matters - --------------------- None. Schedule III to Credit Agreement -------------------------------- SCHEDULE IV Subsidiaries and Investments ---------------------------- [See Section 4.15 and 7.05] Part A - Subsidiaries ------------ Subsidiary State of Incorporation ---------- ---------------------- Arkansas Hearst-Argyle Television, Inc. Delaware Hawaii Hearst-Argyle Television, Inc. Delaware Jackson Hearst-Argyle Television, Inc. Delaware Ohio/Oklahoma Hearst-Argyle Television, Inc. Nevada Hearst-Argyle Stations, Inc. Nevada WAPT Hearst-Argyle Television, Inc. Nevada KITV Hearst-Argyle Television, Inc. Nevada KHBS Hearst-Argyle Television, Inc. Nevada KMBC Hearst-Argyle Television, Inc. Nevada WBAL Hearst-Argyle Television, Inc. Nevada WCVB Hearst-Argyle Television, Inc. Nevada WISN Hearst-Argyle Television, Inc. Nevada WTAE Hearst-Argyle Television, Inc. Nevada Part B - Investments ----------- Holder of Investment Nature of Investment -------------------- -------------------- Argyle Television, Inc. An investment in common stock of Affiliated Enterprises, Inc., a corporation sponsored by America Broadcasting Company, Inc. ("ABC") and of which all stockholders are ABC affiliates. Affiliated Enterprises, Inc. is investigating new broadcast technologies. KHBS Argyle Television, Forty-nine percent (49%) of the issued and Inc. outstanding common stock of Harrison Television, Inc., which is an applicant for a FCC license to broadcast in the Harrison, Arkansas area. Schedule IV to Credit Agreement ------------------------------- SCHEDULE V Station Licenses ---------------- [See Section 4.16 and Section 5.01(g)] KMBC HEARST-ARGYLE TELEVISION, INC. Call Sign Type --------- ---- KMBC Main WHY-779 TV auxiliary WHY-780 TV auxiliary WHY-781 TV auxiliary WCD-733 TV auxiliary WCD-734 TV auxiliary KZ-2685 Remote Pickup KZ-2686 Remote Pickup KZ-2687 Remote Pickup KC-5476 Remote Pickup KEH-381 Remote Pickup KPE-669 Remote Pickup KCI-998 Remote Pickup WBAL HEARST-ARGYLE TELEVISION, INC. Call Sign Type --------- ---- WBAL-TV Main WZB-677 TV auxiliary WZB-678 TV auxiliary WZB-679 TV auxiliary KEH-561 Remote Pickup KZH-878 Remote Pickup KA88745 TV auxiliary KB55004 TV auxiliary KW4042 TV auxiliary KR9984 TV auxiliary KB96899 Remote Pickup KZH-895 Remote Pickup WLI-958 TV auxiliary KA-21745 TV auxiliary WLP-530 Relay KPH-217 Relay KPH-218 Relay KB-96899 Remote Pickup Schedule V to Credit Agreement ------------------------------ -2- WCVB HEARST-ARGYLE TELEVISION, INC. Call Sign Type --------- ---- WCVB Main 800909MK TV auxiliary BLQ-304 TV auxiliary KR-4778 Remote Pickup KR-5551 Remote Pickup KR-5550 Remote Pickup BLP00720 TV auxiliary BLQ-337 TV auxiliary KPE-562 Remote Pickup KTE-753 TV auxiliary KYY-288 Remote Pickup KPF-325 Remote Pickup KKN-760 Remote Pickup KTE-752 Remote Pickup KO-5245 TV auxiliary KQ-4638 TV auxiliary KR-5541 TV auxiliary KS-2476 TV auxiliary KV-4915 TV auxiliary BLP-01087 TV auxiliary BLQ-790227ME TV auxiliary KA-2007 TV auxiliary KA-2008 TV auxiliary KA-40608 TV auxiliary KA-40534 TV auxiliary KA-95344 TV auxiliary KA-95345 TV auxiliary KA-95346 TV auxiliary KB-55987 TV auxiliary KB-1749 TV auxiliary KC-4973 TV auxiliary KC-4977 TV auxiliary WLD-65 TV auxiliary KR-9742 TV auxiliary KV-3059 TV auxiliary WHY-437 TV auxiliary WHS-688 TV auxiliary WLD-702 TV auxiliary Schedule V to Credit Agreement ------------------------------ -3- WHS-687 TV auxiliary KA-2009 TV auxiliary WHB-262 TV auxiliary WHS-374 TV auxiliary WCG-783 TV auxiliary K5-5551 TV auxiliary KV-3061 TV auxiliary WHB-263 TV auxiliary WHB-264 TV auxiliary WHS-238 TV auxiliary WHS-686 TV auxiliary WIL75 TV auxiliary WDD690 TV auxiliary KY5603 TV auxiliary KA-88791 TV auxiliary KA-88793 TV auxiliary KA-88792 TV auxiliary WLE-632 TV auxiliary WTAE HEARST-ARGYLE TELEVISION, INC. Call Sign Type --------- ---- WTAE-TV Main KZH-868 (BMLRE-830418MH) TV auxiliary KZH-868 (BPLRE-830418MH) TV auxiliary KZH-868 (BMLRE-841017MM) Remote Pickup KZH-868 (BPLRE-860919MG) TV auxiliary KPE-651 Remote Pickup KE-5822 Remote Pickup KA-74922 TV auxiliary WBG-587 TV auxiliary KGL-96 TV auxiliary KW-4093 TV auxiliary KA-74908 TV auxiliary WHY-881 TV auxiliary KW-4094 TV auxiliary KE-5824 TV auxiliary KA88617 Remote Pickup KJH322 Remote Pickup KPM417 Remote Pickup KWU56 Remote Pickup Schedule V to Credit Agreement ------------------------------ -4- WZB718 Remote Pickup WZB719 Remote Pickup BMLQ-790117MD Wireless microphone BLNQ-850122ND Wireless microphone BLQ-791017MG Wireless microphone WMW-748 TV auxiliary WISN HEARST-ARGYLE TELEVISION, INC. Call Sign Type --------- ---- WISN-TV Main WPW28 Relay KA-46987 Remote Pickup KPJ-265 Remote Pickup KZH-839 Remote Pickup KE-5738 TV auxiliary KA-88867 TV auxiliary KU-3779 TV auxiliary WJJ-70 TV auxiliary KX-3707 TV auxiliary KX-3708 TV auxiliary KX-3709 TV auxiliary WHQ-248 TV auxiliary WHY-410 TV auxiliary WHY-801 TV auxiliary WBM-684 TV auxiliary KB-97047 Remote Pickup KSF-759 Remote Pickup KKR-988 TV auxiliary BLP-00445 TV auxiliary BLO-790213MA TV auxiliary BLQ-811015MG TV auxiliary 900902MF TV auxiliary KC-3749 TV auxiliary KX-7958 Remote Pickup KC-5437 Remote Pickup WNTL959 TV auxiliary WNTL958 TV auxiliary WNTL957 TV auxiliary WLE-489 TV auxiliary WLE-490 TV auxiliary Schedule V to Credit Agreement ------------------------------ -5- WLE-491 TV auxiliary WLE-493 TV auxiliary KA-88900 TV auxiliary WNAC HEARST-ARGYLE TELEVISION, INC. Call Sign Type --------- ---- WDTN Main WGZ-599 TV auxiliary WLJ-325 TV auxiliary WGZ-598 TV auxiliary KUQ-43 TV auxiliary BMPCT-7687 TV auxiliary KK-2350 TV auxiliary WZB-758 Remote Pickup KVX-642 Remote Pickup KQ-5598 TV auxiliary KB-55261 TV auxiliary KB-96270 TV auxiliary KS-3413 Remote Pickup BLP-00444 TV auxiliary KA-2336 TV auxiliary WMV-770 TV auxiliary KC-26174 TV auxiliary KR7807 TV auxiliary KUQ43 TV auxiliary KS2929 Remote Pickup KITV ARGYLE TELEVISION, INC. Parent Call Aux. Call Sign Expiration Date - ----------- -------------- --------------- HONOLULU, HI. KITV(TV) KB-55352 2-1-99 WBS-406 2-1-99 WDT-808 2-1-99 KA-35132 2-1-99 WDT-805 2-1-99 Schedule V to Credit Agreement ------------------------------ -6- WAILUKU, HI. KMUA(TV) WFW-614 2-1-99 WFW-615 2-1-99 WFW-616 2-1-99 WGR-808 2-1-99 HILO, HI. KHVO(TV) WCX-441 2-1-99 WMV-612 2-1-99 LIHUE, HI. K51BB TV Translator 2-1-99 WNAC ARGYLE TELEVISION, INC. Parent Call Aux. Call Sign Expiration Date - ----------- -------------- ---------------- WNAC(TV), Providence, RI 4-1-99 WAPT ARGYLE TELEVISION, INC. Parent Call Aux. Call Sign Expiration Date -------------- --------------- WAPT(TV), Jackson, MS KE-5839 6-1-2005 KSP-357 6-1-2005 KE-5843 6-1-2005 KP-2585 6-1-2005 KW-4092 6-1-2005 Schedule V to Credit Agreement ------------------------------ -7- OHIO/OKLAHOMA ARGYLE TELEVISION, INC. Parent Call Aux. Call Sign Expiration Date - ----------- ------------------ --------------- WLWT(TV), Cincinnati, OH BLP01076 10-1-97 KPI-932 10-1-97 KPI-936 10-1-97 KZ-2688 10-1-97 KC-23102 10-1-97 KC-23103 10-1-97 WHY-329 10-1-97 WHY-414 10-1-97 WHY-426 10-1-97 KA088625 10-1-97 WGR-884 10-1-97 WHB-737 10-1-97 WHB-738 10-1-97 WHB-739 10-1-97 KA-88634 10-1-97 KE-5896 10-1-97 WHY-386 10-1-97 WHY-429 10-1-97 BLP-99816 10-1-97 BLP-00816 10-1-97 KA-99625 10-1-97 KY-5514 10-1-97 WCT-99625 10-1-97 Schedule V to Credit Agreement ------------------------------ -8- OHIO/OKLAHOMA TELEVISION, INC. Parent Call Aux. Call Sign Expiration Date - ----------- -------------- --------------- KOCO(TV), Oklahoma City, BLP-01173 6-1-98 OK KPH-911 6-1-98 KPM-665 6-1-98 KQA-844 6-1-98 WHS-330 6-1-98 WMV-350 6-1-98 KLW-30 6-1-98 WBG-574 6-1-98 KA-26191 6-1-98 KW-4040 6-1-98 KQ-5617 6-1-98 WLL-550 6-1-98 BLP-00700 6-1-98 KGJ-813 6-1-98 KW-4041 6-1-98 KHBS ARGYLE TELEVISION, INC. Parent Call Aux. Call Sign Expiration Date - ----------- -------------- --------------- KHBS(TV), Fort Smith, AR KC-27615 6-1-2005 KPM-413 6-1-2005 KPM-449 6-1-2005 KP3-985 6-1-2005 KPE-951 6-1-2005 KPM-450 6-1-2005 WHY-481 6-1-2005 WCQ-534 6-1-2005 WGM-90 6-1-2005 WMU-661 6-1-2005 KPM-451 6-1-2005 KPE-950 6-1-2005 WCQ-532 6-1-2005 KPM-445 6-1-2005 Schedule V to Credit Agreement ------------------------------ -9- KHOG(TV), Fayetteville, AR KC-2616 6-1-2005 KPK-543 6-1-2005 WFD-538 6-1-2005 KPM-403 6-1-2005 KPM-404 6-1-2005 KPM-405 6-1-2005 KA-88647 6-1-2005 WCQ-536 6-1-2005 WFD-536 6-1-2005 WFD-537 6-1-2005 WFD-579 6-1-2005 WFD-580 6-1-2005 KC-26096 6-1-2005 WMU-414 6-1-2005 KHB-68 6-1-2005 WCT-536 6-1-2005 WCT-657 6-1-2005 Schedule V to Credit Agreement ------------------------------ SCHEDULE VI Certain Equity Rights --------------------- [See Section 4.14] Neither the Borrower nor any of its subsidiaries shall repurchase any outstanding shares of Series A Preferred Stock, $.01 par value per share, of the Borrower (the "Series A Preferred Stock") unless the Borrower on the same terms either (i) offers to purchase all of the then outstanding shares of Series A Preferred Stock or (ii) offers to purchase shares of Series A Preferred Stock from the holders in proportion to the respective number of shares of Series A Preferred Stock held by each holder. Neither the Borrower nor any of its subsidiaries shall repurchase any outstanding shares of Series B Preferred Stock, $.01 par value per share, of the Borrower (the "Series B Preferred Stock") unless the Borrower on the same terms either (i) offers to purchase all of the then outstanding shares of Series B Preferred Stock or (ii) offers to purchase shares of Series B Preferred Stock from the holders in proportion to the respective number of shares of Series B Preferred Stock held by each holder. Schedule VI to Credit Agreement ------------------------------- EXHIBIT A [Form of Assignment and Acceptance] ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of August 29, 1997 (as amended and in effect on the date hereof, the "Credit Agreement"), between ---------------- Argyle Television, Inc. (to be renamed Hearst-Argyle Television Inc. following the Merger Transactions therein referred to), the Lenders named therein and The Chase Manhattan Bank, as Administrative Agent for the Lenders. Terms defined in the Credit Agreement are used herein with the same meanings. The Assignor named on the reverse hereof hereby sells and assigns, without recourse, to the Assignee named on the reverse hereof, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Assignment Date set forth on the reverse hereof, the interests set forth on the reverse hereof (the "Assigned Interest") in the Assignor's rights and ----------------- obligations under the Credit Agreement, including the interests set forth on the reverse hereof in the Commitment of the Assignor on the Assignment Date and Loans owing to the Assignor which are outstanding on the Assignment Date, together with unpaid interest accrued on the assigned Loans to the Assignment Date, the participations in Letters of Credit, LC Disbursements and Swingline Loans held by the Assignor on the Assignment Date, and the amount, if any, set forth on the reverse hereof of the fees accrued to the Assignment Date for the account of the Assignor. The Assignee hereby acknowledges receipt of a copy of the Credit Agreement. From and after the Assignment Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is a Foreign Lender, any documentation required to be delivered by the Assignee pursuant to Section 2.16(e) of the Credit Agreement, duly completed and executed by the Assignee, and (ii) if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form supplied by the Administrative Agent, duly completed by the Assignee. The [Assignee/Assignor] shall pay the fee payable to the Administrative Agent pursuant to Section 10.04(b) of the Credit Agreement. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. Assignment and Acceptance ------------------------- -2- Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notices: Effective Date of Assignment ("Assignment Date")/1/: --------------- Percentage Assigned of Facility/Commitment (set forth, to at least 8 decimals, as a percentage of the Facility and the aggregate Commitments Principal Amount of all Lenders Facility Assigned thereunder - -------- -------- ---------------- Commitment Assigned: $ % Loans: Fees Assigned (if any): The terms set forth above and on the reverse side hereof are hereby agreed to: [Name of Assignor] , as Assignor ------------------------ By: ---------------------------------- Name: Title: [Name of Assignee] , as Assignee ------------------------ By: ---------------------------------- Name: Title: - ----------------------- /1/ Must be at least five Business Days after execution hereof by all required parties. Assignment and Acceptance ------------------------- -3- The undersigned hereby consent to the within assignment:/2/ HEARST-ARGYLE TELEVISION, INC. By: -------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent and Swingline Lender By: -------------------------- Name: Title: [NAME OF ISSUING LENDER] By: -------------------------- Name: Title: [NAME OF SWINGLINE LENDER] By: -------------------------- Name: Title: /2/ Consents to be included to the extent required by Section 10.04(b) of the Credit Agreement. Assignment and Acceptance ------------------------- EXHIBIT B [Form of Guarantee Assumption Agreement] GUARANTEE ASSUMPTION AGREEMENT GUARANTEE ASSUMPTION AGREEMENT dated as of ________ __, ____ by [NAME OF ADDITIONAL SUBSIDIARY GUARANTOR], a ________ corporation (the "Additional ---------- Subsidiary Guarantor"), in favor of The Chase Manhattan Bank, as administrative - -------------------- agent for the lenders or other financial institutions or entities party as "Lenders" to the Credit Agreement referred to below (in such capacity, together with its successors in such capacity, the "Administrative Agent"). -------------------- Argyle Television, Inc. (to be renamed Hearst-Argyle Television Inc. following the Merger Transactions therein referred to), a Delaware corporation, the Subsidiary Guarantors referred to therein and the Administrative Agent are parties to a Credit Agreement dated as of August 29, 1997 (as modified and supplemented and in effect from time to time, the "Credit Agreement"). ---------------- Pursuant to Section 6.09(c) of the Credit Agreement, the Additional Subsidiary Guarantor hereby agrees to become a "Subsidiary Guarantor" for all purposes of the Credit Agreement. Without limiting the foregoing, the Additional Subsidiary Guarantor hereby, jointly and severally with the other Subsidiary Guarantors, guarantees to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of all Guaranteed Obligations (as defined in Section 3.01 of the Credit Agreement) in the same manner and to the same extent as is provided in Article III of the Credit Agreement. In addition, the Additional Subsidiary Guarantor hereby makes the representations and warranties set forth in Sections 4.01, 4.02 and 4.03 of the Credit Agreement with respect to itself and its obligations under this Agreement, as if each reference in such Sections to the Basic Documents included reference to this Agreement. Guarantee Assumption Agreement ------------------------------ -2- IN WITNESS WHEREOF, the Additional Subsidiary Guarantor has caused this Guarantee Assumption Agreement to be duly executed and delivered as of the day and year first above written. [NAME OF ADDITIONAL SUBSIDIARY GUARANTOR] By ------------------------------- Title: Accepted and agreed: THE CHASE MANHATTAN BANK, as Administrative Agent By ---------------------------- Title: Guarantee Assumption Agreement ------------------------------ EXHIBIT C [Form of Opinion of Counsel to the Obligors] __________, 199__ To the Lenders party to the Credit Agreement referred to below and The Chase Manhattan Bank, as Administrative Agent Ladies and Gentlemen: We have acted as counsel to Argyle Television (to be renamed Hearst- Argyle Television Inc. following the Merger Transactions therein referred to), Inc. (the "Borrower"), and its subsidiaries and affiliates, in connection with -------- the Credit Agreement (the "Credit Agreement") dated as of August 29, 1997, ---------------- between the Borrower, the Subsidiary Guarantors party thereto, the lenders party thereto and The Chase Manhattan Bank, as Administrative Agent, providing for extensions of credit to be made by said lenders to the Borrower in an aggregate principal or face amount not exceeding $***. Except as otherwise provided herein, terms defined in the Credit Agreement are used herein as defined therein. This opinion letter is being delivered pursuant to Section 5.01(b)(i) of the Credit Agreement. In rendering the opinions expressed below, we have examined the following agreements, instruments and other documents: (a) the Credit Agreement; and (b) such records of the Obligors and such other documents as we have deemed necessary as a basis for the opinions expressed below. The Borrower and its Subsidiaries and affiliates party to the Credit Agreement are herein collectively referred to as the "Obligors". -------- In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon statements of governmental officials and upon representations made in or pursuant to the Credit Agreement and certificates of appropriate representatives of the Obligors. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that (except, to the extent set forth in the opinions expressed below, as to the Obligors): Opinion of Counsel to the Obligors ---------------------------------- -2- (i) such documents have been duly authorized by, have been duly executed and delivered by, and constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate or other) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that: 1. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Subsidiary of the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the respective state indicated opposite its name in Schedule V to the Credit Agreement. Each of the Borrower and its Subsidiaries has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. 2. The Transactions are within the corporate powers of each Obligor. 3. The Transactions have been duly authorized by all necessary corporate action on the part of each Obligor. 4. The Credit Agreement has been duly executed and delivered by each Obligor party thereto. 5. Under conflict of law principles for the State of Texas, the stated choice of New York law to govern the Credit Agreement will be honored by the courts of the State of Texas and the Credit Agreement will be construed in accordance with, and will be treated as being governed by, the law of the State of New York. However, if the Credit Agreement were stated to be governed by and construed in accordance with the law of the State of Texas, or if a court of the State of Texas were to apply the law of the State of Texas to the Credit Agreement, the Credit Agreement would nevertheless constitute the legal, valid and binding obligation of each Obligor party thereto, enforceable against such Obligor in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws Opinion of Counsel to the Obligors ---------------------------------- -3- relating to or affecting the rights of creditors generally and except as the enforceability of the Credit Agreement is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. 6. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or assets, or give rise to a right thereunder to require any payment to be made by any such Person, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. 7. [Except as set forth in Schedule IV to the Credit Agreement,] we have no knowledge (after due inquiry) of any actions, suits or proceedings by or before any arbitrator or Governmental Authority now pending against or threatened against or affecting the Obligors or any of their respective Subsidiaries (a) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect (other than the Disclosed Matters) or (b) that involve the Credit Agreement or the Transactions. 8. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. The foregoing opinions are subject to the following comments and qualifications: (A) The enforceability of Sections 3.03 and 10.03 of the Credit Agreement may be limited by (i) laws rendering unenforceable indemnification contrary to Federal or state securities laws and the public policy underlying such laws and (ii) laws limiting the enforceability of provisions exculpating or exempting a party, or requiring indemnification of a party for, liability for its own action or inaction, to the extent the action or inaction involves gross negligence, recklessness, willful misconduct or unlawful conduct. Opinion of Counsel to the Obligors ---------------------------------- -4- (B) The enforceability of provisions in the Credit Agreement to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (C) We express no opinion as to (i) the effect of the laws of any jurisdiction in which any Lender is located (other than the State of Texas) that limit the interest, fees or other charges such Lender may impose, (ii) the last sentence of Section 2.17(d) or Section 3.06 of the Credit Agreement and (iii) the first sentence of Section 10.09(b) of the Credit Agreement, insofar as such sentence relates to the subject matter jurisdiction of the United States District Court for the Southern District of New York to adjudicate any controversy related to the Credit Agreement. (D) We express no opinion as to the applicability to the obligations of any Subsidiary Guarantor of Section 548 of the Bankruptcy Code, Article 10 of the New York Debtor Creditor Law or any other provision of law relating to fraudulent conveyances, transfers or obligations, nor do we express any opinion as to the enforceability of such obligations. The foregoing opinions are limited to matters involving the Federal laws of the United States[, the Delaware General Corporation Law] and the law of the State of Texas, and we do not express any opinion as to the laws of any other jurisdiction (nor do we express any opinion as to the applicability to, or the effect upon, the transactions contemplated by the Credit Agreement of the Federal Communications Act of 1934, as amended, the rules and regulations promulgated thereunder or the policies of the FCC). At the request of our clients, this opinion letter is, pursuant to Section 5.01(b)(i) of the Credit Agreement, provided to you by us in our capacity as counsel to the Obligors and may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Credit Agreement without, in each instance, our prior written consent. Very truly yours, Opinion of Counsel to the Obligors ---------------------------------- EXHIBIT D [Form of Opinion of Special Communications Counsel to the Borrower] , 199 ---------- -- To the Lenders party to the Credit Agreement referred to below and The Chase Manhattan Bank, as Administrative Agent Ladies and Gentlemen: We have acted as special communications counsel to Argyle Television, Inc. (to be renamed Hearst-Argyle Television Inc. following the Merger Transactions therein referred to), a Delaware corporation (the "Borrower"), and -------- its Subsidiaries in connection with the Credit Agreement (the "Credit ------ Agreement") dated as of August 29, 1997, between the Borrower, the Subsidiary Guarantors party thereto, the lenders party thereto and The Chase Manhattan Bank, as Administrative Agent, providing for extensions of credit to be made by said lenders to the Borrower in an aggregate principal or face amount not exceeding $***. Terms defined in the Credit Agreement are used herein as defined therein. This opinion letter is being delivered pursuant to Section 5.01(b)(ii) of the Credit Agreement. We have examined originals or copies authenticated to our satisfaction of all such agreements, instruments and other documents, and such other documents and public files of the Federal Communications Commission ("FCC") as --- we have deemed necessary in connection with the opinions hereinafter expressed. In such examination we have assumed the genuineness of all signatures, the authenticity of documents submitted to us as originals, the conformity with the originals of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such latter documents. As to questions of fact material to such opinions, we have, when relevant facts were not independently established, relied upon representations and certificates of the Borrower and its Subsidiaries and their respective officers. Our opinions set forth below are limited to matters governed by the Federal Communications Act of 1934, as amended (the "Communications Act"), and ------------------ the rules and regulations promulgated thereunder or the policies of the FCC. Based upon the foregoing, we are of the opinion that: 1. On ________________, the FCC granted the application for consent to assignment (File No.__________________) of the main station license and associated broadcast auxiliary licenses for the operation of television broadcast station ____-TV, Channel ___, [City, State --Complete as appropriate]. Such grant by the FCC is valid Opinion of Special Communications Counsel to the Borrower --------------------------------------------------------- -2- and subsisting and final (i.e. no longer subject to further judicial or administrative review) and no further approval or action of the FCC is required to permit the assignments of such licenses to ________________. All such licenses are in full force and effect. To our knowledge, no authorizations, approvals or consents of, and no filings or registrations with the FCC are required for the existing operation of said Station. 2. To our knowledge, there is no action, suit, or proceeding before the FCC pending or threatened against or affecting the Borrower or any of its Subsidiaries. To our knowledge, each of the Stations is operating in compliance in all material respects with its FCC licenses, the Act and the current rules, regulations and policies of the FCC. 3. No authorizations, consents, approvals, licenses, filings or registrations with the FCC are required in connection with the execution, delivery or performance by the Borrower of the Credit Agreement and the other Basic Documents. The foregoing opinions are limited to matters involving the Federal Communications Act of 1934, as amended, the rules and regulations promulgated thereunder or the policies of the FCC. At the request of our clients, this opinion letter is, pursuant to Section 5.01(b)(ii) of the Credit Agreement, provided to you by us in our capacity as special communications counsel to the Obligors and may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Credit Agreement without, in each instance, our prior written consent. Very truly yours, Opinion of Special Communications Counsel to the Borrower --------------------------------------------------------- EXHIBIT E [Form of Opinion of Special New York Counsel to The Chase Manhattan Bank] , 199 ---------- -- To the Lenders party to the Credit Agreement referred to below and The Chase Manhattan Bank, as Administrative Agent Ladies and Gentlemen: We have acted as special New York counsel to The Chase Manhattan Bank in connection with the Credit Agreement (the "Credit Agreement") dated as of ---------------- August 29, 1997, between Argyle Television, Inc. (to be renamed Hearst-Argyle Television Inc. following the Merger Transactions therein referred to, and herein referred to as the "Borrower"), the Subsidiary Guarantors party thereto, -------- the lenders party thereto and The Chase Manhattan Bank, as Administrative Agent, providing for extensions of credit to be made by said lenders to the Borrower in an aggregate principal or face amount not exceeding $1,000,000,000. Except as otherwise provided herein, terms defined in the Credit Agreement are used herein as defined therein. This opinion letter is being delivered pursuant to Section 5.01(c) of the Credit Agreement. In rendering the opinions expressed below, we have examined the following agreements, instruments and other documents: (a) the Credit Agreement; and (b) such records of the Obligors and such other documents as we have deemed necessary as a basis for the opinions expressed below. The Borrower and its Subsidiaries and affiliates party to the Credit Agreement are herein collectively referred to as the "Obligors". -------- In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with authentic original documents of all documents submitted to us as copies. When relevant facts were not independently established, we have relied upon representations made in or pursuant to the Credit Agreement. In rendering the opinions expressed below, we have assumed, with respect to all of the documents referred to in this opinion letter, that: (i) such documents have been duly authorized by, have been duly executed and delivered by, and (except to the extent set forth in the opinions Opinion of Special New York Counsel to The Chase Manhattan Bank --------------------------------------------------------------- -2- expressed below as to the Obligors) constitute legal, valid, binding and enforceable obligations of, all of the parties to such documents; (ii) all signatories to such documents have been duly authorized; and (iii) all of the parties to such documents are duly organized and validly existing and have the power and authority (corporate or other) to execute, deliver and perform such documents. Based upon and subject to the foregoing and subject also to the comments and qualifications set forth below, and having considered such questions of law as we have deemed necessary as a basis for the opinions expressed below, we are of the opinion that the Credit Agreement constitutes the legal, valid and binding obligation of each Obligor party thereto, enforceable against such Obligor in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of the Credit Agreement is subject to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including (a) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (b) concepts of materiality, reasonableness, good faith and fair dealing. The foregoing opinions are subject to the following comments and qualifications: (A) The enforceability of Sections 3.03 and 10.03 of the Credit Agreement may be limited by (i) laws rendering unenforceable indemnification contrary to Federal or state securities laws and the public policy underlying such laws and (ii) laws limiting the enforceability of provisions exculpating or exempting a party, or requiring indemnification of a party for, liability for its own action or inaction, to the extent the action or inaction involves gross negligence, recklessness, willful misconduct or unlawful conduct. (B) The enforceability of provisions in the Credit Agreement to the effect that terms may not be waived or modified except in writing may be limited under certain circumstances. (C) We express no opinion as to (i) the effect of the laws of any jurisdiction in which any Lender is located (other than the State of New York) that limit the interest, fees or other charges such Lender may impose, (ii) the last sentence of Section 2.17(d) or Section 3.06 of the Credit Agreement and (iii) the first sentence of Section 10.09(b) of the Credit Agreement, insofar as such sentence relates to the Opinion of Special New York Counsel to The Chase Manhattan Bank --------------------------------------------------------------- -3- subject matter jurisdiction of the United States District Court for the Southern District of New York to adjudicate any controversy related to the Credit Agreement. (D) We express no opinion as to the applicability to the obligations of any Subsidiary Guarantor of Section 548 of the Bankruptcy Code, Article 10 of the New York Debtor Creditor Law or any other provision of law relating to fraudulent conveyances, transfers or obligations, nor do we express any opinion as to the enforceability of such obligations. The foregoing opinions are limited to matters involving the Federal laws of the United States and the law of the State of New York, and we do not express any opinion as to the laws of any other jurisdiction (nor do we express any opinion as to the applicability to, or the effect upon, the transactions contemplated by the Credit Agreement of the Federal Communications Act of 1934, as amended, the rules and regulations promulgated thereunder or the policies of the FCC). At the request of our client, this opinion letter is, pursuant to Section 5.01(c) of the Credit Agreement, provided to you by us in our capacity as special New York counsel to The Chase Manhattan Bank and may not be relied upon by any Person for any purpose other than in connection with the transactions contemplated by the Credit Agreement without, in each instance, our prior written consent. Very truly yours, [Opining and Consultant Partner's initials] Opinion of Special New York Counsel to The Chase Manhattan Bank --------------------------------------------------------------- EXHIBIT A TO CREDIT AGREEMENT TERM NOTE $72,000,000 New York, New York ____________, 1998 FOR VALUE RECEIVED, STC BROADCASTING OF VERMONT SUBSIDIARY, INC. ("Borrower") promises to pay to the order of HEARST-ARGYLE STATIONS, INC. (the "Lender") at its office, located at __________________________________, in lawful money of the United States of America and in immediately available funds, the principal amount of SEVENTY-TWO MILLION DOLLARS ($72,000,000), or, if less, the principal amount of the Loans made by the Lender pursuant to subsection 2.1 of the Credit Agreement referred to below. The principal amount of this Note shall be paid in the amounts and on the dates specified in subsection 2.3 of the Credit Agreement. Borrower further agrees to pay interest in like money at the office of the Lender specified above on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in subsection 2.4 of the Credit Agreement. The holder of this Note is authorized to endorse on the schedule annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date and amount of each Loan and the date and amount of each payment or prepayment of principal thereof. Each such endorsement shall constitute prima facie evidence of the accuracy of the ----- ----- information endorsed. The failure to make any such endorsement shall not affect the obligations of Borrower in respect of the Loans. This Note (i) is the Note referred to in the Credit Agreement dated as of ______________, 1998 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), between Borrower and the Lender, (ii) is subject to the provisions of the Credit Agreement (including the limitations on transfers and assignments set forth in Section 9.6 thereof) and (iii) is subject to prepayment as provided in the Credit Agreement. This Note is secured as provided in the Credit Agreement and the Related Documents. Upon the occurrence of any one or more Events of Default, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. All parties now and hereafter liable with respect to this Note, whether as maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind. SCHEDULE TO TERM NOTE --------------------- Amount of Amount of Notation Made Date Loan Principal Repaid Unpaid Balance By ---- --------- ---------------- -------------- ------------- Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. STC BROADCASTING OF VERMONT SUBSIDIARY, INC. By: --------------------------------------- Name: Title: 2 SCHEDULE TO TERM NOTE --------------------- Amount of Amount of Notation Made Date Loan Principal Repaid Unpaid Balance By ---- --------- ---------------- -------------- ------------- 3 EXHIBIT B TO CREDIT AGREEMENT PLEDGE AGREEMENT This Pledge Agreement (the "Pledge Agreement") is made and entered into as of ___________, 1998 by and between STC Broadcasting of Vermont, Inc., a Delaware corporation (the "Pledgor") and HEARST-ARGYLE STATIONS, INC. ------- (the "Lender"). ------ RECITALS WHEREAS, the Pledgor is the owner of [____________] shares of common stock (the "Shares") of STC BROADCASTING OF VERMONT SUBSIDIARY, INC. (the ------ "Borrower"), constituting 100% of the issued and outstanding shares of common stock of the Borrower; and WHEREAS, the Borrower and the Lender have entered into a Credit Agreement dated as of the date hereof (as amended, modified and supplemented from time to time, the "Credit Agreement") pursuant to which the ---------------- Lender has agreed to make Loans to the Borrower; and WHEREAS, in order to secure the Obligations of the Borrower under the Credit Agreement and the Note and the obligations of the Pledgor under the Guaranty and this Pledge Agreement, the Lender has required the Pledgor to pledge, and the Pledgor has agreed to pledge to the Lender, the Shares together with the other items of Collateral set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions. Except as otherwise defined herein, ----------- all capitalized terms used but not defined herein shall have the respective meanings given to such terms in the Credit Agreement. SECTION 2. Creation of Security Interest. The Pledgor hereby ----------------------------- pledges, grants and assigns to the Lender an exclusive and continuing security interest in and lien on all of its right, title and interest in, to and under the following (hereinafter, the "Collateral") as security for the payment and ---------- performance in full of the Obligations of the Borrower under the Credit Agreement and the Note and the obligations of the Pledgor hereunder and under the Guaranty; (a) The Shares, together with the certificates representing such Shares and all rights and privileges of the Pledgor with respect to the Shares, all income and profits thereof and all property received in addition thereto, in respect thereof or in exchange or in substitution therefor; (b) Any and all proceeds of any of the foregoing. The Shares and all other shares or other ownership interests constituting a part of the "Collateral" described in clauses (a) and (b) above are hereinafter collectively referred to as the "Pledged Securities". ------------------ SECTION 3. Delivery of Certificates. Simultaneously with the ------------------------ execution and delivery hereof, the Pledgor is delivering to the Lender all instruments and certificates representing the Pledged Securities, together with appropriate undated instruments of transfer or assignment duly executed in blank. In addition, the Pledgor shall promptly deliver to the Lender, or cause the issuer of the Pledged Securities to deliver directly to the Lender, all certificates, instruments or other property, including any cash dividends or distributions representing or constituting any Collateral received or receivable by the Pledgor after the date of this Pledge Agreement, other than distributions permitted by Section 7.6 of the Credit Agreement. Any certificates or other instruments so delivered shall be duly endorsed and subscribed by the Pledgor or accompanied by appropriate instruments of transfer or assignment duly executed in blank by the Pledgor. Any such certificates, instruments or other property representing or constituting any Collateral received by the Pledgor after the date of this Pledge Agreement shall be held by the Pledgor in trust for the Lender and shall forthwith be delivered by the Pledgor to the Lender as aforesaid. If at any time the Lender notifies the Pledgor that additional endorsements or other instruments of transfer or assignment with respect to any of the Collateral held by the Lender are required, the Pledgor shall promptly execute the same in blank and deliver such endorsements or other instruments of transfer or assignment as the Lender may request. SECTION 4. Dividends and Distributions. The Pledgor shall --------------------------- deliver to the Lender, as Collateral, any and all additional shares of stock or any other property of any kind received, receivable, distributed or distributable on or by reason of the Collateral pledged hereunder, whether in the form of or by way of cash, stock dividends or distributions, warrants, subscription rights, liquidation (in whole or in part), conversion, prepayment or redemption (in whole or in part) or otherwise. SECTION 5. Power of Attorney. The Pledgor hereby constitutes ----------------- and irrevocably appoints the Lender, with full power of substitution and revocation by the Lender, as the Pledgor's true and lawful attorney-in-fact, for the purpose from time to time upon the occurrence and during the continuance of an Event of Default of carrying out the provisions of this Pledge Agreement and taking any action and executing any instrument that the Lender deems necessary or advisable to accomplish the purposes of this Pledge Agreement, including, without limitation, to affix to certificates and documents representing any Collateral the endorsements or other instruments of transfer or assignment delivered with respect thereto and to transfer or cause the transfer of the Collateral, or any part thereof, on the books of the Borrower. The power of attorney granted pursuant to this Pledge Agreement and all authority hereby conferred are granted and conferred solely to protect the Lender's interest in the Collateral and shall not impose any duty upon the Lender to exercise any power. This power of attorney shall be irrevocable as one coupled with an interest. SECTION 6. Representations of Pledgor. The Pledgor represents -------------------------- and warrants to the Lender that: (a) No consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person is required (i) for the execution, delivery and performance of this Pledge Agreement by the Pledgor, 2 (ii) for the Pledge by the Pledgor of the Collateral to the Lender pursuant to this Pledge Agreement, or (iii) subject to Section 17 hereof, for the exercise by the Lender of the rights provided for in this Pledge Agreement or the remedies in respect of the Collateral pursuant to this Pledge Agreement, except as may be required under federal or state securities laws in connection with any sale of the Collateral; (b) The Pledgor is the sole legal and beneficial owner of, and has valid and transferrable title to, the Collateral, free and clear of all Liens, other than the Lien in favor of the Lender created by this Pledge Agreement; (c) There are no outstanding options, warrants or other agreements with respect to the Collateral; (d) The Shares represent 100% of the issued and outstanding capital stock of the Borrower. (e) The Pledged Securities have been duly authorized and validly issued, are fully paid and non-assessable, and, subject to Section 17 hereof, are not subject to any charter, bylaw, statutory, contractual or other restrictions governing their issuance, transfer, ownership or control; and (f) All actions (including, without limitation, delivery to the Lender of all certificates representing the Pledged Securities together with undated stock powers or other instruments of assignment duly executed in blank, registration of the Lien created hereby on the Collateral on the books and records of the issuer of any Pledged Securities and, if required, the filing of UCC-1 financing statements in all appropriate jurisdictions) required to create and perfect the Lien of the Lender in the Collateral have been taken and the Lien on the Collateral in favor of the Lender is superior in right to any rights or claims of any other Person. SECTION 7. Obligations of Pledgor. The Pledgor further ---------------------- covenants to the Lender that: (a) The Pledgor will not sell, transfer or convey any interest in, or suffer or permit any Lien to exist on or with respect to, any of the Collateral except the Lien created under this Pledge Agreement; (b) The Pledgor will, at its own expense, at any time and from time to time at the request of the Lender, do, make, procure, execute and deliver all acts, things, writings, assurances and other documents as may be reasonably requested by the Lender to further preserve, establish, perfect or enforce the Lender's rights, interests and remedies created by, provided in or emanating from this Pledge Agreement; (c) The Pledgor will defend the Lender's right, title and interest in, to and under the Collateral against the claims and demands of all Persons whomsoever (other than Persons claiming by or through the Lender); (d) The Pledgor hereby authorizes the Lender to file one or more financing or continuation statements and amendments thereto relating to all or any part of the 3 Collateral without the Pledgor's signature. A photocopy or other reproduction of this Pledge Agreement shall be sufficient as a financing statement; (e) The Pledgor will not permit the Borrower to issue any additional securities or capital stock; and (f) The Pledgor will cause the Borrower to execute and deliver to the Lender on the date hereof a letter substantially in the form of Exhibit A hereto. SECTION 8. Rights of Pledgor. So long as no Event of Default ----------------- has occurred and is continuing, the Pledgor shall be entitled to vote or consent with respect to the Collateral in any manner not inconsistent with this Pledge Agreement, the Credit Agreement or any other Related Document. Upon the occurrence and during the continuance of an Event of Default, the Lender shall have the exclusive right to vote the Pledged Securities. The Pledgor hereby grants to the Lender an irrevocable proxy to vote the Collateral, which proxy shall be effective immediately upon the occurrence of and during the continuance of an Event of Default, and upon the request of the Lender, the Pledgor agrees to deliver to the Lender such further evidence of such irrevocable proxy or such further irrevocable proxy to vote the Collateral as the Lender may request. SECTION 9. Rights of the Lender. -------------------- (a) If the Pledgor fails to perform any agreement contained herein, the Lender may (but shall not be obligated or required to) perform, or cause the performance, of such agreement (b) At any time upon and during the continuance of an Event of Default, the Lender may (but shall not be obligated or required to): (i) Subject to Section 17 hereof, cause the Collateral to be transferred to its name or to the name of its nominee or nominees and thereafter exercise as to such Collateral all of the rights, powers and remedies of an owner, (ii) Ask for, demand, collect, sue for, recover, compromise, receive and give acquittances and receipts for monies due or to become due under or in respect of any of the Collateral and hold the same as part of the Collateral, or apply the same to any of the Obligations in such manner as the Lender may direct in its sole discretion; (iii) Receive, endorse and collect any drafts or other instruments, documents and chattel paper, in connection with clause (ii) above (including, without limitation, all instruments representing dividends, interest payments or other distributions in respect of the Collateral or any part thereof and give full discharge for the same); (iv) Subject to Section 17 hereof, file any claims or take any actions or institute any proceedings that the Lender may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the rights of the Lender with respect to any of the Collateral; (v) Enter into any extension, subordination, reorganization, deposit, merger, or consolidation agreement, or any other agreement relating to or affecting the Collateral, and in connection therewith deposit or surrender control of such Collateral 4 thereunder, and accept other property in exchange therefor and hold and apply such property or money so received in accordance with the provisions hereof; and (vi) Discharge any taxes levied on the Collateral or pay for the maintenance and preservation of the Collateral; the amount of such payments, plus any and all fees, costs and expenses of the Lender (including reasonable attorneys' fees and disbursements) actually in connection therewith, shall, at the Lender's option, be reimbursed by the Pledgor on demand. SECTION 10. Release of Collateral. In the event that the --------------------- entire outstanding principal sum of and accrued interest on the Loans is paid in full and all other non-contingent Obligations are pain and performed in full, the Lender shall deliver the Collateral to the Pledgor, thereby releasing the security interest granted hereunder and this Pledge Agreement shall terminate. SECTION 11. Event of Default Remedies. Upon and during the ------------------------- continuance of an Event of Default: (a) The Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code as in effect in any applicable jurisdiction. In addition, the Lender shall have the right, without demand of performance or other demand, advertisement or notice of any kind, except as specified below, to or upon the Pledgor or any other Person (all and each of which demands, advertisements and/or notices are hereby expressly waived), to proceed forthwith to collect, receive, appropriate and realize upon the Collateral, or any part thereof and to proceed forthwith to sell, assign, give an option or options to purchase, contract to sell, or otherwise dispose of and deliver the Collateral or any part thereof in one or more parcels at public or private sale or sales at such prices and on such terms and restrictions (including, without limitation, a requirement that any purchaser of all or any part of the Collateral shall be required to purchase any securities constituting the Collateral solely for investment and without any intention to make a distribution thereof) as the Lender may deem appropriate without any liability for any loss due to decrease in the market value of the Collateral during the period held. If any notification to the Pledgor of the intended disposition of the Collateral is required by law, such notification shall be deemed reasonable and properly given if hand delivered or made by telecopy at least ten Business Days' prior to such disposition to the address of the Pledgor indicated below. (b) All of the Lender's rights and remedies under this Pledge Agreement and under applicable law, including but not limited to the foregoing, shall be cumulative and not exclusive and shall be enforceable alternatively, successively or concurrently as the Lender may deem expedient (c) Upon any sale or other disposition. the Lender shall have the right to deliver, endorse, assign and transfer to the purchaser thereof the Collateral so sold or disposed of. Each purchaser at any such sale or other disposition, including the Lender, shall hold the Collateral free from any claim or right of whatever kind, including any equity or right of redemption. The Pledgor specifically waives all rights of stay or appraisal which the Pledgor had or may have under any rule of law or statute now existing or hereafter adopted. 5 (d) The Lender undertakes to use commercially reasonable efforts to cause a sale of the Collateral: provided, that the Lender -------- shall not be obligated to make any sale or other disposition unless the terms thereof shall be satisfactory to it. The Pledgor acknowledges and agrees that the Lender shall have no liabilities for any delay experienced in its efforts to effect such a sale or the ultimate terms of any such sale. The Lender may, without notice or publication, adjourn any private or public sale, and, upon ten Business Days' prior notice to the Pledgor, hold such sale at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral, on credit or future delivery, the Collateral so sold may be retained by the Lender until the selling price is paid by the purchaser thereof, but the Lender shall incur no liability in case of the failure of such purchaser to take up and pay for the property so sold and, in case of any such failure, such property may again be sold as herein provided. SECTION 12. Disposition of Proceeds. The proceeds of any sale ----------------------- or disposition of all or any part of the Collateral shall be applied (after payment of any amounts payable to the Lender pursuant to Section 14 hereof) by the Lender to the payment of the Obligations in such order as the Lender may elect. Any surplus thereafter remaining shall be paid to the Pledgor, subject to the rights of any holder of a Lien on the Collateral of which the Lender has actual notice. If the proceeds from the sale of the Collateral are insufficient to satisfy the Obligations. the Pledgor shall remain liable for any deficiency. SECTION 13. Termination. This Pledge Agreement shall: (a) ----------- create a continuing security interest in the Collateral; (b) remain in full force and effect for so long as any Obligations under any of the Related Documents are outstanding; (c) be binding upon the Pledgor and its permitted successors and assigns; and (d) inure to the benefit of the Lender and its successors, transferees and assigns. Without limiting the foregoing, the Lender may assign or otherwise transfer the Loan, or any portion thereof, held by it to any other Person in accordance with the terms of the Credit Agreement, and such other Person shall thereupon become vested with all the benefits in respect thereof granted herein or otherwise. The Pledgor may not assign its rights or obligations under this Pledge Agreement without the prior written consent of the Lender. SECTION 14. Expenses of the Lender. All expenses (including, ---------------------- without limitation, reasonable attorneys' fees and disbursements) actually incurred by the Lender in connection with the failure by the' Pledgor to perform or observe any provision of this Pledge Agreement, the exercise or enforcement of any rights of the Lender under this Pledge Agreement and the custody or preservation of any of the Collateral and any actual or attempted sale or exchange of, or any enforcement, collection, compromise or settlement respecting, the Collateral, or any other action taken by the Lender hereunder whether directly or as attorney-in-fact pursuant to a power of attorney or other authorization herein conferred, shall be deemed an Obligation secured by the Collateral and the Lender may apply the Collateral to payment of or reimbursement of itself for such liability. SECTION 15. Lender's Duty. Except as otherwise expressly set ------------- forth in Section 11(d) hereof, the Lender shall not be required to take any action hereunder in respect of an Event of Default. The Lender shall not be liable for any acts, omissions, errors of judgment or mistakes of fact or law including, without limitation, acts, omissions, errors or mistakes with respect to the Collateral, except for those arising out of or in connection with the Lender's (i) gross negligence' or willful misconduct, or (ii) failure to use reasonable care with respect to the safe custody of any certificate or instrument evidencing any part of the Collateral which is in the 6 physical possession of the Lender. The Lender shall be under no obligation to take any steps necessary to preserve rights in the Collateral against any prior parties but may do so at its option, and all expenses incurred in connection therewith shall be for the account of the Pledgor, and shall be added to the Obligations secured hereby. SECTION 16. General Provisions. ------------------ (a) No failure on the part of the Lender to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Lender of any right, power or remedy hereunder preclude any other or future exercise thereof, or the exercise of any other right, power or remedy. The representations, covenants and agreements of the Pledgor herein contained shall survive the date hereof. (b) This Pledge Agreement is a Related Document to which reference is made in, and which is executed pursuant to, the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof. (c) No amendment or waiver of any provision of this Pledge Agreement nor consent to any departure by the Pledgor herefrom nor release of all or any part of the Collateral shall in any event be effective unless the same shall be in writing, signed by the Lender. Any such waiver or consent or release shall be effective only in the specific instance and for the specific purpose for which it is given. (d) Except as expressly otherwise provided herein, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy or telex), and shall be delivered and deemed effective in the manner set forth in the Credit Agreement, except that the address for all notices to Pledgor shall be the address set forth below the signature of the Pledgor. (e) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. EACH OF THE LENDER AND THE PLEDGOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS PLEDGE AGREEMENT. (f) The Pledgor hereby consents to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County and the United States District Court for the Southern District of New York with respect to any suit, claim, action or proceeding arising out of or related to this Pledge Agreement or the transactions contemplated hereby and hereby waives any objection which it may have now or hereafter to the venue of any suit, claim, action or proceeding arising out of or related to this Pledge Agreement or the transactions contemplated hereby and brought in the courts specified above and also hereby waives any claim that any such suit, claim, action or proceeding has been brought in an inconvenient forum. The Pledgor agrees that service of process or other legal summons for purposes of any action or proceeding under this Pledge Agreement or the other Related Documents may be served on Pledgor by mailing a copy thereof by registered mail, or a form of mail substantially equivalent thereto, addressed to it at its address set forth in or designated pursuant to Section 16(d), such 7 service to become effective 10 days after such mailing and agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (g) If any provision of this Pledge Agreement is determined by a court of competent jurisdiction to be unenforceable, such provision shall be automatically reformed and construed so as to be valid, operative and enforceable to the maximum extent permitted by the law while most nearly preserving its original intent. The invalidity of any part of this Pledge Agreement shall not render invalid the remainder of the Pledge Agreement. (h) This Pledge Agreement may be executed in counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts taken together shall constitute but one and the same instrument. (i) The section headings in this Pledge Agreement are for convenience of reference only and shall not affect the interpretation hereof. SECTION 17. FCC Compliance. -------------- (a) Notwithstanding anything to the contrary contained herein or in any other agreement, instrument, or document executed in connection herewith, no party hereto shall take any actions hereunder that would constitute or result in a transfer or assignment of any Station License (as defined in the HAT Exchange Agreement), permit or authorization, or a change of control over such Station License, permit or authorization requiring the prior approval of the FCC without first obtaining such prior approval of the FCC. In addition, the parties acknowledge that the voting rights of the Pledged Securities shall remain with the Pledgor even upon the occurrence and during the continuance of an Event of Default until the FCC shall have given its prior consent to the exercise of stockholder rights by a purchaser at a public or private sale of such Pledged Securities or the exercise of such rights by the Lender or by a receiver, trustee, conservator or other agent duly appointed pursuant to applicable law. (b) If an Event of Default shall have occurred, Pledgor shall take any action which the Lender may request in the exercise of its rights and remedies under this Pledge Agreement in order to transfer or assign the Collateral to the Lender or to such one or more third parties as the Lender may designate, or to a combination of the foregoing. To enforce the provisions of this Section 17, the Lender is empowered to seek from the FCC and any other ---------- Governmental Authority, to the extent required, consent to or approval of any involuntary transfer of control of any entity whose Collateral is subject to this Pledge Agreement for the purpose of seeking a bona fide purchaser to whom control ultimately will be transferred. Pledgor agrees to cooperate with any such purchaser and with the Lender in the preparation, execution and filing of any forms and providing any information that may be necessary or helpful in obtaining the FCC's consent to the assignment to such purchase of the Collateral. Pledgor hereby agrees to consent to any such voluntary or involuntary transfer after and during the continuation of an Event of Default and, without limiting any rights of the Lender under this Pledge Agreement, to authorize the Lender to nominate a trustee or receiver to assume control of the Collateral, subject only to required judicial, FCC or other consents required by Governmental Authorities, in order to effectuate the transactions contemplated by this Section 17. Such trustee or receiver shall have all the rights and ---------- powers as provided to it by law or court order, or to the Lender under this Pledge Agreement. Pledgor shall cooperate fully in obtaining the consent of the FCC 8 and the approval or consent of each other Governmental Authority required to effectuate the foregoing. (c) In connection with this Section 17, the Lender shall be ---------- entitled to rely in good faith upon an opinion of outside FCC counsel of the Lender's choice with respect to any such assignment or transfer, whether or not the advice rendered is ultimately determined to have been accurate. [signatures begin on next page] 9 IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. STC BROADCASTING OF VERMONT, INC. By: -------------------------------------- Name: Title: Address: c/o STC Broadcasting, Inc. 3839 Fourth Street North Suite 420 St. Petersburg, Florida 33703 Attn: David Fitz Tel.: (813) 821-7346 Fax: (813) 821-8092 with a copy to: Hogan & Hartson LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 Attn: William S. Reyner, Jr. Tel.: (202) 637-6510 Fax: (202) 637-5910 Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, TX 75201 Attn: Lawrence D. Stuart, Jr. Tel.: (214) 740-7365 Fax: (214) 740-7355 HEARST-ARGYLE STATIONS, INC. By: ----------------------------------- Name: Title: The undersigned, as issuer of the Shares, hereby acknowledges the grant of the security interest set forth herein and consents to the rights and remedies of the Lender provided herein in respect of the Pledged Securities. STC BROADCASTING OF VERMONT SUBSIDIARY, INC. By: ------------------------------------- Name: Title: 11 Exhibit A to Pledge Agreement ----------------------------- STC BROADCASTING OF VERMONT SUBSIDIARY, INC. , 1998 ------------ Hearst-Argyle Stations, Inc. c/o Hearst-Argyle Television, Inc. 959 Eighth Avenue New York, NY 10019 Gentlemen: Reference is made to the Pledge Agreement dated as of the date hereof (the "Pledge Agreement") between STC Broadcasting of Vermont, Inc., as pledge ---------------- (the "Pledgor"), and you, as lender. Capitalized terms used but not defined ------- herein have the respective meanings provided in the Pledge Agreement. In connection with the pledge of the Collateral to you by the Pledgor, the undersigned, as issuer of the Pledged Securities, hereby agrees with you as follows: (i) To deliver directly to you at your address set forth in the Pledge Agreement, any and all instruments and/or share certificates evidencing any right, option or warrant, and all new, additional or substituted securities issued to, or to be received by, the Pledgor by virtue of its ownership of those Pledged Securities issued by the undersigned or upon exercise by the Pledgor of any option, warrant or right attached to such Pledged Securities; (ii) Except for distributions permitted pursuant to Section 7.6 of the Credit Agreement, to pay directly to you any and all cash dividends which might be declared and payable (including any unpaid dividend accrued prior to the date hereof) on any of such Pledged Securities; and (iii) At any time upon and during the continuance of an Event of Default, upon your presentation of executed instruments of transfer or assignment naming you or your nominee as transferee, together with stock certificates representing the Pledged Securities (issued by the undersigned) to be transferred, to register the transfer of such Pledged Securities to you or your nominee, as applicable, subject to the terms of Section 17 of the Pledge Agreement and to any restrictions on transfers set forth in applicable federal or state securities laws. A-1 In addition, the undersigned agrees that, if at any time you shall determine to exercise your right to sell all or any of the Collateral, the undersigned will, upon your request and at the undersigned's expense: (a) provide you with such other information and projections in respect of the undersigned as may be necessary or, in your opinion, advisable to enable you to effect the sale of the Collateral; and (b) do or cause to be done all such other acts and things consistent with the terms of the Pledge Agreement as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law. You are hereby authorized, in connection with any sale of the Collateral, to deliver or otherwise disclose to any prospective purchaser of the Collateral (i) any information provided to you pursuant to subsection (a) above and (ii) any other information in your possession relating to the undersigned or the Collateral. Very truly yours, STC BROADCASTING OF VERMONT SUBSIDIARY, INC. By: ------------------------------- Name: Title: ACKNOWLEDGED, CONSENTED AND AGREED TO: STC BROADCASTING OF VERMONT, INC. By: ----------------------------- Name: Title: A-2 INITIAL DISCLOSURE SCHEDULES WITH RESPECT TO TELEVISION BROADCAST STATION KSBW, CHANNEL 8, SALINAS, CALIFORNIA TO ASSET EXCHANGE AGREEMENT DATED AS OF FEBRUARY 18, 1998 BY AND AMONG STC BROADCASTING, INC. STC BROADCASTING, OF VERMONT, INC. STC BROADCASTING OF VERMONT SUBSIDIARY, INC. STC LICENSE COMPANY, INC. AND HEARST-ARGYLE STATIONS, INC. TERMS AND CONDITIONS The Disclosure Schedules attached hereto are subject to the following terms and conditions: 1. The inclusion of any fact or item on a schedule, which schedule requires the listing of a "material" item, is not deemed to be an admission or representation that the included item is "material". 2. The inclusion of any fact or item on a schedule referenced by a particular section in the Asset Exchange Agreement shall, should the existence of the fact or item or its contents, be relevant to any other section, be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears. 3. The introductory language and heading to each of the disclosure schedules are inserted for convenience only and shall not create a different standard for disclosure than the language set forth in the Asset Exchange Agreement. 4. All capitalized terms used herein and not otherwise defined shall have the meaning given such terms in the Asset Exchange Agreement. 2 DISCLOSURE SCHEDULES Schedule 2.3.1 FCC Licenses Schedule 2.3.2 Real Property Interests Schedule 2.3.3 Tangible Personal Property Schedule 2.3.4 Intellectual Property Schedule 2.3.5 Program Contracts Schedule 2.3.6 Trade-out Agreements Schedule 2.3.8 Network Affiliation Agreements Schedule 2.3.9 Other Operating Contracts Schedule 2.3.10 Vehicles Schedule 2.3.12 Auxiliary Facilities Schedule 2.3.14 Accounts Receivable Schedule 2.4.13 Shared Contracts Schedule 2.4.14 Labor Union Contract Schedule 2.4.15 Excluded Assets Schedule 2.4.16 Affiliated Transactions Schedule 3.4 Consents Schedule 3.5 Financial Statements Schedule 3.6 Absence of Certain Changes or Events Schedule 3.7 Litigation Schedule 3.8 Encumbrances on Assets Schedule 3.9 FCC Matters Schedule 3.10 Real Property Documents Delivered & Encumbrances Schedule 3.14 Employee Benefit Plans Schedule 3.15 Labor Relations Schedule 3.16 Environmental Matters Schedule 3.17 Insurance Schedule 3.19 Affiliated Transactions Schedule 12.2 Brokers 3 SCHEDULE 2.3.1 FCC LICENSES Call Sign Class Expiration Date - --------- ----- --------------- KSBW-TV Main Broadcast License December 31, 1998 K13GS Translator April 1, 1998 (renewal application filed 12/1/97- File No. BRTTV-971201GG Auxiliaries: KB-55808 TV Pickup December 1, 1998 KB-55148 TV Pickup December 1, 1998 KB-55150 TV Pickup December 1. 1998 KA-88915 TV Pickup December 1, 1998 KA-59086 TV Pickup December 1, 1998 KR-9885 TV Pickup December 1, 1998 WHY-730 TV Intercity Relay December 1, 1998 WBE-815 TV Intercity Relay December 1, 1998 WHS-279 TV Intercity Relay December 1, 1998 WHS-369 TV Intercity Relay December 1, 1998 WHY-871 TV Intercity Relay December 1, 1998 KMT-27 TV Intercity Relay December 1, 1998 KUQ-36 TV Intercity Relay December 1, 1998 WLD-202 TV Intercity Relay December 1, 1998 WLD-563 TV Intercity Relay December 1, 1998 WLD-570 TV Intercity Relay December 1, 1998 WHG-366 TV Intercity Relay December 1, 1998 WHG-365 TV Intercity Relay December 1, 1998 WHG-368 TV Intercity Relay December 1, 1998 WLD-566 TV Intercity Relay December 1, 1998 WLD-559 TV Intercity Relay December 1, 1998 WGX-279 TV Intercity Relay December 1, 1998 WLI-982 TV Intercity Relay December 1, 1998 KA-88554 Remote Pickup Mobile December 1, 1998 WHB-938 TV Intercity Relay December 1, 1998 KPH-796 Remote Pickup Automatic Relay December 1, 1998 KPH-801 Remote Pickup Automatic Relay December 1, 1998 KPH-797 Remote Pickup Base Mobile System December 1, 1998 KA-88554 Remote Pickup Mobile System December 1, 1998 Note: Certain of the above referenced intercity relay stations (which were previously used to provide NBC service to KSBY) are no longer operational. 4 SCHEDULE 2.3.2 REAL PROPERTY INTERESTS Owned Real Property - ------------------- 1. Seller owns a studio site (John's Street Studio) more particularly described as set forth below: The following land and premises located in the County of Monterey, State of California: Parcel I: - --------- Situate in the City of Salinas, County of Monterey, State of California, and being a portion of Block 11 as shown on the map entitled "F.S. Spring's Addition to Salinas City," filed June 7, 1902 in Volume 1, Page 28 of cities and towns, records of said county and also a portion of Block 3, as shown on the map filed December 1, 1873 in Volume 1, Page 27 of cities and towns, records of said county, and also a portion of the land described in the deed to John Stolz, et ux, dated August 13, 1923 in Volume 40, Page 78, official records of said county, being contiguous without gaps or gores, described as follows: Beginning at a 3/4 inch iron pipe standing in the northeasterly line of Winham Street (a city street 66 feet wide) at the southwest corner of the land described in the deed to Glen O. Kellum, recorded April 5, 1966 in the Reel 456, Page 144, official records of said county; thence along said northeasterly line of Winham Street (1) N. 74(degrees)12' W., 235.40 feet to the intersection with the easterly line of Front Street (a city street 66 feet wide); thence along said line of Front Street (2) N. 15(degrees) 47' E., 253.30 feet to the intersection with the southwesterly line of John Street (a city street 80 feet wide); thence along said line of John Street (3) S. 76(degrees) 06' E., 439.56 feet to the intersection with the southwesterly line of Abbott Street (a city street 86 feet wide); thence along said line of Abbott Street (4) S. 31(degrees) 04' 45" E., 51.28 feet to a 3/4 inch iron pipe at the most northern corner of the land described in the deed Ramesh J. Patel, et ux, recorded September 28, 1973 in Reel 873, Page 15, official records of said County; thence along the northwesterly boundary of said land (5) S. 68(degrees)06' 50" W., 185.17 feet to the easterly boundary of said land of Kellum; thence along said easterly boundary (6) N. 11(degrees)54' 29" W., 11.64 feet to the northeasterly corner thereof; thence along the northerly boundary of said land 5 (7) N. 74(degrees)09' 41" W., 89.39 feet to the northwesterly corner thereof; thence along the westerly boundary of said land (8) S. 15(degrees)46' 33" W., 129.99 feet to the point of beginning Excepting therefrom that portion of said land described to Thelma Alys Lehman and Barbara Frances Donnelly, recorded November 20, 1947 in Book 1010, Page 429, official records. Also described as Parcel A of map filed March 15, 1983 in Volume 15 of parcel maps, Page 134, official records of Monterey County, State of California. A.P. No. 2-382-72 2. Seller owns a transmitter site (Fremont Peak) more particularly described as set forth below. Parcel II: - ---------- Being a part of that certain parcel of land situate in the Rancho Cienega Del Gabilan, in the county of Monterey, State of California, designated as "Parcel One" in deed to Rollin Reeves, dated June 3, 1929 and recorded in Volume 914, Page 236, official records of said County, being contiguous without gaps or gores, described as follows: Beginning at a point in the southeasterly boundary of and land designated "Parcel VI" in the deed to the County of San Benito, dated June 22, 1931 and recorded in Volume 393, Page 246, official records of said County, from which a brass capped 6" diameter concrete monument standing at the most southerly corner of said land bears along said boundary S. 50(degrees) 52' 54" W., 273.68 feet; thence along said boundary (1) N. 50(degrees) 52' 54" E., 276.81 feet at 83.32 feet another brass-capped 6 inch diameter concrete monument, 276.81 feet to a point; thence along the westerly line of a 40' road (2) S. 11(degrees)31' 23" E., 60.76 feet, at 1.28 feet a 1/2" diameter iron pipe, 60.76 feet to a 2" by 3" redwood post, thence (3) S. 7(degrees) 42' 37"W., 136.79 feet to a 1/2" diameter iron pipe from which a 2" x 3" redwood post bears along said westerly line S. 7 (degrees) 42' 37" W., 36.53 feet; thence leave said line (4) S. 50(degrees) 53' 37" W., 137.42 feet, to a 1-1/2 inch iron pipe in the easterly line of said road, from which a 3/4" diameter iron pipe bears along said line S. 47(degrees) 42' 23" E., 25.28 feet; thence along said easterly line (5) N. 43(degrees)34' 23" W., 147.85 feet, at 147.75 feet a 3/4" diameter iron pipe 147.85 feet to the place of beginning A.P. No. 149-011-13 6 Parcel III: - ----------- An easement for road, poles, power, water and pipelines and any necessary utilities purposes, 40 feet wide, lying along, contiguous to and easterly of courses number (2) and (3) above, being contiguous without gaps or gores, and particularly described as follows: Beginning at the most northerly corner of the above described tract of land and running thence, along the easterly boundary thereof, (1) S. 11(degrees)31' 23" E., 60.76 feet to a 2" x 3" redwood post; thence (2) S. 7(degrees)42' 37" W., 136.79 feet to a 1/2" diameter iron pipe. Parcel IV: - ---------- An easement for road, poles, power, water and pipelines and any necessary utilities purposes, 40 feet wide, lying along, contiguous to and southwetserly of Course Number (5) above, being contiguous without gaps or gores, and particularly described as follows: Beginning at the most southerly corner of the above described tract of land and running thence, along the southwesterly boundary thereof, (1) N. 43(degrees)34' 23" W., 147.85 feet to the most westerly corner thereof. Parcel V: - --------- An easement for road, poles, power, water, and pipelines and necessary utilities purposes 40 feet wide being contiguous without gaps or gores, lying along, contiguous to and southwesterly, southerly and southeasterly of the following described line: Beginning at the most southerly corner of Parcel 2 herein described above; thence (1) S. 47(degrees) 42' 23" E., 25.28 feet; thence (2) S. 58(degrees) 36' 23" E., 31.53 feet, thence (3) S. 86(degrees) 24' 23" E., 29.91 feet; thence (4) N. 38(degrees) 12' 37" E., 28.62 feet; thence (5) N. 7(degrees) 42' 37" E., 100.41 feet to the angle point formed by courses numbered "(3)" and "(4)" in the boundary of the above described Parcel II. 7 3. Seller owns a transmitter site (Summit Road) more particularly described as set forth below: All that certain real property in the unincorporated area, County of Santa Clara, State of California, being contiguous without gaps or gores, described as follows: Parcel One: The north half of the southwest quarter of Section 17, Township 10 South, Range 2 East, M.D.B. & M., excepting therefrom that portion thereof lying within Santa Cruz County. Parcel Two: The southeast quarter of the southwest quarter and the east half of the east half of the southwest quarter of the southwest quarter of Section 17, Township 10 South, Range 2 East, M.D.B. & M., excepting therefrom that portion thereof lying within Santa Cruz County. Parcel Three: The southwest quarter of the southeast quarter of Section 17 and Lot 5 of Section 20, Township 10 South, Range 2 East, M.D.B. & M., excepting therefrom that portion thereof lying within Santa Cruz County. Parcel Four: All that certain real property in the unincorporated area, County of Santa Cruz, State of California, being contiguous without gaps or gores, described as follows: All that portion of the northwest quarter of the southwest quarter of Section 17, Township 10 South, Range 2 East, M.D.B. & M. lying southwest of the centerline of Summit Road. Leased Real Property 3. License agreement dated May 1, 1983 with Allnet Communications Services, Inc.. 4. License Agreement dated June 1, 1989 with Dolores J. Boesch. 5. Commercial Lease Agreement dated June 1, 1992 with Michael and Eva Boronfield. 6. Lease agreement dated July 25, 1990 with Gibson, Riordan, Riordan and Tobin d/b/a Braniforte Plaza. 7. Lease agreement dated May 25, 1964 with Norman Miller. 8. Permit for Right of Way dated November 15, 1994 with the State of California, acting through the Department of Parks and Recreation. 8 9. Lease agreement dated February 1, 1992 with the State of California, acting through the Director of General Services. 10. Lease Agreement dated August 1, 1997 with Heritage Harbor. Other Interests - --------------- See the fixed asset list attached to Schedule 2.3.3 to the extent it contains any fixtures or other interests in real property. 9 SCHEDULE 2.3.3 TANGIBLE PERSONAL PROPERTY (see attached)** 1. The attached fixed asset appraisal as of March 1, 1997, includes two sections of equipment (Spare Parts and Surplus) which are not presently used in the Station operation. 2. Since acquisition of the Station by STC Broadcasting, Inc., the Station has replaced items of equipment and has retained such replaced equipment in storage or disposed of it as outlined on the attached. 3. See attached schedule of capital expenditures for period 3/1/97 to 12/31/97. - ------------------ ** Attachments previously delivered to HAT and not included herein. 10 SCHEDULE 2.3.4 INTELLECTUAL PROPERTY Trade Names Trademark - ----------- --------- Action News No Coverage You Can Count On No This schedule incorporates by reference all other contracts and rights of Seller to use trademarks, trade names, service marks and other intellectual property under the contracts set forth in Schedules 2.3.5, 2.3.6 and 2.3.8 and 2.3.9. 11 SCHEDULE 2.3.6 TRADE-OUT AGREEMENTS Consent SCHEDULE 2.3.5 PROGRAM CONTRACTS
Start End Consent Contracting Party Program Date Date Necessary - ----------------- ------- ----- ---- --------- King World Jeopardy * 9/97 9/99 Yes King World Weekend Jeopardy 9/97 9/99 Yes King World Oprah 9/97 9/2000 Yes King World Wheel * 9/97 9/99 Yes King World Weekend Wheel 9/97 9/99 Yes King World Mr. Food 1/98 12/99 Yes Turner Prog Services CNN News Product 1/98 12/98 Yes Twentieth Television NYPD Blue 9/97 9/99 Yes Warner Bros. Rosie O'Donnell 9/97 9/2000 No Warner Bros. Warner Bros, Vol 28 9/90 9/98 Yes Warner Bros. Warner Bros, Vol 29 9/90 9/2002 Yes Warner Bros Warner Bros, Vol 31 1/94 11/2008 Yes Columbia Tristar Donnie & Marie 9/98 9/2000 No BARTER PROGRAM - -------------- All American Baywatch 9/97 9/98 No Warner Bros. Extra 9/98 9/2000 No Buena Vista Television Honey I Shrunk the Kids 9/97 9/98 Yes Warner Bros. Jenny Jones 9/97 9/98 No Warner Bros. Martin 9/97 6/99 Yes Warner Bros. Mr. Cooper 9/97 9/98 Yes Twentieth Television Real Stories 9/97 9/98 Yes The Phoenix Communications Sports News Satellite 9/95 9/2001 No Dow Jones & Company, Inc. Wall Street Journal 9/97 9/98 Yes
* Commitments: ------------ Sandy DiPasquale has signed a letter of intent and is awaiting final contracts through the fall of 2002, however, the actual contracts have not been signed. The reason is the omission, by King World, of co-op dollars language that has existed in the current contracts. Though we have not utilized this co-op to date, we did not want to lose having the option to do so in the future. 12 SCHEDULE 2.3.6 TRADE-OUT AGREEMENTS
Consent Contracting Party Description Term Necessary - ----------------- ----------- ---- --------- Active Media Bill Payor 8/1/97 to 7/31/98 No Services Cash Plus K Mart 2 hour movies 9/15/97 to 6/98 No El Palomar Food and beverage in 3/20/95 through 12/31/96 No exchange for airtime Expired but ongoing until balance used up Pacific Bell Bill Payor 1/13/97 to 12/31/98 No TBS Media PaLapas Restaurant Food credit 1/1/97 to 12/31/97 No Expired but ongoing until balance used up Pebble Beach Co. Awards Dinner 10/18/97 to 10/17/98 No Jefferson Awards Sanctuary Day Spa Day spa tickets 11/28/97 to 12/24/98 No Seacliff Inn Banquet and restaurant 3/17/97 to 12/31/97 No usage in exchange for television airtime SeaSide Associates Amusement Park 1/1/98 to 12/31/98 No Santa Cruz Tower Media Airfare and Hotel 3/21/95 through 3/21/00 No (for Lucky Stores) accommodations in exchange for television airtime Active Media Payment of Media Data 12/29/97 to 12/28/98 No Services bills 2 for 1 Universal Internet Website Services 3/24/97 to 12/31/97 No On going at this time. No new agreement signed for 1998.
13 SCHEDULE 2.3.8 NETWORK AGREEMENTS
Contracting Consent Party Description Term Necessary - ----------- ----------- ---- --------- National Broadcasting Network Affiliation 1/17/96 - 12/31/05 Yes, plus Company, Inc. Agreement additional requirements set forth in Section 16 of the agreement. NBC News Channel, Inc. NBC News Channel 1/1/91 Renewed in 52 Yes Participation Agreement week terms. Cancelable by written notice 60 days prior to the last Friday in June or December. NBC News Channel, Inc. "Nightside" License 11/4/91 through 11/3/93 Yes, plus Agreement renewable in 2 yr terms. (i) notice Can cancel in writing at requirement least 180 days prior to (ii) NBCNC end of term. can terminate see section 13) National Broadcasting News Excerpt License 1/1/91 renews in 52 week Yes Agreement terms. Cancelable by written notice 60 days prior to the last Friday in June or December.
14 SCHEDULE 2.3.9 OPERATING CONTRACTS 1. General
Consent Contracting Party Description Term Necessary - ----------------- ----------- ---- --------- American Society of Music License 3/1/97 to 3/31/98 No Composers, Authors and Agreement including Publishers option for per program method for computing license fees Automated Weather Source Weather Stations System 3/8/95 through 3/7/98 Yes renewable in 1 year terms A.C. Nielsen Company Audience Ratings 11/1/93 through 12/31/00 No Service Agreement A.C. Nielsen Company S.T.A.R. Sales/Audience 3/25/94 through 3/24/97 Yes Research Information Bay City News News Service 1/1/98 to 12/31/98 No renewable in one year terms Broadcast Music, Inc. Music License Agreement No including per option program method for computing license fees Cellular One Cellular Phone Rental Ongoing until written Yes and/or Service notice of cancellation Agreements is given Columbine Systems, Inc. Data Processing System 4/1/96 to 3/30/2001 Yes License Agreement Columbine/BMP BMP Sales Software 6/1/95 to 5/31/98 No License Agreement First Com Music Compact Disc 1/1/97 to 12/31/99 Yes Library Frank Magid & Associates News Consultant 6/1/97 to 12/31/99 No International Business Operating System and Ongoing - Cancelable Yes Machines Corporation Utility Software License upon one month prior Agreement written notice
15
Consent Contracting Party Description Term Necessary - ----------------- ----------- ---- --------- KCBA TV Shared use of Fremont 7/1/95 through 7/1/97 No Peak right of way permit Kavouras, Inc. Meteorological Services Ongoing No Agreement (including addendum for additional services) Leigh Stowell & Company, Sales Research Services 4/1/97 to 3/31/99 No Incorporated Agreement Lexus Financial Services General Manager Auto 2/17/96 to 2/15/99 No Monterey Bay Office Products Copier Lease 3/1/96 through 2/28/01 No Monterey Bay Office Products Copier Lease 8/1/97 to 7/31/2000 No MRI Music License Reporting 1/1/98 to 12/31/98 No Cancelable 30 days notice NAACP and Lulac Minority Employment 7/13/94 No Interns Meetings to 12/1/98 agreement must be assumed by individual/ corporation acquiring the station Noll & Associates Television Broadcast 1/1/98 to 12/31/98 No Sales Training OMNIMUSIC Music License 9/1/95 through 8/31/98 No Agreement SESAC, Inc. Music License 2/28/97 through 12/31/2000 No Agreement P. Allen Smith Gardens News Service 1/1/98 to 12/31/98 No Summit Road Association Road Maintenance Ongoing No Agreement for Mt. Madonna Tower Site Telerep, Incorporated National Sales 11/21/97 to 6/14/2000 No - ------- Representation Agreement Tribune - News In Motion News Service 1/1/98 to 12/31/98 No
16
Consent Contracting Party Description Term Necessary - ----------------- ----------- ---- --------- The Associated Press AP NewsPower Wire 1/17/96 through 6/30/98 No - however, Successor Service Agreement renews automatically for must apply for new AP successive two year membership periods unless canceled by six months prior written notice The Associated Press APTV Service 1/17/96 through 6/30/98 No - however Successor Agreement renews automatically for must apply for new A.P. successive two year membership and periods unless canceled expressly assumes all by six months prior obligations under the written notice contract The Associated Press AP Newscenter 1/17/96 through 6/30/98 No - however Successor Supplemental Software Coterminous with main must apply for A.P. License Agreement membership agreement membership and expressly assumes all obligations under the contract The Associated Press APTV Supplemental 1/17/96 through 6/30/98 No - however Successor Software Coterminous with main must apply for A.P. membership agreement membership The Associated Press News Desk Software 1/17/96 through 6/30/98 No - however Successor Agreement Coterminous with main must apply for new A.P. membership agreement membership and expressly assumes all obligations under the contract The Associated Press AP Membership 1/17/96 through 6/30/98 No - however, Successor Agreement for renews automatically for must apply for A.P. Television successive two year terms membership unless cancellation by six months prior written notice The Frick Company Consultant and Agent 11/1/97 through 10/30/98 No for CA Unemployment Automatically renewed Tax Matters for 1 year periods. Cancelable on by 60 days written notice
17 2. Lease Agreements where Station is Lessor of Real Property
Consent Contracting Party Location Term Necessary - ----------------- -------- ---- --------- Frontier Communications Tower Space and 10/1/97 through 9/30/98 No Services, Inc. Equipment Room Attn: Joseph D. Buckman Space at 238 John Lease Administrator Street Microwave 30300 Telegraph Road Tower Bingham Farms, MI 48025 Frontier Communications Land Lease-Fremont 8/1/94 through 7/31/99 No Services, Inc. Peak to erect tenant has option to terminate Attn: Joseph D. Buckman Microwave Relay after 7/31/96 upon 60 days Lease Administrator Tower and small prior written notice to 30300 Telegraph Rd. Equipment Building Lessor Bingham Farms, MI 48025 Henry Broadcasting Corp Tower Space on 11/1/95 through 10/31/2005 No (as successor to Grace KSBW's backup Broadcasting Corp) tower site and space KDON-FM in equipment room - 2277 Jerrold Avenue Fremont Peak, CA San Francisco, CA 94124 Nextel of California Land Lease - 6/1/93 through 5/31/98 No 3675 Mr. Diablo Blvd. Fremont Peak, CA extendable by tenant for an Suite 330 site for Equipment additional five year period Lafayette, CA 94549 Building Telecommunications Fremont Peak, CA 3/1/86 through 2/28/96 No Properties Communications extendable by Telecom. 1220 Brickyard Cove Rd Lease and Site Properties for two Ste 200 Management consecutive ten year Pt. Richmond, CA 94801 Agreement periods Telecommunications Summit Road, CA 1/15/86 through 1/15/96 No Properties Communications extendable by Telecom. 1220 Brickyard Cove Road Lease and Site Properties for two Suite 200 Management consecutive ten year Pt. Richmond, CA 94801 Agreement periods
18
Consent Contracting Party Location Term Necessary - ----------------- -------- ---- --------- ICO Network Equipment Room 10/1/97 to 9/30/99 No 5617 Scotts Valley Dr., space at 238 #180 John Street Scotts Valley, CA 95066 James John Duznica, et.al. Road Lease - 9/23/87 through 9/22/17 No Summit Road Tower extendable by tenant for an Tower Site additional ten year period Monterey-Carmel Antenna Space Lease 1/15/96 to 1/14/2006 No Communications Corp. Fremont Peak, CA DBA Repenter Communications of Monterey 212 Cypress Ave. Marina, CA 93933
19 3. Lease Agreements where Station is Lessee of Real Property
Consent Contracting Party Location Term Necessary - ----------------- -------- ---- --------- Dolores J. Boesch Quimby Road 6/1/89 through 6/1/04 No 15287 Penetencia Microwave Relay however, landlord retains Creek Road, Site right to revoke agreement San Jose, CA 95035 at any time upon 120 days notice and licensee can terminate at any time upon 60 days notice if site is no longer feasible Michael and Eva Gilroy Bureau 9/1/96 to 8/31/97 on Yes Brownfield 7459 Monterey St month to month basis 7463 Monterey St. Suite 3 Gilroy, CA Gilroy, CA Gibson, Riordan, Riordan and Tobin d/b/a Branciforte Plaza c/o Ron Matusich Ste 220-Branciforte 7/1/97 to 6/30/98 Yes R.G. Ron Matusich & Plaza, 555 Soquel month to month basis Associates Avenue, Santa Cruz, 2707 Union Avenue CA 95062 San Jose, CA 95121 Santa Cruz Bureau Norman Miller K13GS Translator 2/28/64 through 2/28/99 Yes Upper Circle Drive Site Carmel Valley, CA 93924 Carmel Valley, CA Department of Parks and Fremont Peak 11/15/94 to 11/15/99 Yes Recreation State Park State of California Heritage Harbor Monterey News and 7/15/97 to 7/14/2000 Yes Sales Office
20 4. Cable Must Carry / Retransmission Agreements See FCC Memorandum Opinion and Order dated 2/12/96
Expiration Consent Contracting Party Description Date Necessary - ----------------- ----------- ---- --------- TCI Monterey/Salinas Retransmission Consent December 31, 2000 No Scotts Valley/Santa Cruz Retransmission Consent December 31, 1999 No San Jose Must Carry December 31, 1999 No Los Altos Cupertino Retransmission Consent December 31, 1999 No Merced Retransmission Consent December 31, 1999 No Morgan Hill Must Carry December 31, 1999 No Los Gatos Must Carry December 31, 1999 No Gilroy Must Carry December 31, 1999 No San Martin Must Carry December 31, 1999 No Mont Serrano Must Carry December 31, 1999 No Saratoga Must Carry December 31, 1999 No Campbell Must Carry December 31, 1999 No Cupertino Must Carry December 31, 1999 No Matrix Saratoga Retransmission Consent December 31, 1999 No Coastside Fort Ord/Marina Retransmission Consent December 31, 1999 No Coastside Presidio Retransmission Consent December 31, 1999 No Coast Cable San Jose Retransmission Consent December 31, 1999 No Weststar Bishop Retransmission Consent December 31, 1999 No Optel/SanFrancisco Retransmission Consent December 31, 1999 No Sonic Livingston Retransmission Consent December 31, 1999 No Sonic Capitola Retransmission Consent December 31, 1999 No Sonic Watsonville Retransmission Consent December 31, 1999 No Sonic Parajo Dunes Retransmission Consent December 31, 1999 No Sonic Santa Cruz County Retransmission Consent December 31, 1999 No Falcon Hollister Retransmission Consent December 31, 1999 No Falcon Oak Hill Retransmission Consent December 31, 1999 No Falcon Laguna Seca Retransmission Consent December 31, 1999 No Falcon Watsonville Retransmission Consent December 31, 1999 No Falcon Moss Landing Retransmission Consent December 31, 1999 No Falcon Tierra Grande Retransmission Consent December 31, 1999 No Falcon Monterey Retransmission Consent December 31, 1999 No Falcon Castroville Retransmission Consent December 31, 1999 No Falcon Salinas Retransmission Consent December 31, 1999 No Falcon Carmel Valley Retransmission Consent December 31, 1999 No Falcon Aromas Retransmission Consent December 31, 1999 No Falcon Carmel Highlands Retransmission Consent December 31, 1999 No Falcon Soledad Retransmission Consent December 31, 1999 No Falcon San Juan Bautista Retransmission Consent December 31, 1999 No Falcon Los Lomas Retransmission Consent December 31, 1999 No Falcon Hidden Hills Retransmission Consent December 31, 1999 No Falcon Ridgemark Retransmission Consent December 31, 1999 No
21
Expiration Consent Contracting Party Description Date Necessary - ----------------- ----------- ---- --------- Falcon La Mesa Village Retransmission Consent December 31, 1999 No Falcon Conzoles Retransmission Consent December 31, 1999 No Falcon Gilroy Retransmission Consent December 31, 1999 No Falcon San Martin Retransmission Consent December 31, 1999 No Falcon Morgan Hill Retransmission Consent December 31, 1999 No Falcon Pine Canyon Retransmission Consent December 31, 1999 No Falcon Greenfield Retransmission Consent December 31, 1999 No Falcon King City Retransmission Consent December 31, 1999 No
22 5. Employment Contracts
Start and End Consent to Employee Name Job Title Dates of Contracts Assignment Required - ------------- --------- ------------------ ------------------- David Belyn Assignment Editor 1/5/98 through 1/4/2000 No Beverly Byer 5 pm News Anchor 5/16/96 through 5/15/98 No Kate Callaghan Anchor/Reporter 2/7/97 through 2/6/99 No Erin Clark Primary Anchor 2/2/98 through 2/2/2001 No* Laura Clark News Director 5/31/95 through 5/30/98 No Eric Collins Anchor Reporter 9/16/95 through 9/15/98 No Felix Cortez Reporter 5/15/96 through 4/21/98 No Dan Green Primary Anchor 10/1/97 through 9/30/2000 No Tom Langford Reporter 6/4/97 through 6/3/99 No Jennifer Lee News Producer 7/22/97 through 7/21/99 No Dennis Lehnen Primary Sports Anchor 3/5/97 through 3/31/99 No Libby Lewis W/E Anchor/Reporter 12/12/97 through 12/11/99 No Scott Mace Weather 10/15/97 through 10/2/98 No Cassady McCabe News Producer 6/18/97 through 6/22/99 No Ted W. Price III Anchor/Reporter 4/22/96 through 4/21/98 No Randy Reeves News Producer 3/6/97 through 3/9/99 No Edgard Sandoval Anchor/Reporter 12/12/97 through 12/11/2000 No Aram Sarkissian News Producer 11/20/97 through 11/30/98 No Rick Seeger News Producer 9/9/96 through 9/13/98 No Jim Vanderzwaan Primary Weather Anchor 3/1/96 through 2/28/99 No Janelle Wang Reporter 3/12/97 through 2/16/99 No
* Draft terms for new main anchor 6. Collective Bargaining Agreements None 23 SCHEDULE 2.3.10 VEHICLES
MAKE/MODEL IDENTIFICATION CODE ----------- ------------------- 1995 CHEVY LUMINA 1GNDU06D5ST102466 1994 CHEVY VAN 1GCGG35K2RF162048 1994 TOYOTA 4 RUNNER JT3VN39W8R0153601 1994 FORD ESCORT 3FARP15J0RR106719 1993 FORD VAN 1FTJS34GXPHA52514 (Live Truck) 1993 NISSAN PATHFINDER JN8HD17S1PW116503 1992 FORD AEROSTAR 1FMCA11U8NZA60592 1991 DODGE SPIRIT 1B3XA46K2LF839792 1988 TOYOTA STATION WAGON JT2AL32W8J0308607 1996 LEXUS ES300 JT8BF12G2T0153506 (Leased) 1993 CHEVY S10 BLAZER 1GNDT13WXP2165574 1996 TOYOTA RAV4 JT36P10V5T7005951 1980 FORD VAN S34ZHJ65732 1996 TOYOTA RAV4 JT3HP10VXT7015993 1996 FORD VAN 1FTJS3461THB43276 (Live Truck) 1997 MERCURY TRACER 3MELM15P1VR601971 1997 ISUZU RODEO 4WD 452CM58VO43306778 1996 TOYOTA RAV4 JT36TP10VXT7004780 1997 TOYOTA RAV4 JT3HP10V807028034
24 SCHEDULE 2.3.12 AUXILIARY FACILITIES Carmel Valley, CA - translator sight K136S Fremont Peak - backup tower Pal Escrito, CA - Microwave relay site Quimby Road - Microwave relay site Monterey Street, Gilroy, CA - Gilroy Bureau Branciforte Plaza, Santa Cruz, CA - Santa Cruz Bureau Heritage Harbor, Monterey, CA - Monterey Bureau 25 SCHEDULE 2.3.14 ACCOUNTS RECEIVABLE See Attached:** - ------------ Schedule of Receivables at 12/31/97 Aging of Trade Receivables at 12/31/97 Bad Debt analysis at 12/31/97 - ------------------------------------ ** Attachments previously delivered to HAT and not included herein. 26 KSBW-TV ACCOUNTS RECEIVABLE DECEMBER 31, 1997 Accounts Receivable - station cash $2,703,049.67 Network Receivable 27,463.00 Coop Receivable 10,000.00 Employee Receivable 1,533.00 Accounts Receivable - other 28,185.68 Unbilled revenue 71,686.10 Allowance for doubtful accounts (48,827.12) ------------- $2,793,090.63 ============= 27 SCHEDULE 2.4.13 SHARED CONTRACTS A.C. Nielsen Contract was a SCI Television contract. Nielsen has honored the terms of the agreement through the various owners since SCI ownership was sold. The Associated Press Agreements are STC contracts. Our rates reflect reduced amounts due to ownership of multiple stations using AP. These same discounts are available to Hearst-Argyle Stations, Inc. See Schedule 2.4.16. 28 SCHEDULE 2.4.14 LABOR CONTRACTS NONE 29 SCHEDULE 2.4.15 EXCLUDED ASSETS/CONTRACTS NONE 30 SCHEDULE 2.4.16 AFFILIATED TRANSACTIONS 1. Employee Benefit Program --------------------------- KSBW has elected to be a participating affiliate in certain Sunrise Television Corp employee benefits programs. KSBW is charged the same amount as any participating affiliate and contributes to the costs of audits on the 401(k) Plan and Benefit Trust. Sunrise Television Corp. or its employees do not receive any compensation from any participating affiliate for services rendered. As long as a participating affiliate elects to participate in the Great West Health, Life and/or Dental Plan, the administrative costs normally charged by Great West Life Assurance to the 401(k) plan is waived. 2. General Insurance ------------------ Station has elected to participate in the Hicks, Muse, Tate & Furst insurance program. Station is billed actual premium costs incurred. Hicks, Muse, Tate & Furst and its employees receive no compensation for providing this service. 3. Allocation of V.P. News Salary ------------------------------- KSBW-TV has agreed as long as Ms. Holly Stewart is employed by WROC-TV to contribute $7,500 annually towards her total compensation. Ms. Stewart provides news consulting services to KSBW. Any travel costs of Ms. Stewart to KSBW are paid by KSBW. 31 SCHEDULE 3.4 CONSENTS 1. See Schedule 2.3.5 2. See Schedule 2.3.6 3. See Schedule 2.3.8 4. See Schedule 2.3.9 32 SCHEDULE 3.5 FINANCIAL STATEMENTS . Summary and detailed balance sheet as of December 31, 1997 . Summary and detailed statement of operations for the 10 months ended December 31, 1997. . Summary and detailed balance sheet as of February 28, 1997. . Summary and detailed statement of operations for the two months ended February 28, 1997. . Summary and detailed balance sheet as of December 31, 1996. . Summary and detailed statement of operations for the period 1/3/96 to 12/31/96. 33 SCHEDULE 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS If not offered employment by Hearst-Argyle Stations, Inc. at closing, STC Broadcasting, Inc. has agreed with Robert Rice, general manager of KSBW-TV, that they will pay him one year severance. 34 SCHEDULE 3.7 LITIGATION Phillip Passafuime of Dawson, Passafuime and Bowden, a law corporation, sent a letter to Robert Rice on December 22, 1997, indicating that he represented Ms. Karen Rostodha, a former employee of the station. The letter indicated that Ms. Rostodha had not been paid for all of her overtime, a minimum of 320 hours and for wrongful termination. On January 2, 1998, our attorney, Benjamin Ferrara responded indicating that she did not have a contract, that the station had paid all overtime and that she was terminated because her performance was not at acceptable levels. In our letter of January 2, 1998, we requested additional information related to her alleged claims. See attached letters. 35 [LETTERHEAD OF FERRARA, FIORENZA, LARRISON, BARRETT & REITZ, P.C. APPEARS HERE] January 2, 1998 Via facsimile at (408) 438-2812 and U.S. Mail Phillip A. Passafuime, Esq. Dawson, Passafuime & Bowden 4665 Scotts Valley Drive Scotts Valley, CA 95066-4291 Re: Karen Rostodha and KSBW-TV Dear Mr. Passafuime: This office represents the STC Corporation, owner and operator of KSBW-TV and the undersigned provides assistance to it in connection with certain personnel and labor relations matters. Robert Rice, President and General Manager of KSBW, has forwarded a copy of your letter dated December 22, 1997, regarding the above matter to my attention for review and response. We have consulted with our clients concerning the claims made in your letter. Our clients advise that Ms. Rostodha was not serving under any contract of employment. They further advise that Ms. Rostodha was terminated when it was determined that she was not performing at acceptable levels and further, after she was given opportunities to improve her performance. At the time of her termination, Ms. Rostodha was given the opportunity to resign with a severance package, and chose not to do so. . Regarding Overtime Claims ------------------------- According to our clients, Ms. Rostodha was paid all sums due her at the time of termination. She was asked to provide the Station with any claims she may have made for any such work for which she was not compensated. She did so and the Station paid her accordingly. The Station is at a loss as to her new claim of "320 hours" overtime. If you would provide me with documentation (particularization as to date, time and services Mr. Passafuime January 2, 1998 Page 2 allegedly performed by Ms. Rostodha while in the employ of KSBW) that covers such claims, I will review same with my clients. . Regarding Refusal to Pay Overtime When Requested ------------------------------------------------ My client is unable to identify any instances when Ms. Rostodha allegedly requested overtime compensation and was improperly refused same. If you will provide me with particularization concerning this claim(s), I will be happy to review it with my clients. . Regarding Termination --------------------- The Station feels it acted properly with respect to Ms. Rostodha's termination. Therefore, we are at a loss to understand your claim that she was "wrongfully terminated." Please provide me with the factual and legal basis for such a claim and I will review same with my client. Under the condition stated in your letter to Mr. Rice, please treat this correspondence as a rejection of your demands. However, I will be happy to further discuss this matter, if you choose to supply the information referred to above. Thank you. Very truly yours, Ferrara, Florenza, Larrison, Barrett & Reitz, P.C. /s/ Benjamin J. Ferrara Benjamin J. Ferrara BJF/cmb cc: Robert Rice, President and General Manager, KSBW David Fitz, Executive Vice President and Chief Financial Officer, STC [LETTERHEAD OF DAWSON, PASSAFUIME & BOWDEN APPEARS HERE] December 22, 1997 Bob Rice KSBW 238 John St. Sallnas, CA 93901 Re: Karen Rostodha Dear Mr. Rice, Please be advised that this law firm represents Ms. Karen Rostodha with reference to her employment with Channel 8 News. She was recently terminated from her employment and was Issued a check which did not compensate her for overtime hours worked over the period of time she was employed by the station. I have reviewed Ms. Rostodha's records, including her calendar and other logs. She can easily demonstrate by way of clear time records that she worked a minimum of 320 hours of overtime for which she was not compensated. She is clearly a non-exempt employee and is entitled to be compensated at the rate of time-and-a-half the normal rate of pay. Your handbook, provided for informational purposes to employees, specifies overtime pay for non-exempt employees. In addition, Ms. Rostodha has been treated as a non-exempt employee in the past by KSBW, and meets the criteria as specified by the Court. (See Nordquist v McGraw (1995) 32 Cal.App.4th 555.). In addition, Ms. Rostodha is - ------------------ entitled to reasonable attorneys fees in collecting her unpaid overtime. When our client was hired at KSBW, she was assured that she would be given one of the anchor jobs. In reliance upon those assurances, she moved from Houston to take the job at KSBW. Over the next two years, she was passed over several times for open anchor positions. When she did fill-in, she was commended for doing a good job, and was asked to "fill-in" again, but with no overtime pay. She was refused overtime pay when she requested it, and was finally terminated after "sufficient review and investigation." Please consider this letter our demand for payment for overtime for 320 hours at time and one-half for a total of $6,678.00, as well as $1,500.00 for interest and attorneys fees. Further demand is made in the sum of $28,000 for the wrongful termination of Ms. Rostodha. This demand shall remain open for 10 days from the date of this letter, and if not fully accepted shall be deemed rejected. Please contact me if you would like to discuss this matter further. Very truly yours, /s/ Phillip A. Passafuime PHILLIP A. PASSAFUIME PAP/wjc cc: client SCHEDULE 3.8 ENCUMBRANCES ON ASSETS Permitted Encumbrances - ---------------------- 1. See Schedule 3.4 2. See Schedule 3.10 36 SCHEDULE 3.9 FCC MATTERS Thomas O. Hicks, the ultimate controlling partner of STC Broadcasting and STC License Company, and certain of his associates, have attributable interests in the following stations that implicate the FCC's ownership restrictions: WYGY-FM, Hamilton, OH -- WDTN-TV's Grade A signal encompasses all of Hamilton thereby requiring a one-to-a market waiver of (S)73.3555(c) of the FCC's Rules. WISH-TV, Indianapolis, IN -- There is Grade B overlap between this station and WDTN-TV, but no Grade A overlap. Assuming completion of the LIN Television Corp. transfer of control that is presently pending, a waiver of (S)73.3555(b) (the duopoly rule) will be required. A temporary waiver conditioned on the outcome of the pending rulemaking will be requested. WING-FM, Springfield, OH -- An application presently is pending to assign the license of this station to parties unaffiliated with Mr. Hicks. WEZF-FM, Burlington, VT -- A temporary waiver of the one-to-a-market rule will be requested for the brief period of time that STC License Company may control WNNE-TV and WPTZ-TV. With respect to WNAC-TV, Mr. Hicks and certain of his associates have attributable interest in three radio stations serving Providence, RI; however, the proposed assignee of the license for WNAC-TV (Smith Acquisition License Company) and its attributable parties do not have attributable interest in any media in the Providence, RI area. Mount Mansfield Television, Inc., the license of WCAX-TV, Burlington, VT, has filed various petitions and objections with the FCC relating to the overlap of Grade B signals between WNNE-TV and WPTZ-TV and the affiliated LMA with WFFF-TV. See, e.g., Memorandum Opinion and Order, FCC-98-6 (January 23, 1998). It is possible WCAX-TV will oppose the acquisition and/or sale of WNNE-TV and WPTZ-TV by STC License Company. While the FCC has granted a permanent waiver of Section 73.3555(b) with respect to the overlap of WNNE-TV's and WPTZ-TV's Grade B contours, this is not yet a final order, and a continuation of this waiver will be necessary to complete the acquisition by HAT. 37 SCHEDULE 3.10 PROPERTY DOCUMENTS DELIVERED Survey of Properties - -------------------- Studio on John Street, Salinas, CA Summit Road Fremont Peak Grant Deeds - ----------- Studio on John Street, Salinas, CA Summit Road - Transmitter Fremont Peak Title Policy - ------------ Studio on John Street, Salinas, CA Summit Road - Transmitter Fremont Peak 38 SCHEDULE 3.10 ENCUMBRANCES ON REAL PROPERTY AND LEASEHOLD INTEREST Studio Site and Fremont Peak - ---------------------------- 1. The lien of supplemental taxes, if any, assessed pursuant to Chapter 498 Statutes of 1983, of the State of California, arising by reason of a change in ownership or the completion of new construction; a lien not yet due and payable. 2. Assessment For Water usage by the Monterey Regional Water Pollution Control Agency; a lien not yet due and payable. Affects Parcel I. 3. A non-exclusive easement for the purpose shown below and rights incidental thereto as set forth in a document Granted To: The Pacific Telephone and Telegraph Company Purpose: Electric Utility Line Recorded: 6/14/49 in Volume 1144 of Official Records, at Page 421 4. The fact that said land is included within a project area of the Redevelopment Agency shown below, and that proceedings for the Redevelopment of said project have been instituted under the Redevelopment Law (such redevelopment to proceed only after the adoption of the Redevelopment Plan) as disclosed by a document. Agency: Salinas Urban Renewal Agency, City of Salinas Recorded: 7/26/74 in Reel 926 of Official Records at Page 695 Affects: Parcel I Amended Redevelopment Plan Recorded: January 28, 1995 in Reel 3193 of Official Records, at Page 584 5. A non-exclusive easement for the purpose shown below and rights incidental thereto as set forth in a document. Granted To: Pacific Gas and Electric Company and the Pacific Telephone and Telegraph Company Purpose: Electric Utility Facilities Recorded: 6/15/81 in Reel 1487 of Official Records, at Page 782 Affects: Portions of Parcel II 6. A non-exclusive easement for the purpose shown below and rights incidental thereto as set forth in a final Order of Condemnation and as shown on that certain survey made by Monterey County Surveyors, Inc. dated 11/28/1995, Job #18342 and last revised 1/10/1996. 39 Granted To: Pacific Gas and Electric Company Purpose: Electric Transmission Line Recorded: 7/6/50 in Volume 1228 of Official Records, at Page 523 and 1/27/58 in Reel 1844 of Official Records at Page 324. Affects: A Portion of Parcel II 7. A non-exclusive easement for the purpose shown below and rights incidental thereto as set forth in a document and as shown on that certain survey made by Monterey County Surveyors, Inc. dated 11/28/96, Job #18324 and last revised 1/10/96. Granted To: Pacific Bell Purpose: Underground Telecommunications Facilities Recorded: 7/29/85 in Reel 1862 of Official Records, at Page 266 Affects: The Southwesterly 6 feet of the Southeasterly 34 feet of Parcel II 8. Any rights, interests, or claims which may exist or arise by reason of the following facts shown on a survey plat made for Smith Television of Salinas-Monterey, L.P., dated 11/28/95, Job #18324 and last revised 1/10/96, prepared by Monterey County Surveyors, Inc.: (A) The fact that a KSBW sign encroaches along a portion of the Westerly boundary over the public way. (B) The fact that the metal facade of the studio building encroaches over the lot line on the Northwest corner of the studio site and over a portion of the Northerly boundary of the lot running along John Street onto the public way. AS TO PARCEL II: (A) The fact that overhead electric lines encroach over portions of the Northeasterly and Southerly boundary lines of said lot. (B) The fact that guy with 8' high C/L fence encroaches along the Southerly boundary partially on said land and partially on said adjoining land. (C) The fact that a steel T.V. tower with a 8' high C/L fence encroaches in the Southwesterly boundary. (D) The fact that an 8' high C/L fence encroaches along the Southwesterly boundary partially on said land and partially on adjoining land. (E) The fact that a guy encroaches along a portion of the Southerly boundary. 40 9. Covenants and conditions contained in Permit Approval Notice Executed by: KSBW, Inc. And Between: Monterey County Recorded: 5/25/93 in Reel 2947 of Official Records, at Page 1018 Affects: Parcel II and as Amended by an Indemnification Agreement recorded October 4, 1993, in Reel 3004 of Official Records at Page 812. 10. Rights of tenant as tenant only under an unrecorded lease with certain terms, covenants, conditions and provisions set forth therein. Lessor: KSBW, Inc. Lessee: Nextel of California Disclosed By: Memorandum of Lease Recorded: 1/4/94 in Reel 3048 of Official Records, at Page 1017 Affects: a portion of Parcel II The present ownership of the leasehold created by the above Lease and other matter affecting the interest of the Lessee are not shown herein. 11. Right of access to Parcel II. Access to the land is possible solely pursuant to the terms, conditions, and limitations of a Permit for Right of Way from the State of California acting through the Department of Parks and Recreation and E.P. Communications, Inc. dated November 15, 1994. 12. Defects, liens, encumbrances, adverse claims affecting the road that is the subject of the Permit for the Right of Way from the State of California acting through the Department of Parks and Recreation and E.P. Communications, Inc. dated November 15, 1994. 13. See Schedule 2.1.8, Section 3, Lease Agreements Where Station is Lessor. Transmitter Site - Summit Road - ------------------------------ As to property within Santa Cruz County (Parcel Four): - ------------------------------------------------------ 14. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Section 75, et. seq. of the Revenue and Taxation Code of the State of California, arising by reason of a change in ownership or the completion of new construction; a lien not yet due and payable. 15. The right of the public to use as a roadway so much of the herein described premises lying within the bounds of Summit Road (Mt. Madonna Road). 41 As to property within Santa Clara County (Parcels One, Two and Three): - ---------------------------------------------------------------------- 16. The lien of supplemental taxes, if any, assessed pursuant to the provisions of Section 75, et. seq. of the Revenue and Taxation Code of the State of California, arising by reason of a change in ownership or the completion of new construction; a lien not yet due and payable. 17. An easement for the purpose shown below and rights incidental thereto as set forth in document: Granted To: County of Santa Clara, et al Purpose: public street and road purposes and utilities Recorded: April 18, 1984 in Book I 470 page 364, Official Records Affects: portions of said land lying within Mt. Madonna Road (Summit Road) and as shown on Survey made by Garcia and Henry, Inc., dated 12/86; 5/94 and 10/31/95, and last revised 1/18/96 (Job #86218 & 94022). 18. An easement for the purpose shown below and rights incidental thereto as set forth in the document: Granted To: Pacific Gas and Electric Company, a California Purpose: corporation construct, install, inspect, maintain, Recorded: replace, remove and use facilities Affects: July 5, 1984 in Book I 695 page 354, Official Records as second party deems necessary located within the portion of Summit Road as shown upon the Record of Survey Map filed for record in Book 495 of Maps at Page 11, Santa Clara County Records, lying within said lands. and as shown on Survey made by Garcia and Henry, Inc., dated 12/86; 5/94 and 10/31/95, and last revised 1/18/96 (Job #86218 & 94022). 19. See Schedule 2.1.8, Section 3, Lease Agreements Where Station is Lessor. General - ------- 20. Real estate taxes not yet due and payable or the validity of which is being contested in good faith. 21. Laws and governmental regulations that affect the use and maintenance of such real property. 22. Mechanics', carriers', workers', repairmens', and other similar liens not more than ninety (90) days old arising or incurred in the ordinary course of business. There has been no work done within the past ninety (90) days that would arise in any such liens. 23. Rights or claims of parties in possession not shown by the public records as parties in possession as tenant only. 42 SCHEDULE 3.14 EMPLOYEE BENEFIT PLANS STC Broadcasting, Inc. is a participating affiliate in the following Sunrise Television Corp. Benefit Plans. 1. Sunrise Television Corp. Employee Benefit Trust. Covering the following: . Life Insurance . Accidental Death, Dismemberment + Loss of Sight Insurance . Hospital . Medical Benefits Dental Care Benefits . Prescription and Mail Order Drug Benefit . Vision . Flexible Benefit Account - Dependent Premium only. . Long term care *, ** Determination letter sought, received and valid on tax exempt status of Trust. STC Broadcasting, Inc. will owe the following for each employee and separate dependent unit withdrawn from the Sunrise Health Plan, which will be satisfied on or before the closing: Employee $ 405.55 ========== Dependent Coverage Additional Amount $ 1,086.23 ========== These payments are to cover incurred but unreported claims as of closing. 2. Sunrise Television Corp. + Affiliates 401(k) Plan ***,**** 3. Sunrise Television Corp. + Affiliates Long and Short-Term Disability Plan *,** 4. Sunrise Television Corp. + Affiliates Travel - Accident Insurance Plan *, ** * No determination letter sought on plan. ** Completely funded by purchase of insurance contracts. *** Prototype plan of Dun & Bradstreet. Dun & Bradstreet has received favorable determination letter on prototype plan. Sunrise Television Corp has requested and received a favorable determination letter from the IRS. 43 **** The matching contribution component of the 401(k) Plan for employees is presently 100% on the first 3% of salary contributed. An additional discretionary matching contribution is possible. Participation in each of the foregoing plans will terminate at closing. 5. Additional Items a. See Seller's Employee Handbooks which are incorporated herein by reference. b. See Schedule 2.3.9 regarding employment agreements which may provide for additional benefits. 6. Cost of Benefit Programs . Health, Life and Dental . $210 for employee . $465 for family . Life Insurance . $.23 per $1,000 for Life . $.04 per $1,000 for AD & D . Disability . $.32 per $100 of covered compensation . $.29 per $100 of covered compensation . Long Term Care . See schedule attached 44 - -------------------------------------------------------------------------------- [LOGO OF UNUM RATE SHEET LONG TERM CARE APPEARS HERE] SUNRISE TELEVISION CORPORATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BASE PLAN - --------- Facility Monthly Benefit $2,000 House Monthly Benefit $1,000 Facility Benefit Duration 3 Years House Benefit 50% Lifetime Maximum $72,000 Elimination Period 90 DAY Home Care Level TOTAL - -------------------------------------------------------------------------------- This rate sheet shows the cost per $2,000 of coverage - -------------------------------------------------------------------------------- Your insurance age: Your age as of the effective date of coverage. - -------------------------------------------------------------------------------- Select age, plan and transfer premium cost to your Benefit Election Form. - -------------------------------------------------------------------------------- Monthly Rates - -------------------------------------------------------------------------------- AGE BASE PLAN AGE BASE PLAN - -------------------------------------------------------------------------------- 18-30 7.00 60 38.20 31 7.40 61 41.20 32 7.60 62 44.60 33 7.80 63 48.20 34 8.20 64 52.00 35 8.60 65 58.00 36 9.00 66 62.60 37 9.40 67 67.80 38 9.80 68 73.60 39 10.40 69 79.60 40 11.00 70 86.40 41 11.40 71 97.60 42 12.00 72 109.00 43 12.80 73 120.40 44 13.40 74 131.80 45 14.20 75 143.20 46 15.00 76 155.50 47 16.00 77 169.60 48 17.00 78 185.20 49 17.80 79 201.60 50 19.00 80 219.40 51 20.20 81 230.00 52 21.60 82 260.00 53 22.80 83 283.80 54 24.40 84 307.80 55 25.80 56 28.00 57 30.40 58 32.60 59 35.40 RUN DATE: 07/01/97 Employer Funded: MUBUYUP - -------------------------------------------------------------------------------- SCHEDULE 3.15 LABOR RELATIONS . See attached list of employees as of December 31, 1997. . See schedule 3.14 for details on benefits and employee personnel policies . See Schedule 2.3.9 for employee personal service contracts. . There are no collective bargaining agreements at KSBW-TV. . See Schedule 3.7 for potential claim on overtime by former employee. . If not offered employment by Hearst Argyle Stations, Inc. at closing, STC Broadcasting, Inc. has agreed with Robert Rice, general manager of KSBW-TV, that they will pay him one year severance. 45 All Current KSBW Employees by Dept. -----------------------------------
- ------------------------------------------------------------------------------------------------------------------------------ Last Name First Name Ann. Salary Job Title Ee Status - ------------------------------------------------------------------------------------------------------------------------------ ============================================================================================================================== Engineering: Fulltime: 13, Openings: 0 - ------------ ------------------------- ============================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------ Camacho Jose $37,500 Master Control Supervisor Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Dahle Randy $40,000 TV Maintenance Engineer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Fazekas Gary $26,392 Master Control Operator Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Garden Frank $34,049 TV Maintenance Engineer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Green Theresa $29,282 Master Control Operator Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Jagoda Stuart $62,500 Chief Engineer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Jonasson Bob $35,218 Master Control Operator Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Koskinen Stanley $35,219 Master Control Operator Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Mincey Gil $19,760 Master Control Operator Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Sainz David $21,367 Building Maintenance Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Salas Arnold $31,357 Master Control Operator Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Scott Bob $19,760 Master Control Operator Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Snow Calvin $35,360 TV Maintenance Engineer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Totals: $427,764 - ------------------------------------------------------------------------------------------------------------------------------ ============================================================================================================================== Programming: Fulltime: 1, Openings: 0 - ------------ ------------------------ ============================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------ AlkassAdeh Helbard $22,000 Programming Coordinator Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Totals: $22,000 - ------------------------------------------------------------------------------------------------------------------------------ ============================================================================================================================== News: Fulltime: 36, Openings: 1 Parttime: 2, Openings: 0 - ----- ------------------------- ------------------------ ============================================================================================================================== OPEN POSITION Reporter Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Alvarez Paul $23,920 Photographer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Barnwell Richard $17,944 New Operation Coordinator Fulltime/30+hours - ------------------------------------------------------------------------------------------------------------------------------ Balyn David $33,000 Assignment Editor Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Benitez Rapheal $21,632 Photographer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Bohn Veryl $22,495 Photographer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Byer Beverly $30,800 5 pm Anchor Fulltime/Contract - ------------------------------------------------------------------------------------------------------------------------------ Callaghan Kate $27,000 Sunrise/Midday Anchor Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Clark Laura $70,035 News Director Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Cortez Felix $26,500 Reporter Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Crisan Laurel $13,260 Associate Producer Fulltime/30+hours - ------------------------------------------------------------------------------------------------------------------------------ Evans Andrew $25,750 Weekend & Fill-in Sports Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------ Garrott Vance $22,048 Photographer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------------------
Page 1 All Current KSBW Employees by Dept. ----------------------------------- - --------------------------------------------------------------------------------------------------- Gomez Phil $28,000 Santa Cruz Bureau Reporter Fulltime/Perm - --------------------------------------------------------------------------------------------------- Green Dan $85,000 5, 6, 11pm Anchor Fulltime/Perm - --------------------------------------------------------------------------------------------------- Haubert Chris $38,000 Executive Producer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Kershner Dan $23,150 Photographer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Kim Darryl $21,632 Photographer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Langford Tom $24,500 Reporter Fulltime/Perm - --------------------------------------------------------------------------------------------------- Laurent Adrienne $31,500 11 pm Anchor Fulltime/Contract - --------------------------------------------------------------------------------------------------- Lee Jen $25,500 11 pm Producer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Lehnen Dennis $50,250 Primary Sports Anchor Fulltime/Perm - --------------------------------------------------------------------------------------------------- Lewis Libby $32,500 Weekend Anchor Fulltime/Perm - --------------------------------------------------------------------------------------------------- Mace Scott $30,000 Sunrise/Midday WX Fulltime/Perm - --------------------------------------------------------------------------------------------------- Mills Steve $28,208 Photographer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Moren Chris $7,600 Weekend Weather Anchor Parttime/Perm - --------------------------------------------------------------------------------------------------- Panalloni Charlotte $18,720 Associate Producer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Price Ted $27,500 Ag/Sunrise/Midday Anchor Fulltime/Perm - --------------------------------------------------------------------------------------------------- Reeves Randy $27,000 6 pm Producer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Sandoval Edgar $30,000 Weekend Anchor Fulltime/Perm - --------------------------------------------------------------------------------------------------- Sarkissian Aram $24,500 Sunrise Producer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Seeger Rick $27,000 Associate Producer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Smith Geoff $16,380 Fill-In Sports Anchor Fulltime/30+hrs - --------------------------------------------------------------------------------------------------- Teran Edgar $21,736 Photographer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Thompson Dan $22,880 Photographer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Van Aken Brian $7,600 Weekend Weather Anchor Parttime/Perm - --------------------------------------------------------------------------------------------------- Vanderzwaan Jim $76,000 Primary WX Anchor Fulltime/Perm - --------------------------------------------------------------------------------------------------- Velasco-Evers Cassady $28,000 5 pm Producer Fulltime/Perm - --------------------------------------------------------------------------------------------------- Wang Janelle $27,000 Gilroy Bureau Reporter Fulltime/Perm - --------------------------------------------------------------------------------------------------- Totals: $1,112,540 - --------------------------------------------------------------------------------------------------- =================================================================================================== Operations: Fulltime: 18, Openings:0 Parttime: 5, Openings: 1 =================================================================================================== - --------------------------------------------------------------------------------------------------- OPEN POSITION Operations Assistant *Parttime/Temp - --------------------------------------------------------------------------------------------------- Belicha Reina $20,800 Operations Coordinator Fulltime/Perm - --------------------------------------------------------------------------------------------------- Bennett Ray $45,000 MIS & Fulltime/Perm - --------------------------------------------------------------------------------------------------- Carpenter Chris $40,000 Operations Manager Fulltime/Perm - --------------------------------------------------------------------------------------------------- Chavez Robert $30,000 Graphic Artist Fulltime/Perm - --------------------------------------------------------------------------------------------------- Cleaveland Ray $39,400 Creative Services Producer/Dir Fulltime/Perm - --------------------------------------------------------------------------------------------------- DiVackey Ken $15,600 Operations Assistant Fulltime/Perm - --------------------------------------------------------------------------------------------------- Gomez Tito $15,600 Operations Assistant Fulltime/Perm - --------------------------------------------------------------------------------------------------- Govea Britt $29,994 Creative Services Producer/Dir Fulltime/Perm - ---------------------------------------------------------------------------------------------------
Page 2 All Current KSBW Employees by Dept. ----------------------------------- - ------------------------------------------------------------------------------------------------------------------- Hendricks Ron $15,600 Operations Assistant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Jamieson Rebecca $8,970 Operations Assistant *Parttime/Perm - ------------------------------------------------------------------------------------------------------------------- Jones Andrew $5,850 Operations Assistant *Parttime/Temp - ------------------------------------------------------------------------------------------------------------------- Mayes Doug $27,583 Newscast Director Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- McKenna Graham $21,840 Newscast Director Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Mora David $15,600 Operations Assistant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Morphy Oshen $2,080 Operations Videographer Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Nisley-Martinez Rachel $29,120 Assistant Operations Manager Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Parga Angela $19,760 Operations Assistant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Petree Vickie $11,700 Operations Assistant *Parttime/Temp - ------------------------------------------------------------------------------------------------------------------- Schiro Dean $21,840 Newcast Director Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Simmons Tadhg $15,600 Operations Assistant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Smith Steve $7,800 Operations Assistant *Partime/Temp - ------------------------------------------------------------------------------------------------------------------- Townsend Jet $21,840 Newscast Director Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Turner Mitch $9,750 Operations Assistant *Parttime/Temp - ------------------------------------------------------------------------------------------------------------------- Totals: $471,327 - ------------------------------------------------------------------------------------------------------------------- =================================================================================================================== Sales: Fulltime: 11 Openings: 1 - ------ -------------------------- =================================================================================================================== - ------------------------------------------------------------------------------------------------------------------- OPEN POSITION **(Will Be Commission Only) Media Consultant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Clifton Kelli (2) $36,397 Sales Promotion Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Fratzke Nicole (1) $35,557 Media Consultant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Hillan Wendy (2) $100,837 Sales Manager Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Klayman Jeff (2) $77,162 National Sales Manager Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Lazaro Helen $20,800 Sales Assistant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Moran (Balertrieri) Cassandra (1) $56,182 Media Consultant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Oates Judy (1) $42,463 Media Consultant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Schreck Diane (2) $83,696 Regional Sales Manager Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Subbotin Sally (1) $64,484 Media Consultant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Tervooren Barbara (1) $67,480 Media Consultant Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Thomas Amanda (2) $34,127 Sales Events Fulltime/Perm - ------------------------------------------------------------------------------------------------------------------- Totals: $619,185 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- (1): Paid By Commission, Used 1998 Budget - ------------------------------------------------------------------------------------------------------------------- (2): Includes Salary plus 1998 Budgeted Commissions. - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- =================================================================================================================== Traffic: Fulltime: 3 Openings: 0 - -------- ------------ ------------ - -------------------------------------------------------------------------------------------------------------------
Page 3
All Current KSBW Employees by Dept. ----------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- L'Hommedieu Phrona $27,429 Traffic Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Pendergrass Pam $41,862 Traffic Manager Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Tilmon Marian $22,187 Traffic Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Totals: $91,478 - -------------------------------------------------------------------------------------------------------------- ============================================================================================================== Promotions: Fulltime: 1 Openings: 0 ============================================================================================================== - -------------------------------------------------------------------------------------------------------------- Frederick Charles $29,000 Promotions Producer Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Totals: $29,000 - -------------------------------------------------------------------------------------------------------------- ============================================================================================================== General & Administrative: Fulltime: 7 Openings: 0 ============================================================================================================== - -------------------------------------------------------------------------------------------------------------- Holmes Elaine $19,282 Receptionist Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Kiser Shannon $26,000 Human Resources & Executive Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Martin-Fong Joyce $31,929 Accounts Payable & Payroll Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Penera Tessie $26,500 Accounts Receivables Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Pires Carol $62,000 Business Manager Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Rice Bob $176,402 General Manager Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Wright Theresa $30,900 Community Relations Director Fulltime/Perm - -------------------------------------------------------------------------------------------------------------- Totals: $373,013 - --------------------------------------------------------------------------------------------------------------
Page 4 SCHEDULE 3.16 ENVIRONMENTAL MATTERS 1. Phase I Environmental Site Assessment and Limited Soil Survey dated March 8,1994 is incorporated herein by reference. 2. Letter from Environmental Strategies Corporation ("ESC") dated August 4, 1995 is incorporated herein by reference. 3. Letter from PHR Environmental Consultants ("PHR") dated September 19, 1995 is incorporated herein by reference. 4. Letter from "PHR" dated October 9, 1995 is incorporated herein by reference. 5. Letter from "ESC" dated October 17, 1995 is incorporated herein by reference. 6. Letter from "PHR" dated October 30, 1995 is incorporated herein by reference. 7. Report dated November 20, 1995 from "PHR" is incorporated herein by reference. 8. Letter from "PHR" dated December 22, 1995 is incorporated herein by reference. 9. Letter from "PHR" dated January 10, 1996 is incorporated herein by reference. 10. Letter from "PHR" dated January 18, 1996 is incorporated herein by reference. 11. Letter from "ESC" dated January 24, 1996 is incorporated herein by reference. 12. KSBW Business Response Plan dated April 15, 1996 is incorporated herein by reference. 13. Letter from ESC dated January 21,1998 46 SCHEDULE 3.17 INSURANCE POLICIES See attached Summary of Coverage. STC Broadcasting, Inc. has elected to participate in the Hicks, Muse, Tate & Furst insurance program. Coverage for the Station under all such policies will terminate as of Closing. 47 [SUNRISE TELEVISION CORP. LOGO APPEARS HERE] STC Broadcasting, Inc. VI. Schedule of Insurance and Aon Service Team = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = STC BROADCASTING, INC. SCHEDULE OF INSURANCE --------------------- As of April 1, 1997
==================================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ COVERAGE CARRIER XXX NUMBER EFFECTIVE DATES LIMITS - ------------------------------------------------------------------------------------------------------------------------------------ Aircraft Liability St. Paul (USAIG) 360AC279269 4/01/97 - 4/01/98 $ 30,000,000 Combined Single Limit (Non-Owned) Auto Liability/Physical Federal Insurance Co 73212846 4/01/97 - 4/01/98 $ 1,000,000 CSL Damage $ 500 Comprehensive Deductible $ 500 Collision Deductible $ 50,000 Hired Car Physical Damage $ 500 Hired Car Physical Damage Comprehensive Ded $ 500 Hired Car Physical Damage Collision Ded Boiler & Machinery Hartford Steam Boiler BMINY621326501 4/01/97 - 4/01/98 $ 100,000,000 Combined PD/BI/EE/Utility Interruption $ 5,000,000 Ammonia Contamination $ 5,000,000 Water Damage $ 5,000,000 Consequential Damage $ 5,000,000 Expediting Expense $ 500,000 Hazardous Substance $ 5,000 Deductible; except ----------- 12 Hours Utility Interruption 24 Hours BI/EE Broadcasters E&O Employers Reins. Corp. BR11030 2/28/97 - 2/28/98 $ 5,000,000 Each Occurrence Crime Federal Insurance Co. 81477513 2/28/97 - 7/01/98 $ 1,000,000 Employee Theft $ 100,000 Depositor's Theft $ 1,000 Deductible
STC BROADCASTING, INC. SCHEDULE OF INSURANCE --------------------- As of April 1, 1997
- ------------------------------------------------------------------------------------------------------------------------------------ COVERAGE CARRIER POLICY NUMBER EFFECTIVE DATES LIMITS - ------------------------------------------------------------------------------------------------------------------------------------ Directors & Officers National Union Fire 4835299 2/28/97 - 07/01/99 $ 10,000,000 Limit of Liability Liability Insurance Company $ 100,000 Corporate Retention Employment Practices A.I. Surplus Lines 8192085 2/28/97 - 12/31/99 $ 10,000,000 Limit of Liability Liability $ 100,000 Corporate Retention Fiduciary Liability Federal Insurance Co. 81477513 2/28/97 - 7/01/98 $ 10,000,000 Limit of Liability General Liability Federal Insurance Co. 35352734 4/01/97 - 4/01/98 $ 2,000,000 General Aggregate $ 1,000,000 Products/Completed Operations Aggregate $ 1,000,000 Personal & Advertising Injury $ 1,000,000 Per Occurrence $ 1,000,000 Fire Damage $ 10,000 Medical Property Lexington Insurance Co. 8793049 4/01/97 - 4/01/98 $ 400,000,000 "All Risk" Including Business Interruption (Primary $5,000,000) Loss Limit Per Occurrence Sublimits Are Per Occurrence unless Otherwise Stated $ 400,000,000 Earthquake - Annual Aggregate (Outside CA) $ 100,000,000 Earthquake - Annual Aggregate (CA) $ 400,000,000 Flood - Annual Aggregate $ 5,000 Deductible Except: ------ $ 5,000 Transit $ 50,000 Flood 5% Earthquake - Per Unit of Insurance $ 100,000 Earthquake Minimum - CA Only $ 50,000 Earthquake Minimum - All Other States 2% Wind - Tier 1 Locations $ 100,000 Wind - Minimum
STC BROADCASTING, INC. SCHEDULE OF INSURANCE --------------------- As of April 1, 1997
==================================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ COVERAGE CARRIER POLICY NUMBER EFFECTIVE DATES LIMITS - ------------------------------------------------------------------------------------------------------------------------------------ Umbrella Westchester Fire Ins. Co. CUA1036790 4/01/97 - 4/01/98 $ 20,000,000 Per Occurrence $ 20,000,000 Aggregate $ 10,000 Self-Insured Retention Excess Liability TIG Insurance Co. XLX9262707 4/01/97 - 4/01/98 $ 25,000,000 Per Occurrence Excess of $20,000,000 $ 25,000,000 Aggregate Excess Liability Federal Insurance Co. 79402066 4/01/97 - 4/01/98 $ 30,000,000 Per Occurrence Excess of $45,000,000 $ 30,000,000 Aggregate Excess Liability Travelers Indemnity Co. 7FSEEEX269T427297 4/01/97 - 4/01/98 $ 25,000,000 Per Occurrence Excess of $75,000,000 $ 25,000,000 Aggregate Workers' Compensation Federal Insurance Co. 71631919 4/01/97 - 4/01/98 Statutory (Work Comp) Employers' Liability: $ 1,000,000 Each Accident $ 1,000,000 Disease-Policy Limit $ 1,000,000 Disease-Each Employee
SCHEDULE 3.19 AFFILIATED TRANSACTIONS See Schedule 2.4.16 for details 48 SCHEDULE 12.2 BROKER Hearst-Argyle Stations, Inc. and STC Broadcasting, Inc have agreed to pay Chase Manhattan Bank a broker fee of $1.1 million. Each party agrees to pay 50% of this amount upon the final closing of the Asset Exchange Agreement. 49 EX-10.25 4 AMENDMENT NO. 1 TO CREDIT AGMT EXHIBIT 10.25 Execution Copy AMENDMENT NO. 1 AMENDMENT NO. 1 dated as of October 31, 1997, between HEARST-ARGYLE TELEVISION, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Borrower"); each of the subsidiaries of the -------- Company party hereto and party to the Credit Agreement (individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors"); each of - --------------------- --------------------- the lenders that is a signatory hereto (individually, a "Lender" and, ------ collectively, the "Lenders"); and THE CHASE MANHATTAN BANK, as Administrative ------- Agent. The Borrower, the Subsidiary Guarantors, the Lenders and the Administrative Agent are parties to a Credit Agreement dated as of August 29, 1997 (the "Credit Agreement"), providing, subject to the terms and conditions ---------------- thereof, for extensions of credit to the Borrower (by means of loans and letters of credit) in an aggregate amount up to $1,000,000,000 (which may, in the circumstances therein provided, be increased to $1,250,000,000). The Borrower has requested that the Lenders amend the Credit Agreement in order to, among other things, (i) release the Subsidiary Guarantors from their respective obligations under the Credit Agreement and (ii) make certain other modifications to the Credit Agreement. Accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this ----------- Amendment No. 1, terms defined in the Credit Agreement are used herein as defined therein (including the Credit Agreement as amended by this Amendment No. 1). Section 2. Release. Subject to the execution and delivery of this ------- Amendment No. 1 by each Obligor and each Lender, but effective as of the date hereof, the Subsidiary Guarantors are hereby released and discharged from their respective obligations under the Credit Agreement. Without limiting the generality of the foregoing, subject to the satisfaction of such conditions precedent, but effective the date hereof, the Subsidiary Guarantors shall cease to be parties to the Credit Agreement and shall no longer have any rights or obligations thereunder. Section 3. Amendments. Subject to the satisfaction of the conditions ---------- set forth in Section 4 hereof, but effective as of the date hereof, the Credit Agreement is hereby amended as follows: 3.01. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended hereby. -2- 3.02. Section 1.01 of the Credit Agreement shall be amended by adding the following new definitions (to the extent not already included in said Section 1.01) and inserting the same in the appropriate alphabetical locations and amending the following definitions (to the extent already included in said Section 1.01), as follows: "Obligor" means the Borrower. ------- "Restricted Debt Payment" means any purchase, redemption, retirement ----------------------- or acquisition for value, or the setting apart of any money for a sinking, defeasance or other analogous fund for the purchase, redemption, retirement or other acquisition of, or any voluntary payment or prepayment of the principal of or interest on, or any other amount owing in respect of, the Senior Subordinated Notes or any Additional Permitted Indebtedness, provided that the term "Restricted Debt Payment" shall not include (x) the -------- repurchase of the Senior Subordinated Notes resulting from a "change of control event" in connection with the Merger Transactions or the redemption or defeasance of the Senior Subordinated Notes contemplated by Section 6.09(d) hereof, (y) regularly scheduled payments of principal or interest in respect of the Senior Subordinated Notes or (z) regularly scheduled payments of principal or interest in respect of Additional Permitted Indebtedness, in the case of each of the foregoing clauses (y) and (z), to the extent required pursuant to the instruments evidencing the Senior Subordinated Notes or such Additional Permitted Indebtedness, as the case may be. "Senior Notes" means, collectively, the Senior Notes Due 2007 and ------------ Senior Debentures Due 2027 to be issued by the Borrower as contemplated in a Prospectus Supplement to Prospectus dated October 17, 1997, a copy of which has ben supplied to the Lenders prior to the execution and delivery of Amendment No. 1 hereto. "Senior Notes Indenture" means the Indenture between the Borrower and ---------------------- Bank of Montreal Trust Company, as trustee, pursuant to which the Senior Notes are to be issued. 3.03. Section 1.01 of the Credit Agreement shall be amended by deleting the definition of "Guarantee Assumption Agreement" and of "Subsidiary Guarantor" in their entirety. 3.04. Article III of the Credit Agreement is hereby deleted its entirety, and instead the following should be inserted under "ARTICLE III": "ARTICLE III IS INTENTIONALLY DELETED IN ITS ENTIRETY". -3- 3.05. Section 6.09 of the Credit Agreement is hereby amended to read as follows: "SECTION 6.09. Certain Obligations Respecting Subsidiaries and Senior ------------------------------------------------------ Subordinated Notes. ------------------ (a) Wholly Owned Subsidiaries. Subject to paragraph (b) below, the ------------------------- Borrower will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that each of its Consolidated Subsidiaries is a Wholly Owned Subsidiary. (b) Designated Subsidiaries. Notwithstanding the provisions of ----------------------- paragraph (a) above, the Borrower may at any time after the date hereof designate any Subsidiary (other than a Subsidiary holding any Station Licenses or the operating assets of any Stations) as a "Designated Subsidiary" for purposes of this Agreement, by delivering to the Administrative Agent a certificate of a senior officer of the Borrower (and the Administrative Agent shall promptly deliver a copy thereof to each Lender following receipt) identifying such Subsidiary, stating that such Subsidiary shall be treated as a "Designated Subsidiary" for all purposes hereof and certifying that, after giving effect to such designation, the Borrower will be in compliance with the provisions of this Agreement applicable to such Designated Subsidiary (including the provisions of Section 7.05(f) with respect to the type of business in which a Designated Subsidiary shall be involved and the limitations upon the aggregate amount of Investments in Designated Subsidiaries therein specified), and such designation will not result in a Default hereunder. Any Subsidiary of a Designated Subsidiary shall be deemed to be a "Designated Subsidiary". (c) Incorporation by Reference. The Borrower agrees, for the benefit --------------------------- of the Lenders and the Administrative Agent hereunder, to perform, comply with and be bound by each of is covenants, agreements and obligations contained in Section 10.7 and 10.8 of the Senior Notes Indenture as originally in effect and without giving effect to any modifications or supplements thereto, or termination thereof, after the date thereof. Without limiting the generality of the foregoing, the above-mentioned provisions of the Senior Notes Indenture, together with related definitions and ancillary provisions and schedules and exhibits, are hereby incorporated by reference, as if set forth herein in full, mutatis ------- mutandis; provided that, as incorporated herein (i) each reference to the -------- -------- "Company" shall be deemed to be reference to the Borrower hereunder and (ii) each reference to the "Debt Securities" of any series shall be deemed to be a reference to the Loans hereunder. (d) Retirement of Senior Subordinated Notes. Within 120 days --------------------------------------- following the effectiveness of Amendment No. 1 hereto, the Borrower shall either (x) take such action as shall be necessary either to redeem the Senior Subordinated Notes in full pursuant to the provisions of Section 11.01(c) of the Indenture for the Senior Subordinated Notes or (y) irrevocably deposit with the trustee for the Senior -4- Subordinated Notes an amount sufficient to defease the Senior Subordinated Notes pursuant to Section 4.03 of said Indenture, and, in the case of either of the foregoing clauses (x) and (y), shall have delivered to the Administrative Agent evidence satisfactory to the Administrative Agent that such action shall have been taken or such deposit made." 3.06. Section 7.01 of the Credit Agreement is hereby amended to read as follows: "SECTION 7.01. Indebtedness. The Borrower will not, nor will it ------------ permit any of its Consolidated Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness hereunder; (b) Indebtedness existing on the date hereof and set forth in Part A of Schedule II (including Indebtedness relating to the Hearst Stations assumed in connection with the Merger Transactions, but excluding, following the making of the initial Loans hereunder, the Indebtedness to be repaid with the proceeds of such Loans, as indicated on Schedule II), together with any extensions, renewals, refinancings or replacements of any such Indebtedness so long as the principal thereof is not increased and such Indebtedness, as so extended, renewed, refinanced or replaced, would constitute Indebtedness that could be incurred in compliance with Section 7.01(g); (c) Indebtedness of any Consolidated Subsidiary to the Borrower or any other Consolidated Subsidiary; (d) Guarantees by the Borrower of Indebtedness of any Consolidated Subsidiary and by any Consolidated Subsidiary of Indebtedness of any other Consolidated Subsidiary; (e) Indebtedness of the Borrower and its Subsidiaries in respect of the deferred payment of insurance premiums up to an aggregate principal amount not exceeding $10,000,000 at any one time outstanding; (f) Indebtedness of any Person that becomes a Consolidated Subsidiary after the Effective Date; provided that such Indebtedness -------- exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Consolidated Subsidiary; (g) additional Indebtedness of the Borrower, incurred after the Effective Date (or assumed in connection with an Acquisition), provided that -------- -5- (i) the stated maturity date with respect to such Indebtedness shall be at least six months after the Maturity Date, (ii) no principal payments with respect to such Indebtedness shall be stated to be due prior to the Maturity Date (other than in respect of a Change of Control or similar event), except that if such Indebtedness is pari passu in right of ---- ----- payment with the obligations of the Obligors hereunder (i.e. not subordinated in right of payment to such obligations), such Indebtedness may provide for principal payments prior to the Maturity Date, so long as the weighted average life to maturity of such Indebtedness (determined in accordance with GAAP) is not earlier than the weighted average life to maturity of the Loans hereunder, (iii) all covenants with respect to such Indebtedness shall be no more restrictive then the covenants set forth in this Agreement and the Borrower shall be in compliance with such covenants, (iv) such Indebtedness is not secured by any Lien on property of the Borrower or any Consolidated Subsidiary, and (v) at the time of such incurrence, and after giving effect thereto, no Default shall have occurred and be continuing and the Borrower shall be in pro forma compliance with Section 7.10 (the determination of such pro forma compliance to be calculated, as at the end of and for the period of four fiscal quarters most recently ended prior to the date of such incurrence for which financial statements of the Borrower and its Consolidated Subsidiaries are available, under the assumption that such incurrence shall have occurred at the beginning of the applicable period) and the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer showing such calculations in reasonable detail to demonstrate such compliance; and (h) other Indebtedness (whether or not secured) of the Borrower or any Consolidated Subsidiary in an aggregate principal amount not exceeding $25,000,000 at any time outstanding, and other Indebtedness (not secured) of the Borrower (but not of any Consolidated Subsidiary) in an aggregate principal amount not exceeding $100,000,000 at any time outstanding, so long as the aggregate principal amount of Indebtedness permitted under this clause (h) shall not exceed $125,000,000 at any time outstanding." 3.07. Section 7.03(a) of the Credit Agreement is hereby amended in its entirety to read as follows: -6- "(a) Mergers and Consolidations. The Borrower will not, nor will it -------------------------- permit any of its Consolidated Subsidiaries to, enter into any transaction of merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that, subject -------- to Section 7.04, and so long as after giving effect thereto no Default shall have occurred and be continuing hereunder, (i) any Consolidated Subsidiary of the Borrower may merge into or consolidate with the Borrower or a Consolidated Subsidiary so long as the Borrower or a Consolidated Subsidiary is the continuing or surviving party, (ii) any Consolidated Subsidiary of the Borrower may liquidate or dissolve into the Borrower or a Consolidated Subsidiary and (iii) the Borrower and its Consolidated Subsidiaries may enter into the transactions permitted under clauses (B), (C) or (D) of paragraph (b) below, and under clause (iv) of paragraph (c) below." 3.08. The first sentence of Section 10.01(a) of the Credit Agreement is hereby amended by deleting "or any Subsidiary Guarantor". 3.09. Section 10.02(b) of the Credit Agreement is hereby amended in its entirety to read as follows: "(b) Amendments. Neither this Agreement nor any provision hereof may ---------- be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase any -------- Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of any reduction or expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.17(b) or (d) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, or (v) change any of the provisions of this Section or the definition of the term "Required Incremental Facility Lenders", "Required Lenders", "Required Revolving Lenders" or "Required Term Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; and provided further -------- ------- that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Lender or either Swingline Lender hereunder without the prior written consent of the Administrative Agent, the Issuing Lender or such Swingline Lender, as the case may be. -7- Anything in this Agreement to the contrary notwithstanding, no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling the Borrower to satisfy a condition precedent to the making of a Revolving Loan, or Incremental Facility Loans of any Series, shall be effective against the Revolving Lenders or Incremental Facility Lenders of such Series, as the case may be, for purposes of the Revolving Commitments or Incremental Facility Commitments of such Series unless the Required Revolving Lenders or Required Incremental Facility Lenders of such Series, as applicable, shall have concurred with such waiver or modification." Section 4. Conditions to Effectiveness. The effectiveness of the --------------------------- amendments to the Credit Agreement provided in Section 3 hereof are subject to the fulfillment of the following conditions precedent to the satisfaction of the Administrative Agent: (a) Execution. This Amendment No. 1 shall have been duly executed --------- and delivered by each Obligor and each Lender. (b) Issuance of Senior Notes. The Senior Notes shall have been ------------------------ issued substantially as contemplated in the Prospectus Supplement to Prospectus dated October 17, 1997, heretofore delivered to each of the Lenders, and the Borrower shall have received the net cash proceeds thereof. (c) Other Documents. The Administrative Agent shall have received --------------- such other documents as it shall have reasonably requested. Upon the satisfaction of such conditions precedent, the Administrative Agent shall advise the Borrower and each of the Lenders in writing, whereupon the amendments provided for in Section 3 hereof shall become effective. Section 5. Miscellaneous. Except as herein provided, the Credit ------------- Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 1 by signing any such counterpart. This Amendment No. 1 shall be governed by, and construed in accordance with, the law of the State of New York. -8- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered as of the day and year first above written. HEARST-ARGYLE TELEVISION, INC. By /s/ Dean H. Blythe ---------------------------- Title: As provided in Section 2 of the foregoing Amendment No. 1, the Subsidiary Guarantors hereby consent to the execution and delivery of said Amendment No. 1 and agree that, effective upon the Amendment No. 1 Effective Date, the Subsidiary Guarantors will be released and discharged from any and all obligations under the Credit Agreement. SUBSIDIARY GUARANTORS --------------------- ARKANSAS HEARST-ARGYLE HAWAII HEARST-ARGYLE TELEVISION, INC., TELEVISION, INC. By /s/ Dean H. Blythe By /s/ Dean H. Blythe ------------------------- ---------------------------- Name: Name: Title: Title: JACKSON HEARST-ARGYLE OHIO/OKLAHOMA HEARST-ARGYLE TELEVISION, INC. TELEVISION, INC. By /s/ Dean H. Blythe By /s/ Dean H. Blythe ------------------------- ---------------------------- Name: Name: Title: Title: HEARST-ARGYLE STATIONS, INC WAPT HEARST-ARGYLE TELEVISION, INC., By /s/ Dean H. Blythe By /s/ Dean H. Blythe ------------------------- -------------------------- Name: Name: Title: Title: -9- KITV HEARST-ARGYLE KHBS HEARST-ARGYLE TELEVISION, INC. TELEVISION, INC. By /s/ Dean H. Blythe By /s/ Dean H. Blythe ------------------------- -------------------------- Name: Name: Title: Title: KMBC HEARST-ARGYLE WBAL HEARST-ARGYLE TELEVISION, INC TELEVISION, INC By /s/ Dean H. Blythe By /s/ Dean H. Blythe ------------------------ ---------------------------- Name: Name: Title: Title: WCVB HEARST-ARGYLE WISN HEARST-ARGYLE TELEVISION, INC TELEVISION, INC By /s/ Dean H. Blythe By /s/ Dean H. Blythe ------------------------ ---------------------------- Name: Name: Title: Title: WTAE HEARST-ARGYLE TELEVISION, INC By /s/ Dean H. Blythe ------------------------- Name: Title: -10- LENDERS ------- THE CHASE MANHATTAN BANK, MORGAN GUARANTY TRUST COMPANY individually, as Swingline Lender OF NEW YORK, individually, as and as Administrative Agent Swingline Lender and as Documentation Agent By /s/ Mitchell Gervis By /s/ Adam J. Silver ---------------------- -------------------------- Name: Mitchell J. Gervis Name: Adam J. Silver Title: Vice President Title: Associate BANK OF MONTREAL THE BANK OF NEW YORK By /s/ R. Encarnacion By /s/ Brendan J. Nedzi ----------------------- ------------------------- Name: R. Encarnacion Name: Brendan J. Nedzi Title: Director Title: Senior Vice President BANQUE PARIBAS TORONTO DOMINION (TEXAS), INC. By /s/ Lynne S. Randall By /s/ Frederic Hawley ---------------------- -------------------------- Name: Lynne S. Randall Name: Frederic Hawley Title: Director Title: Vice President By /s/ William B. Schink ---------------------- Name: William B. Schink Title: Director UNION BANK OF CALIFORNIA, N.A. CAISSE NATIONALE DE CREDIT AGRICOLE By /s/ Sonia L. Isaacs By /s/ John McCloskey ----------------------- ------------------------- Name: Sonia L. Isaacs Name: John McCloskey Title: Vice President Title: Vice President -11- THE DAI-ICHI KANGYO BANK, LTD. WACHOVIA BANK, N.A. By /s/ Frank A. Bertelle By /s/ June C. Deaver ---------------------------- ----------------------------- Name: Frank A. Bertelle Name: June C. Deaver Title: Assiatant Vice President Title: Vice President THE BANK OF NOVA SCOTIA FIRST HAWAIIAN BANK By /s/ Margot C. Bright By /s/ James C. Polk ---------------------------- ----------------------------- Name: Margot C. Bright Name: James C. Polk Title: Authorized Signatory Title: Assistant Vice President THE MITSUBISHI TRUST AND SUNTRUST BANK, CENTRAL FLORIDA, BANKING CORPORATION N.A. By /s/ Beatrice E. Kossodo By /s/ Janet P. Sammons ---------------------------- --------------------------- Name: Beatrice E. Kossodo Name: Janet P. Sammons Title: Senior Vice President Title: Vice President THE SANWA BANK LIMITED THE TOYO TRUST & BANKING COMPANY, LTD. By /s/ Paul Judike By /s/ Takashi Mikumo ---------------------------- ----------------------------- Name: Paul Judicke Name: Takashi Mikumo Title: Vice President Title: Vice President MICHIGAN NATIONAL BANK By /s/ Stephane Lubin ---------------------------- Name: Stephane Lubin Title: Relationship Manager EX-10.26 5 AMENDMENT #2 TO CREDIT AGREEMENT EXHIBIT 10.26 Execution Copy AMENDMENT NO. 2 AMENDMENT NO. 2 dated as of January 30, 1998, between HEARST-ARGYLE TELEVISION, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Borrower"); each of the lenders that is a -------- signatory hereto (individually, a "Lender" and, collectively, the "Lenders"); ------ ------- and THE CHASE MANHATTAN BANK, as Administrative Agent. The Borrower, the Lenders and the Administrative Agent are parties to a Credit Agreement dated as of August 29, 1997, as amended (the "Credit ------ Agreement"), providing, subject to the terms and conditions thereof, for - --------- extensions of credit to the Borrower (by means of loans and letters of credit) in an aggregate amount up to $1,000,000,000 (which may, in the circumstances therein provided, be increased to $1,250,000,000). The Borrower has requested that the Lenders amend the Credit Agreement in order to make certain modifications to Section 6.09 of the Credit Agreement. Accordingly, the parties hereto hereby agree as follows: Section 1. Definitions. Except as otherwise defined in this ----------- Amendment No. 2, terms defined in the Credit Agreement are used herein as defined therein (including the Credit Agreement as amended by this Amendment No. 2). Section 2. Amendments. Subject to the satisfaction of the conditions ---------- set forth in Section 3 hereof, but effective as of the date hereof, the Credit Agreement is hereby amended as follows: 2.01. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended hereby. 2.02. Section 6.09 of the Credit Agreement is hereby amended to read as follows: "SECTION 6.09. Certain Obligations Respecting Subsidiaries. ------------------------------------------- (a) Wholly Owned Subsidiaries. Subject to paragraph (b) below, the ------------------------- Borrower will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that each of its Consolidated Subsidiaries is a Wholly Owned Subsidiary. (b) Designated Subsidiaries. Notwithstanding the provisions of ----------------------- paragraph (a) above, the Borrower may at any time after the date hereof designate any Subsidiary (other than a Subsidiary holding any Station Licenses or the operating assets of any Stations) as -2- a "Designated Subsidiary" for purposes of this Agreement, by delivering to the Administrative Agent a certificate of a senior officer of the Borrower (and the Administrative Agent shall promptly deliver a copy thereof to each Lender following receipt) identifying such Subsidiary, stating that such Subsidiary shall be treated as a "Designated Subsidiary" for all purposes hereof and certifying that, after giving effect to such designation, the Borrower will be in compliance with the provisions of this Agreement applicable to such Designated Subsidiary (including the provisions of Section 7.05(f) with respect to the type of business in which a Designated Subsidiary shall be involved and the limitations upon the aggregate amount of Investments in Designated Subsidiaries therein specified), and such designation will not result in a Default hereunder. Any Subsidiary of a Designated Subsidiary shall be deemed to be a "Designated Subsidiary". (c) Incorporation by Reference. The Borrower agrees, for the benefit --------------------------- of the Lenders and the Administrative Agent hereunder, to perform, comply with and be bound by each of is covenants, agreements and obligations contained in Section 10.7 and 10.8 of the Senior Notes Indenture as originally in effect and without giving effect to any modifications or supplements thereto, or termination thereof, after the date thereof. Without limiting the generality of the foregoing, the above-mentioned provisions of the Senior Notes Indenture, together with related definitions and ancillary provisions and schedules and exhibits, are hereby incorporated by reference, as if set forth herein in full, mutatis ------- mutandis; provided that, as incorporated herein (i) each reference to the -------- -------- "Company" shall be deemed to be reference to the Borrower hereunder and (ii) each reference to the "Debt Securities" of any series shall be deemed to be a reference to the Loans hereunder." Section 3. Conditions to Effectiveness. The effectiveness of the --------------------------- amendments to the Credit Agreement provided in Section 2 hereof are subject to the fulfillment of the following conditions precedent to the satisfaction of the Administrative Agent: (a) Execution. This Amendment No. 2 shall have been duly executed --------- and delivered by the Borrower and each Lender. (b) Other Documents. The Administrative Agent shall have received --------------- such other documents as it shall have reasonably requested. Upon the satisfaction of such conditions precedent, the Administrative Agent shall advise the Borrower and each of the Lenders in writing, whereupon the amendments provided for in Section 2 hereof shall become effective. Section 4. Miscellaneous. Except as herein provided, the Credit ------------- Agreement shall remain unchanged and in full force and effect. This Amendment No. 2 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 2 by signing any such -3- counterpart. This Amendment No. 2 shall be governed by, and construed in accordance with, the law of the State of New York. -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be duly executed and delivered as of the day and year first above written. HEARST-ARGYLE TELEVISION, INC. By /s/ Harry T. Hawk _____________________________________ Name: Harry T. Hawk Title: Senior Vice President and Chief Financial Officer -5- LENDERS ------- THE CHASE MANHATTAN BANK, MORGAN GUARANTY TRUST COMPANY individually, as Swingline Lender OF NEW YORK, individually, as and as Administrative Agent Swingline Lender and as Documentation Agent By /s/ Mitchell J. Gervis By /s/ David V. Fox --------------------------- --------------------------- Name: Mitchell J. Gervis Name: David V. Fox Title: Vice President Title: Vice President BANK OF MONTREAL THE BANK OF NEW YORK By /s/ Juliet Barnes By /s/ Debra L. McGarry --------------------------- --------------------------- Name: Juliet Barnes Name: Debra L. McGarry Title: Director Title: Vice President BANQUE PARIBAS TORONTO DOMINION (TEXAS), INC. By /s/ Lynne S. Randall By /s/ Neva Nesbitt --------------------------- --------------------------- Name: Lynne S. Randall Name: Neva Nesbitt Title: Director Title: Vice President By /s/ William B. Schink --------------------------- Name: William B. Schink Title: Director UNION BANK OF CALIFORNIA, N.A. CREDIT AGRICOLE INDOSUEZ By /s/ William D. Gooch By /s/ R. Craig Welch --------------------------- --------------------------- Name: William D. Gooch & /s/ Cheryl A. Solaneto Title: Vice President --------------------------- Name: R. Craig Welsh Title: First Vice President -6- THE DAI-ICHI KANGYO BANK, LTD. WACHOVIA BANK, N.A. By /s/ Frank A. Bertelle By /s/ James McCreary --------------------------------- --------------------------- Name: Frank A. Bertelle Name: James McCreary Title: Assistant Vice President Title: Senior Vice President THE BANK OF NOVA SCOTIA FIRST HAWAIIAN BANK By /s/ Vincent J. Fitzgerald, Jr. By /s/ James C. Polk --------------------------------- --------------------------- Name: Vincent J. Fitzgerald, Jr. Name: James C. Polk Title: Authorized Signatory Title: Assistant Vice President THE MITSUBISHI TRUST AND SUNTRUST BANK, CENTRAL FLORIDA, BANKING CORPORATION N.A. By /s/ T. Hayashi By /s/ Janet P. Sammons --------------------------------- --------------------------- Name: Toshihiro Hayashi Name: Janet P. Sammons Title: Senior Vice President Title: Vice President THE SANWA BANK LIMITED THE TOYO TRUST & BANKING COMPANY, LTD. By /s/ Paul Judicke By /s/ T. MiKumo --------------------------------- -------------------------- Name: Paul Judicke Name: T. MiKumo Title: Vice President Title: Vice President MICHIGAN NATIONAL BANK By /s/ Stephane Lubin --------------------------------- Name: Stephane Lubin Title: Relationship Manager EX-10.27 6 ASSET EXCHANGE AGREEMENT EXHIBIT 10.27 ASSET EXCHANGE AGREEMENT by and among ------------------------------- STC BROADCASTING, INC., STC BROADCASTING OF VERMONT, INC., STC LICENSE COMPANY, STC BROADCASTING OF VERMONT SUBSIDIARY, INC. as STC and HEARST-ARGYLE STATIONS, INC. as HAT ------------------------------- February 18, 1998 INDEX TAB DOCUMENTS - --- --------- 1. Asset Exchange Agreement 2. Exhibits to Asset Exchange Agreement Exhibit A: Bill of Sale and Assignment of Assets Exhibit B: Assignment of FCC Licenses Exhibit C: Assignment of Contracts and Leases Exhibit D: Assumption Agreement Exhibit E: Credit Facilities 3. STC Disclosure Schedules 4. HAT Guaranty ASSET EXCHANGE AGREEMENT BY AND AMONG STC BROADCASTING, INC., STC BROADCASTING OF VERMONT, INC., STC LICENSE COMPANY STC BROADCASTING OF VERMONT SUBSIDIARY, INC. AND HEARST-ARGYLE STATIONS, INC. Dated as of February 18, 1998 TABLE OF CONTENTS ----------------- Page ---- ARTICLE 1. DEFINITIONS AND REFERENCES......................................3 ARTICLE 2. EXCHANGE OF ASSETS..............................................3 2.1. Transfer by the STC Exchange Entities..............................3 2.2. Transfer by HAT....................................................4 2.3. Description of the Assets..........................................4 2.3.1. FCC Licenses..............................................4 2.3.2. Real and Leased Property Interests........................4 2.3.3. Tangible Personal Property................................5 2.3.4. Intellectual Property.....................................5 2.3.5. Program Contracts.........................................5 2.3.6. Trade-out Agreements......................................6 2.3.7. Broadcast Time Sales Agreement............................6 2.3.8. Network Affiliation Agreements............................6 2.3.9. Operating Contracts.......................................6 2.3.10. Vehicles.................................................6 2.3.11. Files and Records........................................7 2.3.12. Auxiliary Facilities.....................................7 2.3.13. Permits and Licenses.....................................7 2.3.14. Goodwill.................................................7 2.3.15. Certain Accounts Receivable..............................7 2.3.16. Rights Under the Sinclair Documents......................7 2.3.17. Certain Cash.............................................8 2.4. Excluded Assets....................................................8 2.4.1. Cash......................................................8 2.4.2. Certain Accounts Receivable...............................8 2.4.3. Personal Property Disposed Of.............................8 2.4.4. Insurance.................................................8 2.4.5. Employee Plans and Assets.................................9 2.4.6. Right to Tax Refunds......................................9 2.4.7. Certain Books and Records.................................9 2.4.8. Third-Party Claims........................................9 2.4.9. Rights Under this Agreement...............................9 2.4.10. Rights Under the HAT Merger Agreement....................9 2.4.11. Names....................................................10 2.4.12. Deposit and Prepaid Expenses.............................10 2.4.13. Shared Contracts.........................................10 2.4.14. Labor Union Contracts....................................10 2.4.15. Miscellaneous Excluded Assets............................10 TABLE OF CONTENTS (continued) ----------------- Page ---- 2.4.16. Affiliated Transactions..................................10 2.4.17. Assets of Other Television Stations......................11 2.5. Exchange of Assets.................................................11 2.6. Proration Amounts..................................................11 2.7. Accounts Receivable................................................13 2.8. Allocation of Asset Values.........................................15 2.9. Assumption of Liabilities by STC...................................15 2.10. Assumption of Liabilities by HAT..................................16 2.11. Matters Related to the Burlington Stations........................16 2.12. Matters Related to the Providence Stations........................18 2.13. Financing of Burlington Stations..................................19 2.14. Working Capital...................................................19 ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY THE STC PARTIES...............20 3.1. Organization and Standing..........................................20 3.2. Authorization......................................................20 3.3. Compliance with Laws...............................................21 3.4. Consents and Approvals; No Conflicts...............................21 3.5. Financial Statements; Undisclosed Liabilities......................21 3.6. Absence of Certain Changes or Events...............................22 3.7. Absence of Litigation..............................................23 3.8. Assets.............................................................23 3.9. FCC Matters........................................................23 3.10. Real Property.....................................................24 3.11. Intellectual Property.............................................25 3.12. Station Contracts.................................................26 3.13. Taxes.............................................................26 3.14. Employee Benefit Plans............................................27 3.15. Labor Relations...................................................29 3.16. Environmental Matters.............................................29 3.17. Insurance.........................................................30 3.18. Reports...........................................................30 3.19. Affiliated Transactions...........................................31 3.20. Special Purpose...................................................31 3.21. Availability of Funds.............................................31 ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY HAT...........................31 4.1. Organization and Standing..........................................31 4.2. Authorization......................................................32 4.3. Compliance with Laws...............................................32 -ii- TABLE OF CONTENTS (continued) ----------------- Page ---- 4.4. Consents and Approvals; No Conflicts...............................32 4.5. Financial Statements; Undisclosed Liabilities......................33 4.6. Absence of Certain Changes or Events...............................34 4.7. Absence of Litigation..............................................34 4.8. Assets.............................................................34 4.9. FCC Matters........................................................35 4.10. Real Property.....................................................36 4.11. Intellectual Property.............................................37 4.12. Station Contracts.................................................37 4.13. Taxes.............................................................37 4.14. Employee Benefit Plans............................................38 4.15. Labor Relations...................................................40 4.16. Environmental Matters.............................................40 4.17. Insurance.........................................................41 4.18. Reports...........................................................41 4.19. Affiliated Transactions...........................................42 ARTICLE 5. PRE-CLOSING FILINGS.............................................42 5.1. Applications for FCC Consent.......................................42 5.2. Hart-Scott-Rodino..................................................42 5.3. Non-Required Actions...............................................43 ARTICLE 6. COVENANTS AND AGREEMENTS OF THE PARTIES.........................43 6.1. Negative Covenants.................................................43 6.1.1. Dispositions; Mergers.....................................43 6.1.2. Accounting Principles and Practices.......................43 6.1.3. Trade-out Agreements......................................43 6.1.4. Broadcast Time Sales Agreements...........................44 6.1.5. Network Affiliation Agreements and TBAs...................44 6.1.6. Additional Agreements.....................................44 6.1.7. Breaches..................................................44 6.1.8. Employee Matters..........................................44 6.1.9. Actions Affecting FCC Licenses............................45 6.1.10. Programming..............................................45 6.1.11. Encumbrances.............................................45 6.1.12. Transactions With Affiliates.............................45 6.2. Affirmative Covenants..............................................45 6.2.1. Preserve Existence........................................45 6.2.2. Normal Operations.........................................45 6.2.3. Maintain FCC Licenses.....................................46 6.2.4. Network Affiliation.......................................46 -iii- TABLE OF CONTENTS (continued) ----------------- 6.2.5. Station Contracts.........................................46 6.2.6. Taxes.....................................................46 6.2.7. Access....................................................46 6.2.8. Insurance.................................................47 6.2.9. Financial Statements......................................47 6.2.10. Consents.................................................48 6.2.11. Corporate Action.........................................48 6.2.12. Environmental Audit......................................49 6.2.13. Sinclair Agreement.......................................49 6.3. Confidentiality....................................................49 6.4. Collection of Receivables..........................................50 6.5. Possession and Control.............................................50 6.6. Risk of Loss.......................................................51 6.7. Public Announcements...............................................51 6.8. Sinclair Employee Matters..........................................51 6.9. Other Employee Matters.............................................53 6.10. Disclosure Schedules..............................................54 6.11. Bulk Sales Laws...................................................55 6.12. Tax Matters.......................................................55 6.13. Preservation of Books and Records.................................57 6.14. Affiliated Transactions...........................................57 6.15. Clear Channel Agreements..........................................57 6.16. Sinclair Agreement................................................58 6.17. Environmental Remediation.........................................58 6.18. Certain FCC Matters...............................................58 ARTICLE 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STC......................58 7.1. Closing Under the Sinclair Agreement...............................59 7.2. Representations and Covenants......................................59 7.3. Delivery of Documents..............................................59 7.4. Consents...........................................................59 7.5. ABC Affiliation Agreement..........................................59 7.6. FCC Order..........................................................60 7.7. Hart-Scott-Rodino..................................................60 7.8. Legal Proceedings..................................................60 ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF HAT..................60 8.1. Closing Under the Sinclair Agreement...............................60 8.2. Representations and Covenants......................................61 8.3. Delivery of Documents..............................................61 -iv- TABLE OF CONTENTS (continued) ----------------- 8.4. Consents...........................................................61 8.5. FCC Order..........................................................61 8.6. Hart-Scott-Rodino..................................................61 8.7. Legal Proceedings..................................................62 8.8. LKE Facilitation Transactions......................................62 ARTICLE 9. CLOSING.........................................................62 9.1. Closing. ..........................................................62 9.2. Time and Place of Closing..........................................62 9.3. Delivery by STC at the Closing.....................................62 9.3.1. Agreements and Instruments................................62 9.3.2. Consents..................................................63 9.3.3. Certified Resolutions.....................................63 9.3.4. Officers' Certificates....................................63 9.3.5. Good Standing Certificates................................63 9.4. Delivery by HAT at the Closing.....................................64 9.4.1. Agreements and Instruments................................64 9.4.2. Consents..................................................64 9.4.3. Certified Resolutions.....................................64 9.4.4. Officers' Certificates....................................64 9.4.5. Good Standing Certificates................................65 ARTICLE 10. SURVIVAL; INDEMNIFICATION......................................65 10.1. Survival of Representations.......................................65 10.2. Indemnification by STC............................................66 10.3. Indemnification by HAT............................................66 10.4. Limitations on Indemnification....................................67 10.5. Conditions of Indemnification.....................................67 10.6. Special Tax Indemnification by HAT................................68 10.7. Cure of Breach....................................................70 ARTICLE 11. TERMINATION....................................................70 11.1. Termination of Exchange by the Parties............................70 11.2. Termination of Agreement..........................................72 11.3. Effect of Termination.............................................72 ARTICLE 12. GENERAL PROVISIONS.............................................73 12.1. Additional Actions, Documents and Information.....................73 12.2. Brokers...........................................................73 12.3. Expenses and Taxes................................................74 12.4. Notices...........................................................75 12.5. Waiver. ..........................................................76 12.6. Benefit and Assignment............................................76 -v- TABLE OF CONTENTS (continued) ----------------- Page ---- 12.7. Entire Agreement; Amendment.......................................77 12.8. Severability......................................................77 12.9. Headings..........................................................77 12.10. Governing Law....................................................77 12.11. Signature in Counterparts........................................78 -vi- SCHEDULES Schedule 2.3.1 FCC Licenses Schedule 2.3.2 Real Property Interests Schedule 2.3.3 Tangible Personal Property Schedule 2.3.4 Intellectual Property Schedule 2.3.5 Program Contracts Schedule 2.3.6 Trade-out Agreements Schedule 2.3.8 Network Affiliation Agreements Schedule 2.3.9 Other Operating Contracts Schedule 2.3.10 Vehicles Schedule 2.3.12 Auxiliary Facilities Schedule 2.3.14 Accounts Receivable Schedule 2.4.13 Shared Contracts Schedule 2.4.14 Labor Union Contracts Schedule 2.4.15 Excluded Assets Schedule 2.4.16 Affiliated Transactions Schedule 2.12 WNAC/WPRI Assets Schedule 3.4 STC Consents Schedule 3.5 STC Financial Statements Schedule 3.6 STC Absence of Certain Changes or Events Schedule 3.7 STC Litigation Schedule 3.8 STC Encumbrances on Assets Schedule 3.9 STC FCC Matters Schedule 3.10 STC Real Property and Encumbrances Schedule 3.14 STC Employee Benefit Plans Schedule 3.15 STC Employee Matters Schedule 3.16 STC Environmental Matters -vii- Schedule 3.17 STC Insurance Schedule 3.19 STC Affiliated Transactions Schedule 4.4 HAT Consents Schedule 4.6 HAT Absence of Certain Changes or Events Schedule 4.7 HAT Litigation Schedule 4.8 HAT Encumbrances on Assets Schedule 4.9 HAT FCC Matters Schedule 4.10 HAT Real Property and Encumbrances Schedule 4.14 HAT Employee Benefit Plans Schedule 4.15 HAT Employee Matters Schedule 4.16 HAT Environmental Matters Schedule 4.17 HAT Insurance Schedule 4.19 HAT Affiliated Transactions Schedule 12.2 Brokers -viii- EXHIBITS EXHIBIT A Form of Bill of Sale and Assignment of Assets EXHIBIT B Form of Assignment of FCC Licenses EXHIBIT C Form of Assignment of Contracts and Leases EXHIBIT D Form of Assumption Agreement EXHIBIT E Form of Credit Facilities -ix- EXHIBIT 10.27 ASSET EXCHANGE AGREEMENT THIS ASSET EXCHANGE AGREEMENT (this "Agreement") is entered into as of this 18th day of February, 1998, by and among STC BROADCASTING, INC., a Delaware corporation ("STC Broadcasting"), STC BROADCASTING OF VERMONT, INC., a Delaware corporation and a wholly-owned subsidiary of STC Broadcasting ("STCBV"), STC LICENSE COMPANY, a Delaware corporation and wholly-owned subsidiary of STC Broadcasting ("STC License Company"), and STC BROADCASTING OF VERMONT SUBSIDIARY, INC., a Delaware corporation and wholly-owned subsidiary of STCBV ("STCBV Sub") (STC Broadcasting, STCBV, STC License Company and STCBV Sub are sometimes individually referred to herein as a "STC Party" and collectively referred to herein as "STC" or the "STC Parties"), and HEARST-ARGYLE STATIONS, INC., a Nevada corporation ("HAT"). WHEREAS, pursuant to an Asset Purchase Agreement dated as of July 16, 1997 (the "Heritage Agreement"), by and among Sinclair Broadcast Group, Inc., a Maryland corporation ("Sinclair Parent"), and certain indirect subsidiaries (the "Heritage Subsidiaries") of Heritage Media Corporation, a Delaware corporation ("HMC"), Sinclair has agreed to buy, and the Heritage Subsidiaries have agreed to sell, certain broadcast stations owned, controlled or operated by the Heritage Subsidiaries, including (i) television broadcast station WPTZ (TV), Channel 5, North Pole, New York ("WPTZ"); (ii) certain assets and rights relating to television broadcast station WFFF-TV, Channel 44, Burlington, Vermont ("WFFF"); and (iii) television broadcast station WNNE (TV), Channel 31, Hartford, Vermont ("WNNE") (WPTZ, WFFF and WNNE are collectively referred to herein as the "Burlington Stations"); WHEREAS, STCBV and Tuscaloosa Broadcasting, Inc., a Maryland corporation ("Tuscaloosa"), WPTZ Licensee, Inc., a Maryland corporation ("WPTZ Licensee"), and WNNE Licensee, Inc., a Maryland corporation ("WNNE Licensee") (Tuscaloosa, WPTZ Licensee and WNNE Licensee are collectively referred to herein as "Sinclair") have as of February 3, 1998, entered into an Asset Purchase Agreement (the "Sinclair Agreement") pursuant to which STCBV has agreed to buy, and Sinclair has agreed to sell, the assets of the Burlington Stations, all subject to the terms described in the Sinclair Agreement; WHEREAS, prior to any closing under the Sinclair Agreement, STCBV intends to assign to STCBV Sub all of STCBV's rights under the Sinclair Documents to acquire the Assets (as defined in the Sinclair Agreement); WHEREAS, STC License Company is the licensee of television broadcast station KSBW (TV), Channel 8, Salinas, California ("KSBW"), pursuant to certain authorizations issued by the FCC, and STC Broadcasting operates KSBW and owns or leases certain assets used in connection with the operation of KSBW (KSBW, WPTZ and WNNE are collectively referred to herein as the "STC Stations"); WHEREAS, HAT is the licensee of television broadcast station WDTN (TV), Channel 2, Dayton, Ohio ("WDTN"), pursuant to certain authorizations issued by the FCC, and HAT operates WDTN and owns or leases certain assets used in connection with the operation of WDTN; WHEREAS, HAT (as successor-in-interest to WNAC Argyle Television, Inc., a Nevada corporation ("WNAC Argyle")) is the licensee of television broadcast station WNAC (TV), Channel 64, Providence, Rhode Island ("WNAC"), pursuant to certain authorizations issued by the FCC (WDTN and WNAC are collectively referred to herein as the "HAT Stations") (the STC Stations and the HAT Stations are sometimes each individually referred to herein as a "Station"); WHEREAS, Clear Channel Television License, Inc. is the licensee of WPRI-TV, Channel 12, Providence, Rhode Island ("WPRI"), pursuant to certain authorizations issued by the FCC; WHEREAS, pursuant to a Joint Marketing and Programming Agreement dated as of June 10, 1996, and a Reciprocal Right of First Refusal dated as of June 10, 1996 (collectively, the "Clear Channel Agreements"), both between Clear Channel Television, Inc. ("Clear Channel") and HAT (as successor-in-interest to WNAC Argyle and Providence Argyle Television, Inc., a Delaware corporation), each of HAT and Clear Channel have certain rights and obligations regarding WNAC and WPRI; WHEREAS, STC desires to assign, transfer and convey to HAT all of STC's right, title and interest in the assets of the STC Stations, and HAT desires to assign, transfer and convey to STC all of HAT's right, title and interest in the Clear Channel Agreements and the assets of the HAT Stations, all subject to the terms and conditions described in this Agreement; WHEREAS, the parties hereto intend that certain of the conveyances contemplated by this Agreement shall constitute a "like-kind exchange" (the "Like-Kind Exchange") and that certain of the transactions hereunder shall qualify as such for nonrecognition of income under Section 1031 of the Code; and WHEREAS, in order to facilitate the Like-Kind Exchange, immediately prior to or at the Closing hereunder, STC shall take such actions in order that all of the FCC Licenses of the STC Stations shall be held by STC License Company and all other Assets of STC shall be held by STC Broadcasting as -2- contemplated by Section 8.8 (after the consummation of any such actions, "STC ----------- Broadcasting and "STC License Company" are sometimes referred to herein as the "STC Exchange Entities"). WHEREAS, pursuant to a guaranty given as of the date hereof by Hearst- Argyle Television, Inc., a Delaware corporation ("H-A"), H-A has guaranteed to STC the prompt and complete performance of the obligations of HAT arising under or pursuant to this Agreement. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows: ARTICLE 1. DEFINITIONS AND REFERENCES Capitalized terms used herein without definition shall have the respective meanings assigned thereto in Annex I attached hereto and incorporated ------- herein for all purposes of this Agreement (such definitions to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise specified, all references herein to "Articles" or "Sections" are to Articles or Sections of this Agreement. ARTICLE 2. EXCHANGE OF ASSETS 2.1. Transfer by the STC Exchange Entities. Subject to the terms and conditions hereof and in reliance upon the representations, warranties and agreements contained herein, (a) STC Broadcasting shall assign, transfer, convey and deliver to HAT free and clear of any Encumbrances other than Permitted Encumbrances, and HAT shall acquire and accept from STC Broadcasting all right, title and interest of STC Broadcasting in, to and under all real, personal and mixed assets, rights, benefits and privileges, both tangible and intangible, owned, leased, used or useful by STC Broadcasting in connection with the business and operations of the STC Stations other than the STC License Assets (collectively, the "STC Non-License Assets"); and (b) STC License Company shall assign, transfer, convey and deliver to HAT free and clear of any Encumbrances other than Permitted Encumbrances, and HAT shall acquire and accept from STC License Company, all right, title and interest of STC License Company in, to and under all STC License Assets (the STC Non- License Assets and the STC License Assets are collectively referred to herein as the "STC Assets"). The STC Assets shall exclude the STC Excluded Assets described in Section 2.4. ----------- -3- 2.2. Transfer by HAT. Subject to the terms and conditions hereof and in reliance upon the representations, warranties and agreements contained herein, (a) HAT shall assign, transfer, convey and deliver to STC Broadcasting free and clear of any Encumbrances other than Permitted Encumbrances, and STC Broadcasting shall acquire and accept from HAT, all right, title and interest of HAT in, to and under all real, personal and mixed assets, rights, benefits and privileges, both tangible and intangible, owned, leased, used or useful by HAT in connection with the business and operations of the HAT Stations other than the HAT License Assets (collectively, the "HAT Non-License Assets"); and (b) HAT shall assign, transfer, convey and deliver to STC License Company (and in the case of the FCC Licenses for WNAC, for assignment, transfer, conveyance and delivery by STC License Company immediately thereafter on the Closing Date to Smith Acquisition License Company, a Delaware corporation ultimately controlled by Robert N. Smith ("SALC")) free and clear of any Encumbrances other than Permitted Encumbrances, and STC License Company shall acquire and accept from HAT, all right, title and interest of HAT in, to and under all HAT License Assets (the HAT License Assets and the HAT Non-License Assets are collectively referred to herein as the "HAT Assets") (the STC Assets and the HAT Assets are sometimes each individually referred to herein as "Assets"). The HAT Assets shall exclude the HAT Excluded Assets described in Section 2.4. ----------- 2.3. Description of the Assets. The Assets for each Station shall include, without limitation, all of the right, title and interest of the party transferring such Assets in, to and under the items described below. The party transferring Assets is sometimes referred to herein as the "Transferring Party"; and the party acquiring and accepting Assets from the Transferring Party is sometimes referred to herein as the "Recipient Party". 2.3.1. FCC Licenses. All licenses, permits and other authorizations issued by the FCC for the operation of the Stations of the Transferring Party (the "FCC Licenses"), including without limitation those listed in Schedule 2.3.1, and all -------------- applications therefor, together with any renewals, extensions or modifications thereof and additions thereto. 2.3.2. Real and Leased Property Interests. (a) All the real property, including, without limitation, all land, fee interests, easements and other interests of every kind and description -4- in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon owned by the Transferring Party and used or useful in connection with the business and operations of its Stations ("Real Property"), including, without limitation, all of those items listed in Schedule 2.3.2. - -------------- (b) All the real property leasehold interests, including, without limitation, leases and subleases of any land, easements and other real property leasehold interests of every kind and description in real property, buildings, structures, fixtures, appurtenances, towers and antennae, and other improvements thereon leased by the Transferring Party in connection with the business and operations of its Stations ("Leased Property"), including, without limitation, all of those items listed in Schedule 2.3.2. -------------- 2.3.3. Tangible Personal Property. All of the furniture, fixtures, furnishings, machinery, computers, equipment, inventory, spare parts, supplies, office materials and other tangible property of every kind and description owned, leased or used by the Transferring Party in connection with the business and operations of its Stations, together with any replacements thereof and additions thereto made before the Closing Date, and less any retirements or dispositions thereof made before the Closing Date in the Ordinary Course of Business, including, without limitation, those items which have a book value in excess of Five Thousand Dollars ($5,000), all of which are set forth and identified in Schedule 2.3.3. -------------- 2.3.4. Intellectual Property. All of the service marks, copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes and other similar intangible assets maintained, owned, leased or used by the Transferring Party in connection with the business and operations of its Stations (including any and all applications, registrations, extensions and renewals relating thereto) (the "Intellectual Property"), and all of the rights, benefits and privileges associated therewith including, without limitation, the right to use the call letters for its Stations identified in Schedule 2.3.4. -------------- 2.3.5. Program Contracts. The program licenses and contracts under which the Transferring Party is authorized to broadcast programs on its Stations (collectively the "Program Contracts") including, without limitation, (a) all program (cash and non-cash) licenses and contracts listed on Schedule 2.3.5, and -------------- (b) any other such program contracts that are entered into between the date of this Agreement and the Closing Date in accordance with the terms of this Agreement. -5- 2.3.6. Trade-out Agreements. All contracts and agreements (excluding Program Contracts) pursuant to which commercial air time on the Transferring Party's Stations has been sold, traded or bartered in consideration for any property or services in lieu of or in addition to cash (collectively, the "Trade-out Agreements") including, without limitation, those set forth and identified in Schedule 2.3.6. -------------- 2.3.7. Broadcast Time Sales Agreement. All contracts and agreements pursuant to which commercial air time on the Transferring Party's Stations has been sold for cash (collectively the "Time Sales Agreements"). 2.3.8. Network Affiliation Agreements. All network affiliation agreements and other contracts of the Stations of the Transferring Party with a television broadcast network (collectively, the "Network Agreements") including, without limitation, those listed on Schedule 2.3.8. -------------- 2.3.9. Operating Contracts. All other operating contracts and agreements relating to the business or operations of the Transferring Party's Stations, all material such contracts as of the date hereof being listed on Schedule 2.3.9 (including, -------------- without limitation, the Clear Channel Agreements, all employment agreements and talent contracts, all leases and subleases relating to the Leased Property, all agreements relating to any motor vehicles, and all national and local advertising representation agreements for its Stations), together with all contracts and agreements that will be entered into between the date of this Agreement and the Closing Date in accordance with the terms of this Agreement (collectively, the "Operating Contracts" and together with the Program Contracts, Trade-out Agreements, Time Sales Agreements and Network Agreements, the "Station Contracts"). 2.3.10. Vehicles. All automotive equipment and motor vehicles maintained, owned, leased or otherwise used by the Transferring Party in connection with the business and operations of its Stations, including, without limitation, those set forth and described in Schedule 2.3.10. --------------- -6- 2.3.11. Files and Records. All engineering, business and other books, papers, logs, files and records pertaining to the business and operations of the Transferring Party's Stations, but not the organizational documents and records of the Transferring Party. 2.3.12. Auxiliary Facilities. All translators, earth stations, and other auxiliary facilities, and all applications therefor owned, leased or otherwise used or useful by the Transferring Party in connection with the business and operations of its Stations, including, without limitation, those set forth and described in Schedule 2.3.12. - --------------- 2.3.13. Permits and Licenses. All permits, approvals, orders, authorizations, consents, licenses, certificates, franchises, exemptions of, or filings or registrations with, any court or Governmental Authority (other than the FCC) in any jurisdiction, which have been issued or granted to or are owned or used or useful by the Transferring Party in connection with the business and operations of its Stations and all pending applications therefor. 2.3.14. Goodwill. The business of the Transferring Party's Stations as a "going concern", customer relationships and goodwill. 2.3.15. Certain Accounts Receivable. As to STC, all Accounts Receivable arising out of the business and operations of KSBW, and all Accounts Receivable arising out of the business and operations of the Burlington Stations from the STC Transfer Date under the Sinclair Agreement. As to HAT, all Accounts Receivable arising out of the business and operations of WDTN. Schedule 2.3.15 contains a true and --------------- complete list, dated as of December 31, 1997, of all Accounts Receivable with respect to KSBW and WDTN as of such date. 2.3.16. Rights Under the Sinclair Documents. As to STC, all of STCBV's rights under or pursuant to the Sinclair Documents except to the extent that such rights pertain to or affect WFFF. -7- 2.3.17. Certain Cash. As to STC, all cash, cash equivalents or deposits arising out of the business and operations of the Burlington Stations from and after the STC Transfer Date, and all interest payable in connection with any such cash, cash equivalents or deposits after giving effect to the payment of operating expenses of the Burlington Stations, but excluding any proceeds of a WFFF Disposition (as defined in that certain Credit Agreement to be entered into by HAT and STCBV Sub in connection with the Burlington Financing Amount). 2.4. Excluded Assets. Notwithstanding anything to the contrary in this Agreement, there shall be excluded from the Assets of each Transferring Party and retained by such Transferring Party, to the extent in existence as of the Closing Date, the following assets (collectively, the "Excluded Assets") (the Excluded Assets for the STC Stations are sometimes individually referred to herein as the "STC Excluded Assets"; and the Excluded Assets for the HAT Stations are sometimes individually referred to herein as the "HAT Excluded Assets"). 2.4.1. Cash. Except as set forth in Section 2.3.17, all cash, cash -------------- equivalents or deposits held by such Transferring Party, all interest payable in connection with any such cash, cash equivalents or deposits or short term investments, bank balances and rights in and to bank accounts, marketable and other securities of such Transferring Party. 2.4.2. Certain Accounts Receivable. As to STC, all accounts receivable assigned to STCBV Sub for purposes of collection only under the Sinclair Agreement (the "Sinclair Receivables"); and, as to HAT, all amounts which are payable to HAT under the Clear Channel Agreements which were earned prior to the Closing Date. 2.4.3. Personal Property Disposed Of. All tangible personal property disposed of or consumed in the Ordinary Course of Business as permitted by this Agreement. 2.4.4. Insurance. All contracts of insurance and all insurance plans and the assets thereof. -8- 2.4.5. Employee Plans and Assets. All Plans, Benefit Arrangements (except for any Station Contracts, Proration Items or other matters which are specifically required to be assumed by the Recipient Party pursuant to the terms thereof), Qualified Plans and Welfare Plans and the assets thereof. 2.4.6. Right to Tax Refunds. Any and all claims of the Transferring Party with respect to any Tax refunds. 2.4.7. Certain Books and Records. All of (a) the Transferring Party's organizational documents, corporate books and records (including minute books and stock ledgers and records), and originals of account books of original entry, (b) duplicated copies of any books, records, accounts, checks, payment records, Tax records (including payroll, unemployment, real estate and other Tax records) and other similar books, records and information of the Transferring Party relating to the Transferring Party's operation of the business of its Stations prior to the Closing Date, (c) all records prepared by or on behalf of the Transferring Party in connection with the acquisition by it or conveyance of its Stations, and (d) all records and documents relating to any Excluded Assets. 2.4.8. Third-Party Claims. To the extent related to any Excluded Assets, all rights and claims of the Transferring Party whether mature, contingent or otherwise, against third parties relating to the Assets or the Stations of the Transferring Party, whether in tort, contract, or otherwise. 2.4.9. Rights Under this Agreement. All of the Transferring Party's rights under or pursuant to this Agreement or any other rights in favor of the Transferring Party pursuant to the other agreements contemplated hereby. 2.4.10. Rights Under the HAT Merger Agreement. As to HAT, all of HAT's rights under or pursuant to that (a) certain Amended and Restated Agreement and Plan of Merger, dated as of March 26, 1997, by and among The Hearst Corporation, HAT Merger Sub, Inc., HAT Contribution Sub, Inc., Argyle Television, Inc., and (b) that certain Stock -9- Purchase Agreement, dated as August 26, 1994, by and among Argyle Television Holdings II, Inc. and NPG, Inc. 2.4.11. Names. As to STC, all rights to the name "Sunrise Television", "STC", "STC Broadcasting" and any logo or variation thereof and the goodwill associated therewith; and, as to HAT, all rights to the name "Hearst-Argyle", "Hearst" and any logo or variation thereof and the goodwill associated therewith. 2.4.12. Deposit and Prepaid Expenses. All of the Transferring Party's deposits and prepaid expenses, provided, however, any deposit and prepaid expenses shall be included -------- ------- in the Assets of the Transferring Party conveyed pursuant hereto to the extent that the Transferring Party receives a credit therefor in the calculation of the Proration Amount pursuant to Section 2.6. ----------- 2.4.13. Shared Contracts. As to STC, all shared contracts and agreements relating to both the STC Stations and any television broadcast station other than the STC Stations (including, without limitation, WFFF, subject to Section 2.11) as ------------ identified on Schedule 2.4.13; and, as to HAT, all shared contracts and --------------- agreements relating to both the HAT Stations and any television broadcast station other than the HAT Stations as identified on Schedule 2.4.13. --------------- 2.4.14. Labor Union Contracts. As to STC, all labor union or other collective bargaining agreements relating to KSBW as identified on Schedule 2.4.14; and, as to HAT, --------------- all labor union or other collective bargaining agreements relating to WDTN as identified on Schedule 2.4.14. --------------- 2.4.15. Miscellaneous Excluded Assets. The assets listed and identified on Schedule 2.4.15. --------------- 2.4.16. Affiliated Transactions. All of the Transferring Party's rights and obligations under any Affiliated Transactions except to the extent any such rights or obligations are temporarily transferred pursuant to Section 6.13, including, without ------------ limitation, those set forth in Schedule 2.4.16. --------------- -10- 2.4.17. Assets of Other Television Stations. As to STC, all assets and properties of STC owned, used, held for use or leased by STC in connection with the business and operations of any television broadcast station other than the STC Stations (including, without limitation, WFFF, subject to Section 2.11); and, as to HAT, all assets and ------------ properties of HAT owned, used, held for use or leased by HAT in connection with the business and operations of any television broadcast station other than the HAT Stations. 2.5. Exchange of Assets. 2.5.1. For and in consideration of the conveyance of the STC Assets to HAT and in addition to the assumption of Liabilities by HAT as set forth in Section 2.10, at the Closing HAT agrees to (a) transfer to STC Broadcasting the - ------------ HAT Non-License Assets and transfer to STC License Company the HAT License Assets, as provided for in Section 2.2, and (b) pay to STC by wire transfer of ----------- immediately available funds to an account designated by STC the amount of Twenty-One Million Three Hundred Sixty-Six Thousand Six Hundred and Fifty Dollars ($21,366,650) (the "Cash Consideration"), less (i) any Burlington ---- Financing Amount which is not repaid by STCBV Sub as of the Closing Date, and (ii) plus any adjustments, if any, with respect to the ABC Affiliation Agreement ---- as described in Section 7.5. ----------- 2.5.2. For and in consideration of the conveyance of the HAT Assets to the STC Exchange Entities, the payment of the Cash Consideration to STC and in addition to the assumption of Liabilities by STC as set forth in Section 2.9, ----------- at the Closing the STC Exchange Entities agree to transfer to HAT the STC Assets as provided for in Section 2.3. ----------- 2.6. Proration Amounts. 2.6.1. At least five (5) days prior to the Closing Date, each Transferring Party shall make a good faith estimate of the Proration Items for its Stations that are customary in television broadcast station transactions (each a "Proration Amount") to reflect that all Proration Items of the Transferring Party's Stations shall be apportioned between the Recipient Party and the Transferring Party in accordance with the principle that the Transferring Party shall receive the benefit of all revenues, refunds, deposits (other than deposits for Program Contracts which shall be prorated based on the percentage of the term that the film or program was aired on the Transferring Party's Stations before the Closing Date and the percentage available to be aired on and after the Closing Date) and prepaid expenses, and shall be responsible for all expenses, costs and liabilities allocable to the conduct of the businesses or operations of the Transferring Party's Stations for -11- the period prior to the Closing Date, and the Recipient Party shall receive the benefit of all revenues, refunds, deposits and prepaid expenses, and shall be responsible for all expenses, costs and liabilities allocable to the conduct of the businesses or operations of such Stations from and after the Closing Date; provided, however, there shall be no adjustment or proration for any negative or - -------- ------- positive net trade balance for WPTZ or WNNE except to the extent that the negative trade balance (i.e., the amount by which the value of goods or services --- to be received is less than the value of any advertising time remaining to be run) for either Station exceeds Fifty Thousand Dollars ($50,000) as of the Closing Date; provided, further, that prorations or adjustments pursuant to this -------- ------- Section 2.6 shall be made with respect to WNAC and WPRI only to the extent that - ----------- there are earnings under the Clear Channel Agreements which have not been paid to HAT and which relate to HAT's period of ownership of WNAC. Determinations pursuant to this Section 2.6.1 shall be made in accordance with generally ------------- accepted accounting principles consistently applied for the period prior to the Closing Date. All Proration Amounts shall be payable in cash at the Closing. 2.6.2. Within ninety (90) days after the Closing Date, the Recipient Party shall deliver to the Transferring Party in writing and in reasonable detail a good faith final determination of the Proration Amount determined as of the Closing Date under Section 2.6.1 ("Final Proration Amount"). The ------------- Transferring Party shall assist the Recipient Party in making such determination, and the Recipient Party shall provide the Transferring Party with reasonable access to the properties, books and records relating to the Stations of the Transferring Party for the purpose of determining the Final Proration Amount. The Transferring Party shall have the right to review the computations and workpapers used in connection with the Recipient Party's preparation of the Final Proration Amount. If the Transferring Party disagrees with the amount of the Final Proration Amount determined by the Recipient Party, the Transferring Party shall so notify the Recipient Party in writing within thirty (30) days after the date of receipt of the Recipient Party's Final Proration Amount, specifying in detail any point of disagreement; provided, however, that if the -------- ------- Transferring Party fails to notify the Recipient Party in writing of the Transferring Party's disagreement within such thirty (30) day period, the Recipient Party's determination of the Final Proration Amount shall be final, conclusive and binding on the parties. After the receipt of any notice of disagreement, the parties shall negotiate in good faith to resolve any disagreements regarding the Final Proration Amount. If any such disagreement cannot be resolved by the parties within thirty (30) days after the Recipient Party has received notice from the Transferring Party of the existence of such disagreement, the parties shall jointly select a nationally recognized independent public accounting firm (the "Accounting Firm"), to review the Recipient Party's determination of the Final Proration Amount and to resolve as soon as possible all points of disagreement raised by the Transferring Party. All determinations made by the Accounting Firm with respect to the Final Proration Amount shall be final, -12- conclusive and binding on the parties. The fees and expenses of the Accounting Firm incurred in connection with any such determination shall be shared one-half by the Recipient Party and one-half by the Transferring Party. 2.6.3. If the Final Proration Amount is such that the Recipient Party's payment of the Proration Amount at the Closing was an underpayment to the Transferring Party, then the Recipient Party shall pay such underpayment amount to the Transferring Party in cash, within two (2) business days following the final determination of the Final Proration Amount. If the Final Proration Amount is such that the Recipient Party's payment of the Proration Amount at the Closing was an overpayment to the Transferring Party, then the Transferring Party shall pay such overpayment amount to the Recipient Party in cash within two (2) business days following the final determination of the Final Proration Amount. Any amounts paid pursuant to this Section 2.6.3 shall be by wire ------------- transfer of immediately available funds for credit to the recipient at a bank account identified by such recipient in writing. 2.6.4. The parties agree that prior to the date of the final determination of the Final Proration Amount pursuant to this Section 2.6 (by the ----------- Accounting Firm or otherwise), neither party will destroy any records pertaining to, or necessary for, the final determination of the Final Proration Amount. 2.7. Accounts Receivable. 2.7.1. At least five (5) days prior to the Closing Date, STC shall make a good faith estimate of the Accounts Receivable as of the Closing Date for KSBW less five percent (5%) reserved for bad debts (the "KSBW Receivables"), and HAT shall make a good faith estimate of the Accounts Receivable as of the Closing Date for WDTN less five percent (5%) reserved for bad debts (the "WDTN Receivables"). On the Closing Date, (a) if the amount of the KSBW Receivables is greater than the amount of the WDTN Receivables, HAT shall pay to STC, in cash, the amount of the KSBW Receivables minus the amount of the WDTN ----- Receivables, and (b) if the amount of the WDTN Receivables is greater than the amount of the KSBW Receivables, STC shall pay to HAT, in cash, the amount of the WDTN Receivables minus the amount of the KSBW Receivables. ----- 2.7.2. Within thirty (30) days after the Closing Date, the Recipient Party shall deliver to the Transferring Party in writing and in reasonable detail a good faith final determination of the Accounts Receivable acquired by the Recipient Party as of the Closing Date (the "Final AR Amount"). The Transferring Party shall assist the Recipient Party in making such determination, and the Recipient Party shall provide the Transferring Party with reasonable access to the books and records relating to the Stations of the Recipient Party for the purpose of determining the final Accounts Receivable amount. The Transferring Party shall -13- have the right to review the computations and work papers used in connection with the Recipient Party's preparation of the Final AR Amount. If the Transferring Party disagrees with the Final AR Amount determined by the Recipient Party, the Transferring Party shall so notify the Recipient Party within thirty (30) days after the date of receipt of the Recipient Party's Final AR Amount, specifying in detail any point of disagreement; provided, however, -------- ------- that if the Transferring Party fails to notify the Recipient Party in writing of the Transferring Party's disagreement within such thirty (30) day period, the Recipient Party's determination of the Final AR Amount shall be final, conclusive and binding on the parties. After the receipt of any notice of disagreement, the parties shall negotiate in good faith to resolve any disagreements regarding the Final AR Amount. If any such disagreement cannot be resolved by the parties within thirty (30) days after the Recipient Party has received notice from the Transferring Party of the existence of such disagreement, the parties shall jointly select an Accounting Firm to review the Recipient Party's determination of the Final AR Amount and to resolve as soon as possible all points of disagreement raised by the Transferring Party. All determinations made by the Accounting Firm with respect to the Final AR Amount shall be final, conclusive and binding on the parties. The fees and expenses of the Accounting Firm incurred in connection with any such determination shall be shared one-half by the Recipient Party and one-half by the Transferring Party. 2.7.3. If the Final AR Amount is such that the Recipient Party's payment of the Accounts Receivable amount at the Closing was an underpayment to the Transferring Party, then the Recipient Party shall pay such underpayment amount to the Transferring Party in cash, within two (2) business days following the final determination of the Final AR Amount. If the Final AR Amount is such that the Recipient Party's payment of the Accounts Receivable amount at the Closing is an overpayment to the Transferring Party, then the Transferring Party shall pay such overpayment to the Recipient Party in cash within two (2) business days following the determination of the Final AR Amount. Any amount paid pursuant to this Section 2.7 shall be by wire transfer of immediately ----------- available funds for credit to the recipient at a bank account identified by such recipient in writing. 2.7.4. The parties agree that prior to the date of the final determination of the Final AR Amount pursuant to this Section 2.7 (by the ----------- Accounting Firm or otherwise) neither party will destroy any records pertaining to, or necessary for, the final determination of the Final AR Amount. -14- 2.8. Allocation of Asset Values. 2.8.1. The fair market value of the STC Assets and the HAT Assets shall be determined and allocated on the basis of an appraisal (the "Appraisal") prepared by Bond & Pecaro (the "Appraisal Firm"). The Appraisal Firm shall be instructed to perform an appraisal of the classes of Assets of each Station and to deliver a report to STC and HAT as soon as reasonably practicable (the "Appraisal Report"). The Appraisal Report shall be subject to the approval of HAT and STC and HAT and STC shall cooperate in good faith to resolve any issues or differences relating to the Appraisal Report. HAT and STC shall each pay one-half of the fees, costs and expenses of the Appraisal Firm whether or not the transactions contemplated hereby are consummated. 2.8.2. Within thirty (30) days of receipt of the Appraisal Report, the parties shall prepare a schedule that sets forth the "exchange groups" and "residual groups" (as each quoted term is defined by Treas. Reg. Section 1.1031(j)-1(b)(2)) for the exchanges contemplated by Section 6.12.2 (the -------------- "Section 1031 Schedule"), together with each asset included in the STC Assets and HAT Assets that belongs to the relevant exchange group or residual group. The parties shall cooperate in good faith to resolve any issues relating to the Section 1031 Schedule to be filed by each individual taxpayer. 2.8.3. Each party, as necessary, shall prepare IRS Form 8594 and IRS Form 8824 reflecting the fair market value of the Assets such party has transferred and received as determined in accordance with the above provisions and shall forward such form to the other parties within thirty (30) days after agreement on the Section 1031 Schedule. Each party, as necessary, shall file their respective federal income tax returns for the tax year in which the Closing occurs with the IRS Form 8594 and IRS Form 8824 as prepared in accordance with the foregoing. The parties hereto hereby covenant and agree with each other that they will not take a position on any income tax return that is in any way inconsistent with the terms of this Section 2.8.3. ------------- 2.9. Assumption of Liabilities by STC. 2.9.1. At the Closing, STC shall assume, pay, perform, discharge and indemnify and hold HAT harmless from and against (a) all Liabilities arising out of events occurring on or after the Closing Date related to the businesses or operations of the HAT Stations or the ownership of the HAT Assets by STC, (b) all Liabilities arising out of events occurring on or after the Closing Date with respect to the FCC Licenses of HAT, (c) all Liabilities arising on or after the Closing Date under the Station Contracts of HAT (including, without limitation, Trade-out Agreements) pursuant to their terms (except for Liabilities for any breaches -15- thereunder by HAT occurring prior to the Closing Date), (d) all Liabilities for which there is an adjustment in favor of STC in connection with the calculation of the Proration Amount, and (e) all Liabilities to employees of the HAT Stations to be assumed by STC in accordance with Section 6.9 hereof. ----------- 2.9.2. Except for the Assumed Liabilities described in this Section ------- 2.9, no STC Party will assume any other Liabilities of any kind or description - --- of HAT. 2.10. Assumption of Liabilities by HAT. 2.10.1. At the Closing, HAT shall assume, pay, perform, discharge and indemnify and hold STC harmless from and against (a) all Liabilities arising out of events occurring on or after the Closing Date related to the businesses or operations of the STC Stations or the ownership of the STC Assets by HAT, (b) all Liabilities arising out of events occurring on or after the Closing Date with respect to the FCC Licenses of STC License Company, (c) all Liabilities arising on or after the Closing Date under the Station Contracts of STC (including, without limitation, Trade-out Agreements) pursuant to their terms (except for Liabilities for any breaches thereunder by STC occurring prior to the Closing Date), (d) all Liabilities for which there is an adjustment in favor of HAT in connection with the calculation of the Proration Amount, (e) all Liabilities to employees of the STC Stations to be assumed by HAT in accordance with Section 6.8 and Section 6.9 hereof, (f) except for the WFFF Liabilities, ----------- ----------- all Liabilities of STC under the Sinclair Documents (or Liabilities assumed pursuant to the terms thereof), and (g) all Liabilities arising out of events occurring on or after the Non-License Transfer (as defined in the Sinclair Agreement) relating to the business and operations of WNNE and WPTZ (the Liabilities described in Section 2.10.1(f) and Section 2.10.1(g) are sometimes ----------------- ----------------- collectively referred to herein as the "Sinclair Liabilities"). 2.10.2. Except for the Assumed Liabilities described in this Section 2.10, HAT will not as *** any other Liabilities of any kind or - ------------ description of STC. 2.11. Matters Related to the Burlington Stations. 2.11.1. HAT acknowledges and agrees that the consummation of the purchase by STC of WPTZ and WNNE is, as of the date of this Agreement, pending pursuant the terms of the Sinclair Agreement. Notwithstanding anything to the contrary set forth herein or otherwise, no STC Party shall make or be deemed to make any representations, warranties, covenants or agreements regarding WPTZ or WNNE or any assets related thereto until the consummation of the purchase by STC of such Stations and Assets and thereafter any representations, warranties, covenants or agreements regarding such Stations and Assets shall only relate to -16- STC's period of ownership of such Stations and Assets. In addition, the terms "STC Assets", "Assets", "STC Stations" and "Stations" shall not include WPTZ or WNNE or the related assets of such stations until such time as WPTZ and WNNE are acquired by STC pursuant to the Sinclair Agreement. 2.11.2. At the Closing, STC Broadcasting (as the successor-in- interest to STCBV Sub) agrees to assign to HAT all of STC Broadcasting's right, title and interest in, to and under the Sinclair Documents that relate to WPTZ, WNNE and any assets related thereto (but not including the assets of WFFF). In the event that any such rights and interests are not assignable, STC Broadcasting shall use commercially reasonable efforts (a) to provide HAT the financial and business benefits HAT would have enjoyed had such rights and interests been assignable as of the date hereof, and (b) upon the request of HAT, to enforce in STC Broadcasting's name for the account of HAT any rights that would otherwise have been available to HAT had the rights and interests under the Sinclair Documents been assignable as of the date hereof. 2.11.3. Subject to the terms and conditions of Section 2.11.4 -------------- below, all of the assets used in the operation of WFFF shall be retained by STC Broadcasting or its permitted designee, including the rights and obligations of Heritage Media Corporation pursuant to the Broadcast Facilities Agreement and Time Brokerage Agreement, each entered into on August 3, 1995, as amended (the "WFFF TBA"). As of the Closing Date, HAT shall operate WFFF pursuant to the WFFF TBA for a period up to two (2) years from the Closing Date until such time as STC Broadcasting requests termination of such operation by HAT (the "Interim Operation"). Under the Interim Operation, STC Broadcasting shall receive all income net of any out-of-pocket expenses incurred by HAT for the operation of WFFF and shall reimburse HAT if WFFF is being operated at a net deficit. STC Broadcasting shall be responsible for all payments due to Champlain Valley Telecasting, Inc. pursuant to the WFFF TBA during the Interim Operation. At the conclusion of the Interim Operation, STC Broadcasting shall no longer use any of the WPTZ facilities in connection with the operation of WFFF, other than the use of tower and equipment space at Terry Mountain, New York, until such time as STC Broadcasting is able to relocate its transmission facilities to Mt. Mansfield, Vermont. There will be no charges for rental of such space for a period of up to two (2) years after the conclusion of the Interim Operation. HAT agrees to cooperate at the sole expense of STC Broadcasting in all reasonable respects in connection with such relocation. In the event that STC Broadcasting is unsuccessful in relocating WFFF to Mt. Mansfield within this two (2) year period, HAT agrees to enter into a twenty (20) year lease agreement with STC Broadcasting for the Terry Mountain space on fair market value terms and conditions. During the period of the Interim Operation, STC Broadcasting shall not have the right to assign the WFFF TBA (and any rights or obligations hereunder relating to WFFF), in whole or in part, except (a) to any Affiliate of STC Broadcasting or (b) to any other Person with the -17- prior written consent of HAT (which consent shall not be unreasonably withheld, conditioned or delayed). 2.11.4. HAT acknowledges and agrees that certain of the STC Assets are also used, held for use or useful in connection with the business and operations of WFFF (collectively, the "STC Shared Assets"). Prior to the Closing, STC Broadcasting and HAT shall in good faith allocate the STC Shared Assets between STC Broadcasting and HAT in accordance with the principle that those STC Shared Assets used solely in connection with the business and operations of WFFF shall be retained by STC Broadcasting and included in the STC Excluded Assets, and all other STC Shared Assets shall be transferred to HAT. Notwithstanding the foregoing, to the extent that any of the STC Shared Assets retained by STC Broadcasting are necessary for HAT's operation of WPTZ and/or WNNE after the Closing, or any of the STC Shared Assets conveyed to HAT are necessary for STC Broadcasting's continued operation of WFFF after the Closing, such STC Shared Assets shall be available for joint use by the parties at no cost for a transitional period for up to two (2) years following the Closing Date. 2.11.5. At the Closing, the parties agree to enter into a mutually agreeable transitional services agreement which shall set forth the terms and conditions of (a) the Interim Operation described in Section 2.11.3, and (b) the -------------- joint use of certain STC Shared Assets described in Section 2.11.4. -------------- 2.11.6. In order to provide an equitable sharing of the indemnities contained in Article 12 of the Sinclair Agreement and the Guaranty of even date by Sinclair Parent, the parties will coordinate the filing of any claims against Sinclair or Sinclair Parent so that (a) with respect to WFFF, STC shall have the benefits of up to two percent (2%) of the Basket Amount (as defined in the Sinclair Agreement) and the Indemnity Cap (as defined in the Sinclair Agreement), and (b) with respect to WPTZ and WNNE, HAT shall have the benefits of up to ninety-eight percent (98%) of the Basket Amount (as defined in the Sinclair Agreement) and the Indemnity Cap (as defined in the Sinclair Agreement). However, if STC, on the one hand, or HAT, on the other hand, does not use all of its respective share of such Basket Amount or Indemnity Cap prior to the scheduled expiration date for the filing of claims against Sinclair or Sinclair Parent, then the parties shall cooperate so that to the fullest extent practicable the unused portion of such share shall be made available by STC to HAT or by HAT to STC, as the case may be, immediately prior to such scheduled expiration date. 2.12. Matters Related to the Providence Stations. HAT represents and warrants to the STC Parties that the only HAT Assets owned, leased, used or useful by HAT in connection with the business and operations of WNAC are as set forth in Schedule 2.12 (the "Providence Assets"). ------------- In -18- reliance upon such representation and warranty, each STC Party acknowledges and agrees that, notwithstanding anything to the contrary set forth herein or otherwise, HAT shall not make nor be deemed to make any representations, warranties, covenants or agreements regarding WNAC or WPRI or any assets related thereto, except to the extent any such representation, warranty, covenant or agreement relates to, or is applicable to, the Providence Assets, the Clear Channel Agreements or the HAT Balance Sheets. 2.13 Financing of Burlington Stations. On or prior to the acquisition of the non-licensed STC Assets from Sinclair pursuant to the terms of the Sinclair Agreement, STCBV shall assign to STCBV Sub all of STCBV's rights under the Sinclair Documents and HAT agrees to loan to STCBV Sub, such amounts as are contemplated by the credit agreement, guaranty and related documents in the form of Exhibit F (all loans thereunder --------- being referred to as the "Burlington Financing Amount"), and STCBV and STCBV Sub agree to simultaneously execute and deliver to HAT, and HAT agrees to simultaneously execute and deliver to STCBV and STCBV Sub, such credit agreement, guaranty and related documents. 2.14. Working Capital. (a) From and after the STC Transfer Date through the Closing Date, HAT agrees to make advances to STCBV Sub for the working capital requirements of STCBV Sub in connection with the business and operations of the Burlington Stations during such period (each a "Working Capital Advance"), as STC may request from time to time . In order to request a Working Capital Advance, STCBV Sub shall deliver written notice to HAT at least three (3) business days prior to the proposed date of the Working Capital Advance, signed by or on behalf of STCBV Sub, and specifying the following information: (i) the date of such Working Capital Advance, (ii) the amount of such Working Capital Advance (which amount shall not be less than Two Hundred and Fifty Thousand Dollars ($250,000)), and (iii) the number and location of the account to which funds are to be disbursed. Upon receipt of any such notice, HAT shall deliver the amount of the Working Capital Advance to STCBV Sub, by wire transfer of federal funds to the account specified in such notice and within three (3) business days following the date specified in such notice. (b) STCBV Sub and HAT acknowledge and agree that each Working Capital Advance shall be used by STCBV Sub for general working capital purposes in the business and operations of the Burlington Stations from and after the STC Transfer Date through the Closing Date, which shall include, without limitation (i) payments of any proration amounts owed by STCBV Sub under the Sinclair Agreement, (ii) fees under that certain TBA Agreement (as defined in the -19- Sinclair Agreement), and (iii) interest payments arising under the Burlington Financing Amount. STCBV Sub acknowledges and agrees that in the event this Agreement is terminated as provided in Section 11.2, STCBV Sub agrees to ------------ reimburse HAT for any Working Capital Advances provided by HAT pursuant to this Section 2.14. - ------------ ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY THE STC PARTIES Each STC Party, with respect to such STC Party and with respect to the STC Stations and STC Assets owned by such STC Party, represents and warrants to HAT as follows: 3.1. Organization and Standing. The STC Party is duly organized, validly existing and in good standing under the laws of the state of its organization and is or will be prior to the Closing Date duly qualified to do business and is or will be prior to the Closing Date in good standing in any jurisdiction where its STC Stations are located and operated and in each other jurisdiction where and at such time as such qualification is necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on its STC Stations. The STC Party has the corporate power and authority to own, lease and otherwise to hold and operate its STC Assets, to carry on the business of its STC Stations as now conducted, and to enter into and perform the terms of this Agreement, the other STC Documents to which the STC Party is a party and the transactions contemplated hereby and thereby. 3.2. Authorization. The execution, delivery and performance of this Agreement and of the other STC Documents to which the STC Party is a party, and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action (none of which actions has been modified or rescinded and all of which actions are in full force and effect). This Agreement constitutes, and upon execution and delivery of the other agreements to which the STC Party is a party will constitute, valid and binding agreements and obligations of the STC Party, enforceable against the STC Party in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity. -20- 3.3. Compliance with Laws. To STC's knowledge, STC is in material compliance with all Laws applicable to the STC Assets and to the business and operations of the STC Stations. STC has obtained and holds all material permits, licenses and approvals (none of which has been modified or rescinded and all of which are in full force and effect) from all Governmental Authorities necessary in order to conduct the operations of the STC Stations as presently conducted. 3.4. Consents and Approvals; No Conflicts. 3.4.1. The execution and delivery of this Agreement, and the performance of the transactions contemplated herein by the STC Party, will not require any consent, approval, authorization or other action by, or filing with or notification to, any Person or Governmental Authority, except as follows: (a) filings required under Hart-Scott-Rodino, (b) consents to the assignment of the FCC Licenses by the FCC, (c) filings, if any, with respect to real estate transfer taxes, (d) certain of the Station Contracts may be assigned only with the consent of third parties, as specified in Schedule 3.4, and (e) filings with ------------ the Securities and Exchange Commission. 3.4.2. Assuming all consents, approvals, authorizations and other actions described in Section 3.4.1 have been obtained and all filings and ------------- notifications described in Section 3.4.1 have been made, the execution, delivery ------------- and performance of this Agreement and the other STC Documents to which the STC Party is a party do not and will not (a) conflict with or violate in any material respect any Law applicable to the STC Party, its STC Assets or STC Stations or by which any of its STC Assets or STC Stations is subject or affected, (b) conflict with or result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) of any of the STC Party's Station Contracts or other material agreements to which the STC Party is a party or by which the STC Party is bound or to which any of its STC Assets or STC Stations is subject or affected, (c) result in the creation of any Encumbrance upon its STC Assets, or (d) conflict with or violate the organizational documents of the STC Party. 3.5. Financial Statements; Undisclosed Liabilities. 3.5.1. STC has provided to HAT unaudited balance sheets of the STC Stations as listed on Schedule 3.5 (the "STC Balance Sheets"), and unaudited ------------ statements of income and operating cash flows for the STC Stations as listed on Schedule 3.5. Such financial statements (a) present fairly in all material - ------------ respects the financial condition of the STC Stations as of the date and the results of operations and operating cash flows for the period indicated, and (b) have been -21- prepared in accordance with generally accepted accounting principles applied on a consistent basis (except that the financial statements referred to in this Section 3.5.1 do not contain all footnotes and cash flow information from - ------------- investing and financing activities required under generally accepted accounting principles and are subject to customary year-end adjustments). To the knowledge of STC, the Accounts Receivable of STC shown on the balance sheets described in this Section 3.5 and the KSBW Receivables have been collected or are collectible in amounts not less than the amounts thereof carried on the books of STC, except to the extent of the allowance for doubtful accounts shown on such balance sheets. 3.5.2. There exist no Liabilities of the STC Stations relating to, or arising out of, the business or operations of the STC Stations, contingent or absolute, matured or unmatured, known or unknown, except (a) as reflected on the STC Balance Sheets and (b) for Liabilities that (i) were incurred after December 31, 1997 (the "Current Balance Sheet Date") in the Ordinary Course of Business, or (ii) were not required to be reflected on the STC Balance Sheets in accordance with generally accepted accounting principles applied on a consistent basis. 3.6. Absence of Certain Changes or Events. Except as set forth and described in Schedule 3.6, since the Current ------------ Balance Sheet Date, there has been no Material Adverse Effect on the STC Stations. Since the Current Balance Sheet Date, the business of the STC Stations has been conducted in the Ordinary Course of Business, and the STC Party has not, with respect to its STC Stations or STC Assets, (a) incurred any extraordinary loss of, or injury to, any of its STC Assets as the result of any fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident, act of God or public enemy or armed forces, or other casualty; (b) incurred, or become subject to, any Liability, except current Liabilities incurred in the Ordinary Course of Business; (c) discharged or satisfied any Encumbrance or paid any Liability other than current Liabilities shown in the STC Balance Sheets, current Liabilities incurred since the Current Balance Sheet Date in the Ordinary Course of Business, and Liabilities (including, without limitation, partial and complete prepayments) arising under any credit or loan agreement between the STC Party and its lenders; (d) mortgaged, pledged or subjected to any Encumbrance any of its STC Assets (except for Permitted Encumbrances); (e) made any material change in any method of accounting or accounting practice; (f) sold, leased, assigned or otherwise transferred any of its material STC Assets other than obsolete STC Assets which have been replaced by suitable replacements; (g) made any material increase in compensation or benefits payable to any employee other than in the Ordinary Course of Business; or (h) made any agreement to do any of the foregoing. -22- 3.7. Absence of Litigation. As of the date hereof, except as set forth in Schedule 3.7, there is ------------ no material or, to STC's knowledge, immaterial action, suit, investigation, claim, arbitration, litigation or similar proceeding, nor any order, decree or judgment pending or, to STC's knowledge, threatened against STC , the STC Assets or STC Stations before any Governmental Authority. 3.8. Assets. Except for the STC Excluded Assets, the STC Assets include all of the assets or property used or useful in the businesses of the STC Stations as presently operated, including all of the assets or property acquired under the Sinclair Documents. Except for leased or licensed STC Assets, STC is the owner of, and has good title to, the STC Assets free and clear of any Encumbrances, except for Permitted Encumbrances (including, without limitation, those items set forth on Schedule 3.8). At the Closing, HAT shall acquire good title to, ------------ and all right, title and interest in and to the STC Assets, free and clear of all Encumbrances, except for Permitted Encumbrances. 3.9. FCC Matters. 3.9.1. STC License Company holds the FCC Licenses for the STC Stations listed as held by the STC License Company on Schedule 2.3.1. The FCC -------------- Licenses contained on Schedule 2.3.1 constitute all of the licenses, permits and -------------- authorizations from the FCC that are required for the business and operations of the STC Stations. Except as set forth on Schedule 3.9, such FCC Licenses are ------------ valid and in full force and effect through the dates set forth on Schedule -------- 2.3.1, unimpaired by any condition, other than as set forth in such FCC - ----- Licenses. Except as set forth on Schedule 3.9, no application, action or ------------ proceeding is pending for the renewal or modification of any of STC License Company's FCC Licenses, and, except for actions or proceedings affecting television broadcast stations generally, no application, complaint, action or proceeding is pending or, to STC's knowledge, threatened that may result in the (a) the revocation, modification, non-renewal or suspension of any of STC License Company's FCC Licenses, or (b) the issuance of a cease-and-desist order. Except as set forth in Schedule 3.9, STC has no knowledge of any facts, ------------ conditions or events relating to STC License Company or its STC Stations that would reasonably be expected to cause the FCC to revoke any of the FCC Licenses for the STC Stations or not to grant any pending applications for renewal of any FCC Licenses for the STC Stations or to deny the assignment of the FCC Licenses of STC License Company to HAT as provided for in this Agreement. 3.9.2. (a) Except as disclosed in Schedule 3.9, STCBV Sub is, and ------------ pending the closing under the Sinclair Agreement will remain legally, financially -23- and otherwise qualified under the Communications Act and all rules, regulations and policies of the FCC to acquire and operate the Burlington Stations. Except as disclosed in Schedule 3.9, there are no facts or proceedings which would ------------ reasonably be expected to disqualify STCBV Sub under the Communications Act or otherwise from acquiring or operating any of the Burlington Stations or would cause the FCC not to approve the assignment of the FCC Licenses to STCBV Sub. Except as disclosed in Schedule 3.9, STC has no knowledge of any fact or ------------ circumstance relating to STC or any Affiliate of STC that would reasonably be expected to (i) cause the filing of any objection to the assignment of the FCC Licenses for the Burlington Stations from Sinclair to STCBV Sub, or (ii) lead to a delay in the processing by the FCC of the applications for such assignment. Except for existing waivers pertaining to the Burlington Stations and except for the temporary waiver specified in Schedule 3.9, no waiver of any FCC rule or ------------ policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses for the Burlington Stations from Sinclair to STCBV Sub, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. (b) Except as disclosed in Schedule 3.9, each of STC License ------------ Company and SALC is, and pending the Closing will remain legally, financially and otherwise qualified under the Communications Act and all rules, regulations and policies of the FCC to acquire and operate WDTN and WNAC, respectively. Except as disclosed in Schedule 3.9, there are no facts or proceedings which ------------ would reasonably be expected to disqualify STC License Company or SALC under the Communications Act or otherwise from acquiring or operating WDTN and WNAC, respectively, or would cause the FCC not to approve the assignment of the FCC Licenses of WDTN and WNAC to STC License Company and SALC, respectively. Except as disclosed in Schedule 3.9, STC has no knowledge of any fact or circumstance ------------ relating to STC or any Affiliate of STC that would reasonably be expected to (i) cause the filing of any objection to the assignment of the FCC Licenses for WDTN and WNAC from HAT to STC License Company and SALC, respectively, or (ii) lead to a delay in the processing by the FCC of the applications for such assignment. Except for existing waivers pertaining to the HAT Stations, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses for WDTN and WNAC from HAT to STC License Company and SALC, respectively, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. 3.10. Real Property. 3.10.1. STC has good and marketable fee simple title to all fee estates included in the Real Property of STC and good title to all other owned Real Property of STC, in each case free and clear of all Encumbrances, except for -24- Permitted Encumbrances (including, without limitation, those items listed on Schedule 3.10). - ------------- 3.10.2. STC has a valid leasehold interest in all Leased Property listed as leased by STC in Schedule 2.3.2. Schedule 2.3.2 lists all leases and -------------- -------------- subleases pursuant to which any of such Leased Property is leased by STC in connection with the business and operations of the STC Stations. STC is the owner and holder of all such Leased Property purported to be granted by such leases and subleases. Each such lease and sublease is valid as to STC thereunder and, to STC's knowledge valid as to any other party thereto, and is in full force and effect and, to STC's knowledge, constitutes a legal and binding obligation of, and is legally enforceable against STC and each other party thereto and grants the leasehold interest it purports to grant, including any rights to nondisturbance and peaceful and quiet enjoyment that may be contained therein. The lessees and sublessees are, and to the knowledge of STC, all other parties are, in compliance in all material respects with the provisions of such leases and subleases. 3.10.3. The Real Property and the Leased Property of STC listed in Schedule 2.3.2 constitute all of the real property owned, leased or used in the - -------------- business and operations of the STC Stations which is material to the business and operations of the STC Stations. 3.10.4. No portion of the Real Property of STC or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or, to the knowledge of STC, threatened. To STC's knowledge, and to the extent that such documents are in the possession of STC, STC has delivered to HAT true, correct and complete copies of the following documents with respect to its Real Property and Leased Property as identified in Schedule 3.10: (i) deeds, by which STC has received a fee interest in any of - ------------- such Real Property; (ii) leases for all of its Leased Property; (iii) title insurance policies or commitments; (iv) surveys; and (v) inspection reports or other instruments or reports, including, without limitation, any phase I or phase II environmental reports or other similar environmental reports, surveys or assessments (including any and all amendments and other modifications of such instruments). 3.11. Intellectual Property. STC possesses adequate rights, licenses and authority to use all Intellectual Property necessary to conduct the business of the STC Stations as presently conducted. STC has good title to all Intellectual Property maintained, owned, leased or used in connection with the business and operations of the STC Stations, free and clear of any Encumbrances, except for Permitted Encumbrances. STC is not obligated to pay any royalty or other fees to anyone with respect to the -25- Intellectual Property of STC. STC has not received any written notice to the effect that any service rendered by STC relating to the business of the STC Stations may infringe, or that STC is otherwise infringing, on any intellectual property right or other legally protectable right of another. No director, officer or employee of STC has any interest in any Intellectual Property. 3.12. Station Contracts. Complete and correct copies of the Station Contracts of STC set forth in Schedules 2.3.5, 2.3.6, 2.3.8 and 2.3.9 (which schedules, as to STC, --------------------------------------- are true and correct in all material respects) have been made available to HAT and (a) each such material Station Contract and, to STC's knowledge, each such immaterial Station Contract, is in full force and effect and constitutes a legal, valid and binding obligation of STC, and, to STC's knowledge, of each other party thereto; (b) STC is not in breach or default in any material respect of the terms of any such Station Contract; (c) none of the material rights of STC under any such Station Contract will be subject to termination, nor will a default occur, as a result of the consummation of the transactions contemplated hereby, except to the extent that failure to obtain the prior consent to assignment thereof of any party thereto shall or could be interpreted to constitute a termination or modification of or a default under any such Station Contract; and (d) to the knowledge of STC, no other party to any such Station Contract is in breach or default in any material respect of the terms thereunder. 3.13. Taxes. STC has (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will have prior to the Closing Date) duly filed all material Tax Returns required to be filed by STC on or before the Closing Date with respect to all material applicable Taxes. In the case of any such Tax Returns which receive an extension for their date of filing, such Tax Returns will be considered due on, and not considered required to be filed before, the extended due date. All such Tax Returns are (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will be) true and complete in all material respects. STC has: (a) paid all Taxes due to any Governmental Authority as indicated on such Tax Returns; or (b) established (or, in the case of amounts becoming due after the date hereof, prior to the Closing Date will have established) adequate reserves (in conformity with generally accepted accounting principles consistently applied) for the payment of such Taxes. -26- 3.14. Employee Benefit Plans. 3.14.1. Schedule 3.14 lists all Plans and Benefit Arrangements ------------- maintained by or contributed to by STC for the benefit of the employees of the STC Stations (collectively referred to as "STC Benefit Plans"). Each STC Benefit Plan has been maintained in material compliance with its terms and with ERISA, the Code and other applicable Laws. 3.14.2. Schedule 3.14 sets forth a list of all Qualified Plans ------------- maintained by or contributed to by STC for the benefit of the employees of the STC Stations. All such Qualified Plans and any related trust agreements or annuity agreements (or any other funding document) have been maintained in material compliance with ERISA and the Code (including, without limitation, the requirements for tax qualification described in Section 401 thereof), other than any Multiemployer Plan. To STC's knowledge, any trusts established under such Plans are exempt from federal income taxes under Section 501(a) of the Code. 3.14.3. Schedule 3.14 lists all funded Welfare Plans of STC that ------------- provide benefits to current or former employees of the STC Stations or their beneficiaries. To STC's knowledge, the funding under each such Welfare Plan does not exceed and has not exceeded the limitations under Sections 419A(b) and 419A(c) of the Code. To STC's knowledge, STC is not subject to taxation on the income of any such Welfare Plan's welfare benefit fund (as such term is defined in Section 419(e) of the Code) under Section 419A(g) of the Code. 3.14.4. STC has no post-retirement medical, life insurance or other benefits promised, provided or otherwise due now or in the future to current, former or retired employees of the STC Stations. 3.14.5. To STC's knowledge, except as set forth in Schedule 3.14, ------------- STC has (a) filed or caused to be filed all returns and reports on STC's Plans that they are required to file and (b) paid or made adequate provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made relating to those returns or reports. All other fees, interest, penalties and assessments that are payable by or for STC have been timely reported, fully paid and discharged. There are no unpaid fees, penalties, interest or assessments due from STC or from any other person that are or could become an Encumbrance on any of the STC Assets or could otherwise adversely affect the businesses of the STC Stations or STC Assets. To STC's knowledge, STC has collected or withheld all amounts that are required to be collected or withheld by it to discharge its obligations, and all of those amounts have been paid to the appropriate Governmental Authority or set aside in appropriate accounts for future payment -27- when due. STC has furnished to HAT true and complete copies of all documents setting forth the terms and funding of each of STC's Plans. 3.14.6. Except as set forth in Schedule 3.14, neither STC nor any ------------- ERISA Affiliate of STC has ever sponsored or maintained, had any obligation to sponsor or maintain, or had any liability (whether actual or contingent, with respect to any of its assets or otherwise) with respect to any of STC's Plans subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan). Neither STC nor any ERISA Affiliate of STC (since January 1, 1989) has terminated or withdrawn from or sought a funding waiver with respect to any plan subject to Title IV of ERISA, and no facts exist that could reasonably be expected to cause such actions in the future; no accumulated funding deficiency (as defined in Code Section 412), whether or not waived, exists with respect to any such plan; no reportable event (as defined in ERISA Section 4043) has occurred with respect to any such plan (other than events for which reporting is waived); all costs of any such plans have been provided for on the basis of consistent methods in accordance with sound actuarial assumptions and practices, and the assets of each such plan, as of its last valuation date, exceeded its "Benefit Liabilities" (as defined in ERISA Section 4001(a)(16)); and, since the last valuation date for each such plan, no such plan has been amended or changed to increase the amounts of benefits thereunder and, to the knowledge of STC, there has been no event that would reduce the excess of assets over benefit liabilities; and except as set forth in Schedule 3.14, neither STC nor any ERISA Affiliate of STC has ever made or been - ------------- obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any Multiemployer Plan of STC. 3.14.7. No claims (other than for benefits in the Ordinary Course of Business) or lawsuits are pending or, to the knowledge of STC, threatened by, against, or relating to any of the STC Benefit Plans. To STC's knowledge, the STC Benefit Plans are not presently under audit or examination (nor has notice been received of a potential audit or examination) by the IRS, the Department of Labor, or any other governmental agency or entity and no matters are pending with respect to any Qualified Plan of STC under the IRS's Voluntary Compliance Resolution program, its Closing Agreement Program, or other similar programs. 3.14.8. With respect to each Plan of STC, there has occurred no non-exempt "prohibited transaction" (within the meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty described in Section 404 of ERISA that would, if successful, result in any liability for STC. 3.14.9. STC has no liability with respect to any employee benefit plan of STC that is not a STC Benefit Plan (exclusive of severance arrangements and retention agreements) or with respect to any employee benefit plan sponsored -28- or maintained (or which has been or should have been sponsored or maintained or with respect to which there has been an obligation to do so) by any ERISA Affiliate of STC. 3.14.10. All group health plans of STC and its ERISA Affiliates covering any current or former employees of the STC Stations have been operated in material compliance with the requirements of Sections 4980B (and its predecessor) and 5000 of the Code, and STC has provided, or will have provided before the Closing Date, to individuals entitled thereto all required notices and coverage pursuant to Section 4980B with respect to any "qualifying event" (as defined therein) occurring before or on the Closing Date. 3.15. Labor Relations. Schedule 3.15 contains a true and complete list of all employees ------------- engaged in the business or operations of the STC Stations as of the date set forth on the list, together with such employee's position, salary and date of hire. Schedule 3.15 lists all written employment contracts with any such ------------- employees and all written agreements, plans, arrangements, commitments and understandings pursuant to which STC has severance obligations with respect to such employees. Except as set forth on Schedule 3.15, no labor union or other ------------- collective bargaining unit represents or, to STC's knowledge, claims to represent, any of the employees of the STC Stations. There are no strikes, work stoppages, grievance proceedings, union organization efforts, or other controversies pending between STC and any union or collective bargaining unit representing (or, to STC's knowledge, claiming to represent) any employees of the STC Stations. STC is in compliance with all Laws relating to the employment of employees of the STC Stations or the workplace of the STC Stations, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration and the withholding of income taxes, unemployment compensation, worker's compensation, employee privacy and right to know and social security contributions, except for any noncompliance which would not have a Material Adverse Effect on the STC Stations. Except as set forth on Schedule 3.15, there ------------- are no collective bargaining agreements relating to the STC Stations or the business and operations thereof. 3.16. Environmental Matters. 3.16.1. Schedule 3.16 contains a true and complete list and brief ------------- summary of all material reports, audits and other documents relating to the environmental condition of STC's Real Property in STC's possession. 3.16.2. Except as set forth in Schedule 3.16, to STC's knowledge ------------- (which knowledge is based on the items set forth on Schedule 3.16), STC is in ------------- -29- material compliance with, and STC's Real Property and all improvements thereon are in material compliance with, all Environmental Laws. 3.16.3. Except as set forth in Schedule 3.16, there are no pending ------------- or, to the knowledge of STC , threatened actions, suits, claims, or other legal proceedings based on (and STC has not received any written notice of any complaint, order, directive, citation, notice of responsibility, notice of potential responsibility, or information request from any Governmental Authority arising out of or attributable to): (a) the current or past presence at any part of STC's Real Property of Hazardous Materials; (b) the current or past release or threatened release into the environment from STC's Real Property (including, without limitation, into any storm drain, sewer, septic system or publicly owned treatment works) of any Hazardous Materials; (c) the off-site disposal of Hazardous Materials originating on or from STC's Real Property or the STC Assets or businesses of the STC Stations; (d) any facility operations or procedures of the STC Stations which do not conform to requirements of the Environmental Laws; or (e) any violation of Environmental Laws at any part of STC's Real Property arising from activities of the STC Stations involving Hazardous Materials. To the knowledge of STC, STC has been duly issued all material permits, licenses, certificates and approvals required under any Environmental Law. 3.17. Insurance. Schedule 3.17 contains a true and complete list and brief summary of ------------- all policies of title, property, fire, casualty, liability, life, workmen's compensation, libel and slander, and other forms of insurance of any kind relating to the STC Assets or the business and operations of the STC Stations. All such policies: (a) are in full force and effect; (b) are sufficient for compliance in all material respects with all requirements of Law and of all material agreements to which STC is a party; and (c) to STC's knowledge, are valid, outstanding, and enforceable policies and the policy holder is not in default in any material respect thereunder. 3.18. Reports. All material returns, reports and statements that the STC Stations are currently required to file with the FCC or any governmental agency have been timely filed, and all reporting requirements of the FCC and other governmental authorities having jurisdiction thereof have been complied with in all material respects. All of such reports, returns and statements are complete and correct in all material respects as filed. To STC's knowledge, all documents required by the FCC to be deposited by STC in its public files (as defined in the rules and regulations of the FCC) during the period of operation of the STC Stations by STC have been deposited therein. -30- 3.19. Affiliated Transactions. Except as set forth in Schedule 3.19, the STC Party is not now, and ------------- during the past three (3) years has not been, a party, directly or indirectly, to any material contract, lease, arrangement or transaction relating to its STC Stations, whether for the purchase, lease or sale of property, for the rendition of services or otherwise, with any Affiliate of the STC Party, or any officer, director, employee, proprietor, partner or shareholder of the STC Party (collectively, "STC Affiliated Transactions"). None of the STC Affiliated Transactions which are identified on Schedule 3.19 contains terms and conditions ------------- which are in the aggregate significantly less favorable to the STC Party and as would be obtained in a comparable arms length transaction or transaction which would not have occurred but for the relationship between the parties. 3.20. Special Purpose. Except for Liabilities incurred in connection with the organization and incorporation of STCBV and STCBV Sub and the transactions contemplated by this Agreement and the Sinclair Agreement, neither STCBV nor STCBV Sub has not incurred, directly or indirectly, any Liabilities or engaged in any business activities of any type whatsoever or entered into any agreements or arrangements with any Person. 3.21. Availability of Funds. STC will have available on the Closing Date sufficient funds to enable it to consummate the transactions contemplated hereby and repay the Burlington Financing Amount (less the Cash Consideration). ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY HAT HAT represents and warrants to the STC Parties as follows: 4.1. Organization and Standing. HAT is duly organized, validly existing and in good standing under the laws of the state of its organization and is or will be prior to the Closing Date duly qualified to do business and is or will be prior to the Closing Date in good standing in any jurisdiction where the HAT Stations are located and operated and in each other jurisdiction where and at such time as such qualification is necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect on the HAT Stations. HAT has the corporate power and authority to own, lease and otherwise -31- to hold and operate the HAT Assets, to carry on the business of the HAT Stations as now conducted, and to enter into and perform the terms of this Agreement, the HAT Documents to which HAT is a party and the transactions contemplated hereby and thereby. 4.2. Authorization. The execution, delivery and performance of this Agreement and of the HAT Documents to which HAT is a party, and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action (none of which actions has been modified or rescinded and all of which actions are in full force and effect). This Agreement constitutes, and upon execution and delivery of the HAT Documents to which HAT is a party will constitute, valid and binding agreements and obligations of HAT, enforceable against HAT in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity. 4.3. Compliance with Laws. To HAT's knowledge, HAT is in material compliance with all Laws applicable to the HAT Assets and to the business and operations of the HAT Stations. HAT has obtained and holds all material permits, licenses and approvals (none of which has been modified or rescinded and all of which are in full force and effect) from all Governmental Authorities necessary in order to conduct the operations of the HAT Stations as presently conducted. 4.4. Consents and Approvals; No Conflicts. 4.4.1. The execution and delivery of this Agreement, and the performance of the transactions contemplated herein by HAT, will not require any consent, approval, authorization or other action by, or filing with or notification to, any Person or Governmental Authority, except as follows: (a) filings required under Hart-Scott-Rodino, (b) consents to the assignment of the FCC Licenses by the FCC, (c) filings, if any, with respect to real estate transfer taxes, (d) certain of the Station Contracts may be assigned only with the consent of third parties, as specified in Schedule 4.4, (e) filings with the ------------ Securities and Exchange Commission, and (f) under H-A's indenture for certain of H-A's bonds, H-A's Board of Directors must deliver to the trustee a resolution determining that the consideration to be received for the HAT Stations is fair market value and under H-A's bank credit agreement, H-A may not acquire additional television stations unless H-A delivers certain certificates and environmental reports to the agent bank as well as evidence that -32- H-A will not become liable for material Tax or ERISA liabilities as a result of such acquisition. 4.4.2. Assuming all consents, approvals, authorizations and other actions described in Section 4.4.1 have been obtained and all filings and ------------- notifications described in Section 4.4.1 have been made, the execution, delivery ------------- and performance of this Agreement and the HAT Documents to which HAT is a party do not and will not (a) conflict with or violate in any material respect any Law applicable to HAT, the HAT Assets or HAT Stations or by which any of the HAT Assets or HAT Stations is subject or affected, (b) conflict with or result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) of any of HAT's Station Contracts or other material agreements to which HAT is a party or by which HAT is bound or to which any of the HAT Assets or HAT Stations is subject or affected, (c) result in the creation of any Encumbrance upon the HAT Assets, or (d) conflict with or violate the organizational documents of HAT. 4.5. Financial Statements; Undisclosed Liabilities. 4.5.1. HAT has provided to the STC Parties unaudited balance sheets of the HAT Stations as of December 31, 1997 (the "HAT Balance Sheets"), and unaudited statements of income and operating cash flows for the HAT Stations for the twelve (12) month period ending December 31, 1997. Such financial statements (a) present fairly in all material respects the financial condition of the HAT Stations as of the date and the results of operations and operating cash flows for the period indicated, and (b) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except that the financial statements referred to in this Section 4.5.1 do not ------------- contain all footnotes and cash flow information from investing and financing activities required under generally accepted accounting principles and are subject to customary year-end adjustments). To the knowledge of HAT, the Accounts Receivable of HAT shown on the balance sheets described in this Section ------- 4.5 and the WDTN Receivables have been collected or are collectible in amounts - --- not less than the amounts thereof carried on the books of HAT, except to the extent of the allowance for doubtful accounts shown on such balance sheets. 4.5.2. There exist no Liabilities of the HAT Stations relating to, or arising out of, the business or operations of the HAT Stations, contingent or absolute, matured or unmatured, known or unknown, except (a) as reflected on the HAT Balance Sheets and (b) for Liabilities that (i) were incurred after the Current Balance Sheet Date in the Ordinary Course of Business, or (ii) were not required to be reflected on the Balance Sheets of HAT in accordance with generally accepted accounting principles applied on a consistent basis. -33- 4.6. Absence of Certain Changes or Events. Except as set forth and described in Schedule 4.6, since the Current ------------ Balance Sheet Date, there has been no Material Adverse Effect on the HAT Stations. Since the Current Balance Sheet Date, the business of the HAT Stations has been conducted in the Ordinary Course of Business, and HAT has not, with respect to the HAT Stations or HAT Assets, (a) incurred any extraordinary loss of, or injury to, any of the HAT Assets as the result of any fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident, act of God or public enemy or armed forces, or other casualty; (b) incurred, or become subject to, any Liability, except current Liabilities incurred in the Ordinary Course of Business; (c) discharged or satisfied any Encumbrance or paid any Liability other than current Liabilities shown in the HAT Balance Sheets, current Liabilities incurred since the Current Balance Sheet Date in the Ordinary Course of Business, and Liabilities (including, without limitation, partial and complete prepayments) arising under any credit or loan agreement between HAT and its lenders; (d) mortgaged, pledged or subjected to any Encumbrance any of the HAT Assets (except for Permitted Encumbrances); (e) made any material change in any method of accounting or accounting practice; (f) sold, leased, assigned or otherwise transferred any of its material HAT Assets other than obsolete HAT Assets which have been replaced by suitable replacements; (g) made any material increase in compensation or benefits payable to any employee other than in the Ordinary Course of Business; or (h) made any agreement to do any of the foregoing. 4.7. Absence of Litigation. As of the date hereof, except as set forth in Schedule 4.7, there is ------------ no material or, to HAT's knowledge, immaterial action, suit, investigation, claim, arbitration, litigation or similar proceeding, nor any order, decree or judgment pending or, to HAT's knowledge, threatened against HAT, the HAT Assets or HAT Stations before any Governmental Authority. 4.8. Assets. Except for the HAT Excluded Assets, the HAT Assets include all of the assets or property used or useful in the businesses of the HAT Stations as presently operated. Except for leased or licensed HAT Assets, HAT is the owner of, and has good title to, the HAT Assets free and clear of any Encumbrances, except for Permitted Encumbrances (including, without limitation, those items set forth on Schedule 4.8). At the Closing, the STC Exchange Entities shall ------------ acquire good title to, and all right, title and interest in and to the HAT Assets, free and clear of all Encumbrances, except for the Permitted Encumbrances. -34- 4.9. FCC Matters. 4.9.1. HAT holds the FCC Licenses listed as held by HAT on Schedule -------- 2.3.1. The FCC Licenses of HAT contained on Schedule 2.3.1 constitute all of - ----- -------------- the licenses, permits and authorizations from the FCC that are required for the business and operations of WDTN and WNAC. Except as set forth on Schedule 4.9, ------------ such FCC Licenses are valid and in full force and effect through the dates set forth on Schedule 2.3.1, unimpaired by any condition, other than as set forth in -------------- such FCC Licenses. Except as set forth on Schedule 4.9, no application, action ------------ or proceeding is pending for the renewal or modification of any of HAT's FCC Licenses, and, except for actions or proceedings affecting television broadcast stations generally, no application, complaint, action or proceeding is pending or, to HAT's knowledge, threatened that may result in the (a) the revocation, modification, non-renewal or suspension of any of HAT's FCC Licenses, or (b) the issuance of a cease-and-desist order. Except as set forth in Schedule 4.9, HAT ------------ has no knowledge of any facts, conditions or events relating to HAT or the HAT Stations that would reasonably be expected to cause the FCC to revoke any of the FCC Licenses for the HAT Stations or not to grant any pending applications for renewal of any FCC Licenses for the HAT Stations or to deny the assignment of the FCC Licenses of HAT to STC License Company as provided for in this Agreement. 4.9.2. Except as disclosed in Schedule 4.9, HAT is, and pending the ------------ Closing will remain legally, financially and otherwise qualified under the Communications Act and all rules, regulations and policies of the FCC to acquire and operate the STC Stations. Except as disclosed in Schedule 4.9, there are no ------------ facts or proceedings which would reasonably be expected to disqualify HAT under the Communications Act or otherwise from acquiring or operating any of the STC Stations or would cause the FCC not to approve the assignment of the FCC Licenses of STC License Company to HAT. Except as disclosed in Schedule 4.9, ------------ HAT has no knowledge of any fact or circumstance relating to HAT or any Affiliate of HAT that would reasonably be expected to (a) cause the filing of any objection to the assignment of the FCC Licenses for the STC Stations from STC License Company to HAT, or (b) lead to a delay in the processing by the FCC of the applications for such assignment. Except as disclosed in Schedule 4.9 ------------ and except for existing waivers pertaining to the STC Stations, no waiver of any FCC rule or policy is necessary to be obtained for the grant of the applications for the assignment of the FCC Licenses for the STC Stations from STC License Company to HAT, nor will processing pursuant to any exception or rule of general applicability be requested or required in connection with the consummation of the transactions herein. -35- 4.10. Real Property. 4.10.1. HAT has good and marketable fee simple title to all fee estates included in the Real Property of HAT and good title to all other owned Real Property of HAT, in each case free and clear of all Encumbrances, except for Permitted Encumbrances (including, without limitation, those items listed on Schedule 4.10). - ------------- 4.10.2. HAT has a valid leasehold interest in all Leased Property listed as leased by HAT in Schedule 2.3.2. Schedule 2.3.2 lists all leases and -------------- -------------- subleases pursuant to which any of such Leased Property is leased by HAT in connection with the business and operations of the HAT Stations. HAT is the owner and holder of all such Leased Property purported to be granted by such leases and subleases. Each such lease and sublease is valid as to HAT thereunder and, to HAT's knowledge valid as to any other party thereto, and is in full force and effect and, to HAT's knowledge, constitutes a legal and binding obligation of, and is legally enforceable against HAT and each other party thereto and grants the leasehold interest it purports to grant, including any rights to nondisturbance and peaceful and quiet enjoyment that may be contained therein. The lessees and sublessees are, and to the knowledge of HAT, all other parties are, in compliance in all material respects with the provisions of such leases and subleases. 4.10.3. The Real Property and the Leased Property of HAT listed in Schedule 2.3.2 constitute all of the real property owned, leased or used in the - -------------- business and operations of the HAT Stations which is material to the business and operations of the HAT Stations. 4.10.4. No portion of the Real Property of HAT or any building, structure, fixture or improvement thereon is the subject of, or affected by, any condemnation, eminent domain or inverse condemnation proceeding currently instituted or pending or, to the knowledge of HAT, threatened. To the knowledge of HAT, and to the extent that such documents are in the possession of HAT, HAT has delivered to STC true, correct and complete copies of the following documents with respect to its Real Property and Leased Property as identified in Schedule 4.10: (i) deeds, by which HAT has received a fee interest in any of - ------------- such Real Property; (ii) leases for all of its Leased Property; (iii) title insurance policies or commitments; (iv) surveys; and (v) inspection reports or other instruments or reports, including, without limitation, any phase I or phase II environmental reports or other similar environmental reports, surveys or assessments (including any and all amendments and other modifications of such instruments). -36- 4.11. Intellectual Property. HAT possesses adequate rights, licenses and authority to use all Intellectual Property necessary to conduct the business of the HAT Stations as presently conducted. HAT has good title to all Intellectual Property maintained, owned, leased or used in connection with the business and operations of the HAT Stations, free and clear of any Encumbrances, except for Permitted Encumbrances. HAT is not obligated to pay any royalty or other fees to anyone with respect to the Intellectual Property of HAT. HAT has not received any written notice to the effect that any service rendered by HAT relating to the business of the HAT Stations may infringe, or that HAT is otherwise infringing, on any intellectual property right or other legally protectable right of another. No director, officer or employee of HAT has any interest in any Intellectual Property. 4.12. Station Contracts. Complete and correct copies of Station Contracts of HAT set forth in Schedules 2.3.5, 2.3.6, 2.3.8 and 2.3.9 (which schedules, as to HAT, are true - --------------------------------------- and correct in all material respects) have been made available to STC and (a) each such material Station Contract and, to HAT's knowledge, each such immaterial Station Contract, is in full force and effect and constitutes a legal, valid and binding obligation of HAT, and, to HAT's knowledge, of each other party thereto; (b) HAT is not in breach or default in any material respect of the terms of any such Station Contract; (c) none of the material rights of HAT under any such Station Contract will be subject to termination, nor will a default occur, as a result of the consummation of the transactions contemplated hereby, except to the extent that failure to obtain the prior consent to assignment thereof of any party thereto shall or could be interpreted to constitute a termination or modification of or a default under any such Station Contract; and (d) to the knowledge of HAT, no other party to any such Station Contract is in breach or default in any material respect of the terms thereunder. 4.13. Taxes. HAT has (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will have prior to the Closing Date) duly filed all material Tax Returns required to be filed by HAT on or before the Closing Date with respect to all material applicable Taxes. In the case of any such Tax Returns which receive an extension for their date of filing, such Tax Returns will be considered due on, and not considered required to be filed before, the extended due date. All such Tax Returns are (or, in the case of returns becoming due after the date hereof and on or before the Closing Date, will be) true and complete in all material respects. HAT has: (a) paid all Taxes due to any Governmental Authority as indicated on such Tax Returns; or (b) established (or, in the case of amounts -37- becoming due after the date hereof, prior to the Closing Date will have established) adequate reserves (in conformity with generally accepted accounting principles consistently applied) for the payment of such Taxes. 4.14. Employee Benefit Plans. 4.14.1. Schedule 4.14 lists all Plans and Benefit Arrangements ------------- maintained by or contributed to by HAT for the benefit of the employees of the HAT Stations (collectively referred to as "HAT Benefit Plans") (the STC Benefit Plans and the HAT Benefit Plans are sometimes individually referred to herein as the "Benefit Plans"). Each HAT Benefit Plan has been maintained in material compliance with its terms and with ERISA, the Code and other applicable Laws. 4.14.2. Schedule 4.14 sets forth a list of all Qualified Plans ------------- maintained by or contributed to by HAT for the benefit of the employees of the HAT Stations. All such Qualified Plans and any related trust agreements or annuity agreements (or any other funding document) have been maintained in material compliance with ERISA and the Code (including, without limitation, the requirements for tax qualification described in Section 401 thereof), other than any Multiemployer Plan. To HAT's knowledge, any trusts established under such Plans are exempt from federal income taxes under Section 501(a) of the Code. 4.14.3. Schedule 4.14 lists all funded Welfare Plans of HAT that ------------- provide benefits to current or former employees of the HAT Stations or its beneficiaries. To HAT's knowledge, the funding under each such Welfare Plan does not exceed and has not exceeded the limitations under Sections 419A(b) and 419A(c) of the Code. To HAT's knowledge, HAT is not subject to taxation on the income of any such Welfare Plan's welfare benefit fund (as such term is defined in Section 419(e) of the Code) under Section 419A(g) of the Code. 4.14.4. HAT has no post-retirement medical, life insurance or other benefits promised, provided or otherwise due now or in the future to current, former or retired employees of the HAT Stations. 4.14.5. To HAT's knowledge, except as set forth in Schedule 4.14, ------------- HAT has (a) filed or caused to be filed all returns and reports on HAT's Plans that they are required to file and (b) paid or made adequate provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made relating to those returns or reports. All other fees, interest, penalties and assessments that are payable by or for HAT have been timely reported, fully paid and discharged. There are no unpaid fees, penalties, interest or assessments due from HAT or from any other person that are or could become an Encumbrance on any of the HAT Assets or could otherwise adversely affect the businesses of the -38- HAT Stations or HAT Assets. To HAT's knowledge, HAT has collected or withheld all amounts that are required to be collected or withheld by it to discharge its obligations, and all of those amounts have been paid to the appropriate Governmental Authority or set aside in appropriate accounts for future payment when due. HAT has furnished to STC true and complete copies of all documents setting forth the terms and funding of each of HAT's Plans. 4.14.6. Except as set forth in Schedule 4.14, neither HAT nor any ------------- ERISA Affiliate of HAT has ever sponsored or maintained, had any obligation to sponsor or maintain, or had any liability (whether actual or contingent, with respect to any of its assets or otherwise) with respect to any of HAT's Plans subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan). Neither HAT nor any ERISA Affiliate of HAT (since January 1, 1989) has terminated or withdrawn from or sought a funding waiver with respect to any plan subject to Title IV of ERISA, and no facts exist that could reasonably be expected to cause such actions in the future; no accumulated funding deficiency (as defined in Code Section 412), whether or not waived, exists with respect to any such plan; no reportable event (as defined in ERISA Section 4043) has occurred with respect to any such plan (other than events for which reporting is waived); all costs of any such plans have been provided for on the basis of consistent methods in accordance with sound actuarial assumptions and practices, and the assets of each such plan, as of its last valuation date, exceeded its "Benefit Liabilities" (as defined in ERISA Section 4001(a)(16)); and, since the last valuation date for each such plan, no such plan has been amended or changed to increase the amounts of benefits thereunder and, to the knowledge of HAT, there has been no event that would reduce the excess of assets over benefit liabilities; and except as set forth in Schedule 4.14, neither HAT nor any ERISA Affiliate of HAT has ever made or been - ------------- obligated to make, or reimbursed or been obligated to reimburse another employer for, contributions to any Multiemployer Plan of HAT. 4.14.7. No claims (other than for benefits in the Ordinary Course of Business) or lawsuits are pending or, to the knowledge of HAT, threatened by, against, or relating to any of its Benefit Plans. To HAT's knowledge, the HAT Benefit Plans are not presently under audit or examination (nor has notice been received of a potential audit or examination) by the IRS, the Department of Labor, or any other governmental agency or entity and no matters are pending with respect to any Qualified Plan of HAT under the IRS's Voluntary Compliance Resolution program, its Closing Agreement Program, or other similar programs. 4.14.8. With respect to each Plan of HAT, there has occurred no non-exempt "prohibited transaction" (within the meaning of Section 4975 of the Code) or transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty described in Section 404 of ERISA that would, if successful, result in any liability for HAT. -39- 4.14.9. HAT has no liability with respect to any employee benefit plan of HAT that is not a HAT Benefit Plan (exclusive of severance arrangements and retention agreements) or with respect to any employee benefit plan sponsored or maintained (or which has been or should have been sponsored or maintained or with respect to which there has been an obligation to do so) by any ERISA Affiliate of HAT. 4.14.10. All group health plans of HAT and its ERISA Affiliates covering any current or former employees of the HAT Stations have been operated in material compliance with the requirements of Sections 4980B (and its predecessor) and 5000 of the Code, and HAT has provided, or will have provided before the Closing Date, to individuals entitled thereto all required notices and coverage pursuant to Section 4980B with respect to any "qualifying event" (as defined therein) occurring before or on the Closing Date. 4.15. Labor Relations. Schedule 4.15 contains a true and complete list of all employees ------------- engaged in the business or operations of the HAT Stations as of the date set forth on the list, together with such employee's position, salary and date of hire. Schedule 4.15 lists all written employment contracts with any such ------------- employees and all written agreements, plans, arrangements, commitments and understandings pursuant to which HAT has severance obligations with respect to such employees. Except as set forth on Schedule 4.15, no labor union or other ------------- collective bargaining unit represents or, to HAT's knowledge, claims to represent, any of the employees of the HAT Stations. There are no strikes, work stoppages, grievance proceedings, union organization efforts, or other controversies pending between HAT and any union or collective bargaining unit representing (or, to HAT's knowledge, claiming to represent) any employees of the HAT Stations. HAT is in compliance with all Laws relating to the employment of employees of the HAT Stations or the workplace of the HAT Stations, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration and the withholding of income taxes, unemployment compensation, worker's compensation, employee privacy and right to know and social security contributions, except for any noncompliance which would not have a Material Adverse Effect on the HAT Stations. Except as set forth on Schedule 4.15, there ------------- are no collective bargaining agreements relating to the HAT Stations or the business and operations thereof. 4.16. Environmental Matters. 4.16.1. Schedule 4.16 contains a true and complete list and brief ------------- summary of all material reports, audits and other documents relating to the environmental condition of the Real Property of HAT in HAT's possession. -40- 4.16.2. Except as set forth in Schedule 4.16, to the knowledge of ------------- HAT (which knowledge is based on the items set forth on Schedule 4.16), HAT is ------------- in material compliance with, and the Real Property of HAT and all improvements thereon are in material compliance with, all Environmental Laws. 4.16.3. Except as set forth in Schedule 4.16, there are no pending ------------- or, to the knowledge of HAT, threatened actions, suits, claims, or other legal proceedings based on (and HAT has not received any written notice of any complaint, order, directive, citation, notice of responsibility, notice of potential responsibility, or information request from any Governmental Authority arising out of or attributable to): (a) the current or past presence at any part of HAT's Real Property of Hazardous Materials; (b) the current or past release or threatened release into the environment from HAT's Real Property (including, without limitation, into any storm drain, sewer, septic system or publicly owned treatment works) of any Hazardous Materials; (c) the off-site disposal of Hazardous Materials originating on or from HAT's Real Property or the HAT Assets or businesses of the HAT Stations; (d) any facility operations or procedures of the HAT Stations which do not conform to requirements of the Environmental Laws; or (e) any violation of Environmental Laws at any part of HAT's Real Property arising from activities of the HAT Stations involving Hazardous Materials. To the knowledge of HAT, HAT has been duly issued all material permits, licenses, certificates and approvals required under any Environmental Law. 4.17. Insurance. Schedule 4.17 contains a true and complete list and brief summary of ------------- all policies of title, property, fire, casualty, liability, life, workmen's compensation, libel and slander, and other forms of insurance of any kind relating to the HAT Assets or the business and operations of the HAT Stations. All such policies: (a) are in full force and effect; (b) are sufficient for compliance in all material respects with all requirements of Law and of all material agreements to which HAT is a party; and (c) to HAT's knowledge, are valid, outstanding, and enforceable policies and the policy holder is not in default in any material respect thereunder. 4.18. Reports. All material returns, reports and statements that the HAT Stations are currently required to file with the FCC or any governmental agency have been timely filed, and all reporting requirements of the FCC and other governmental authorities having jurisdiction thereof have been complied with in all material respects. All of such reports, returns and statements are complete and correct in all material respects as filed. To HAT's knowledge, all documents required by the FCC to be deposited by HAT in its public files (as defined in the rules and regulations of -41- the FCC) during the period of operation of the HAT Stations by HAT have been deposited therein. 4.19. Affiliated Transactions. Except as set forth in Schedule 4.19, HAT is not now, and during the ------------- past three (3) years has not been, a party, directly or indirectly, to any material contract, lease, arrangement or transaction relating to the HAT Stations, whether for the purchase, lease or sale of property, for the rendition of services or otherwise, with any Affiliate of HAT, or any officer, director, employee, proprietor, partner or shareholder of HAT (collectively, "HAT Affiliated Transactions") (STC Affiliated Transactions and HAT Affiliated Transactions are sometimes collectively referred to herein as the "Affiliated Transactions"). None of the HAT Affiliated Transactions which are identified on Schedule 4.19 contains terms and conditions which are in the aggregate - ------------- significantly less favorable to HAT and as would be obtained in a comparable arms length transaction or transaction which would not have occurred but for the relationship between the parties. ARTICLE 5. PRE-CLOSING FILINGS 5.1. Applications for FCC Consent. Within five (5) business days following the execution of this Agreement, the parties hereto shall jointly file applications for the Stations with the FCC requesting consent to the assignment of the FCC Licenses for the Stations as contemplated herein (the "FCC Applications"). Each party hereto will diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to obtain promptly the requested consents and approvals of the FCC Applications by the FCC. 5.2. Hart-Scott-Rodino. Within five (5) business days following the execution of this Agreement, the parties hereto shall complete any filing that may be required pursuant to Hart-Scott-Rodino (each an "HSR Filing"). Each party hereto shall diligently take, or fully cooperate in the taking of, all necessary and proper steps, and provide any additional information reasonably requested in order to comply with, the requirements of Hart-Scott-Rodino. -42- 5.3. Non-Required Actions. No party hereto shall have any obligation to take any steps pursuant to Section 5.1 or Section 5.2 which would require the divestiture of any ----------- ----------- business or assets of any party hereto or any Affiliate thereof. ARTICLE 6. COVENANTS AND AGREEMENTS OF THE PARTIES Each party covenants and agrees with the other party as follows: 6.1. Negative Covenants. Pending and prior to the Closing, such party will not without the prior written consent of the other party (which consent will not be unreasonably withheld, delayed or conditioned, except in the case of matters referred to in Sections 6.1.7, 6.1.9 and 6.1.11, with respect to which the other party's - -------------------------------- consent may be withheld in its sole and absolute discretion), do or agree to do any of the following: 6.1.1. Dispositions; Mergers. Sell, assign, lease or otherwise transfer or dispose of any of such party's Assets other than at substantially fair market value and in the Ordinary Course of Business; or merge or consolidate with or into any other entity or enter into any contracts or agreements relating thereto. 6.1.2. Accounting Principles and Practices. Change or modify any accounting principles or practices or any method of applying such principles or practices. 6.1.3. Trade-out Agreements. (a) As to WPTZ and WNNE, enter into or renew any Trade- out Agreement (excluding any film barter agreements) that would be binding on the other party after the Closing Date, except in the Ordinary Course of Business and which requires the provision of broadcast time having a value of less than (a) Twenty-Five Thousand Dollars ($25,000) individually, and (b) together with existing Trade-out Agreements still in effect as of the Closing Date, Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate as of the Closing Date. (b) As to KSBW and WDTN, enter into or renew any Trade- out Agreements (excluding any film barter agreements) that would be -43- binding on the other party after the Closing Date, except in the Ordinary Course of Business which requires the provision of broadcast time having the value of less than Five Thousand Dollars ($5,000) individually and together with existing Trade-out Agreements still in effect as of the Closing Date, Fifty Thousand Dollars ($50,000) in the aggregate as of the Closing Date. 6.1.4. Broadcast Time Sales Agreements. Enter into or renew any Time Sales Agreement except in the Ordinary Course of Business and which are for cash at prevailing rates for a term not exceeding twelve (12) months. 6.1.5. Network Affiliation Agreements and TBAs. Acquire or enter into or renew any TBA or network affiliation agreement. 6.1.6. Additional Agreements. Acquire or enter into any new Station Contracts not referred to in Sections 6.1.3, 6.1.4 or 6.1.5 above, or renew, extend, amend, alter, modify or - ------------------------------ otherwise change any existing Station Contract, except in the Ordinary Course of Business (collectively, "Additional Agreements"); provided, however, such party -------- ------- shall not enter into (a) any Program Contract for any Station which will be binding on the other party after the Closing Date, or (b) any other Station Contract requiring payments by such party under each Station Contract in excess of Five Thousand Dollars ($5,000) or Seventy-Five Thousand Dollars ($75,000) in the aggregate. 6.1.7. Breaches. Do or omit to do any act which will cause a material breach of any Station Contract. 6.1.8. Employee Matters. (a) Enter into or become subject to any employment, labor, union, or professional service contract not terminable at will, or any bonus, pension, insurance, profit sharing, incentive, deferred compensation, severance pay, retirement, hospitalization, employee benefit, or other similar plan; or increase the compensation payable or to become payable to any employee, or pay or arrange to pay any bonus payment to any employee, except in the Ordinary Course of Business. -44- (b) As to KSBW and WDTN, hire, retain or offer employment to any new employees. 6.1.9. Actions Affecting FCC Licenses. Take any action which may jeopardize the validity or enforceability of or rights under any FCC Licenses. 6.1.10. Programming. Program or broadcast any Program Contract or syndicated program, except in the Ordinary Course of Business and consistent with the terms and conditions of such Program Contracts. 6.1.11. Encumbrances. Create, assume or permit to exist any Encumbrances upon any of the Assets except for Permitted Encumbrances and Encumbrances that will be discharged prior to or on the Closing Date. 6.1.12. Transactions With Affiliates. Enter into any transaction with any Affiliate of such party that will be binding upon the other party on or after the Closing Date, except for transactions not otherwise prohibited by this Section 6.1 and transactions ----------- between and among Stations operating in the same DMA in the Ordinary Course of Business, in each case on arm's length terms. 6.2. Affirmative Covenants. Pending and prior to the Closing, each party will: 6.2.1. Preserve Existence. Preserve its corporate existence and business organization intact, maintain its existing franchises and licenses, use commercially reasonable efforts to preserve for the other party the relationships of its Stations with suppliers, customers, employees and others with whom its Stations have business relationships, and keep all of its Assets substantially in their present condition, ordinary wear and tear excepted. 6.2.2. Normal Operations. Subject to the terms and conditions of this Agreement (including, without limitation, Section 6.1), (a) carry on the businesses and ----------- -45- activities of its Stations, including without limitation, promotional activities, the sale of advertising time, entering into other contracts and agreements, or purchasing and scheduling of programming, in the Ordinary Course of Business; (b) pay or otherwise satisfy all obligations (cash and barter) of its Stations in the Ordinary Course of Business; provided, however, such party -------- ------- shall cause to be brought current as of the Closing Date all payments that are due and payable under its Station Contracts as originally contracted; (c) maintain books of account, records, and files with respect to the business and operations of its Stations in substantially the same manner as heretofore; and (d) maintain its Assets in customary repair, maintenance and condition, except to the extent of normal wear and tear, and repair or replace, consistently with the Ordinary Course of Business, any of its Assets that may be damaged or destroyed; notwithstanding the foregoing, each party acknowledges that the other party shall not be obligated to spend any funds on capital expenditures after the date hereof, except for the repair or replacement of its Assets that may be damaged or destroyed or to comply with improvements required pursuant to the environmental remediation described in Section 6.16. ------------ 6.2.3. Maintain FCC Licenses. Maintain the validity of its FCC Licenses, and comply in all material respects with all requirements of such FCC Licenses and the rules and regulations of the FCC. 6.2.4. Network Affiliation. Use best efforts to maintain in full force and effect the present network affiliation agreements for its Stations (and any and all modifications and renewals thereof). 6.2.5. Station Contracts. Pay and perform obligations in the Ordinary Course of Business under its Station Contracts and under any Additional Agreements that shall be entered into by such party pursuant to Section 6.1.6, in accordance with the ------------- respective terms and conditions of such Station Contracts. 6.2.6. Taxes. Pay or discharge all Taxes when due and payable. 6.2.7. Access. Prior to the Closing and for a period of five (5) years after the Closing Date (and to the extent permitted by the Clear Channel Agreements in -46- the case of HAT and to the extent permitted by the Heritage Agreement and the Sinclair Agreement in the case of STC), cause to be afforded to representatives of the other party reasonable access during normal business hours to offices, properties, assets, books and records, contracts and reports of its Stations, as the other party shall from time to time reasonably request; provided, however, -------- ------- that (a) such investigation shall only be upon reasonable notice and shall not unreasonably disrupt the personnel or operations of either party or its Stations, and (b) under no circumstances shall either party be required to provide access to the other party or any representative of the other party (i) any information or materials subject to confidentiality agreements with third parties required to be kept confidential by applicable Laws, or (ii) any privileged attorney-client communications or attorney work product. All requests for access to the offices, properties, assets, books and records, contracts and reports of the Stations of either party shall be made to such representatives as such party shall designate, who shall be solely responsible for coordinating all such requests and all access permitted hereunder. Each party acknowledges and agrees that neither it nor its representatives shall contact any of the employees, customers, suppliers, partners, or other associates or Affiliates of the other party, in connection with the transactions contemplated hereby, whether in person or by telephone, mail or other means of communication, without the specific prior written authorization of such representatives of the other party. Subject to and in accordance with the terms of this Section 6.2.7, each party shall cooperate in all reasonable respects ------------- with the other party's request to conduct an audit of such party's financial information as the other party may reasonably determine is necessary to satisfy the other party's public company reporting requirements pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934 including, without limitation, (a) using commercially reasonable efforts to obtain the consent of such party's auditors to permit the other party and the other party's auditors to have access to such auditors' work papers, and (b) consenting to such access by the other party. All costs and expenses incurred in connection with the preparation of (and assimilation of relevant information for) any such financial statements shall be paid by the requesting party. 6.2.8. Insurance. Maintain in full force and effect all of its existing casualty, liability, and other insurance in amounts not less than those in effect on the date hereof. 6.2.9. Financial Statements. Provide the other party with unaudited monthly statements of assets and liabilities relating to the business and operations of its Stations, and monthly statements of revenues and expenses reflecting the results of business and -47- operations of its Stations for January 31, 1998 and for each month thereafter, within thirty (30) days after the end of each such month. Such party further agrees to provide the other party with weekly sales pacing reports for its Stations. 6.2.10. Consents. (a) Take all reasonable action required to obtain all consents, approvals and agreements of any third parties necessary to authorize, approve or permit the consummation of the transactions contemplated by this Agreement, including, without limitation, any consent of the parties to the Station Contracts designated as necessary in Schedule 3.4 and Schedule 4.4, as ------------ ------------ applicable, in order to consummate the transactions contemplated hereby (collectively, the "Restricted Contracts"). Notwithstanding anything to the contrary set forth in this Agreement or otherwise, to the extent that the consent or approval of any third party is required under any Restricted Contract, the party to such Restricted Contract shall only be required to use reasonable efforts (not involving the payment by such party of any money to any party to any such Restricted Contract) to obtain such consents and approvals, and in the event that such party fails to obtain any such consent or approval, the other party shall have no right to terminate this Agreement. (b) Notwithstanding anything to the contrary in clause (a) above, each party shall retain, until such time as any required consents shall have been obtained by such party, all rights to and under any Station Contract to which it is a party which requires the consent of any other party thereto for assignment to the other party if such consent has not been obtained on the Closing Date (the "Deferred Contract"). Until the assignment of the Deferred Contract, (i) the party thereto shall continue to use all commercially reasonable efforts and the other party shall cooperate to obtain the consent and/or to remove any other impediments to such assignment, and (ii) the parties agree to cooperate in any lawful arrangement to provide (to the extent permitted without breach of such Deferred Contract) that the other party shall receive the benefits of such interest after the Closing Date to the same extent as if it were the party thereunder. If, subsequent to the Closing Date, the party to a Deferred Contract shall obtain required consents to assign such Deferred Contract to the other party, such Deferred Contract for which consent to assign has been obtained shall at that time be deemed to be conveyed, granted, bargained, sold, transferred, setover, assigned, released, delivered and confirmed to the other party, without need of further action or of future documentation. 6.2.11. Corporate Action. Take all corporate action (including, without limitation, all shareholder action), under the Law of any state having jurisdiction over such party -48- necessary to effectuate the transactions contemplated by this Agreement and the other agreements to which it is a party. 6.2.12. Environmental Audit. Permit the other party and the other party's agents, as soon as practical after the date hereof and upon the other party's request therefor, access to the Real Property of such party and the Leased Property of such party for the purpose of conducting, at the other party's expense, Phase I and Phase II environmental audits. Any such environmental audits shall be conducted by a reputable environmental investigatory firm of the other party's choice subject to the reasonable approval of such party and in a manner as will not unreasonably interfere with the normal business and operations of any of the Stations. 6.2.13. Sinclair Agreement. As to STC, STC shall consummate the acquisition of the Burlington Stations in accordance with the provisions of the Sinclair Agreement and promptly enforce all rights and remedies available to STC pursuant to the Sinclair Documents. 6.3. Confidentiality. The Recipient Party shall, at all times, maintain strict confidentiality with respect to all documents and information furnished to such party by or on behalf of the Transferring Party. Nothing shall be deemed to be confidential information that: (a) is known to the Recipient Party at the time of its disclosure to the Recipient Party; (b) becomes publicly known or available other than through disclosure by the Recipient Party; (c) is received by the Recipient Party from a third party not actually known by the Recipient Party to be bound by a confidentiality agreement with or obligation to the Transferring Party; or (d) is independently developed by the Recipient Party. Notwithstanding the foregoing provisions of this Section 6.3, the Recipient ----------- Party may disclose such confidential information (a) to the extent required or deemed advisable to comply with applicable Laws; (b) to its officers, directors, employees, representatives, financial advisors, attorneys, accountants, and agents with respect to the transactions contemplated hereby (so long as such parties agree to maintain the confidentiality of such information); and (c) to any Governmental Authority in connection with the transactions contemplated hereby. In the event this Agreement is terminated, each party will return to the other party all documents and other material prepared or furnished by the other party relating to the transactions contemplated hereunder, whether obtained before or after the execution of this Agreement. -49- 6.4. Collection of Receivables. At the Closing, STC shall assign the Sinclair Receivables to HAT for collection purposes only, and, within ten (10) business days after the Closing Date, STC shall furnish to HAT a list of such Sinclair Receivables by accounts and the amounts then owing. HAT agrees, during the period of days remaining between the date of the STC Transfer Date and one hundred fifty (150) days from such date (the "Sinclair Collection Period"), without any requirement to litigate to collect such Sinclair Receivables, to use its reasonable efforts (with at least the care and diligence HAT uses to collect its own accounts receivable) to collect for STC such Sinclair Receivables and to remit to Sinclair on the fifth (5th) day following the last day of each month occurring during the Sinclair Collection Period (or, if any such day is a Saturday, Sunday or holiday, on the next day on which banking transactions are resumed), collections received by HAT with respect to such Sinclair Receivables. HAT shall not make any referral or compromise of any Sinclair Receivable to a collection agency or attorney for collection and shall not compromise for less than full value any Sinclair Receivable without the prior written consent of Sinclair. Any Sinclair Receivable not collected by HAT within the Sinclair Collection Period shall revert to Sinclair. HAT shall reassign, without recourse to Sinclair, each Sinclair Receivable and deliver to Sinclair, all records relating thereto on the same day as HAT remits to Sinclair the collections received. All payments in respect of the Sinclair Receivables received during the Sinclair Collection Period shall be first applied to the oldest balance then due on the Sinclair Receivables unless the account debtor indicates in writing that payment is to be applied otherwise due to a dispute over an Account Receivable. HAT agrees, upon the reasonable request of STC, to furnish to STC and Sinclair periodic reports on the status of its Sinclair Receivables. HAT shall have no right to set-off any amounts collected for the Sinclair Receivable for any amounts owed to HAT by STC; provided, however, that HAT shall have the right to seek indemnification in -------- ------- accordance with the terms and conditions of this Agreement. 6.5. Possession and Control. Between the date hereof and the Closing Date, the Recipient Party shall not directly or indirectly control, supervise or direct, or attempt to control, supervise or direct, the business and operations of the Transferring Party's Stations, and such operation, including complete control and supervision of all programming, shall be the sole responsibility of the Transferring Party. On and after the Closing Date, the Transferring Party shall have no control over, or right to intervene, supervise, direct or participate in, the business and operations of the Stations transferred to the Recipient Party. -50- 6.6. Risk of Loss. The risk of loss or damage by fire or other casualty or cause to the Assets of the Transferring Party until the Closing Date shall be upon the Transferring Party. In the event of loss or damage prior to the Closing Date with respect to which the Transferring Party has adequate replacement cost insurance and which has not been restored, replaced, or repaired as of the Closing Date and if the Recipient Party shall proceed with the Closing, then the Recipient Party shall receive at the Closing the insurance proceeds or an assignment of the right to receive such insurance proceeds, as applicable, to which the Transferring Party otherwise would be entitled, whereupon the Transferring Party shall have no further liability to the Recipient Party for such loss or damage. 6.7. Public Announcements. Each party shall consult with the other party before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated herein and shall not issue any such press release or make any such public statement without the prior written consent of the other party, which shall not be unreasonably withheld; provided, -------- however, that a party may, without the prior written consent of the other party, - ------- issue such press release or make such public statement as may be required by Law or any listing agreement with a national securities exchange to which such party is a party if it has used all reasonable efforts to consult with the other party and to obtain such party's consent but has been unable to do so in a timely manner. 6.8. Sinclair Employee Matters. 6.8.1. At the Closing, HAT shall offer employment to each of the employees of WNNE and WPTZ (including those on leave of absence, whether short-term, long-term, family, maternity, disability, paid, unpaid or other), at a comparable salary, position and place of employment as held by each such employee immediately prior to the Closing Date (such employees who are given such offers of employment and accept such offers and are employed by HAT are referred to herein as the "Sinclair Employees"). Nothing in this Section 6.8.1 ------------- is intended to guarantee employment for any Sinclair Employee for any length of time after the Closing Date. 6.8.2. Except as provided otherwise in this Section 6.8, STC ----------- shall pay, discharge and be responsible for (a) all salary and wages arising out of or relating to the employment of the employees of WNNE and WPTZ prior to the Closing Date and (b) any employee benefits arising under the Benefit Plans of STC and its Affiliates during the period prior to the Closing Date. From and after the Closing Date, HAT shall pay, discharge and be responsible for all salary, wages and -51- benefits arising out of or relating to the employment of the Sinclair Employees by HAT on and after the Closing Date. HAT shall be responsible for all severance Liabilities, and all COBRA Liabilities for any Sinclair Employees terminated by HAT on or after the Closing Date. 6.8.3. HAT shall cause all Sinclair Employees as of the Closing Date to be eligible to participate in its "employee welfare benefit plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2) of ERISA, respectively) to the extent required under the Sinclair Agreement. 6.8.4. For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service in any such plan for which a Sinclair Employee may be eligible after the Closing, HAT shall ensure that, to the extent permitted by law, service by such Sinclair Employee with the Heritage Subsidiaries, Sinclair, STC or any of their respective Affiliates shall be deemed to have been service with HAT. In addition, HAT shall ensure that each Sinclair Employee receives credit under any welfare benefit plan of HAT for any deductibles or co-payments paid by such Sinclair Employee and his or her dependents for the current plan year under a plan maintained by the Heritage Subsidiaries, Sinclair, STC or any of their respective Affiliates. HAT shall grant credit to each Sinclair Employee for all sick leave in accordance with the policies of HAT applicable generally to its employees after giving effect to service for STC as service for HAT. To the extent taken into account in determining the Final Proration Amount, HAT shall assume and discharge STC's Liabilities for the payment of all unused vacation leave accrued by Sinclair Employees as of the Closing Date. To the extent any claim with respect to such accrued vacation leave is lodged against STC, with respect to any Sinclair Employee, HAT shall indemnify, defend and hold harmless STC from and against any and all losses, directly or indirectly, as a result of, or based upon or arising from the same. 6.8.5. As soon as practicable following the Closing Date, HAT shall establish and maintain a defined contribution plan or plans (which may be a preexisting plan or plans (the "HAT Retirement Plan") intended to be qualified under Section 401(a) and 401(k) of the Code for the benefit of the Sinclair Employees. Effective as of the Closing Date, STC shall cause appropriate amendments to be made to its retirement savings plan (the "STC Retirement Plan") to provide that the Sinclair Employees shall be fully vested in their accounts under the STC Retirement Plan. As soon as practicable after the Closing Date, HAT shall take all necessary action to qualify the HAT Retirement Plan under the applicable provisions of the Code (including but not limited to Section 401), if it is not yet so qualified, and HAT and STC shall make any and all filings and submissions to the appropriate governmental agencies required to be made by them in connection with the transfer of assets described hereafter. As soon as practicable following the earlier of the receipt of a favorable determination letter from the Internal Revenue -52- Service regarding the qualified status of both the STC Retirement Plan and the HAT Retirement Plan (each as amended to the date of transfer) or sooner, if STC and HAT so agree, STC shall cause to be transferred to the HAT Retirement Plan, in cash, all of the individual account balances of Sinclair Employees under the STC Retirement Plan, including any outstanding plan participant loan receivables allocated to such accounts. 6.8.6. HAT acknowledges and agrees that its obligations pursuant to this Section 6.8 are in addition to, and not in limitation of, HAT's ----------- obligation to assume the employment contracts set forth on Schedule 2.3.9. -------------- 6.8.7. Except as otherwise provided in this Section 6.8 or ----------- in any employment, severance or retention agreements of any Sinclair Employees, all Sinclair Employees shall be at-will employees, and HAT may terminate their employment or change their terms of employment at will. No employee (or beneficiary of any employee) of WPTZ or WNNE may sue to enforce the terms of this Agreement, including specifically this Section 6.8, and no employee or ----------- beneficiary shall be treated as a third party beneficiary of this Agreement. Except to the extent provided for herein, HAT may cover the Sinclair Employees under existing or new benefit plans, programs, and arrangements, and may amend or terminate any such plans, programs, or arrangements at any time. 6.9. Other Employee Matters. 6.9.1. Except for the Sinclair Employees (who are addressed in Section 6.8), at least five (5) days prior to the Closing Date, the Recipient ----------- Party shall designate in writing which employees of the Transferring Party's Stations the Recipient Party shall offer employment after the Closing Date (all such employees shall be referred to herein as the "Designated Employees"; all other employees shall be referred to herein as the "Non-Transferred Employees"). As of the Closing Date, the Recipient Party shall offer employment to each of the Designated Employees (including those on leave of absence, whether short- term, long-term, family, maternity, disability, paid, unpaid or other), on terms and conditions set by the Recipient Party (such employees who are given such offers of employment and accept such offers and are employed by the Recipient Party are referred to herein as the "Transferred Employees"). Nothing in this Section 6.9.1 is intended to guarantee employment for any Transferred Employee - ------------- for any length of time after the Closing Date. 6.9.2. Except as provided otherwise in this Section 6.9, the ----------- Transferring Party shall pay, discharge and be responsible for (a) all salary and wages arising out of or relating to the employment of the employees of its Stations prior to the Closing Date, (b) all accrued and unpaid vacation pay, (c) any employee benefits arising under the Benefit Plans of the Transferring Party and its Affiliates -53- during the period prior to the Closing Date and (d) all severance Liabilities and all COBRA Liabilities for any Non-Transferred Employees (subject to the Recipient Party's reimbursement obligations set forth in Section 6.9.8). From ------------- and after the Closing Date, the Recipient Party shall pay, discharge and be responsible for all salary, wages and benefits arising out of or relating to the employment of the Designated Employees by the Recipient Party on and after the Closing Date. The Recipient Party shall be responsible for all severance Liabilities, and all COBRA Liabilities for any Designated Employees terminated by the Recipient Party on or after the Closing Date. 6.9.3. For purposes of any length of service requirements, waiting periods, vesting periods or differential benefits based on length of service pursuant to any employment program provided by the Recipient Party in any such plan for which a Transferred Employee may be eligible after the Closing, the Recipient Party shall ensure that, to the extent permitted by law, service by such Transferred Employee with the applicable Station or any Affiliate of the Station shall be deemed to have been service with the Recipient Party. 6.9.4. Each party acknowledges and agrees that its obligations pursuant to this Section 6.9 are in addition to, and not in ----------- limitation of, such party's obligation to assume the employment contracts of the other party set forth on Schedule 2.3.9. -------------- 6.9.5. Except as otherwise provided in this Section 6.9 or ----------- in any employment, severance or retention agreements of any Designated Employees, all Designated Employees shall be at-will employees, and the Recipient Party may terminate their employment or change their terms of employment at will. No employee (or beneficiary of any employee) of the Stations may sue to enforce the terms of this Agreement, including specifically this Section 6.9, and no employee or beneficiary shall be treated as a third party - ----------- beneficiary of this Agreement. Except to the extent provided for herein, the Recipient Party may cover the Designated Employees under existing or new benefit plans, programs, and arrangements, and may amend or terminate any such plans, programs, or arrangements at any time. 6.9.6. The Recipient Party agrees to reimburse the Transferring Party for all severance Liabilities and COBRA Liabilities for Non- Transferred Employees which are paid by the Transferring Party pursuant to Section 6.9.2 and which are consistent with the Transferring Party's severance - ------------- policy in effect as of the date hereof and disclosed to the Recipient Party. 6.10. Disclosure Schedules. (a) STC hereby acknowledges that for business reasons HAT has not been able to deliver a complete set of the Schedules for the HAT Stations -54- referred to herein prior to the date hereof. HAT covenants that HAT shall deliver to STC and to STC's counsel a complete set of the Schedules for the HAT Stations (and copies of all materials identified on the Schedules, as reasonably required to support such Schedules or as otherwise requested by STC) within ten (10) business days after the execution and delivery of this Agreement. On the date of receipt, an officer of HAT shall certify in writing that the Schedules (and supporting materials) delivered to STC and STC's counsel are complete and correct. STC shall have ten (10) business days following the date of receipt by STC and STC's counsel of the complete and correct set of the Schedules (and supporting materials) for the HAT Stations (the "Schedule Review Period") to review such Schedules and to determine in the good faith exercise of STC's reasonable business judgment whether the items referenced therein are acceptable to STC. If STC, after reasonable consultation with HAT, determines in the good faith exercise of STC's reasonable business judgment that the items referred to in the HAT Schedules are not acceptable, STC shall be entitled to terminate this Agreement pursuant to the terms set forth in Section 11.2(b). --------------- (b) The parties acknowledge and agree that each party shall have the right from time to time after the date hereof to update or correct solely Schedules 2.3.5, 2.3.6, 2.3.8, 2.3.9, 3.4, 4.4, 3.17 and 4.17 attached ------------------------------------------------------------- hereto solely to reflect actions by such party (and, in the case of STC, actions by Sinclair or the Heritage Subsidiaries) after the date hereof which are not prohibited by Section 6.1 hereof. The inclusion of any fact or item on a ----------- Schedule referenced by a particular section in this Agreement shall, should the existence of the fact or item or its contents, be relevant to any other section, be deemed to be disclosed with respect to such other section whether or not an explicit cross-reference appears in the Schedules. 6.11. Bulk Sales Laws. Each party hereby waives compliance by the other party, in connection with the transactions contemplated hereby, with the provisions of any applicable bulk transfer laws. 6.12. Tax Matters. 6.12.1. Each party represents, warrants, covenants and agrees with the other party that for tax purposes the exchange of Assets is not effective until the Closing Date. The parties agree that all Tax returns and reports shall be filed consistent with the sale of assets taking place as aforesaid. 6.12.2. The parties intend that the following exchanges of Assets pursuant to this Agreement shall qualify as "like kind" exchanges under Section 1031 of the Code: (a) for the STC Exchange Entities, the exchange by the -55- STC Exchange Entities of KSBW for the HAT Assets, and (b) for HAT, the exchange by HAT of the HAT Assets for the STC Assets. The parties acknowledge and agree that the exchange by the STC Exchange Entities of WNNE and WPTZ is not intended to qualify for the STC Exchange Entities as a "like kind" exchange under Section 1031 of the Code. 6.12.3. STC covenants with and warrants to HAT, and HAT covenants with and warrants to STC, that (a) in no Tax return hereafter filed by STC or any Affiliate of STC, or by HAT or any Affiliate of HAT, or any of their respective representatives, successors or assigns, will STC or HAT or any of their respective representatives, successors or assigns, treat any exchanges described herein inconsistently with or differently than as described herein, and (b) in no tax audit, tax examination, tax review or tax litigation will STC or any Affiliate of STC, or HAT or any Affiliate of HAT, or any of their respective representatives, successors or assigns, treat any such exchange inconsistently with or differently than as described herein. Each party agrees to cooperate with the other party in order that STC and HAT effectuate the tax- deferred exchanges as described herein of like-kind property pursuant to Section 1031 of the Code. The parties agree to execute such agreements and other documents as may be necessary to complete and otherwise effectuate these tax- deferred exchanges. 6.12.4. In order to facilitate the Like-Kind Exchange as contemplated hereunder, STC agrees to take such actions prior to the Closing (subject to applicable regulatory requirements) as are necessary (the "LKE Facilitation Transactions") so that immediately prior to the Closing and the consummation of the Like-Kind Exchange STC Broadcasting shall own all of the STC Non-License Assets and STC License Company shall own all of the STC License Assets (the "Preferred STC Ownership"). Notwithstanding anything in this Agreement to the contrary, the parties acknowledge and agree that STC shall have the right, without the prior consent of HAT (provided that STC delivers written notice to HAT of STC's intent to exercise such right at least three (3) days prior to Closing), to take such actions in order to facilitate the Like-Kind Exchange in a manner which minimizes the tax consequences to STC of the transactions contemplated herein provided that the tax consequences for HAT are the same as if the Preferred STC Ownership structure was used and the transactions hereunder shall not be adversely affected except that in no event shall STCBV fail to assign to STCBV Sub all rights under the Sinclair Documents or STCBV Sub fail to be the entity which acquires WPTZ and WNNE from Sinclair as contemplated by Section 8.1. ----------- 6.12.5. HAT acknowledges and agrees that STC may elect to facilitate the exchanges contemplated by this Agreement by the use of a "qualified intermediary" as defined in Treas. Reg. (S)1.1031(k)-1(g)(4) ("QI") for purposes of engaging in the exchange of the STC License Assets. If STC so elects, STC shall -56- provide notice to HAT of STC's election, and thereafter both HAT and STC may at the Closing (but immediately prior to the consummation of the exchange of Assets contemplated in Article 2) assign such party's rights in respect of such ---------- party's License Assets under this Agreement to a QI (but such assignment shall not relieve either party of such party's obligations under this Agreement). Each party shall cooperate with all reasonable requests of the other party and the QI in arranging and effecting the transfer of the License Assets to and from the QI. Without limiting the generality of the foregoing, if STC has given notice of STC's intention to effect the exchange of the Assets with a QI, (i) HAT shall promptly provide STC with written acknowledgment of such notice, (ii) at Closing, each party shall deliver such party's License Assets plus the amount of cash if any, required to complete the exchange to the QI rather than to the other party (which delivery shall discharge the obligation of such party to make delivery of the License Assets (and such cash) hereunder), and (iii) at Closing, accept delivery of the other party's License Assets from the QI rather than from the other party. 6.13. Preservation of Books and Records. For a period of five (5) years after the Closing Date, each party agrees not to dispose of, and agrees to provide the other party reasonable access to, any material books or records in such party's possession immediately after the Closing Date that relate to the business or operations of its Stations prior to the Closing Date. 6.14. Affiliated Transactions. If as of the Closing Date a Recipient Party desires to continue any Affiliated Transactions of a Transferring Party, such Recipient Party shall provide such Transferring Party written notice at least ten (10) days prior to the Closing Date designating which Affiliated Transactions shall continue after the Closing Date; provided, however, the parties acknowledge and -------- ------- agree that no Affiliated Transactions shall continue for a period in excess of sixty (60) days after the Closing Date. 6.15. Clear Channel Agreements. HAT shall not (a) do or omit to do any act which will cause a material breach under any of the Clear Channel Agreements, or (b) amend, modify, terminate or agree to amend, modify or terminate any of the Clear Channel Agreements without the prior written consent of STC. -57- 6.16. Sinclair Agreement. STC shall not (a) do or omit to do any act which will cause a breach under the Sinclair Agreement, or (b) amend, modify, terminate, grant or consent to a waiver under, or agree to amend, modify, terminate, grant or consent to a waiver under, the Sinclair Agreement without the prior written consent of HAT. 6.17. Environmental Remediation. The parties acknowledge and agree that certain environmental remediation is required at WDTN and KSBW and that (a) HAT shall, at its own cost, take whatever remedial actions are necessary to cause the abandoned underground storage tanks at WDTN to be in compliance in all material respects with Environmental Laws, and (b) STC shall, at its own cost, take whatever remedial actions are necessary to cause the retrofitting at KSBW to be in compliance in all material respects with Environmental Laws. 6.18 Certain FCC Matters (a) Without the prior written consent of HAT, STC covenants and agrees that, prior to the Closing, neither STC, SALC nor any Affiliated Entities of STC or SALC shall acquire any new or increased "attributable interest," as defined in the FCC rules, in any media property ("Further Media Interest"), which Further Media Interest could not be held together with the HAT Stations by STC License Company and SALC as contemplated herein following the Closing Date under the rules and regulations of the FCC. (b) Without the prior written consent of STC, HAT covenants and agrees that, prior to the Closing, neither HAT nor any Affiliated Entities of HAT shall acquire any Further Media Interest, which Further Media Interest could not be held together with the STC Stations by HAT and Affiliated Entities of HAT as contemplated herein following the Closing Date under the rules and regulations of the FCC. ARTICLE 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STC The obligations of STC under this Agreement to proceed with the Closing are subject to the satisfaction (or waiver in writing by STC) at or prior to the Closing of each of the following conditions: -58- 7.1. Closing Under the Sinclair Agreement. STCBV Sub shall have acquired WPTZ and WNNE and the related Assets (including, without limitation, the FCC Licenses) (as such terms are defined in the Sinclair Agreement) pursuant to the terms of the Sinclair Agreement. 7.2. Representations and Covenants. The representations and warranties of HAT made in this Agreement shall be true and correct on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (except as modified by the Schedules updated after the date hereof in accordance with Section 6.10 and except for representations and ------------ warranties that speak as of a specific date or time other than the Closing Date, (which need only be true and correct in all material respects as of such date or time)), and the covenants and agreements of HAT required to be performed on or before the Closing Date in accordance with the terms of this Agreement shall have been performed in all respects, except to the extent that the failure of such representations and warranties to be true and correct and the failure to perform such covenants shall not have, when considered together, had a Material Adverse Effect on the HAT Stations. 7.3. Delivery of Documents. HAT shall have delivered to STC all contracts, agreements, instruments and documents required to be delivered by HAT to STC pursuant to Section 9.4. - ----------- 7.4 Consents. HAT shall have obtained all consents, authorizations or approvals necessary to effect valid assignments to STC of the main transmission tower and studio leases for WDTN. 7.5 ABC Affiliation Agreement. (a) HAT shall have assigned to STC a written network affiliation agreement with the American Broadcasting Company ("ABC") for WDTN that provides for (i) Two Million Dollars ($2,000,000) of annual compensation from ABC (ii) a duration of at least five (5) years after the Closing Date, and (iii) terms and conditions that are otherwise consistent with the current programming at WDTN (the "ABC Affiliation Agreement"); provided, however, that -------- ------- HAT shall not be obligated to assign the ABC Affiliation Agreement if STC provides written notice to -59- HAT within thirty (30) days of the date of this Agreement that STC shall not require HAT to obtain the consent of ABC to the assignment of the ABC Affiliation Agreement to STC as a condition to Closing. (b) STC and HAT acknowledge and agree that if the ABC Affiliation Agreement does not provide for Two Million Dollars ($2,000,000) of annual compensation from ABC, the Cash Consideration payable hereunder by HAT shall be increased by the amount of (i) Two Million Dollars ($2,000,000) minus ----- the actual annual compensation received from ABC, multiplied by (ii) Twelve and ---------- one-half (12.5). In addition, if the ABC Affiliation Agreement contains terms and conditions which are inconsistent with any obligations under any Station Contracts to be assumed by STC hereunder, the Cash Consideration payable hereunder by HAT shall also be increased by the amount of Losses to be incurred by STC as a result of STC's inability to fully use STC's rights under such Station Contracts. 7.6. FCC Order. The FCC Order shall have been issued with respect to each Station and shall be in effect. 7.7. Hart-Scott-Rodino. All applicable waiting periods under Hart-Scott-Rodino shall have expired or terminated. 7.8. Legal Proceedings. No injunction, restraining order or decree of any nature of any court or Governmental Authority of competent jurisdiction shall be in effect that restrains or prohibits the transactions contemplated by this Agreement. ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF HAT The obligations of HAT under this Agreement to proceed with the Closing are subject to the satisfaction (or waiver in writing by HAT) at or prior to the Closing of each of the following conditions: 8.1. Closing Under the Sinclair Agreement. STCBV shall have assigned all of its rights under the Sinclair Documents to STCBV Sub and STCBV Sub shall have acquired WPTZ and WNNE -60- and the related Assets (including, without limitation, the FCC Licenses) (as such terms are defined in the Sinclair Agreement) pursuant to the terms of the Sinclair Agreement. 8.2. Representations and Covenants. The representations and warranties of STC made in this Agreement shall be true and correct on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (except as modified by the Schedules updated after the date hereof in accordance with Section 6.10 and except for representations and warranties that speak as of ------------ a specific date or time other than the Closing Date (which need only be true and correct in all material respects as of such date or time)), and the covenants and agreements of STC required to be performed on or before the Closing Date in accordance with the terms of this Agreement shall have been performed in all respects, except to the extent that the failure of such representations and warranties to be true and correct and the failure to perform such covenants shall not have, when considered together, had a Material Adverse Effect on the STC Stations. 8.3. Delivery of Documents. STC shall have delivered to HAT all contracts, agreements, instruments and documents required to be delivered by STC to HAT pursuant to Section 9.3. ----------- 8.4. Consents. STC shall have obtained all consents, authorizations or approvals necessary to effect valid assignments to HAT of the Network Agreement for KSBW. 8.5. FCC Order. The FCC Order shall have been issued with respect to each Station and shall be in effect. 8.6. Hart-Scott-Rodino. All applicable waiting periods under Hart-Scott-Rodino shall have expired or terminated. -61- 8.7. Legal Proceedings. No injunction, restraining order or decree of any nature of any court or Governmental Authority of competent jurisdiction shall be in effect that restrains or prohibits the transactions contemplated by this Agreement. 8.8. LKE Facilitation Transactions. Immediately prior to or at the Closing, STC shall have consummated the LKE Facilitation Transactions, if necessary. ARTICLE 9. CLOSING 9.1. Closing. The closing of the exchange of the Assets hereunder (the "Closing") shall be held on a date that is the fifth business day after all conditions precedent to the Closing set forth in Articles 7 and 8 hereof are satisfied or ---------------- waived (the "Closing Date"). 9.2. Time and Place of Closing. The Closing shall be held at 10:00 A.M. local time on the Closing Date at the offices of Hogan & Hartson L.L.P., 8300 Greensboro Drive, Suite 1100, McLean, Virginia, or at such other time and place as the parties may agree. 9.3. Delivery by STC at the Closing. At or before the Closing, STC shall deliver to HAT the following: 9.3.1. Agreements and Instruments The following bills of sale, assignments and other instruments of transfer with respect to the STC Assets, dated as of the Closing Date and duly executed by the applicable STC Exchange Entity: (a) a Bill of Sale; (b) an Assignment of FCC Licenses; (c) an Assignment of Contracts and Leases; (d) an Assumption Agreement; -62- (e) certificates of title with respect to motor vehicles of the STC Exchange Entities listed on Schedule 2.3.10 or --------------- if any such motor vehicles are leased by any STC Exchange Entity, an assignment of such lease; and (f) special or limited warranty deeds for all Real Property owned by the STC Exchange Entities in the form appropriate to the jurisdictions in which such Real Property is located. 9.3.2. Consents. Copies of all consents STC has been able to obtain to effect the assignment to HAT of STC's Station Contracts listed on Schedule 3.4. ------------ 9.3.3. Certified Resolutions. A copy of the approval of the board of directors of each STC Party, certified as being correct and complete and then in full force and effect, authorizing the execution, delivery and performance of this Agreement, and of the other agreements to which such STC Party is a party, and the consummation of the transactions contemplated hereby and thereby. 9.3.4. Officers' Certificates. (a) A certificate of each STC Party certifying the matters set forth in Section 8.2; ----------- (b) A certificate of each STC Party as to the incumbency of the representatives of such STC Party executing this Agreement or any of the other agreements to which such STC Party is a party; and (c) A certificate of STC Broadcasting certifying that all amounts due and payable as of the Closing Date under any of STC's Station Contracts relating to KSBW have been paid in full. 9.3.5. Good Standing Certificates. To the extent available from the applicable jurisdictions, certificates as to the formation and/or good standing of each STC Party issued by the appropriate governmental authorities in the states of organization and each jurisdiction in which such STC Party is qualified to do business, each such certificate (if available) to be dated a date not more than a reasonable number of days prior to the Closing Date. -63- 9.4. Delivery by HAT at the Closing. At or before the Closing, HAT shall deliver to STC the following: 9.4.1. Agreements and Instruments The following bills of sale, assignments and other instruments of transfer with respect to the HAT Assets, dated as of the Closing Date and duly executed by HAT: (a) a Bill of Sale; (b) an Assignment of FCC Licenses; (c) an Assignment of Contracts and Leases; (d) an Assumption Agreement; (e) certificates of title with respect to motor vehicles of HAT listed on Schedule 2.3.10 or if any such motor --------------- vehicles are leased by HAT, an assignment of such lease; and (f) special or limited warranty deeds for all Real Property owned by HAT in the form appropriate to the jurisdictions in which such Real Property is located. 9.4.2. Consents. (a) Copies of all consents HAT has been able to obtain to effect the assignment to STC of HAT's Station Contracts listed on Schedule 4.4. ------------ (b) Copies of all consents or notices required under the Clear Channel Agreements as are required to comply with the terms thereof and to validly assign the Clear Channel Agreements to STC. 9.4.3. Certified Resolutions. A copy of the approval of the board of directors of HAT, certified as being correct and complete and then in full force and effect, authorizing the execution, delivery and performance of this Agreement, and of the other agreements to which HAT is a party, and the consummation of the transactions contemplated hereby and thereby. 9.4.4. Officers' Certificates. (a) A certificate of HAT certifying the matters set forth in Section 7.2; - ----------- -64- (b) A certificate of HAT as to the incumbency of the representatives of HAT executing this Agreement or any of the other agreements to which HAT is a party; and (c) A certificate of HAT certifying that all amounts due and payable as of the Closing Date under any of HAT's Stations Contracts relating to WDTN have been paid in full. 9.4.5. Good Standing Certificates. To the extent available from the applicable jurisdictions, certificates as to the formation and/or good standing of HAT issued by the appropriate governmental authorities in the states of organization and each jurisdiction in which HAT is qualified to do business, each such certificate (if available) to be dated a date not more than a reasonable number of days prior to the Closing Date. ARTICLE 10. SURVIVAL; INDEMNIFICATION 10.1. Survival of Representations. 10.1.1. Unless otherwise set forth herein (including, without limitation, Section 10.1.2), all representations and warranties, covenants and -------------- agreements of the parties hereto contained in or made pursuant to this Agreement or in any certificate furnished pursuant hereto shall survive the Closing Date and shall remain in full force and effect to the following extent: (a) representations and warranties shall survive for a period of twelve (12) months after the Closing Date, (b) the covenants and agreements which by their terms survive the Closing shall continue in full force and effect until fully discharged (but not beyond the expiration of twelve (12) months after the Closing Date except in the case of the indemnities set forth in clauses (a), (b), (d) and (g) of Section 10.2, clauses (a), (b), (d) and (g) of Section 10.3 ------------ ------------ and Section 10.6 which shall survive indefinitely), and (c) any representation, ------------ warranty, covenant or agreement that is the subject of a claim which is asserted in a reasonably detailed writing prior to the expiration of the survival period set forth in this Section 10.1.1, shall survive with respect to such claim or -------------- dispute until the final resolution thereof. 10.1.2. No claim for indemnification may be made pursuant to this Article 10 after the survival period set forth in this Section 10.1. - ---------- ------------ -65- 10.2. Indemnification by STC. Subject to the conditions and provisions of Section 10.4 and Section ------------ ------- 10.5, from and after the Closing Date, STC agrees to indemnify, defend and hold - ---- harmless HAT from and against and in any respect of, on a net after-tax basis, any and all Losses, asserted against, resulting to, imposed upon or incurred by HAT, directly or indirectly, by reason of or resulting from: (a) any failure by STC to pay, perform or discharge any Liabilities not assumed by HAT pursuant hereto; (b) the business or operations of KSBW during the period prior to the Closing Date; (c) any misrepresentation or breach of the representations and warranties of STC contained in or made pursuant to this Agreement or any STC Document (it being agreed that for this purpose the representations and warranties made in the certificates delivered pursuant to Section 9.3.4(a) shall ---------------- not be qualified by references to Material Adverse Effect set forth in Section ------- 8.2); (d) any breach by STC of any covenants of STC contained in or made - ---- pursuant to this Agreement or any other STC Document except for covenants relating to WPTZ and WNNE (which are addressed in Section 10.2(h)); (e) the --------------- failure of STC to comply with the provisions of any applicable bulk transfer law; (f) any breach of the covenants and agreements of STC contained in Section ------- 6.18; (g) any WFFF Liabilities; or (h) any Sinclair Liabilities arising as a - ---- result of the willful misconduct, gross negligence or bad faith of STC. 10.3. Indemnification by HAT. Subject to the conditions and provisions of Section 10.4 and Section ------------ ------- 10.5, from and after the Closing Date, HAT agrees to indemnify, defend and hold - ---- harmless STC from and against and in any respect of, on a net after-tax basis, any and all Losses, asserted against, resulting to, imposed upon or incurred by STC, directly or indirectly, by reason of or resulting from: (a) any failure by HAT to pay, perform or discharge any Liabilities not assumed by STC pursuant hereto; (b) the business or operations of the HAT Stations during the period prior to the Closing Date (except to the extent STC has assumed the Liability for any such Losses pursuant hereto); (c) any misrepresentation or breach of the representations and warranties of HAT contained in or made pursuant to this Agreement or any HAT Document (it being agreed that for this purpose the representations and warranties made in the certificates delivered pursuant to Section 9.4.4(a) shall not be qualified by references to Material Adverse Effect - ---------------- set forth in Section 7.2); (d) any breach by HAT of any covenants of HAT ------------ contained in or made pursuant to this Agreement or any other HAT Document; (e) the failure of HAT to comply with the provisions of any applicable bulk transfer law; (f) any breach of the covenants and agreements of HAT contained in Section ------- 6.18; or (g) any Sinclair Liabilities (but excluding any such Sinclair - ---- Liabilities arising as a result of the willful misconduct, gross negligence or bad faith of STC). -66- 10.4. Limitations on Indemnification. 10.4.1. Notwithstanding any other provision of this Agreement to the contrary, in no event shall Losses include a party's incidental, consequential or punitive damages, regardless of the theory of recovery. Each party hereto agrees to use reasonable efforts to mitigate any Losses which form the basis for any claim for indemnification hereunder. 10.4.2. Notwithstanding any other provision of this Agreement to the contrary, neither party shall be liable to the other party in respect of any indemnification hereunder except to the extent that the aggregate amount of Losses of the other party under this Agreement exceeds Five Hundred Thousand Dollars ($500,000) (the "Basket Amount"), in which event the Indemnified Party shall be entitled to seek indemnity from each Indemnifying Party for the full amount of such Losses; provided, however, the Basket Amount shall not be -------- ------- applicable to any amounts owed in connection with the determination of the Proration Amount pursuant to Section 2.6, to the determination of the Accounts ----------- Receivable amount pursuant to Section 2.7, risk of loss matters pursuant to ----------- Section 6.6, the obligations with respect to employee matters pursuant to - ----------- Section 6.8 and Section 6.9 or to the indemnities set forth in clauses (a), (b), - ----------- ----------- (e), (f), (g) and (h) of Section 10.2 and clauses (a), (b), (e), (f) and (g) of ------------ Section 10.3. - ------------ 10.4.3. Each party (a "recipient party") shall notify the other party in writing (the "representing party") reasonably promptly of any perceived breach by the representing party of which the recipient party has knowledge of any representations, warranties, covenants and agreements, and of any Losses (including a brief description of the same) of the recipient party caused thereby. In the event of any breach that is cured prior to the Closing Date in accordance with the terms of this Agreement, the representing party shall have no obligation under Section 10.2 or Section 10.3 or otherwise to indemnify the ------------ ------------ recipient party with respect to such Losses. 10.5. Conditions of Indemnification. The obligations and liabilities of the parties hereunder with respect to their respective indemnities pursuant to this Article 10, resulting from any ---------- Losses, shall be subject to the following terms and conditions: 10.5.1. The party seeking indemnification (the "Indemnified Party") must give the other party or parties, as the case may be (the "Indemnifying Party"), notice of any such Losses promptly after the Indemnified Party receives notice thereof; provided that the failure to give such notice shall not affect the rights of the Indemnified Party hereunder except to the extent that the Indemnifying Party shall have suffered actual damage by reason of such failure. -67- 10.5.2. The Indemnifying Party shall have the right to undertake, by counsel or other representatives of its own choosing, the defense of such Losses at the Indemnifying Party's risk and expense. 10.5.3. In the event that the Indemnifying Party shall elect not to undertake such defense, or, within a reasonable time after notice from the Indemnified Party of any such Losses, shall fail to defend, the Indemnified Party (upon further written notice to the Indemnifying Party) shall have the right to undertake the defense, compromise or settlement of such Losses, by counsel or other representatives of its own choosing, on behalf of and for the account and risk of the Indemnifying Party (subject to the right of the Indemnifying Party to assume defense of such Losses at any time prior to settlement, compromise or final determination thereof). In such event, the Indemnifying Party shall pay to the Indemnified Party, in addition to the other sums required to be paid hereunder, the costs and expenses incurred by the Indemnified Party in connection with such defense, compromise or settlement as and when such costs and expenses are so incurred. 10.5.4. Anything in this Section 10.5 to the contrary ------------ notwithstanding, (a) if there is a reasonable possibility that Losses may materially and adversely affect the Indemnified Party other than as a result of money damages or other money payments, the Indemnified Party shall have the right, at its own cost and expense, to participate in the defense, compromise or settlement of the Losses, (b) the Indemnifying Party shall not, without the Indemnified Party's written consent, settle or compromise any Losses or consent to entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect of such Losses in form and substance satisfactory to the Indemnified Party, and (c) in the event that the Indemnifying Party undertakes defense of any Losses, the Indemnified Party, by counsel or other representative of its own choosing and at its sole cost and expense, shall have the right to consult with the Indemnifying Party and its counsel or other representatives concerning such Losses and the Indemnifying Party and the Indemnified Party and their respective counsel or other representatives shall cooperate with respect to such Losses and (d) in the event that the Indemnifying Party undertakes defense of any Losses, the Indemnifying Party shall have an obligation to keep the Indemnified Party informed of the status of the defense of such Losses and furnish the Indemnified Party with all documents, instruments and information that the Indemnified Party shall reasonably request in connection therewith. 10.6. Special Tax Indemnification by HAT. (a) The parties acknowledge and agree that STC does not intend to acquire WPTZ and WNNE for productive use in a trade or business or for -68- investment within the meaning of Section 1031 of the Code ("Productive Use/Investment Property") and the parties do not intend for WPTZ and WNNE to be treated as property exchanged by STC under this Agreement for property of a like-kind. STC covenants and agrees not to take any position on any income tax return that is in any way inconsistent with the foregoing. (b) HAT agrees to indemnify, defend and hold harmless (the "Tax Indemnity") STC and each member of STC's federal consolidated group (collectively, the "STC Indemnified Party") from and against, and in any respect of, any and all Losses or any net increase in any Taxes (collectively, the "Tax Increase") to the STC Indemnified Party that is asserted against, resulting to, imposed upon or incurred by any STC Indemnified Party in connection with any assertion by the Internal Revenue Service that the exchange of WPTZ and WNNE pursuant to this Agreement constitutes Productive Use/Investment Property. The Tax Increase shall be computed by (i) determining the amount obtained by multiplying (A) the projected increases and decreases in federal, state and local income or gains of the STC Indemnified Parties for 1998 and each later taxable year on account of the increases and decreases in income or gains each year resulting from treatment of WPTZ and WNNE as Productive Use/Investment Property, by (B) the highest marginal federal, state and local tax rates applicable to a corporation under applicable law as of the Closing, and (ii) discounting the net increases or decreases in potential Taxes described in clause (i) to the date of Closing using a discount rate of 7% per year. The - ---------- amount of any Tax Indemnity payment by HAT to an STC Indemnified Party pursuant to this Section 10.6(b) shall be further increased by an amount (the "Gross-Up --------------- Payment") such that after payment by any STC Indemnified Party of any such Taxes, including any Taxes imposed on the Gross-Up Payment, STC shall receive from HAT an amount as if no Taxes had been payable. For purposes of computing any Taxes relevant to this Section 10.6, any STC Indemnified Party shall be ------------ assumed to be a corporation that is fully taxable on all of its income or gains at the highest applicable marginal rates for the Taxes at issue as of the Closing. (c) Each STC Indemnified Party agrees that in the event it receives notice, whether oral or written, of any federal, state or local examination, audit, proposed adjustment, or other administrative or court proceeding, suit, dispute or other claim (a "Tax Claim") that may affect HAT's liability under this Section 10.6, the STC Indemnified Party shall promptly notify HAT; provided ------------ that the failure to give such notice shall not affect the rights of the STC Indemnified Party hereunder except to the extent that HAT shall have suffered actual damage by reason of such failure. HAT shall be entitled at its sole discretion and expense to handle and control the defense of any Tax Claim, and the STC Indemnified Party shall cooperate with HAT in this regard by giving HAT and its representatives the opportunity to negotiate, settle or dispute the Tax Claim together with reasonable assistance including, without limitation, reasonable access to all relevant -69- information, books and records. In no event may the STC Indemnified Party compromise or settle any Tax Claim without first obtaining the written consent of HAT. 10.7. Cure of Breach. Notwithstanding any other provision of this Agreement to the contrary, a breach by any party hereto of any representations and warranties or a failure to perform any covenant or agreement hereunder may be cured by such party prior to the Closing Date (a) by making payment to a third party or taking other action to discharge the Losses, (b) by placing an amount equal to the Losses in an escrow account under an escrow arrangement reasonably satisfactory to STC and HAT or (c) a combination of the foregoing. If the foregoing actions fully cure the breach, the breaching party shall have no obligation under this Article 10 ---------- or otherwise to indemnify the other party with respect to the Losses caused by such breach; if such actions partially cure the breach, the breaching party shall continue to have an obligation under this Article 10 to indemnify the ---------- other party with respect to the remaining portion of the Losses caused by such breach. ARTICLE 11. TERMINATION 11.1. Termination of Exchange by the Parties. 11.1.1. The obligation of the parties to consummate the closing of the exchange of the Assets contemplated by Article 2 may be terminated at any --------- time prior to such closing by: (a) the mutual consent of STC and HAT; (b) STC if HAT shall default in the performance of its obligations under this Agreement in any material respect and such default is not cured within thirty (30) days after notice thereof, and provided that STC shall not then be in material default in the performance of STC's obligations hereunder; (c) HAT if any STC Party shall default in the performance of its obligations under this Agreement in any material respect and such default is not cured within thirty (30) days after notice thereof, and provided that HAT shall not then be in material default in the performance of HAT's obligations hereunder; and (d) either HAT or STC if such closing shall not have occurred on or prior to such date which is two (2) years after the date of this -70- Agreement (provided that the party seeking to terminate shall not have such termination right if such party is in breach of this Agreement and such breach caused such closing to fail to occur). 11.1.2. Anything contained in this Agreement to the contrary notwithstanding, in the event that (a) the obligation of the parties to consummate the closing of the exchange of the Assets contemplated by Article 2 --------- shall be terminated pursuant to Section 11.1, and (b) HAT shall have provided ------------ all required portions of the Burlington Financing Amount to STCBV Sub in connection with the acquisition of any assets by STC under the Sinclair Agreement, then in lieu of such exchange of Assets transaction (x) the LKE Facilitation Transactions shall not be consummated and (y) STCBV Sub shall sell, assign, transfer, convey and deliver to HAT, free and clear of any Encumbrances other than those Permitted Encumbrances which are applicable to WPTZ and WNNE, and HAT shall purchase, acquire and accept from STCBV Sub, all right, title and interest of STCBV Sub in, to and under all real, personal and mixed assets, rights, benefits and privileges, both tangible and intangible, owned, leased, used or useful by STCBV Sub in connection with the business and operations of WPTZ and WNNE (collectively, the "Cash Purchase Assets"), in each case on the identical terms and conditions as would have otherwise applied if the closing of the exchange of the Assets contemplated by Article 2 had occurred except as --------- follows: (i) All provisions of this Agreement, including but not limited to those provisions contained in Article 2, which relate to the HAT --------- Stations shall be disregarded insofar as such provisions relate to the HAT Stations; (ii) All provisions of this Agreement, including but not limited to those provisions contained in Article 2, which relate to KSBW shall --------- be disregarded insofar as such provisions relate to KSBW; (iii) In lieu of the closing of the exchange of the Assets contemplated by Article 2, the term "Closing" will be deemed to refer to the --------- closing of the purchase and sale of the Cash Purchase Assets described in this Section 11.1; - ------------ (iv) In lieu of the provisions of Section 2.5, the ----------- following shall apply: For and in consideration of the conveyance of Cash Purchase Assets to HAT and in addition to the assumption of Liabilities by HAT as set forth in Section 2.10, at the Closing HAT agrees to pay to STCBV Sub an ------- ---- amount equal to that portion of the Purchase Price (as defined in the Sinclair Agreement) which shall theretofore have been paid by STC pursuant to the Sinclair Agreement (but excluding any proration amounts), either by wire transfer of immediately available funds to an account designated by STC or by set off against any outstanding Burlington Financing Amount; -71- (v) In lieu of Section 2.8, the following shall apply: ----------- The payment made by HAT to STCBV Sub pursuant to subparagraph (iv) above shall be allocated among the Cash Purchase Assets in accordance with the Appraisal, unless the parties otherwise agree, and all Tax returns and reports shall be filed consistent with such allocation; (vi) At the Closing, in lieu of the applicable STC Exchange Entity, STCBV Sub will deliver the bills of sale, assignments and other instruments of transfer described in Section 9.3.1 with respect to the Cash ------------- Purchase Assets; and (vii) The following Sections of this Agreement shall be deemed to be void and shall have no further force and effect: 2.5, 2.7, 2.8, 6.12 and 10.6. 11.2. Termination of Agreement. This Agreement shall automatically terminate without further action by the parties upon the termination of the Sinclair Agreement in accordance with its terms. This Agreement may also be terminated by: (a) HAT by written notice of termination delivered to STC at any time prior to July 26, 1998 if the acquisition by Sinclair of the Burlington Stations under the Heritage Agreement shall not have occurred on or prior to July 16, 1998; (b) STC by written notice of termination delivered to HAT if (i) HAT shall not have delivered a complete set of the Schedules for the HAT Stations (and supporting materials) within ten (10) business days after the execution and delivery of this Agreement, or (ii) at any time prior to the end of the Schedule Review Period pursuant to Section 6.10(a); and --------------- (c) STC by written notice of termination delivered to HAT at any time prior to the closing of the exchange of the Assets contemplated by Article 2 if (i) HAT shall have defaulted in its obligation to provide the - --------- initial funding of the Burlington Financing Amount as required under Section ------- 2.13, or (ii) if prior to the funding of any portion of the Burlington Financing - ---- Amount, there shall have been a default by HAT in the performance of its obligations under this Agreement in any material respect and such default is not cured within thirty (30) days after notice thereof, and provided that STC shall not then be in material default in the performance of STC's obligations hereunder. -72- 11.3. Effect of Termination. 11.3.1. In the event this Agreement is terminated as provided in Section 11.2, this Agreement shall be deemed null, void and of no further force - ------------ or effect, and the parties hereto shall be released from all future obligations hereunder; provided, however, that the obligations of the parties set forth in -------- ------- Section 2.14 (which relate to reimbursement by STCBV Sub of any Working Capital - ------------ Advances), Section 6.3, and Section 12.3, shall survive such termination and the ---- ------------ parties hereto shall have any and all remedies to enforce such obligations provided at law or in equity or otherwise (including, without limitation, specific performance); and provided, further that such termination shall not -------- ------- affect the liability of any party hereto with respect to any breach of this Agreement by such party occurring prior to such termination. 11.3.2. In the event that the Sinclair Agreement is terminated as provided therein and Sinclair is entitled to the Deposit under the Letter of Credit (each as defined in the Sinclair Agreement), HAT shall reimburse STC for the amount of the Deposit; provided, however, there shall not have been a -------- ------- material breach or default by STC under the Sinclair Agreement. ARTICLE 12. GENERAL PROVISIONS 12.1. Additional Actions, Documents and Information. The Transferring Party agrees that it will, at any time, prior to, at or after the Closing Date, take or cause to be taken such further actions, and execute, deliver and file or cause to be executed, delivered and filed such further documents and instruments and obtain such consents, as may be reasonably requested by the Recipient Party in connection with the consummation of the exchange contemplated by this Agreement. 12.2. Brokers. Except for the fees payable as set forth in Schedule 12.2, STC ------------- represents to HAT that STC has not engaged, or incurred any unpaid liability (for any brokerage fees, finders' fees, commissions or otherwise) to, any broker, finder or agent in connection with the transactions contemplated by this Agreement; except for the fees payable as set forth in Schedule 12.2, HAT ------------- represents to STC that HAT has not engaged, or incurred any unpaid liability (for any brokerage fees, finders' fees, commissions or otherwise) to, any broker, finder or agent in connection with the transactions contemplated by this Agreement; and STC agrees to indemnify HAT, and HAT agrees to indemnify STC, against any claims asserted against the -73- other party for any such fees or commissions by any person purporting to act or to have acted for or on behalf of the indemnifying party. Notwithstanding any other provision of this Agreement, this representation and warranty shall survive the Closing without limitation and shall not be subject to the Basket Amount contained in Section 10.4.2. -------------- 12.3. Expenses and Taxes. (a) Unless otherwise provided herein, each party hereto shall pay its own expenses incurred in connection with this Agreement and in the preparation for and consummation of the transactions provided for herein, including, without limitation, all costs and expenses incurred in connection with any title insurance policies, surveys or environmental assessments (including the environmental remediation described in Section 6.16) obtained by ------------ such party (and in the case of STC, all expenses incurred by STC in connection with STC's financing required to consummate the transactions contemplated herein). Notwithstanding the foregoing, HAT and STC shall each pay one-half of (i) all sales (including, without limitation, bulk sales), use, documentary, stamp, gross receipts, registration, transfer, conveyance, excise, recording, license and other similar Taxes and fees ("Transfer Taxes") applicable to, imposed upon or arising out of the conveyances of the Assets whether now in effect or hereinafter adopted and regardless of which party such Transfer Tax is imposed upon, (ii) any FCC filing fees incurred in connection with the assignment of the FCC Licenses, and (iii) any fees and expenses incurred in connection with any HSR Filings, and (iv) any fees and expenses incurred in connection with the use of a QI as contemplated by Section 6.12. ------------ (b) HAT acknowledges and agrees that STC is acquiring WPTZ and WNNE for HAT's benefit, and HAT agrees to reimburse STC for all costs and expenses incurred by STC under the Sinclair Documents, including, without limitation, (i) the costs of the letter of credit deposited by STC pursuant to the Sinclair Agreement (provided that there shall not have been a material breach or default by STC under the Sinclair Agreement which results in the forfeiture of the letter of credit to Sinclair), and (ii) STC's share of costs and expenses required to be paid by STC pursuant to Section 15.3 of the Sinclair ------------ Agreement; provided, however, all expenses of counsel and accountants of any STC -------- ------- Party in connection with the negotiation and documentation of the Sinclair Documents and the consummation of the transactions contemplated therein and all expenses of STC in connection with STC's financing required to repay the Burlington Financing Amount (net of the Cash Consideration) shall be paid by STC. (c) Subject to HAT's obligations to reimburse STC for all costs and expenses incurred by STC under the Sinclair Documents pursuant to Section ------- 12.3(b), from and after the Closing, STC agrees to remit to HAT any monies - ------- -74- received from Sinclair or held for the benefit of STC under the Sinclair Agreement that relate to WPTZ and WNNE. 12.4. Notices. All notices, demands, requests, or other communications which may be or are required to be given or made by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, mailed by first- class registered or certified mail, return receipt requested, postage prepaid, delivered by overnight air courier, or transmitted by telegram, telex, or facsimile transmission addressed as follows: If to STC: STC Broadcasting, Inc. 3839 4th Street North Suite 420 St. Petersburg, Florida 33703 Attn: David Fitz Fax: (813) 821-8092 with a copy (which shall not constitute notice) to: Hogan & Hartson L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 Attn: William S. Reyner, Jr., Esq. Fax: (202) 637-5910 and to: Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart, Jr. Fax: (214) 740-7355 -75- If to HAT: Hearst-Argyle Television, Inc. 959 Eighth Avenue New York, New York 10019 Attn: Dean H. Blythe Fax: (212) 489-2314 with a copy (which shall not constitute notice) to: Rogers & Wells 200 Park Avenue New York, New York 10166 Attn: Steven A. Hobbs Fax: (212) 878-8375 or such other address as the addressee may indicate by written notice to the other parties. Each notice, demand, request, or communication which shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger or (with respect to a telex) the answerback being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 12.5. Waiver. No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement or under any other instrument or document given in connection with or pursuant to this Agreement shall impair any such right, power or privilege or be construed as a waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified therein. 12.6. Benefit and Assignment. 12.6.1. Neither party shall assign this Agreement, in whole or in part, whether by operation of law or otherwise, without the prior written consent of -76- the other party and any purported assignment contrary to the terms hereof shall be null, void and of no force and effect; provided, however, each party consents to the assignment of this Agreement to a QI as contemplated by Section 6.12. ------------ 12.6.2. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto (and any STC Indemnified Party) and their respective successors and assigns as permitted hereunder. No Person, other than the parties hereto (and any STC Indemnified Party) and their respective successors and assigns as permitted hereunder, is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, the parties hereto (and any STC Indemnified Party) or their respective successors and assigns as permitted hereunder. 12.7. Entire Agreement; Amendment. This Agreement, including the Schedules and Exhibits hereto and the other instruments and documents referred to herein or delivered pursuant hereto, contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, commitments or understandings with respect to such matters. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by each of the parties hereto. 12.8. Severability. If any part of any provision of this Agreement or any other contract, agreement, document or writing given pursuant to or in connection with this Agreement shall be invalid or unenforceable under applicable law, such part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of such provisions or the remaining provisions of said contract, agreement, document or writing. 12.9. Headings. The headings of the sections and subsections contained in this Agreement are inserted for convenience only and do not form a part or affect the meaning, construction or scope thereof. 12.10. Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto, shall be governed by and construed under -77- and in accordance with the laws of the State of New York, excluding the choice of law rules thereof. 12.11. Signature in Counterparts. This Agreement may be executed in separate counterparts, none of which need contain the signatures of all parties, each of which shall be deemed to be an original, and all of which taken together constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than the number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. -78- IN WITNESS WHEREOF, each of the parties hereto has executed this Asset Exchange Agreement, or has caused this Asset Exchange Agreement to be duly executed and delivered in its name on its behalf, all as of the day and year first above written. STC BROADCASTING, INC. By: /s/ David A. Fitz ----------------------------- David A. Fitz Chief Financial Officer STC LICENSE COMPANY By: /s/ David A. Fitz ----------------------------- David A. Fitz Chief Financial Officer STC BROADCASTING OF VERMONT, INC. By: /s/ David A. Fitz ----------------------------- David A. Fitz Chief Financial Officer STC BROADCASTING OF VERMONT SUBSIDIARY, INC. By: /s/ David A. Fitz ----------------------------- David A. Fitz Chief Financial Officer -79- HEARST-ARGYLE STATIONS, INC. By: /s/ Dean H. Blythe ----------------------------- Dean H. Blythe Senior Vice President -80- ANNEX I DEFINITIONS "ABC" shall have the meaning specified in Section 7.5. ----------- "ABC Affiliation Agreement" shall have the meaning set forth in Section 7.5. - ------------ "Accounting Firm" shall have the meaning set forth in Section 2.6.2. ------------- "Accounts Receivable" means all cash accounts receivable with respect to a Station as of the end of the broadcast day immediately preceding the Closing Date. "Additional Agreements" shall have the meaning set forth in Section 6.1.6. - ------------- "Affiliate" shall mean, with respect to any Person, any other Person that, (a) directly or indirectly is in control of, is controlled by, or is under common control with, the first Person, (b) is an officer, director, trustee, partner (general or limited), employee or holder of five percent (5%) or more of any class of any voting or non-voting securities or other equity in the first Person, (c) is an officer, director, trustee, partner (general or limited), employee or holder of five percent (5%) or more of any class of the voting or non-voting securities or other equity in any Person which directly or indirectly is in control of, is controlled by, or is under common control with, the first Person, and (d) any Family of any individual included in (a), (b) or (c). For purposes of this definition, "control" (including with correlative meanings "controlled by" and "under common control with") shall mean possession, directly or indirectly, of either (X) five percent (5%) or more of the voting power of the securities having ordinary voting power for the election of directors of the first Person, or (Y) the power to direct or cause the direction of the management or policies of the first Person (whether through ownership of securities, partnership interests or any other ownership or debt interests, by contract or otherwise). "Affiliated Entities" shall mean, with respect to any Person, any other Person that directly or indirectly is in control of, is controlled by, or is under common control with, the first Person. "Affiliated Transactions" shall have the meaning set forth in Section 4.19. - ------------ "Agreement" shall have the meaning set forth in the Preamble. "Applicant" shall have the meaning set forth in Section 3.9.3. ------------- "Appraisal" shall have the meaning set forth in Section 2.8.1. ------------- "Appraisal Firm" shall have the meaning set forth in Section 2.8.1. ------------- "Appraisal Report" shall have the meaning set forth in Section 2.8.1. ------------- "Assets" shall have the meaning set forth in Section 2.2. ----------- "Assignment of Contracts and Leases" means that certain Assignment of Contracts and Leases, dated as of the Closing Date and executed by the Transferring Party, substantially in the form attached hereto as Exhibit C. --------- "Assignment of FCC Licenses" means that certain Assignment of FCC Licenses, dated as of the Closing Date and executed by the Transferring Party, substantially in the form attached hereto as Exhibit B. --------- "Assumed Liabilities" mean the Liabilities assumed by the Recipient Party pursuant to Section 2.9 or Section 2.10, as the case may be. ----------- ------------ "Assumption Agreement" means that certain Assumption Agreement, dated the Closing Date and executed by the parties, substantially in the form attached hereto as Exhibit D. --------- "Basket Amount" shall have the meaning set forth in Section 10.4.2. -------------- "Benefit Arrangement" means any benefit arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Plan, including, without limitation, employment agreements, executive compensation arrangements, incentive programs or arrangements, sick leave, vacation pay, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock option or purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, perquisite, company cars, any plans subject to Code Section 125, and any plans providing benefits or payments in the event of a change of control, change in ownership, or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors, or agents. "Benefit Liabilities" shall have the meaning set forth in Section 3.14.6. - -------------- "Benefit Plans" shall have the meaning set forth in Section 4.14.1. -------------- ANNEXI-2 "Bill of Sale" means that certain Bill of Sale and Assignment of Assets, dated as of the Closing Date and executed by the Transferring Party, substantially in the form attached hereto as Exhibit A. --------- "Burlington Financing Amount" shall have the meaning set forth in Section 2.13. - ------------ "Burlington Stations" shall have the meaning set forth in the Recitals. "Cash Consideration" shall have the meaning set forth in Section 2.5.1. - ------------- "Cash Purchase Assets" shall have the meaning set forth in Section 11.1.2. - -------------- "Clear Channel" shall have the meaning set forth in the Recitals. "Clear Channel Agreements" shall have the meaning set forth in the Recitals. "Closing" shall have the meaning set forth in Section 9.1. ----------- "Closing Date" shall have the meaning set forth in Section 9.1. ----------- "Code" means the Internal Revenue Code of 1986, as amended, and all Laws promulgated pursuant thereto or in connection therewith. "Current Balance Sheet Date" shall have the meaning set forth in Section 3.5.2. - ------------- "Deferred Contract" shall have the meaning set forth in Section 6.2.10(b). - ----------------- "Designated Employees" shall have the meaning set forth in Section 6.9.1. - ------------- "DMA" means the designated market area for a particular television or radio station as determined by the A.C. Nielsen Co. "Encumbrances" mean any mortgages, pledges, liens, security interests, defects in title, easements, rights-of-way, encumbrances, restrictions and any other matters affecting title. "Environmental Laws" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, ("CERCLA") as amended by the ANNEXI-3 Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. (S) 9601 et seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. (S) 2601 et ------ -- seq.; the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1802 et seq.; - ---- ------- the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. (S) 9601 et seq.; ------- the Clean Water Act ("CWA"), 33 U.S.C. (S) 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S) 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. (S) 7401 ------- et seq.; or any other applicable federal, state, or local laws relating to - ------- Hazardous Materials generation, production, use, storage, treatment, transportation or disposal, or the protection of the environment from Hazardous Materials. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and all Laws promulgated pursuant thereto or in connection therewith. "ERISA Affiliate" means any person that, together with the referenced party, would be or was prior to March 17, 1997 treated as a single employer under Section 414 of the Code or Section 4001 of ERISA. "Excluded Assets" shall have the meaning set forth in Section 2.4. ----------- "Family" of an individual includes (a) the individual, (b) the individual's spouse and former spouses and any other natural person who resides with such individual, and (c) any other natural person who is related to the individual or any person described in the preceding clause (b) within the second degree. "FCC" means the Federal Communications Commission. "FCC Applications" shall have the meaning set forth in Section 5.1. ----------- "FCC Licenses" shall have the meaning set forth in Section 2.3.1. ------------- "FCC Order" means an order or orders of the FCC, or of the Chief, Mass Media Bureau of the FCC, acting under delegated authority, consenting to the assignment to the Recipient Party of the FCC Licenses for the Transferring Party's Stations. "Final AR Amount" shall have the meaning set forth in Section 2.7.2. ------------- "Final Proration Amount" shall have the meaning set forth in Section 2.6.2. - ------------- "Further Media Interest" shall have the meaning set forth in Section 6.18. - ------------ ANNEXI-4 "Governmental Authority" means any agency, board, bureau, court, commission, department, instrumentality or administration of the United States government, any foreign government, any state government or any local or other governmental body in a state, territory or possession of the United States or the District of Columbia. "Hart-Scott-Rodino" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and all Laws promulgated pursuant thereto or in connection therewith. "HAT" shall have the meaning set forth in the Preamble. "HAT Affiliated Transactions" shall have the meaning set forth in Section 4.19. - ------------ "HAT Assets" shall have the meaning set forth in Section 2.2. ----------- "HAT Balance Sheets" shall have the meaning set forth in Section 4.5.1. - ------------- "HAT Benefit Plans" shall have the meaning specified in Section 4.14.1. - -------------- "HAT Documents" shall mean the Bill of Sale and Assignment of Assets, the Assignment of FCC Licenses, the Assignment of Contracts and Leases, the Assumption Agreement, and the real property deeds delivered pursuant to Section 9.4.1(f). "HAT Excluded Assets" shall have the meaning set forth in Section 2.4. ----------- "HAT License Assets" shall mean the FCC licenses of the HAT Stations. "HAT Non-License Assets" shall have the meaning set forth in Section 2.2. - ----------- "HAT Retirement Plan" shall have the meaning set forth in Section 6.8.5. - ------------- "HAT Stations" shall have the meaning set forth in the Recitals. "Hazardous Materials" means any wastes, substances, or materials (whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants, or contaminants, including without limitation, substances defined as "hazardous wastes," "hazardous substances," "toxic substances," "radioactive materials," or other similar designations in, or otherwise subject to regulation under, any Environmental Laws. ANNEXI-5 "Heritage Agreement" shall have the meaning set forth in the Recitals. "Heritage Subsidiaries" shall have the meaning set forth in the Recitals. "HMC" shall have the meaning set forth in the Recitals. "HSR Filing" shall have the meaning set forth in Section 5.2. ----------- "Indemnified Party" and "Indemnifying Party" shall have the respective meanings set forth in Section 10.5.1. -------------- "Intellectual Property" shall have the meaning set forth in Section 2.3.4. - ------------- "Interim Operation" shall have the meaning set forth in Section 2.11.3. - -------------- "KSBW" shall have the meaning set forth in the Recitals. "KSBW Receivables" shall have the meaning set forth in Section 2.7.1. ------------- "Laws" means any federal, state or local law, foreign law, statute, code, ordinance, regulation, order, writ, injunction, judgment or decree applicable to the specified Person and to the businesses and assets thereof. "Leased Property" shall have the meaning set forth in Section 2.3.2(b). - ---------------- "Liabilities" shall mean, as to any Person, all debts, adverse claims, liabilities and obligations, direct, indirect, absolute or contingent of such Person, whether accrued, vested or otherwise, whether in contract, tort, strict liability or otherwise and whether or not actually reflected, or required by generally accepted accounting principles to be reflected, in such Person's balance sheets or other books and records. "License Assets" shall mean individually the STC License Assets and the HAT License Assets. "Like-Kind Exchange" shall have the meaning set forth in the Recitals. ANNEXI-6 "LKE Facilitation Transactions" shall have the meaning set forth in Section 6.12.4. - -------------- "Losses" means any and all demands, claims, complaints, actions or causes of action, suits, proceedings, investigations, arbitrations, assessments, losses, damages, liabilities, obligations (including those arising out of any action, such as any settlement or compromise thereof or judgment or award therein) and any costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements. "Material Adverse Effect" on either party's Stations means a material adverse effect on the business, assets or financial condition of such Stations taken as a whole, except for any such material adverse effect resulting from (a) general economic conditions applicable to the television broadcast industry, (b) general conditions in the markets in which such Stations operate, (c) circumstances that are not likely to recur and either have been substantially remedied or can be substantially remedied without substantial cost or delay, or (d) the refusal by the other party to consent to any new Program Contract. "Multiemployer Plan" means any Plan described in Section 3(37) of ERISA. "Network Agreements" shall have the meaning set forth in Section 2.3.8. - ------------- "Non-Transferred Employees" shall have the meaning set forth in Section 6.9.1. - ------------- "Operating Contracts" shall have the meaning set forth in Section 2.3.9. - ------------- "Ordinary Course of Business" of a party's Stations means the ordinary course of business of such Stations consistent with past practices of such party both with respect to type and amount; any actions taken pursuant to the requirements of law or contracts existing on the date hereof shall be deemed to be action in the Ordinary Course of Business. "Permitted Encumbrances" means (a) Encumbrances of a landlord, or other statutory lien not yet due and payable, or a landlord's liens arising in the Ordinary Course of Business, (b) Encumbrances arising in connection with equipment or maintenance financing or leasing under the terms of a Station Contract set forth on the Schedules, (c) Encumbrances arising pursuant to the terms of leases on Real Property or Leased Property as set forth on Schedule -------- 2.3.1 and Schedule 2.3.8 which are subject to any lease or sublease to a third - ----- -------------- party, (d) Encumbrances for Taxes not yet due and payable or which are being contested in ANNEXI-7 good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the contesting party's books in accordance with generally accepted accounting principles, (e) Encumbrances that do not materially detract from the value of any of the Assets or materially interfere with the use thereof as currently used, or (f) those Encumbrances on Schedule -------- 3.8 and Schedule 3.10 with respect to STC and those Encumbrances on Schedule 4.8 - --- ------------- ------------ and Schedule 4.10 with respect to HAT. ------------- "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization, other form of business or legal entity or Governmental Authority. "Plan" of either party means any plan, program or arrangement, whether or not written, that is or was an "employee benefit plan" as such term is defined in Section 3(3) of ERISA and (a) which was or is established or maintained by such party or any ERISA Affiliate for the benefit of any current or former employees of its Stations; (b) to which such party contributed or was obligated to contribute or to fund or provide benefits or had any liability (whether actual or contingent) with respect to any of its assets or otherwise for the benefit of any current or former employees of its Stations; or (c) which provides or promises benefits to any person who performs or who has performed services for its Stations and because of those services is or has been (i) a participant therein or (ii) entitled to benefits thereunder. "Preferred STC Ownership" shall have the meaning set forth in Section 6.12.4. - -------------- "Program Contracts" shall have the meaning set forth in Section 2.3.5. ------------- "Proration Amount" shall have the meaning set forth in Section 2.6.1. ------------- "Proration Items" shall mean any power and utility charges, business and license fees (including retroactive adjustments thereof), sales and service charges, commissions, special assessments, and rental payments and personal and real estate Taxes and assessments with respect to the Real Property, taxes (except for Taxes arising from the transfer of the Assets hereunder), deposits, Trade-out Agreements, unused sick leave pursuant to any collective bargaining agreements and other similar prepaid and deferred items and any other operating expenses incurred in the Ordinary Course of Business (except with respect to Program Contracts, only those payments due and payable during the month in which the Closing Date occurs shall be prorated). The parties acknowledge and agree that there shall be excluded from Proration Items the following: (a) severance pay relating to any employee of the Transferring Party who shall have been ANNEXI-8 terminated prior to the Exchange Date, (b) any Liabilities not being assumed by the Recipient Party in accordance with Section 2.8, and (c) all accrued and ----------- unpaid vacation pay. "Providence Assets" shall have the meaning set forth in Section 2.12. ------------ "QI" shall have the meaning set forth in Section 6.12.5. -------------- "Qualified Plan" of either party means a Plan that satisfies, or is intended by such party to satisfy, the requirements for tax qualification described in Section 401 of the Code including, without limitation, any Plan that was terminated on or after July 1, 1989, as to which such party may have any actual or contingent liability. "Real Property" shall have the meaning set forth in Section 2.3.2(a). ---------------- "Recipient Party" shall have the meaning set forth in Section 2.3. ----------- "Restricted Contracts" shall have the meaning set forth in Section 6.2.10(a). - ----------------- "SALC" shall have the meaning set forth in Section 2.2. ----------- "Schedule Review Period" shall have the meaning set forth in Section 6.10(a). - --------------- "Schedules" shall mean the disclosure schedules delivered by the parties in connection herewith. "Section 1031 Schedule" shall have the meaning set forth in Section 2.8.2. - ------------- "Sinclair" shall have the meaning set forth in the Recitals. "Sinclair Agreement" shall have the meaning set forth in the Recitals. "Sinclair Collection Period" shall have the meaning set forth in Section 6.4. - ----------- "Sinclair Documents" shall mean the Sinclair Agreement and any other agreements, documents or certificates contemplated thereby or delivered in connection therewith. ANNEXI-9 "Sinclair Filing Date" shall have the meaning set forth in Section 3.9.3. - ------------- "Sinclair Liabilities" shall have the meaning set forth in Section 2.10.1. - -------------- "Sinclair Parent" shall have the meaning set forth in the Recitals. "Sinclair Receivables" shall have the meaning set forth in Section 2.4.2. - ------------- "Station" and "Stations" shall have the meaning set forth in the Recitals. "Station Contracts" shall have the meaning set forth in Section 2.3.9. ------------- "STC" shall have the meaning set forth in the Preamble. "STC Affiliated Transactions" shall have the meaning set forth in Section 3.19. - ------------ "STC Assets" shall have the meaning set forth in Section 2.1. ----------- "STC Balance Sheets" shall have the meaning set forth in Section 3.5.1. - ------------- "STC Benefit Plans" shall have the meaning specified in Section 3.14.1. - -------------- "STC Broadcasting" shall have the meaning set forth in the Preamble. "STCBV" shall have the meaning set forth in the Preamble. "STCBV Sub" shall have the meaning set forth in the Preamble. "STC Documents" shall mean the Bill of Sale and Assignment of Assets, the Assignment of FCC Licenses, the Assignment of Contracts and Leases, the Assumption Agreement, and the real property deeds delivered pursuant to Section 9.3.1(f). - ---------------- "STC Exchange Entities" shall have the meaning set forth in the Preamble. ANNEXI-10 "STC Excluded Assets" shall have the meaning set forth in Section 2.4. ----------- "STC Indemnified Party" shall have the meaning set forth in Section 10.6(b). - --------------- "STC License Assets" shall mean the FCC Licenses of the STC Stations. "STC License Company" shall have the meaning set forth in the Preamble. "STC Non-License Assets" shall have the meaning set forth in Section 2.1. - ----------- "STC Parties" shall have the meaning set forth in the Preamble. "STC Stations" shall have the meaning set forth in the Recitals. "STC Retirement Plan" shall have the meaning set forth in Section 6.8.5. - ------------- "STC Transfer Date" shall have the meaning ascribed to such term under the Sinclair Agreement. "Tax Claim" shall have the meaning set forth in Section 10.6(c). --------------- "Tax Increase" shall have the meaning set forth in Section 10.6(b). --------------- "Taxes" means all federal, state and local taxes (including, without limitation, income, profit, franchise, sales, use, real property, personal property, ad valorem, excise, employment, social security and wage withholding taxes) and installments of estimated taxes, assessments, deficiencies, levies, imports, duties, license fees, registration fees, withholdings, or other similar charges of every kind, character or description imposed by any Governmental Authorities. "Tax Returns" of either party means all federal, state, local, foreign and other applicable Tax returns, declarations of estimated Tax reports required to be filed by such party in connection with the business and operations of its Stations (without regard to extensions of time permitted by law or otherwise). "TBA" means any time brokerage agreement, local marketing arrangement, joint sales agreement, joint operating agreement, limited management agreement or other similar agreement or contract. ANNEXI-11 "Time Sales Agreements" shall have the meaning set forth in Section 2.3.7. - ------------- "Trade-out Agreements" shall have the meaning set forth in Section 2.3.6. - ------------- "Transfer Taxes" shall have the meaning set forth in Section 12.3(a). --------------- "Transferred Employees" shall have the meaning set forth in Section 6.9.1. - ------------- "Transferring Party's Plan" shall have the meaning set forth in Section 6.9.4. - ------------- "Tuscaloosa" shall have the meaning set forth in the Recitals. "Welfare Plan" means an "employee welfare benefit plan" as such term is defined in Section 3(1) of ERISA. "WDTN" shall have the meaning set forth in the Recitals. "WDTN Receivables" shall have the meaning set forth in Section 2.7.1. ------------- "WFFF" shall have the meaning set forth in the Recitals. "WFFF Liabilities" shall mean all Liabilities of STC relating solely to WFFF under the Sinclair Documents (or Liabilities relating solely to WFFF assumed pursuant to the terms thereof), and all Liabilities arising out of events occurring on or after the Non-License Transfer (as defined in the Sinclair Agreement) relating solely to the business and operations of WFFF. "WFFF TBA" shall have the meaning set forth in Section 2.11.3. -------------- "WNAC" shall have the meaning set forth in the Recitals. "WNAC/Argyle" shall have the meaning set forth in the Recitals. "WNNE" shall have the meaning set forth in the Recitals. "WNNE Licensee" shall have the meaning set forth in the Recital. "Working Capital Advance" shall have the meaning set forth in Section 2.14. - ------------ "WPRI" shall have the meaning set forth in the Recitals. ANNEXI-12 "WPTZ" shall have the meaning set forth in the Recitals. "WPTZ Licensee" shall have the meaning set forth in the Recitals. ANNEXI-13 EXHIBIT A --------- FORM OF BILL OF SALE AND ASSIGNMENT OF ASSETS THIS BILL OF SALE AND ASSIGNMENT OF ASSETS is made as of this ____ day of ____________, 199__, by STC BROADCASTING, INC., a Delaware corporation ("STC Broadcasting"). WHEREAS, STC Broadcasting, STC Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont Subsidiary, Inc., and Hearst- Argyle Stations, Inc. ("HAT") are parties to that certain Asset Exchange Agreement dated as of February 18, 1998 (the "Exchange Agreement"); WHEREAS, pursuant to the Exchange Agreement, STC Broadcasting has agreed to transfer to HAT, and HAT has agreed to accept from STC Broadcasting the STC Assets (as defined therein) with respect to television broadcast stations WPTZ (TV), Channel 5, North Pole, New York, WNNE-TV, Channel 31, Hartford, Vermont, and KSBW (TV), Channel 8, Salinas, California (collectively, the "Stations"), all in accordance with and subject to the terms and conditions set forth in the Exchange Agreement; and WHEREAS, all capitalized terms used herein shall have the meanings ascribed to such terms in the Exchange Agreement unless otherwise defined herein. NOW, THEREFORE, for and in consideration of the conveyance of the STC Assets to HAT and in further consideration of the mutual covenants and agreements contained in the Exchange Agreement, and pursuant to the terms of the Exchange Agreement, STC Broadcasting hereby assigns, transfers, conveys and delivers to HAT, and HAT hereby accepts from STC Broadcasting, all of STC Broadcasting's right, title and interest in, to and under the following assets (including any contracts or agreements that are entered into and any assets that are acquired between the date of the Exchange Agreement and the Closing Date in accordance with the terms therein), but excluding the Excluded Assets described in Section 2.4 of the Exchange Agreement: ----------- 1. All of the furniture, fixtures, furnishings, machinery, computers, equipment, inventory, spare parts, supplies, office materials and other tangible property of every kind and description owned, leased or used by STC Broadcasting in connection with the business and operations of the Stations, together with any replacements thereof and additions thereto made before the Closing Date, and less any retirements or dispositions thereof made before the Closing Date in the Ordinary Course of Business, including, without limitation, those items which have a book value in excess of Five Thousand Dollars ($5,000), all of which are set forth and identified in Schedule 2.3.3 of the Exchange -------------- Agreement. 2. All of the service marks, copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes and other similar intangible assets maintained, owned, leased or used by STC Broadcasting in connection with the business and operations of the Stations (including any and all applications, registrations, extensions and renewals relating thereto) (the "Intellectual Property"), and all of the rights, benefits and privileges associated therewith including, without limitation, the right to use the call letters for the Stations identified in Schedule 2.3.4 of the Exchange Agreement. -------------- 3. The program licenses and contracts under which STC Broadcasting is authorized to broadcast programs on the Stations (collectively the "Program Contracts") including, without limitation, (a) all program (cash and non-cash) licenses and contracts listed on Schedule 2.3.5 of the Exchange Agreement, and -------------- (b) any other such program contracts that are entered into between the date of the Exchange Agreement and the Closing Date in accordance with the terms of the Exchange Agreement. 4. All contracts and agreements (excluding Program Contracts) pursuant to which commercial air time on the Stations has been sold, traded or bartered in consideration for any property or services in lieu of or in addition to cash (collectively, the "Trade-out Agreements") including, without limitation, those set forth and identified in Schedule 2.3.6 of the Exchange -------------- Agreement. 5. All contracts and agreements pursuant to which commercial air time on the Stations has been sold for cash (collectively the "Time Sales Agreements"). 6. All network affiliation agreements and other contracts of the Stations with a television broadcast network (collectively, the "Network Agreements") including, without limitation, those listed on Schedule 2.3.8 of -------------- the Exchange Agreement. 7. All other operating contracts and agreements relating to the business or operations of the Stations, all material such contracts as of the date of the Exchange Agreement being listed on Schedule 2.3.9 of the Exchange -------------- Agreement (including, without limitation, all employment agreements and talent contracts, all leases and subleases relating to the Leased Property, all agreements relating to any motor vehicles, and all national and local advertising representation agreements for the Stations), together with all contracts and agreements that will be entered into between the date of the Exchange Agreement and the Closing Date in accordance with the terms of the Exchange Agreement (collectively, the "Operating Contracts" and together with the Program Contracts, Trade-out Agreements, Time Sales Agreements and Network Agreements, the "Station Contracts"). -2- 8. All automotive equipment and motor vehicles maintained, owned, leased or otherwise used by STC Broadcasting in connection with the business and operations of the Stations, including, without limitation, those set forth and described in Schedule 2.3.10 of the Exchange Agreement. --------------- 9. All engineering, business and other books, papers, logs, files and records pertaining to the business and operations of the Stations, but not the organizational documents and records of STC Broadcasting. 10. All translators, earth stations, and other auxiliary facilities, and all applications therefor owned, leased or otherwise used or useful by STC Broadcasting in connection with the business and operations of the Stations, including, without limitation, those set forth and described in Schedule 2.3.12 --------------- of the Exchange Agreement. 11. All permits, approvals, orders, authorizations, consents, licenses, certificates, franchises, exemptions of, or filings or registrations with, any court or Governmental Authority (other than the FCC) in any jurisdiction, which have been issued or granted to or are owned or used or useful by STC Broadcasting in connection with the business and operations of the Stations and all pending applications therefor. 12. The business of the Stations as a "going concern", customer relationships and goodwill. 13. All Accounts Receivable arising out of the business and operations of KSBW, and all Accounts Receivable arising out of the business and operations of the Burlington Stations from the STC Transfer Date under the Sinclair Agreement. 14. All of STC's rights under or pursuant to the Sinclair Documents except to the extent that such rights pertain to or affect WFFF. 15. All cash, cash equivalents or deposits held by STC arising out of the business and operations of the Burlington Stations from and after the STC Transfer Date, and all interest payable in connection with any such cash, cash equivalents or deposits, but excluding any proceeds of a WFFF Disposition (as defined in that certain Credit Agreement to be entered into by HAT and STCBV Sub in connection with the Burlington Financing Amount). Notwithstanding anything to the contrary hereinabove or in the Exchange Agreement, specifically excluded from this Bill of Sale and Assignment of Assets are the Excluded Assets. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF STC BROADCASTING MADE IN THE EXCHANGE AGREEMENT, STC -3- BROADCASTING MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ASSETS CONVEYED HEREBY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR INTENDED USE OR FITNESS FOR A PARTICULAR USE. TO HAVE AND TO HOLD the said described property to STC Broadcasting and its successors and assigns for their exclusive use and benefit forever. STC Broadcasting does hereby agree, from and after the date hereof upon the request of HAT, to execute such other documents as HAT may reasonably require in order to obtain the full benefit of this Bill of Sale and Assignment of Assets and STC Broadcasting's obligations hereunder. -4- IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale and Assignment of Assets to be duly executed, as of the date first written above. STC BROADCASTING, INC. By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- -5- EXHIBIT A --------- FORM OF BILL OF SALE AND ASSIGNMENT OF ASSETS THIS BILL OF SALE AND ASSIGNMENT OF ASSETS is made as of this ___ day of_________ 199 by HEARST-ARGYLE STATIONS, INC., a Nevada corporation ("HAT"). WHEREAS, STC Broadcasting, Inc. ("STC Broadcasting"), STC Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont Subsidiary, Inc., and HAT are parties to that certain Asset Exchange Agreement dated as of February 18, 1998 (the "Exchange Agreement"); WHEREAS, pursuant to the Exchange Agreement, HAT has agreed to transfer to STC Broadcasting, and STC Broadcasting has agreed to accept from HAT the HAT Assets (as defined therein) with respect to television broadcast stations WDTN(TV), Channel 2, Dayton, Ohio, and WNAC(TV), Channel 64, Providence, Rhode Island (collectively, the "Stations"), all in accordance with and subject to the terms and conditions set forth in the Exchange Agreement; and WHEREAS, all capitalized terms used herein shall have the meanings ascribed to such terms in the Exchange Agreement unless otherwise defined herein NOW, THEREFORE, for and in consideration of the conveyance of the HAT Assets to STC Broadcasting and in further consideration of the mutual covenants and agreements contained in the Exchange Agreement, and pursuant to the terms of the Exchange Agreement, HAT hereby assigns, transfers, conveys and delivers to STC Broadcasting, and STC Broadcasting hereby accepts from HAT, all of HAT's right, title and interest in, to and under the following assets (including any contracts or agreements that are entered into and any assets that are acquired between the date of the Exchange Agreement and the Closing Date in accordance with the terms therein), but excluding the Excluded Assets described in Section 2.4 of the Exchange Agreement: 1. All of the furniture, fixtures, furnishings, machinery, computers, equipment, inventory, spare parts, supplies, office materials and other tangible property of every kind and description owned, leased or used by HAT in connection with the business and operations of the Stations, together with any replacements thereof and additions thereto made before the Closing Date, and less any retirements or dispositions thereof made before the Closing Date in the Ordinary Course of Business, including, without limitation, those items which have a book value in excess of Five Thousand Dollars ($5,000), all of which are set forth and identified in Schedule 2.3.3 of the Exchange Agreement. 2. All of the service marks, copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes and other similar intangible assets maintained, owned, leased or used by HAT in connection with the business and operations of the Stations (including any and all applications, registrations, extensions and renewals relating thereto) (the "Intellectual Property"), and all of the rights, benefits and privileges associated therewith including, without limitation, the right to use the call letters for the Stations identified in Schedule 2.3.4 of the Exchange Agreement. - -------------- 3. The program licenses and contracts under which HAT is authorized to broadcast programs on the Stations (collectively the "Program Contracts") including, without limitation, (a) all program (cash and non-cash) licenses and contracts listed on Schedule 2.3.5 of the Exchange Agreement, and (b) any other -------------- such program contracts that are entered into between the date of the Exchange Agreement and the Closing Date in accordance with the terms of the Exchange Agreement. 4. All contracts and agreements (excluding Program Contracts) pursuant to which commercial air time on the Stations has been sold, traded or bartered in consideration for any property or services in lieu of or in addition to cash (collectively, the "Trade-out Agreements") including, without limitation, those set forth and identified in Schedule 2.3.6 of the Exchange -------------- Agreement. 5. All contracts and agreements pursuant to which commercial air time on the Stations has been sold for cash (collectively the "Time Sales Agreements"). 6. All network affiliation agreements and other contracts of the Stations with a television broadcast network (collectively, the "Network Agreements") including, without limitation, those listed on Schedule 2.3.8 of the Exchange -------------- Agreement. 7. All other operating contracts and agreements relating to the business or operations of the Stations, all material such contracts as of the date of the Exchange Agreement being listed on Schedule 2.3.9 of the Exchange Agreement -------------- (including, without limitation, the Clear Channel Agreements, all employment agreements and talent contracts, all leases and subleases relating to the Leased Property, all agreements relating to any motor vehicles, and all national and local advertising representation agreements for the Stations), together with all contracts and agreements that will be entered into between the date of the Exchange Agreement and the Closing Date in accordance with the terms of the Exchange Agreement (collectively, the "Operating Contracts" and together with the Program Contracts, Trade-out Agreements, Time Sales Agreements and Network Agreements, the "Station Contracts"). -2- 8. All automotive equipment and motor vehicles maintained, owned, leased or otherwise used by HAT in connection with the business and operations of the Stations, including, without limitation, those set forth and described in Schedule 2.3.10 of the Exchange Agreement. - --------------- 9. All engineering, business and other books, papers, logs, files and records pertaining to the business and operations of the Stations, but not the organizational documents and records of HAT. 10. All translators, earth stations, and other auxiliary facilities, and all applications therefor owned, leased or otherwise used or useful by HAT in connection with the business and operations of the Stations, including, without limitation, those set forth and described in Schedule 2.3.12 --------------- of the Exchange Agreement. 11. All permits, approvals, orders, authorizations, consents, licenses, certificates, franchises, exemptions of, or filings or registrations with, any court or Governmental Authority (other than the FCC) in any jurisdiction, which have been issued or granted to or are owned or used or useful by HAT in connection with the business and operations of the Stations and all pending applications therefor. 12. The business of the Stations as a `"going concern", customer relationships and goodwill. 13. All Accounts Receivable arising out of the business and operations of WDTN. Notwithstanding anything to the contrary hereinabove or in the Exchange Agreement, specifically excluded from this Bill of Sale and Assignment of Assets are the Excluded Assets. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF HAT MADE IN THE EXCHANGE AGREEMENT, HAT MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ASSETS CONVEYED HEREBY, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR INTENDED USE OR FITNESS FOR A PARTICULAR USE. TO HAVE AND TO HOLD the said described property to HAT and its successors and assigns for their exclusive use and benefit forever. HAT does hereby agree, from and after the date hereof upon the request of STC Broadcasting, to execute such other documents as STC Broadcasting may reasonably require in order to obtain the full benefit of this Bill of Sale and Assignment of Assets and HAT'S obligations hereunder. -3- IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale and Assignment of Assets to be duly executed, as of the date first written above. HEARST-ARGYLE STATIONS, INC. By: --------------------------- Name: ------------------------- Title: ------------------------ -4- EXHIBIT B --------- FORM OF ASSIGNMENT OF FCC LICENSES THIS ASSIGNMENT OF FCC LICENSES is made as of this ____ day of _____________________, 199__, by STC LICENSE COMPANY, a Delaware corporation ("Assignor"). WHEREAS, Assignor, STC Broadcasting, Inc., STC Broadcasting of Vermont, Inc. and STC Broadcasting of Vermont Subsidiary, Inc., and Hearst-Argyle Stations, Inc. ("Assignee") are parties to that certain Asset Exchange Agreement dated as of February 18, 1998 (the "Exchange Agreement"), providing, among other things, for the sale, assignment, transfer, conveyance and delivery to Assignee of the STC License Assets (as defined therein); WHEREAS, in the Exchange Agreement it was agreed, subject to the granting of the necessary consents by the Federal Communications Commission (the "Commission"), that Assignor would assign to Assignee the licenses and other authorizations issued by the Commission for operation of television broadcast stations WPTZ (TV), Channel 5, North Pole, New York, WNNE-TV, Channel 31, Hartford, Vermont, and KSBW (TV), Channel 8, Salinas, California (collectively, the "Stations") together with certain auxiliary facilities; WHEREAS, the Commission has authorized the assignment of such licenses and other authorizations from Assignor to Assignee; and WHEREAS, all capitalized terms used herein shall have the meanings ascribed to such terms in the Exchange Agreement unless otherwise defined herein. NOW, THEREFORE, in consideration of the conveyance by Assignee of the HAT Assets and the payment by Assignee of the cash consideration pursuant to the Exchange Agreement and in further consideration of the mutual covenants and agreements contained in the Exchange Agreement, and pursuant to the terms of the Exchange Agreement, Assignor does hereby assign, transfer, convey and deliver to Assignee, and Assignee hereby accepts from Assignor, all of Assignor's right, title and interest in, to and under the licenses and other authorizations issued by the Commission with respect to the Stations, including, without limitation those set forth and identified in Schedule 2.3.1 to the Exchange Agreement. -------------- IN WITNESS WHEREOF, the undersigned has caused this Assignment of FCC Licenses to be duly executed as of the day and year first written above. STC LICENSE COMPANY By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- -2- EXHIBIT B --------- FORM OF ASSIGNMENT OF FCC LICENSES THIS ASSIGNMENT OF FCC LICENSES is made as of this _____ day of __________, 199___, by HEARST-ARGYLE STATIONS, INC., a Nevada corporation ("Assignor"). WHEREAS, STC Broadcasting, Inc., STC Broadcasting of Vermont, Inc., STC license Company ("Assignee") and STC Broadcasting of Vermont Subsidiary, Inc., and Assignor are parties to that certain Asset Exchange Agreement dated as of February 18, 1998 (the "Exchange Agreement"), providing, among other things, for the sale, assignment, transfer, conveyance and delivery to Assignee of the HAT License Assets (as defined therein); WHEREAS, in the Exchange Agreement it was agreed, subject to the granting of the necessary consents by the Federal Communications Commission (the "Commission"), that Assignor would assign to Assignee the licenses and, other authorizations issued by the Commission for operation of television broadcast stations WDTN(TV), Channel 2, Dayton, Ohio ("WDTN"), and WNAC(TV), Channel 64, Providence, Rhode Island (collectively, the "Stations") together with certain auxiliary facilities (and in the case of WDTN, all such licenses and other authorizations shall be assigned by Assignee immediately thereafter to Smith Acquisition license Company); WHEREAS, the Commission has authorized the assignment of such licenses and other authorizations from Assignor to Assignee; and WHEREAS, all capitalized terms used herein shall have the meanings ascribed to such terms in the Exchange Agreement unless otherwise defined herein. NOW, THEREFORE, in consideration of the conveyance by Assignee of the STC Assets pursuant to the Exchange Agreement and in further consideration of the mutual covenants and agreements contained in the Exchange Agreement, and pursuant to the terms of the Exchange Agreement, Assignor does hereby assign, transfer, convey and deliver to Assignee, and Assignee hereby accepts from Assignor, all of Assignor's right, title and interest in, to and under the licenses and other authorizations issued by the Commission with respect to the Stations, including, without limitation those set forth and identified in Schedule 2.3.1 to the Exchange Agreement. - -------------- IN WITNESS WHEREOF, the undersigned has caused this Assignment of FCC licenses to be duly executed as of the day and year first written above. HEARST-ARGYLE STATIONS, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- -2- EXHIBIT C --------- FORM OF ASSIGNMENT OF CONTRACTS AND LEASES THIS ASSIGNMENT OF CONTRACTS AND LEASES is made as of this _____ day of ________, 199__, by STC BROADCASTING, INC., a Delaware corporation ("Assignor"). WHEREAS, Assignor, STC Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont Subsidiary, Inc., and Hearst-Argyle Stations, Inc. ("Assignee") are parties to that certain Asset Exchange Agreement dated as of February 18, 1998 (the "Exchange Agreement"), providing, among other things, for the assignment, transfer, conveyance and delivery to Assignee of the STC Assets (as defined therein), with respect to television broadcast stations WPTZ-TV, Channel 5, North Pole, New York, WNNE-TV, Channel 31, Hartford, Vermont, and KSBW (TV), Channel 8, Salinas, California (collectively, the "Stations") including those assets conveyed by this Assignment of Contracts and Leases; WHEREAS, all capitalized terms used herein shall have the meanings ascribed to such terms in the Exchange Agreement unless otherwise defined herein. NOW, THEREFORE, in consideration of the conveyance by Assignee of the HAT Assets and the payment by Assignee of the cash consideration pursuant to the Exchange Agreement and in further consideration of the mutual covenants and agreements contained in the Exchange Agreement, and pursuant to the terms of the Exchange Agreement, Assignor hereby bargains, assigns, transfers, conveys and delivers to Assignee and its successors and assigns all of Assignor's right, title and interest in and to all contracts, agreements, leases, commitments and understandings owned or held by Assignor and used or useful in connection with the business and operation of the Stations, including, without limitation, the Program Contracts set forth and identified in Schedule 2.3.5 to the Exchange -------------- Agreement, the Trade-Out Agreements set forth and identified in Schedule 2.3.6 -------------- to the Exchange Agreement, the Network Agreements set forth and identified in Schedule 2.3.8 to the Exchange Agreement, and the Operating Agreements set forth - -------------- and identified in Schedule 2.3.9 to the Exchange Agreement, together with those -------------- Program Contracts, Trade-Out Agreements, Network Agreements and Operating Contracts that are entered into between the date of the Exchange Agreement and the Closing Date in accordance with the terms therein. Notwithstanding anything to the contrary herein above or in the Exchange Agreement, specifically excluded from this Assignment of Contracts and Leases are the Excluded Assets. IN WITNESS WHEREOF, Assignor has caused this Assignment of Contracts and Leases to be executed as of the day and year first above written. STC BROADCASTING, INC. By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- -2- EXHIBIT C --------- FORM OF ASSIGNMENT OF CONTRACTS AND LEASES THIS ASSIGNMENT OF CONTRACTS AND LEASES is made as of this _____ day of ____________, 199___, by HEARST-ARGYLE STATIONS, INC., a Nevada corporation ("Assignor"). WHEREAS, STC Broadcasting, Inc. (the "Assignee"), STC Broadcasting of Vermont, Inc., STC License Company and STC Broadcasting of Vermont Subsidiary, Inc., and Assignor are parties to that certain Asset Exchange Agreement dated as of February 18, 1998 (the "Exchange Agreement"), providing, among other things, for the assignment, transfer, conveyance and delivery to Assignee of the HAT Assets (as defined therein), with respect to television broadcast stations WDTN(TV), Channel 2, Dayton, Ohio, and WNAC(TV), Channel 64, Providence, Rhode Island (collectively, the "Stations") including those assets conveyed by this Assignment of Contracts and Leases; WHEREAS, all capitalized terms used herein shall have the meanings ascribed to such terms in the Exchange Agreement unless otherwise defined herein. NOW, THEREFORE, in consideration of the conveyance by Assignee of the STC Assets pursuant to the Exchange Agreement and in further consideration of the mutual covenants and agreements contained in the Exchange Agreement, and pursuant to the terms of the Exchange Agreement, Assignor hereby bargains, assigns, transfers, conveys and delivers to Assignee and its successors and assigns all of Assignor's right, title and interest in and to all contracts, agreements, leases, commitments and understandings owned or held by Assignor and used or useful in connection with the business and operation of the Stations, including, without limitation, the Program Contracts set forth and identified in Schedule 2.3.5 to the Exchange Agreement, the Trade-Out Agreements set forth and - -------------- identified in Schedule 2.3.6 to the Exchange Agreement, the Network Agreements -------------- set forth and identified in Schedule 2.3.8 to the Exchange Agreement, and the -------------- Operating Agreements set forth and identified in Schedule 2.3.9 to the Exchange -------------- Agreement (including the Clear Channel Agreements), together with those Program Contracts, Trade-Out Agreements, Network Agreements and Operating Contracts that are entered into between the date of the Exchange Agreement and the Closing Date in accordance with the terms therein. Notwithstanding anything to the contrary herein above or in the Exchange Agreement, specifically excluded from this Assignment of Contracts and Leases are the Excluded Assets. IN WITNESS WHEREOF, Assignor has caused this Assignment of Contracts and Leases to be executed as of the day and year first above written. HEARST-ARGYLE STATIONS, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- -2- EXHIBIT D --------- FORM OF ASSUMPTION AGREEMENT THIS ASSUMPTION AGREEMENT is made and entered into as of this ____ day of _________________, 199__, by and among STC BROADCASTING, INC., a Delaware corporation ("STC Broadcasting"), STC BROADCASTING OF VERMONT, INC., a Delaware corporation ("STCBV"), STC LICENSE COMPANY, a Delaware corporation ("STC License Company"), and STC BROADCASTING OF VERMONT SUBSIDIARY, INC., a Delaware corporation ("STCBV Sub") (STC Broadcasting, STCBV, STC License Company and STCBV Sub shall be collectively referred to herein as "STC"), and HEARST-ARGYLE STATIONS, INC., a Nevada corporation ("HAT"). WHEREAS, pursuant to that certain Asset Exchange Agreement dated as of February 18, 1998 by and among STC and HAT (the "Exchange Agreement"), STC has agreed to transfer and assign to HAT the STC Assets (as defined therein), for the consideration and upon the terms and conditions set forth in the Exchange Agreement; WHEREAS, the Exchange Agreement provides that HAT shall assume certain liabilities and obligations of STC, but only such specified liabilities and obligations; and WHEREAS, all capitalized terms used herein shall have the meanings ascribed to such terms in the Exchange Agreement unless otherwise defined herein. NOW, THEREFORE, for and in consideration of the transfer of the aforesaid assets, and in further consideration of the mutual covenants and agreements contained herein and in the Exchange Agreement, and pursuant to the Exchange Agreement, the parties hereby agree as follows: Subject to the limitations contained in the Exchange Agreement, HAT hereby assumes, and agrees to pay, perform and discharge and agrees to indemnify and hold STC harmless from and against (a) all Liabilities arising out of events occurring on or after the Closing Date related to the businesses or operations of the STC Stations or the ownership of the STC Assets by HAT, (b) all Liabilities arising out of events occurring on or after the Closing Date with respect to the FCC Licenses of STC License Company, (c) all Liabilities arising on or after the Closing Date under the Station Contracts of STC (including, without limitation, Trade-Out Agreements) pursuant to their terms (except for Liabilities for any breaches thereunder by STC occurring prior to the Closing Date), (d) all Liabilities for which there is an adjustment in favor of HAT in connection with the calculating of the Proration Amount, (e) all Liabilities to employees of the STC Stations to be assumed by HAT in accordance with Section ------- 6.8 and Section 6.9 of the Exchange - --- ----------- Agreement, (f) all Liabilities of STC relating to WNNE and WPTZ under the Sinclair Documents (or Liabilities relating to WNNE and WPTZ assumed pursuant to the terms thereof), and (g) all Liabilities arising out of events occurring on or after the Non-License Transfer (as defined in the Sinclair Agreement) relating to the business and operations of WNNE and WPTZ. HAT shall not assume or be deemed to assume any debts, liabilities or obligations of STC except as specified in this Assumption Agreement. HAT does hereby agree, from and after the date hereof upon the request of STC, to execute such other documents as STC may reasonably require in order to obtain the full benefit of this Assumption Agreement and HAT's obligations hereunder. This Assumption Agreement shall be governed by and construed under and in accordance with the laws of the State of New York (without regard to the choice of law provisions thereof). -2- IN WITNESS WHEREOF, the parties hereto have caused this Assumption Agreement to be duly executed on their behalf, on the day and year first above written. STC BROADCASTING, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- STC LICENSE COMPANY By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- STC BROADCASTING OF VERMONT, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- STC BROADCASTING OF VERMONT SUBSIDIARY, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- -3- HEARST-ARGYLE STATIONS, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- -4- EXHIBIT D --------- FORM OF ASSUMPTION AGREEMENT THIS ASSUMPTION AGREEMENT is made and entered into as of this _____day of _______________, 199___, by and among STC BROADCASTING, INC., a Delaware corporation ("STC Broadcasting"), STC BROADCASTING OF VERMONT, INC., a Delaware corporation ("STCBV"), STC LICENSE COMPANY, a Delaware corporation ("STC License Company"), and STC BROADCASTING OF VERMONT SUBSIDIARY, INC., a Delaware corporation ("STCBV Sub") (STC Broadcasting, STCBV, STC License Company and STCBV Sub shall be collectively referred to herein as "STC"), and HEARST-ARGYLE STATIONS, INC., a Nevada corporation ("HAT"). WHEREAS, pursuant to that certain Asset Exchange Agreement dated as of February 18, 1998 by and among STC and HAT (the "Exchange Agreement"), HAT has agreed to transfer and assign to STC the HAT Assets (as defined therein), for the consideration and upon the terms and conditions set forth in the Exchange Agreement; WHEREAS, the Exchange Agreement provides that STC shall assume certain liabilities and obligations of HAT, but only such specified liabilities and obligations; and WHEREAS, all capitalized terms used herein shall have the meanings ascribed to such terms in the Exchange Agreement unless otherwise defined herein. NOW, THEREFORE, for and in consideration of the transfer of the aforesaid assets, and in further consideration of the mutual covenants and agreements contained herein and in the Exchange Agreement, and pursuant to the Exchange Agreement, the parties hereby agree as follows: Subject to the limitations contained in the Exchange Agreement, STC hereby assumes, and agrees to pay, perform and discharge and agrees to indemnify and hold HAT harmless from and against (a) all Liabilities arising out of events occurring on or after the Closing Date related to the businesses or operations of the HAT Stations or the ownership of the HAT Assets by STC, (b) all Liabilities arising out of events occurring on or after the Closing Date with respect to the FCC Licenses of HAT, (c) all Liabilities arising on or after the Closing Date under the Station Contracts of HAT (including, without limitation, Trade-Out Agreements) pursuant to their terms (except for Liabilities for any breaches thereunder by HAT occurring prior to the Closing Date), (d) all Liabilities for which there is an adjustment in favor of STC in connection with the calculation of the Proration Amount, (e) all Liabilities to employees of the HAT Stations to be assumed by STC in accordance with Section 6.9 of the Exchange ----------- Agreement. STC does hereby agree, from and after the date hereof upon the request of HAT, to execute such other documents as HAT may reasonably require in order to obtain the full benefit of this Assumption Agreement and STC's obligations hereunder. This Assumption Agreement shall be governed by and construed under and in accordance with the laws of the State of New York (without regard to the choice of law provisions thereof). -2- IN WITNESS WHEREOF, the parties hereto have caused this Assumption Agreement to be duly executed on their behalf, on the day and year first above written. STC BROADCASTING, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- STC LICENSE COMPANY By: ----------------------------- Name: --------------------------- Title: -------------------------- STC BROADCASTING OF VERMONT, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- STC BROADCASTING OF VERMONT SUBSIDIARY, INC. By: ----------------------------- Name: --------------------------- Title: -------------------------- -3- HEARST-ARGYLE STATIONS, INC. By: ------------------------------ Name: ---------------------------- Title: --------------------------- -4- EXHIBIT E TO ASSET EXCHANGE AGREEMENT ================================================================================ CREDIT AGREEMENT between STC BROADCASTING OF VERMONT SUBSIDIARY, INC. as Borrower, and HEARST-ARGYLE STATIONS. INC. as Lender Dated as of ______________, 1998 ================================================================================ TABLE OF CONTENTS PAGE SECTION 1. DEFINITIONS .................................................. 1 1.1 Defined Terms ................................................ 1 1.2 Other Definitional Provisions ................................ 6 SECTION 2. CREDIT FACILITY .............................................. 6 2.1 Loans; Borrowing Procedures .................................. 6 2.2 Disbursement of Loans ........................................ 7 2.3 Repayment of Principal ....................................... 7 2.4 Payment of Interest; Default Interest ........................ 7 2.5 Pre payments ................................................. 7 2.6 Note ......................................................... 8 SECTION 3. PAYMENTS; TAXES .............................................. 8 3.1 Computation of Interest ...................................... 8 3.2 Payments ..................................................... 8 3.3 Taxes ........................................................ 8 SECTION 4. REPRESENTATIONS AND WARRANTIES ............................... 9 4.1 Organization and Good Standing ............................... 9 4.2 Authorization ................................................ 9 4.3 No Conflicts or Consents ..................................... 9 4.4 Enforceable Obligations ...................................... 9 4.5 Title to Assets .............................................. 9 4.6 Financial Condition .......................................... 10 4.7 No Default ................................................... 10 4.8 No Litigation ................................................ 10 4.9 Security Interests ........................................... 10 4.10 Taxes ........................................................ 10 4.11 Principal Office, Etc. ....................................... 10 4.12 ERISA ........................................................ 10 4.13 Compliance with Law .......................................... 10 4.14 Insurance .................................................... 10 4.15 Purchase Agreements .......................................... 11 SECTION 5. CONDITIONS PRECEDENT ......................................... 11 5.1 Conditions to Initial Loan ................................... 11 5.2 Conditions to Additional Loans ............................... 12 SECTION 6. AFFIRMATIVE COVENANTS ........................................ 13 6.1 Financial Statements, Reports and Documents .................. 13 6.2 Payment of Taxes and Other Indebtedness ...................... 13 6.3 Maintenance of Existence and Rights; Conduct of Business ..... 13 6.4 Notice of Default ............................................ 14 6.5 Other Notices ................................................ 14 6.6 Use of Proceeds .............................................. 14 6.7 Books and Records; Access .................................... 14 i PAGE 6.8 Compliance with Law .......................................... 14 6.9 Insurance .................................................... 14 6.10 Further Assurances ........................................... 15 6.11 Lien on Assets ............................................... 15 SECTION 7. NEGATIVE COVENANTS ........................................... 15 7.1 Change in Nature of Business ................................. 15 7.2 Limitation on Indebtedness ................................... 15 7.3 Negative Pledge .............................................. 15 7.4 No Restrictions .............................................. 15 7.5 Limitation on Investments .................................... 15 7.6 Limitation on Dividends ...................................... 16 7.7 Amendments; Material Agreements .............................. 16 7.8 Affiliated Transactions ...................................... 16 7.9 Issuance of Shares ........................................... 16 7.10 Name, Fiscal Year and Accounting Method ...................... 16 7.11 Liquidation, Mergers, Consolidations and Dispositions of Substantial Assets ........................................... 16 7.12 Restricted Payments .......................................... 16 7.13 Pension Plans ................................................ 16 7.14 Location of Company .......................................... 16 SECTION 8. EVENTS OF DEFAULT ............................................ 16 8.1 Events of Default ............................................ 16 8.2 Remedies ..................................................... 18 8.3 Default Interest ............................................. 18 SECTION 9. MISCELLANEOUS ................................................ 18 9.1 Amendments ................................................... 18 9.2 Notices ...................................................... 18 9.3 No Waiver; Cumulative Remedies ............................... 20 9.4 Survival of Representations and Warranties ................... 20 9.5 Payment of Lender's Expenses, Indemnity, etc. ................ 20 9.6 Benefit of Agreement; Assignments and Participations ......... 20 9.7 Headings ..................................................... 21 9.8 GOVERNING LAW ................................................ 21 9.9 Submission to Jurisdiction ................................... 21 9.10 WAIVER OF JURY TRIAL ......................................... 21 9.11 Confidentiality .............................................. 21 9.12 FCC Compliance ............................................... 22 EXHIBITS A - Form of Note B - Form of Pledge Agreement C - Form of Guaranty ii CREDIT AGREEMENT dated as of _________________, 1998 between STC BROADCASTING OF VERMONT SUBSIDIARY, INC., a corporation organized under the laws or Delaware (the "Borrower") and HEARST-ARGYLE STATIONS, INC. a corporation organized under the laws of Nevada (the "Lender"). WITNESSETH: ---------- WHEREAS, the Borrower has requested that the Lender commit to make one or more term loans to it in an aggregate principal amount as described herein: and WHEREAS, the Lender is willing to provide such financial accommodations on, and subject to, the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms -------------- shall have the following meanings: "Affiliate": shall mean as to any Person, any other Person which, --------- directly or indirectly, is in control of, is controlled by, or is under common control with such Person. For purposes of this definition, control of a Person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities, by contract or otherwise, provided that, in any event, any Person -------- that owns directly or indirectly securities having more than 50% of the voting power for the election of directors (or Persons having similar management functions) of any other Person shall be deemed to control such other Person. "Agreement": shall mean this Credit Agreement, as amended, --------- supplemented or modified from time to time. "Applicable Rate": shall mean a rate per annum equal to 7.75%. --------------- "Bankruptcy Code": shall mean the Federal Bankruptcy Code of 1978, as --------------- amended from time to time. "Business Day": shall mean a day on which commercial banks are not ------------ authorized or required by law or executive order to close in New York, New York. "Capitalized Lease": shall mean any lease of property, real or ----------------- personal, if the then present value of the minimum rental commitment thereunder is required to be classified and accounted for as a capital lease on the balance sheet of the lessee, in accordance with GAAP. "Cash Equivalents": means (i) marketable direct obligations ---------------- issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof: (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Corporation or Moody's Investor Service, Inc.; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's corporation and at least P-1 from Moody's Investor Service, Inc.; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $200,000,000: and (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above, entered into with any bank meeting the qualifications specified in clause (iv) above. "Closing Date": shall mean the date on which each of the conditions ------------ set forth in subsection 5.1 hereof have been satisfied. "Code": shall mean the Internal Revenue Code of 1986, as amended from ---- time to time. "Collateral": shall mean the shares of stock of the Borrower owned by ---------- the Guarantor in which the Lender has been granted a security interest pursuant to the Pledge Agreement. "Credit Agreement": means the Credit Agreement, dated as of ---------------- February 28, 1997. among STC Broadcasting, Inc., The Chase Manhattan Bank. as agent, NationsBank of Texas, N.A., as documentation agent, and any other financial institutions from time to time party thereto, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time. "Default": shall mean any Event of Default or any event which with ------- the giving of notice, the lapse of time, or both, would become an Event of Default. "Dividends": shall mean, with respect to any Person, (i) cash --------- distributions or any other distributions on, or in respect of, any class of equity interests or securities of such Person, except for distributions made solely in equity interests or securities of the same class of such Person, and (ii) any and all funds, cash or other payments made in respect of the redemption, repurchase or acquisition of equity interests or securities of such Person. "Event of Default": shall mean any of the events specified in ---------------- subsection 8.1. "Final Maturity Date": shall mean the date which occurs two (2) years ------------------- after the date of the HAT Exchange Agreement. "GAAP": shall mean United States generally accepted accounting ---- principles. 2 "Governmental Authority": shall mean any nation or government, ---------------------- any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee": shall mean, with respect to any Person, any obligation, --------- contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall -------- not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantor": shall mean STC Broadcasting of Vermont, Inc., a --------- corporation organized under the laws of Delaware. "Guaranty": shall mean, the guaranty, substantially in the form of -------- Exhibit C hereto, executed by the Guarantor in favor of the Lender. "HAT Acquisition": shall mean the acquisition by the Lender of --------------- (i) the STC Assets (as defined in the HAT Exchange Agreement) other than the STC Excluded Assets (as defined in the HAT Exchange Agreement) in exchange for the HAT Assets (as defined in the HAT Exchange Agreement) or (ii) the Cash Purchase Assets pursuant to Section 11.1.2 of the HAT Exchange Agreement, all as more particularly described in the HAT Acquisition Agreement. "HAT Exchange Agreement": shall mean the Asset Exchange Agreement, ---------------------- dated as of February 18, 1998 among Borrower, STC Broadcasting, Inc., STC Broadcasting of Vermont, Inc., STC License Company, Inc. and Hearst-Argyle Stations, Inc. with respect to the HAT Acquisition. "Indebtedness": shall mean as to any Person, at any date, without ------------ duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person under Capitalized Leases, (v) all contingent or non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid or payable (currently or in the future, on a contingent or non-contingent basis) under a letter of credit or similar instrument, (vi) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person, (vii) all obligations of such Person under interest rate swaps, caps or collars or under any other financial hedging arrangement net of any amounts receivable by such Person under such arrangements and (viii) all Indebtedness of others Guaranteed by such Person. 3 "Indenture": means the Indenture, dated as of March 25, 1997, between --------- STC Broadcasting, Inc., as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "Investment": shall mean, when used with reference to any investment ---------- of any Person: (a) any loan, advance or other extension of credit, including obligations represented by bonds, notes or other securities and any Guarantees, made by it to, or for the benefit of, any other Person; and (b) any capital contribution by such Person to, or acquisition of stock or other securities or partnership or membership interests by such Person in, any other Person, or any other investment evidencing an ownership or other interest of such Person in any other Person. "Lien": shall mean any mortgage, pledge, hypothecation, assignment, ---- deposit arrangement, encumbrance, security interest, lien (statutory or other) or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional or installment sale or other title retention agreement, any Capitalized Lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing). "Loans": shall mean the loans provided for in subsection 2.1. ----- "Material Adverse Effect": shall mean any (i) material adverse effect ----------------------- whatsoever upon the validity, performance or enforceability of this Agreement or any of the Related Documents or any of the transactions contemplated hereby or thereby, (ii) material adverse effect upon the ability of the Guarantor, the Borrower or any other Person to fulfill any of their respective obligations under this Agreement or any of the Related Documents or (iii) material adverse effect on the business, assets or financial condition of the Guarantor or the Borrower, except for any such material adverse effect resulting from (a) general economic conditions applicable to the television broadcast industry, (b) general conditions in the markets in which the television broadcast stations of the Borrower operate, or (c) circumstances that are not likely to recur and either have been substantially remedied or can be substantially remedied without substantial cost or delay. "Note": shall have the meaning provided in subsection 2.6. ---- "Obligations": shall mean any and all of the debts, obligations and ----------- liabilities of the Borrower to the Lender provided for or arising under this Agreement or the Related Documents (including, without limitation, the obligation to repay the Loans and to pay interest thereon), whether now existing or hereafter arising, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred. "Permitted Indebtedness": shall mean (i) Indebtedness hereunder and ---------------------- under the Related Documents, (ii) Indebtedness constituting current liabilities for taxes and assessments incurred in the ordinary course of business, provided such liabilities shall be paid and discharged as provided in subsection 6.2 hereof, (iii) amounts advanced by the Lender to the Borrower 4 pursuant to Section 2.14 of the HAT Exchange Agreement and (iv) other Indebtedness in an aggregate principal amount not exceeding $50,000. "Permitted Investments": shall mean investments in cash and Cash --------------------- Equivalents. "Permitted Liens": shall mean (i) all Liens constituting Permitted --------------- Encumbrances (as defined in the HAT Purchase Agreement), (ii) pledges or deposits made to secure payment of worker's compensation insurance (or to participate in any fund in connection with worker's compensation insurance), unemployment insurance, pensions or social security programs, (iii) Liens such as for landlord's, materialmen's, mechanics', warehousemen's and other like Liens arising in the ordinary course of business, securing Permitted Indebtedness whose payment is not overdue for a period in excess of 60 days or which are being contested in good faith and by appropriate proceedings as to which appropriate reserves in accordance with GAAP or surety, stay or appeal bonds have been provided, (iv) Liens for taxes, assessments and governmental charges or levies imposed upon a Person or upon such Person's income or profits or property, if the same are not yet due and payable or if the same are being contested in good faith and as to which appropriate reserves in accordance with GAAP have been provided, (v) Liens arising from good faith deposits in connection with leases or contracts (other than contracts involving the borrowing of money), pledges or deposits to secure public or statutory obligations, deposits to secure (or in lieu of) surety, stay, appeal or customs bonds, and deposits to secure the payment of taxes, assessments, customs duties or other similar charges, (vi) encumbrances consisting of zoning restrictions, easements, or other restrictions on the use of real property, lawfully in effect from time to time, (vii) Liens imposed by operation of law with respect to any judgments or orders not constituting, or otherwise arising out of an Event of Default; (viii) attachment or judgment Liens not constituting, or otherwise arising out of an Event of Default: and (ix) Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institution incurred in the ordinary course of business and which are within the general parameters customary in the banking industry. "Person": shall mean an individual, partnership, corporation, limited ------ liability company, business trust, joint stock company, trust, unincorporated association, joint venture. Governmental Authority or other entity of whatever nature. "Plan": shall mean any employee benefit plan which is covered by ---- Title IV of the Employee Retirement Income Security Act of 1974, as amended. "Pledge Agreement": shall mean the Pledge Agreement, substantially in ---------------- the form of Exhibit B hereto, executed by the Guarantor in favor of the Lender. "Purchase Agreements": shall mean (a) the STC Purchase Agreement and ------------------- (b) the HAT Exchange Agreement. "Related Documents": shall mean the Note, the Guaranty and the Pledge ----------------- Agreement, together with any security agreement, pledge, collateral assignment and/or mortgage to be executed and delivered pursuant to Section 6.11 hereof and all instruments, documents, agreements and certificates to be executed and delivered in connection therewith. "Subsidiary": shall mean as to any Person, a corporation or other ---------- business entity of which shares of stock or other ownership interests having ordinary voting power to elect a 5 majority of the board of directors or other managers of such corporation or business entity are at the time owned, directly or indirectly through one or more intermediaries, by such Person. "STC Acquisition": shall mean the acquisition by the Borrower of the --------------- Assets (as defined in the STC Purchase Agreement) other than the Excluded Assets (as defined in the STC Purchase Agreement), all as more particularly described in the STC Purchase Agreement. "STC Financing Consents": shall mean all amendments, consents or ---------------------- other waivers which may be required under the Credit Agreement or the Indenture. "STC Purchase Agreement": shall mean the Asset Purchase Agreement, ---------------------- dated as of February 3, 1998, among Tuscaloosa Broadcasting. Inc. WPTZ Licensee, Inc., WNNE Licensee, Inc. and STC Broadcasting of Vermont, Inc. with respect to the STC Acquisition. "Taxes": shall have the meaning provided in subsection 3.3. ----- "WFFF Disposition": shall mean the transfer or other disposition of ---------------- the assets and rights of Borrower relating to WFFF-TV to any entity ultimately controlled, directly or indirectly, by Robert N. Smith. "WFFF-TV": shall mean television broadcast station WFFF-TV, Channel ------- 44, Burlington, Vermont. 1.2 Other Definitional Provisions. (a) Unless otherwise specified ----------------------------- therein, all terms defined in this Agreement shall have the defined meaning's when used in the Related Documents or any certificate or other document made or delivered pursuant hereto. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. (c) Defined terms in the Agreement shall include in the singular number the plural and in the plural number the singular. (d) References in this Agreement to any other agreement, document or instrument shall, unless the context otherwise requires, include such other agreement, document or instrument as the same may be from time to time amended, modified or supplemented. SECTION 2. CREDIT FACILITY 2.1 Loans; Borrowing Procedures. On the terms and subject to the --------------------------- conditions of this Agreement, the Lender agrees to make Loans to the Borrower as follows: (a) On the Closing Date the Lender agrees to make a Loan to the Borrower in an amount equal to either: (i) if the Closing (as defined in the STC Purchase Agreement) occurs simultaneously with the Closing Date hereunder, the Purchase Price (as defined in the STC Purchase Agreement) payable by the Borrower to the Sellers (as defined in the STC Purchase Agreement) upon the occurrence of the Closing (as defined in the STC Purchase 6 Agreement) or (ii) if the Non-License Transfer (as defined in the STC Purchase Agreement) occurs simultaneously with the Closing Date hereunder, the portion of the Purchase Price payable by the Borrower to such Sellers upon the occurrence of the Non-License Transfer (as defined in the STC Purchase Agreement); provided -------- that the amount of such Loan to be advanced under this subsection 2.1(a) shall not exceed $72,000,000; (b) Provided the Non-License Transfer (as defined in the STC Purchase Agreement) occurs before the Closing (as defined in the STC Purchase Agreement), the Lender agrees to make an additional Loan to the Borrower on the date of the Closing (as defined in the STC Purchase Agreement), but in no event after the Final Maturity Date, in an amount equal to the unpaid portion of the Purchase Price (as defined in the STC Purchase Agreement to be paid by the Borrower under the STC Purchase Agreement; provided that the amount of the -------- additional Loan to be advanced by the Lender under this subsection 2.1(b) together with the amount of the initial Loan advanced pursuant to subsection 2.1(a) shall not exceed $72,000,000; (c) Any request for an additional Loan pursuant to subsection 2.1(b) must be delivered in writing to the Lender by not later than 10:00 a.m., New York City time, two Business Days before the date on which such Loan is requested to be made and must specify (i) the amounts of the requested Loan, (ii) the date of borrowing (which must be a Business Day on or prior to the Final Maturity Date) and (iii) the account into which such Loan proceeds are to be disbursed, and certify to the Lender that all conditions to such Loan have been satisfied; and (d) Amounts borrowed and prepaid or repaid under this Agreement may not be reborrowed. 2.2 Disbursement of Loans. Subject to the conditions of this --------------------- Agreement, the Lender shall make Loans available to the Borrower by wire transferring the amount thereof to such account as the Borrower shall designate in writing to the Lender. 2.3 Repayment of Principal. Subject to the provisions of ---------------------- subsection 2.5 hereof, the Borrower agrees to repay to the Lender the entire outstanding principal amount of the Loans on the Final Maturity Date. 2.4 Payment of Interest; Default Interest. The Borrower agrees to ------------------------------------- pay interest on the unpaid principal amount of the Loans from time to time outstanding from and including the Closing Date to but not including the date on which such Loans are paid in full at a rate per annum equal to the Applicable Rate. Interest shall be payable quarterly, in arrears, on the last Business Day of each March, June, September and December (with the first such payment hereunder being payable in June 1998) and on the Final Maturity Date. Notwithstanding the foregoing, if the Borrower shall fail to pay any installment of principal of or interest on any Loan when due, then the Borrower shall pay interest on the amount in default as provided in subsection 8.3. 2.5 Prepayments. (a) The Borrower may, at any time, prepay the ----------- then outstanding principal amount of the Loans, in whole or in part, without premium or penalty. The Borrower shall give the Lender not less than four Business Days' notice of its intent to prepay the Loans, which notice shall specify the date and amount of the prepayment. Any notice of prepayment given by the Borrower shall be irrevocable and obligate the Borrower to make the prepayment specified in such notice on the date specified therein. Any partial prepayment of the 7 Loans pursuant to this subsection 2.5(a) shall be in an aggregate principal amount of at least $5,000,000 or an integral multiple of $1,000,000 in excess thereof. Any prepayment pursuant to this subsection 2.5(a) shall be accompanied by the payment of accrued and unpaid interest to the date of such prepayment on the principal amount prepaid. (b) The Borrower shall prepay the entire outstanding principal balance of the Loans on the earlier to occur of (i) the date of the Closing (as defined in the HAT Exchange Agreement) or (ii) upon the consummation of the Lender's acquisition of the Cash Purchase Assets (as defined in the Hat Exchange Agreement) pursuant to Section 11.1.2 of the HAT Exchange Agreement. All prepayments made hereunder shall be accompanied by the payment of accrued and unpaid interest on the principal amount prepaid through the date of prepayment. 2.6 Note. The Loan made by the Lender shall be evidenced by a single ---- promissory note of the Borrower, substantially in the form of Exhibit A (the "Note"), payable to the order of the Lender. The Lender will note on its ---- internal records the date and amount of each Loan, the date and amount of each repayment of principal thereof and will, prior to any permitted transfer of the Note, endorse on the schedule (or continuation thereof) attached thereto the outstanding principal amount of the Loan evidenced thereby. Failure to so record any such information shall not alter the obligations of the Borrower under this Agreement or the Note. SECTION 3. PAYMENTS; TAXES 3.1 Computation of Interest. Interest on the Loan shall be calculated ----------------------- on the basis of a 365-day year and the actual number of days elapsed. 3.2 Payments. All payments (including prepayments) to be made by the -------- Borrower on account of principal and interest shall be made without any set-off or counterclaim whatsoever and shall be made to the Lender, at such account of the Lender designated for such purpose, in United States Dollars and in immediately available funds not later than 12:00 noon, New York City time, on the date on which such payment shall become due. Any payment received after such time on any Business Day shall be deemed to have been received on the next Business Day. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. 3.3 Taxes. All payments made by the Borrower under this Agreement and ----- the Related Documents shall be made free and clear of, and without reduction for or on account of any current or future taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding income and franchise taxes imposed on the Lender. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce the Lender to enter into this Agreement and to make the Loan herein provided for, the Borrower hereby represents and warrants to the Lender that: 4.1 Organization and Good Standing. The Borrower is a corporation ------------------------------ duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, is duly qualified as a foreign entity and in good standing in all jurisdictions in which 8 the failure to so qualify would have a Material Adverse Effect, and has all requisite power and authority to own its properties and assets, to transact the business in which it is currently engaged, and to execute and deliver, and to perform its obligations under, this Agreement and the Related Documents to which it is a party. All of the issued and outstanding capital stock of the Borrower is owned beneficially and of record by the Guarantor. The Borrower has no Subsidiaries. 4.2 Authorization. The Borrower has taken all corporate action ------------- (including obtaining the consent and approval of the shareholder of the Borrower, if required) necessary to authorize the execution and delivery of this Agreement, the Related Documents to Which it is a party and the Purchase Agreements and to perform the obligations contemplated hereby and thereby. 4.3 No Conflicts or Consents. Except with respect to the STC ------------------------ Financing Consents, which STO Financing Consents have been obtained and are in full force and effect. neither the execution and delivery of this Agreement, the Related Documents to which it is a party or the Purchase Agreements, nor the consummation of the transactions contemplated hereby or thereby, nor the compliance with the terms and provisions hereof or thereof, will contravene or conflict with any provision of any constitution, law or regulation to which the Borrower is subject, or any judgment, license, order or permit applicable to the Borrower, or any indenture, loan agreement, mortgage, deed of trust, or other agreement or instrument to which the Borrower is a party or by which it or its assets may be bound or subject, or violate any provision of its organizational documents or by-laws. No consent, approval, authorization or order of any court or Governmental Authority or third party is required in connection with the execution and delivery by the Borrower of this Agreement or any of the Related Documents to which it is a party or for the consummation of the transactions contemplated hereby or thereby, except with respect to the STC Financing Consents, which STC Financing Consents have been obtained and are in full force and effect. 4.4 Enforceable Obligations. This Agreement and the Related Documents ----------------------- to which the Borrower is a party have been duly executed and delivered by the Borrower and are the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and general principles of equity. 4.5 Title to Assets. The Borrower has good title to all of its assets --------------- free and clear of all Liens and other encumbrances and adverse claims of any nature, except Permitted Liens. The Borrower has sufficient assets to operate its business as currently conducted. 4.6 Financial Condition. Except with respect to the organization and ------------------- incorporation of the Borrower and the transactions contemplated under the Purchase Agreements, the Borrower has not created, incurred or assumed, directly or indirectly. any Indebtedness or engaged in any business activities of any type whatsoever or entered into any agreements or arrangements with any Person. 4.7 No Default. No Default has occurred and is continuing, nor will ---------- the execution, delivery and performance of this Agreement or any of the Related Documents cause a Default to occur. 9 4.8 No Litigation. There are no actions, suits or legal, equitable, ------------- arbitration, regulatory or administrative proceedings pending or, to the best of the Borrower's knowledge after due inquiry, threatened against the Borrower or any of its properties or assets, which if adversely determined, could reasonably be expected to have a Material Adverse Effect. 4.9 Security Interests. The Pledge Agreement creates, as security ------------------ for the Loans and the other obligations purported to be secured thereby, a valid and exclusive, perfected security interest in and Lien on all of the Collateral described in such agreements in favor of the Lender superior and prior to the rights of all third Persons, subject to no other Liens. The Guarantor has good and marketable title to all of its Collateral free and clear of all Liens (except as created pursuant to the Pledge Agreement). No filings or recordings are required in order to perfect the security interests created under the Pledge Agreement. 4.10 Taxes. All tax returns required to be filed by the Borrower in ----- any jurisdiction have been filed or extensions obtained and all taxes as reflected in such returns, assessments, fees and other governmental charges upon the Borrower or upon any of their respective properties, income or franchises have been paid prior to the time that such taxes would give rise to a Lien thereon, other than a Permitted Lien under subsection 6.2 hereof. There is no proposed special tax assessment against the Borrower and, to the knowledge of the Borrower, there is no basis for any such assessment. 4.11 Principal Office Etc. The principal office, chief executive -------------------- office and principal place of business of (a) the Borrower, is located at __________________________________________ and (b) the Guarantor, is located at ____________________. The Borrower maintains its principal records and books at such address. 4.12 ERISA. Except for the Plans described in the HAT ----- Exchange Agreement, or otherwise required to be provided or established by Borrower under the STC Purchase Agreement. the Borrower has not established and does not maintain or contribute to any Plan that is covered by Title IV of the Employee Retirement Income Security Act of 1974, as amended. 4.13 Compliance with Law. The Borrower is in compliance with all ------------------- applicable provisions of all constitutions, laws, rules, regulations, orders, judgments, decrees, licenses and approvals of any Governmental Authority, the violation of which would have a Material Adverse Effect. 4.14 Insurance. The Borrower currently has and maintains insurance --------- coverage of the types and in the amounts required under subsection 8.9. 4.15 Purchase Agreements. The Lender has received a complete and ------------------- correct copy of the executed STC Purchase Agreement and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof, The STC Purchase Agreement has been duly executed and delivered by the Guarantor and, to the best of Borrower's knowledge, is in full force and effect in accordance with the terms thereof. All of the Guarantor's rights under the STC Purchase Agreement have been assigned to the Borrower. The Borrower hereby acknowledges and agrees that the Lender may rely on the representations and warranties of the Borrower and the other parties thereto contained in the STC Purchase Agreement. 10 SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Initial Loan. The obligation of the Lender to make -------------------------- the initial Loan under Section 2.1(a), hereof is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan, of the following conditions precedent: (a) This Agreement and Related Documents: HAT Purchase Agreement. The -------------------------------------------------- --------- Lender shall have received a counterpart of this Agreement, each of the Related Documents and the HAT Purchase Agreement, duly executed by each of the parties thereto. (b) STC Acquisition. The Lender shall have received copies, certified --------------- as true, correct and complete by the Secretary or an Assistant Secretary of the Borrower, of the executed STC Purchase Agreement and all other closing agreements and documents relating thereto or delivered in connection therewith, and, concurrently with or immediately prior to the funding of the initial Loan hereunder, all conditions set forth in the STC Purchase Agreement shall have been satisfied (without any amendment or waiver not expressly approved by the Lender in writing) and the Borrower shall have consummated the STC Acquisition or the Non-License Transfer (as defined in the STC Purchase Agreement): (c) Legal Proceedings. No injunction. restraining order or decree of ----------------- any nature of any court or governmental authority of competent jurisdiction shall be in effect that restrains or prohibits the transactions contemplated by this Agreement or the Related Documents. (d) Approvals. The STC Financing Consents necessary in connection --------- with this Agreement and the Related Documents shall have been obtained and shall remain in effect. The Lender shall have received copies, certified as true, correct and complete by the Secretary or an Assistant Secretary of the Borrower of all such STC Financing Consents. (e) Collateral. The Lender shall have received from the Guarantor (i) ---------- all certificates or other instruments representing all Pledged Securities (as such term is defined in the Pledge Agreement), together with executed and undated stock powers or assignments in blank. (f) Representations and Warranties. Each of the representations and ------------------------------ warranties made by the Borrower and the Guarantor pursuant to this Agreement and the Related Documents, and each of the representations and warranties contained in any certificate, document or financial or other statement furnished in connection with this Agreement and the Related Documents, shall be true and complete in all material respects on and as of the Closing Date as if made on and as of the Closing Date, except to the extent that such representations and warranties expressly relate to a particular date, in which case such representations and warranties shall be true and complete as of such date. (g) No Default. No Default shall have occurred and be continuing on ---------- such date or would occur as a result of the Loan. (h) Corporate Proceedings. The Lender shall have received a copy of --------------------- resolutions, in form and substance reasonably satisfactory to it, of the Board of Directors (or duly empowered committee thereof) of the Borrower and the Guarantor authorizing the execution and delivery of this Agreement and the Related Documents to which it is a party and the 11 consummation of the transactions here under and thereunder certified by its Secretary or an Assistant Secretary, which certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate. (i) Good Standing Certificates. The Lender shall have received a -------------------------- certificate from the Secretary of State of the State of Delaware evidencing the good standing of each of the Borrower and the Guarantor. (j) Corporate Documents. The Lender shall have received a copy of the ------------------- charter and by-laws of each of the Borrower and the Guarantor, together, in each case, with all amendments thereto, certified to be true, correct and complete by the Secretary or an Assistant Secretary of the Borrower and the Guarantor, as the case may be. (k) Incumbency Certificate. the Lender shall have received a ---------------------- certificate of the Secretary or an Assistant Secretary of each of the Borrower and the Guarantor as to the incumbency and signature of their respective officers authorized to sign this Agreement and the Related Documents to which it is a party. (l) Officer's Certificates. The Lender shall have received a ---------------------- certificate from an appropriate officer of each of the Borrower and the Guarantor certifying that (i) the representations and warranties contained in this Agreement and the Related Documents to which it is a party are accurate and complete in all material respects and (ii) no Default has occurred and is continuing or will occur as a result of the initial Loan. (m) Insurance. The Lender shall have received evidence that the --------- Borrower has in effect the insurance coverages required under subsection 6.9 hereof. 5.2 Conditions to Additional Loans. The obligation of the Lender to ------------------------------ make an additional Loan under subsection 2.1(b) hereof is subject to the satisfaction, immediately prior to or concurrently with the making of such additional Loan, of the following conditions precedent: (a) Representations and Warranties. Each of the representations and ------------------------------ warranties made by the Borrower pursuant to this Agreement, and each of the representations and warranties contained in any certificate, document or financial or other statement furnished in connection with this Agreement, shall be true and complete in all material respects on and as of the date of such additional Loan as if made on and as of such date, except to the extent such representations and warranties expressly relate to a particular date in which case such representations and warranties shall be true and correct as of such date. (b) No Default. No Default shall have occurred and be continuing on ---------- such date or would occur as a result of such Loan. (c) Notice of Borrowing. The Lender shall have received the notice ------------------- required pursuant to subsection 2.1(d). (d) Officer's Certificate. The Lender shall have received a --------------------- certificate from an appropriate officer of the Borrower certifying that (i) the representations and warranties contained in Section 4 hereof are accurate and complete in all material respects and (ii) no Default has occurred and is continuing or will occur as a result of such additional Loan. 12 (e) Legal Proceedings. No injunction, restraining order or decree of ----------------- any nature of any court or governmental authority of competent jurisdiction shall be in effect that restrains or prohibits the transactions contemplated by this Agreement or the Related Documents. (f) Supporting Documents. The Lender shall have received copies, -------------------- certified as true, correct and complete by the Secretary or Assistant Secretary of the Borrower, of all closing agreements and documents relating to the Closing (as defined in the STC Purchase Agreement) in connection with the STC Acquisition and concurrently with or immediately prior to the funding of the additional Loan, all conditions to the Closing (as defined in the STC Purchase Agreement) shall have been satisfied (without any amendment or waiver not expressly approved by the Lender in writing) and the Borrower shall have consummated the Closing (as defined in the SIC Purchase Agreement). SECTION 6. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as the Note or the Loan remains outstanding and unpaid or any other amount is owing to the Lender, the Borrower shall and (except in the case of delivery of financial information, reports, notices and certificates) shall cause each of its Subsidiaries to: 6.1 Financial Statements, Reports and Documents. The Borrower shall ------------------------------------------- deliver to the Lender the financial statements and other financial reporting materials required to be delivered pursuant to Section 6.2.9 of the HAT Exchange Agreement. 6.2 Payment of Taxes and Other indebtedness. The Borrower shall pay --------------------------------------- and discharge: (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any property belonging to them, (ii) all lawful claims upon it or its properties and assets (including claims for labor, materials and supplies) and (iii) all of its other Indebtedness in accordance with, and in the manner provided for under Section 6.2 of the HAT Exchange Agreement. 6.3 Maintenance of Existence and Rights; Conduct of Business. The -------------------------------------------------------- Borrower shall preserve and maintain its existence and all of its rights, privileges and franchises in accordance with, and in the manner provided for under Section 6.2.1 of the HAT Exchange Agreement, and conduct its businesses in an orderly and efficient manner consistent with good business practices and in accordance with all valid regulations and orders of any Governmental Authority in accordance with and in the manner provided for under Section 6.2.2 of the HAT Exchange Agreement. 6.4 Notice of Default. Promptly upon becoming aware of the existence ----------------- of any condition or event which constitutes a Default, the Borrower shall furnish to the Lender written notice specifying the nature and period of existence thereof and the action which the Borrower is taking or proposes to take with respect thereto. 6.5 Other Notices. The Borrower shall promptly notify the Lender of ------------- (i) the occurrence of any event or existence of any condition which would have a Material Adverse Effect: and (ii) the commencement of, or any material determination in, any litigation with any third party or any proceeding before any Governmental Authority affecting the Borrower or its assets or properties which could reasonably be expected to have a Material Adverse Effect. The 13 Borrower will promptly deliver to Lender a copy of each notice or written communication received by the Borrower (a) from the Sellers (as defined in the STC Purchase Agreement) under or in connection with the STC Purchase Agreement or (b) from the Federal Communications Commission in connection with the Stations (as defined in the STC Purchase Agreement). Within thirty (30) days after the end of each fiscal quarter, and no later than the date of delivery of the information required to be delivered pursuant to subsection 6.1(d) hereof, the Borrower shall deliver to the Lender notice of (i) the cancellation or termination of, or any default under, any agreement, contract or other instrument to which it is a party or by which any of its properties are bound which could reasonably be expected to have a Material Adverse Effect, and (ii) any material adverse claim against or affecting the Borrower or any of its assets or properties. 6.6 Use of Proceeds. The Borrower will use the proceeds of each --------------- Loan made by the Lender (a) under Section 2.1(a) and 2.1(c) hereof solely for the payment of the Purchase Price (as defined in the STC Purchase Agreement) in connection with the STC Acquisition and (b) under Section 2.1(b) hereof solely for the payment to the Sellers (as defined in the STC Purchase Agreement) of the Final Probation Amount (as defined in the STC Purchase Agreement). 6.7 Books and Records; Access. The Borrower shall give any ------------------------- representative of the Lender access during all business hours and upon reasonable prior notice, and permit such representative to examine, copy or make excerpts from, any and all books, records and documents in the possession of the Borrower relating to the affairs of the Borrower or its assets or properties in accordance with, and in the manner provided for under, Section 6.2.7 of the HAT Exchange Agreement. Lender agrees to take such steps as are reasonably practicable to minimize disruption of the Borrower's operations in connection with such examination. The Borrower shall maintain complete and accurate books and records of its transactions in accordance with good accounting practices. 6.8 Compliance with Law. The Borrower shall comply with all ------------------- applicable constitutions, laws, rules, regulations, judgments, orders, decisions, rulings and decrees of any Governmental Authority applicable to it or to any of its assets, properties, business operations or transactions in accordance with and in the manner provided for under, the HAT Exchange Agreement. 6.9 Insurance. The Borrower shall maintain workers' compensation --------- insurance, liability insurance, casualty insurance and other insurance on its properties, assets and businesses, now owned or hereafter acquired, against such casualties, risks and contingencies, and in such types and amounts, as are maintained by Borrower and in effect on the date of this Agreement; provided, -------- that on the Closing Date, the Lender shall have received evidence that it has been named as a loss payee (as its interest may appear) on the property damage coverage maintained by the Borrower in respect of its assets and properties, and as an additional insured in respect of the liability coverage, maintained in respect of such assets and properties. 6.10 Further Assurances. The Borrower shall make, execute or endorse, ------------------ and acknowledge and deliver or file or cause the same to be done, all such notices, certificates and additional agreements, undertakings, conveyances, transfers, assignments or other assurances, and take any and all such other action, as the Lender may, from time to time, deem reasonably necessary or proper in connection with this Agreement or any of the Related Documents, or the obligations of the Borrower hereunder or thereunder. 14 6.11 Lien on Assets. Upon the written request of Lender at any time -------------- from and after the date which occurs one hundred twenty (120) days after the date of this Agreement, the Borrower will promptly, and in any event within thirty (30) days after the date of such written request, execute and deliver to Lender such security agreements, and take such further action necessary to grant in favor of Lender a first priority perfected security interest in and lien upon all of Borrower's assets, tangible and intangible, whether personal property or real property. Borrower agrees to take all action necessary or reasonably requested by Lender to perfect such liens and ensure that such liens have priority over all Liens other than Permitted Liens. SECTION 7. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as the Note or the Loan remains outstanding and unpaid or any other amount is owing to the Lender hereunder. 7.1 Change in Nature of Business. The Borrower will not (a) enter ---------------------------- into any business other than the business of acquiring the Assets (as defined in the STC Purchase Agreement) pursuant to the STC Purchase Agreement and operating the same pursuant to the TBA Agreement (as defined in the STC Purchase Agreement) and the HAT Exchange Agreement or (b) become a party to any agreement without the prior written consent of the Lender other than the Purchase Agreements, this Agreement, the Related Documents to which it is a party, the Station Contracts (as defined in the HAT Purchase Agreement) and other agreements contemplated in or incidental to the performance of its obligations under, the Purchase Agreements, this Agreement and the Related Documents. 7.2 Limitation on indebtedness. The Borrower shall not incur, -------------------------- create, contract, assume, have outstanding, guarantee or otherwise be or become, directly or indirectly, liable in respect of any Indebtedness, except Permitted indebtedness. 7.3 Negative Pledge. The Borrower shall not create, incur or permit --------------- or suffer to exist any Lien upon any of its properties or assets, now owned or hereafter acquired, except for Permitted Liens. 7.4 No Restrictions. The Borrower shall not permit or suffer to --------------- exist any restrictions on the sale or transfer of any assets acquired with the proceeds of any Loan or pledged to the Lender in accordance with the terms of the Pledge Agreement, except as provided herein and in the Related Documents and restrictions imposed by applicable law. 7.5 Limitation on Investments. The Borrower shall not, without the ------------------------- prior written consent of the Lender, make any investments, except Permitted Investments. 7.6 Limitation on Dividends. The Borrower shall not pay any ----------------------- Dividends, except for the distribution of any proceeds from the WFFF Disposition. 7.7 Amendments: Material Agreements. The Borrower shall not amend ------------------------------- its organizational documents or by-laws. The Borrower shall not consent to or permit any alteration, amendment, modification, release, waiver or termination of any provision of any agreement or contract to which it is a party except in accordance with, and in the manner provided for under, the HAT Exchange Agreement. 15 7.8 Affiliated Transactions. The Borrower shall not enter into any ----------------------- transaction or arrangement with an Affiliate except in accordance with, and in the manner provided for under, Section 6.1.12 of the HAT Exchange Agreement and except with respect to the WFFF Disposition. 7.9 Issuance of Shares. The Borrower shall not issue, sell or ------------------ otherwise dispose of capital stock or other securities, or rights, warrants or options to purchase or acquire any such stock or other securities. 7.10 Name, Fiscal Year and Accounting Method. The Borrower shall not --------------------------------------- change its name. fiscal year or method of accounting. 7.11 Liquidation, Mergers, Consolidations and Dispositions of -------------------------------------------------------- Substantial Assets. The Borrower shall not dissolve or liquidate, or become a - ------------------ party to any merger or consolidation, or sell, transfer. lease or otherwise dispose of all or any part of its property, assets or business, except in accordance with, and in the manner provided for under, Section 6.1.1 or Section 6.12.4 of the HAT Exchange Agreement. 7.12 Restricted Payments. So long as the Obligations are outstanding, ------------------- the Borrower shall not redeem, repurchase or otherwise acquire any capital stock issued by it or any other Person or prepay any Permitted Indebtedness or any other Indebtedness of the Borrower. 7.13 Pension Plans. Except with respect to the Plans described in the ------------- STC Exchange Agreement or otherwise required to be provided or established by Borrower under the STC Purchase Agreement, the Borrower will not establish or become party to any employee benefit plan of the type referred to in Section 4.12 hereof. 7.14 Location of Company. The Borrower will not maintain its ------------------- principal place of business and chief executive office at any place other than the place specified in Section 4.11 hereof unless the Borrower shall have given the Lender not less than 10 days's prior written notice of such change of location. SECTION 8. EVENTS OF DEFAULT 8.1 Events of Default. Each of the following events shall constitute ----------------- an Event of Default (a) The Borrower shall fail to pay (i) any installment of principal of or interest on the Loans when due in accordance with the terms hereof, or (ii) any other amount payable hereunder or under any Related Document when due in accordance with the terms hereof or thereof, and in the case of clause (ii) set forth above, such failure shall continue unremedied for a period of five days after the date when due; or (b) Any representation or warranty made or deemed made by the Borrower herein or by the Borrower or the Guarantor in any Related Document to which it is a party, or in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any Related Documents, shall prove to have been incorrect or incomplete in any material respect on or as of the date made or deemed made or shall be breached; or 16 (c) The Borrower shall default in the observance or performance of any covenant or agreement set forth herein or in any Related Document arid such default shall continue for a period of 30 days after receipt of notice thereof from the Lender, or (d) The Guarantor shall default in the observance or performance of any covenants or agreements contained in the Guaranty or the Pledge Agreement; or (e) The Borrower or the Guarantor shall (i) default in any payment of principal of or premium or interest on any Indebtedness (other than Indebtedness owing under this Agreement or the Note) or (ii) any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity: or (f) The Borrower or the Guarantor shall (i) apply for or consent to the appointment of a receiver, trustee, custodian, intervenor or liquidator of itself or of all or a substantial part of such Person's assets, (ii) file a voluntary petition in bankruptcy, admit in writing that such Person is unable to pay such Person's debts as they become due, or generally not pay such Person's debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) file a petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy or insolvency laws, (v) file an answer admitting the material allegations of, or consent to, or default in answering, a petition filed against such Person in any bankruptcy, reorganization or insolvency proceeding, or (vi) take corporate action for the purpose of effecting any of the foregoing: or (g) An involuntary petition or complaint shall be filed against the Borrower or the Guarantor seeking bankruptcy relief or reorganization or the appointment of a receiver, custodian, trustee, intervenor or liquidator of such Person, or all or substantially all of such Person's assets and such petition or complaint remains undismissed, undischarged or unbonded for a period of 60 days or more, or an order, order for relief, judgment or decree is entered by any court of competent jurisdiction or other competent authority approving or ordering any of the foregoing: or (h) Any of the Related Documents or the Purchase Agreements shall cease for any reason to be in full force and effect in accordance with its terms or any Person obligated thereunder shall so assert in writing or the Pledge Agreement shall cease to be effective to grant the Liens purported to be granted thereby in accordance with its terms or such Liens shall cease to be enforceable or superior to and prior to the rights of any other Person; or (i) The Guarantor shall cease to own, directly or indirectly, 100% of the issued and outstanding capital stock of the Borrower, or (j) Either Purchase Agreement shall terminate or cease for any reason to be in full force and effect either automatically or by any action of any party thereto; or (k) The TBA Agreement (as defined in the STC Purchase Agreement) shall cease for any reason to be in full force and effect in accordance with its terms or any party thereto shall so assert in writing. 17 8.2 Remedies. If any Event of Default shall occur and be continuing, -------- then, and in any such event, (a) if such event is an Event of Default specified in subsection 8.1(f) or (g), automatically the obligation of the Lender to make any further Loans hereunder shall terminate and the Loans (with accrued interest thereon) and all other Obligations shall immediately become due and payable, and (b) if such event is any other Event of Default, the Lender may, by notice of default to the Borrower, terminate its obligation to make any further Loans hereunder, whereupon such commitment of the Lender shall immediately terminate, and/or declare the Loans (with accrued interest thereon) and all other Obligations to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this subsection 8.2, presentment, demand, protest and all other notices of any kind are hereby expressly waived. Upon the occurrence of an Event of Default and the acceleration of the Obligations, the Lender may enforce its rights hereunder, under the Related Documents and under any other instrument or agreement delivered in connection herewith and therewith and take any other action to which it is entitled hereunder or thereunder or by law, whether for the specific performance of any covenant or agreement set forth herein or therein or to enforce payment as provided herein, therein or by law. 8.3 Default Interest. Notwithstanding any other provision of this ---------------- Agreement to the contrary, if the Borrower shall fail to pay any amount owing to the Lender under this Agreement when due (whether at stated due date, on acceleration or otherwise), then the Borrower will pay interest to the Lender, payable on demand, on the amount in default from the date such payment became due until payment in full at a rate per annum equal to the rate of interest payable on the Loans immediately prior to the date of such default plus 3% per annum. SECTION 9. MISCELLANEOUS 9.1 Amendments. This Agreement may be amended, or any provision ---------- waived, only by an instrument in writing executed by each of the Borrower and the Lender. Any waiver given shall be effective only in the specific instance and for the specific purpose for which it is given. 9.2 Notices. Except as expressly otherwise provided herein, all ------- notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy or telex), and shall be deemed to have been duly given or made when delivered by hand, or one Business Day after being sent by overnight mail, or five Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when acknowledged as received (if received during normal business hours on a Business Day, otherwise on the next succeeding Business Day or, in the case of telex notice, when sent, answerback received, addressed as follows, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Note: The Lender: Hearst-Argyle Stations, Inc. c/o Hearst-Argyle Television, Inc. 959 Eighth Avenue New York, NY 10019 Attn: Dean H. Blythe Tel.: (212) 649-2307 Fax: (212) 489-2314 with a copy of each such notice to: 18 Rogers & Wells LLP 200 Park Avenue New York, New York 10166 Attn: Steven A. Hobbs Tel.: (212) 878-8005 Fax: (212) 878-8375 The Borrower STC Broadcasting. Inc. 3839 Fourth Street North Suite 420 St. Petersburg, Florida 33703 Attn: David Fitz Tel.: (813) 821-7346 Fax: (813) 821-8092 with a copy of each such notice to: (i) Hogan & Hartson LLP 555 Thirteenth Street, N.W. Washington, D.C. 20004 Attn: William S. Reyner, Jr. Tel.: (202) 637-6510 Fax: (202) 637-5910 (ii) Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, TX 75201 Attn: Lawrence D. Stuart, Jr. Tel.: (214) 740-7365 Fax: (214) 740-7355 provided that any notice, request or demand to or upon the Lender shall not be - -------- effective until actually received. Any notice, request or demand received on a day which is not a Business Day shall be deemed to have been received on the next following Business Day. 9.3 No Waiver, Cumulative Remedies. No failure to exercise and no ------------------------------ delay in exercising, on the part of the Lender, of any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under any Related Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided or provided in the Related Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided at law, in equity or otherwise. 9.4 Survival of Representations and Warranties. All representations ------------------------------------------ and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Related Documents. 19 9.5 Payment of Lender's Expenses, Indemnity, etc. The Borrower shall: -------------------------------------------- (a) pay all costs and expenses of the Lender in connection with any enforcement of, this Agreement and the Related Documents and the documents and instruments referred to therein or in connection with any restructuring or rescheduling of the Obligations (including, without limitation, the reasonable fees and disbursements of counsel for the Lender); and (b) indemnify the Lender, its officers, directors, employees, representatives and agents and any persons or entities owned or controlled by. owning or controlling, or under common control or Affiliated with Lender (each an "Indemnitee") from, and hold each of them harmless against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitee in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, asserted against or incurred by any Indemnitee as a result of, or arising out of, or in any way related to or by reason of, (i) the occurrence of an Event of Default hereunder and (ii) the exercise by the Lender of its rights and remedies (including, without limitation, foreclosure) under this Agreement or any Related Document (but excluding, as to any indemnitee, any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements incurred by reason of the gross negligence or willful misconduct of such Indemnitee). The Borrower's obligations under this subsection 9.5 shall survive the termination of this Agreement and the payment of the Obligations. 9.6 Benefit of Agreement; Assignments and Participations. (a) This ---------------------------------------------------- Agreement shall be binding upon and inure to the benefit of the Borrower, the Lender, all future permitted holders of the Note and their respective permitted successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender. (b) The Lender may not assign, or enter into any participations, in respect of, all or any part of the Loan without the prior written consent of the Borrower (which consent shall not be unreasonably withheld, conditioned or delayed). The Lender may assign all or any part of the Loan without the Borrower's consent (i) at any time to one or more Affiliates of the Lender or (ii) from and after the occurrence and during the continuance of an Event of Default, to one or more affiliated or unaffiliated parties; and provided further -------- ------- that no such participation shall affect the rights and duties of the Lender vis- a-vis the Borrower. The Borrower shall not be obligated to furnish any information to any such participant, purchaser or assignee, but the Lender may provide any such Person with any information furnished by the Borrower to the Lender in compliance with subsection 9.11. 9.7 Headings. The Section and subsection headings in this Agreement -------- are for convenience of reference only and shall not affect the interpretation hereof. 9.8 GOVERNING LAW. THIS AGREEMENT AND THE RELATED DOCUMENTS AND THE ------------- RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE RELATED DOCUMENTS SHALL BE GOVERNED BY, AND 20 CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 9.9 Submission to Jurisdiction. The Borrower hereby irrevocably and -------------------------- unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any Related Document, or for recognition and enforcement of any judgment in respect thereof, to the non- exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that if any process or summons may be served by mailing a copy thereof by registered mail, or a form of mail substantially equivalent thereto, addressed to it at its address set forth in or designated pursuant to subsection 9.2, such service to become effective 10 days after such mailing; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. 9.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT -------------------- IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. 9.11 Confidentiality. The Lender agrees to hold any non-public --------------- information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure to (i) employees, directors, agents, legal counsel, accountants, and other professional advisors who are advised of the confidential nature of such information, on a need-to-know basis, (ii) as required by law or legal process or in connection with any legal proceeding, and (iii) permitted assignees, purchasers or participants in connection with a disposition or proposed disposition of the Lender's interests hereunder or under the Related Documents, upon execution by such institution of an agreement to keep such information confidential to the extent described in this subsection 9.11. Notwithstanding (ii) and (iii) above, in the event that the Lender is requested pursuant to, or required by, applicable law, regulation, legal process, or regulatory authority to disclose any such information, the Lender will provide the Borrower with prompt notice of such request or requirement in order to enable the Borrower to seek an appropriate protective order or other remedy, or to consult with the Lender with respect to the Borrower's taking steps to resist or narrow the scope of such request or legal process. If, in such event, the Borrower has not provided the Lender with a protective order or other remedy in sufficient time, with the Lender acting in good faith and otherwise in its sole discretion, for the Lender to avoid unlawful nondisclosure of such information, the Lender may disclose such information pursuant to such law, regulation, or in such legal process, or to such regulatory authority, as the case may be, without any recourse or remedy against the Lender by the Borrower or any Affiliate of the Borrower, which the Borrower hereby expressly waives. 9.12 FCC Compliance. Notwithstanding anything to the contrary -------------- contained herein or in any other agreement, instrument or document executed in connection herewith, no party hereto shall take any actions hereunder that would constitute or result in a transfer or assignment of any license, permit or authorization issued by the Federal Communications Commission (the "FCC") or a change of control over any such license, permit or authorization requiring the prior approval of the FCC without first obtaining such prior approval of the FCC. 21 [signatures begin on next page] 22 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. STC BROADCASTING OF VERMONT SUBSIDIARY, INC. By: --------------------------- Name: Title: HEARST-ARGYLE STATIONS, INC. By: --------------------------- Name: Title: EX-10.28 7 GUARANTY EXHIBIT 10.28 GUARANTY GUARANTY (this "Guaranty") given as of February 18, 1998 by HEARST- ARGYLE TELEVISION, INC., a Delaware corporation (the "Guarantor"), to STC BROADCASTING, INC., a Delaware corporation ("STC Broadcasting"), STC BROADCASTING OF VERMONT, INC., a Delaware corporation ("STCBV"), STC LICENSE COMPANY, a Delaware corporation and wholly-owned subsidiary of STC BROADCASTING ("STC License Company"), and STC BROADCASTING OF VERMONT SUBSIDIARY, INC., a Delaware corporation and wholly-owned subsidiary of STCBV ("STCBV Sub") (STC Broadcasting, STCBV, STC License Company and STCBV Sub are collectively referred to herein as "STC"). WHEREAS, STC and Hearst-Argyle Stations, Inc., a Nevada corporation ("HAT") have entered into an Asset Exchange Agreement, dated as of even date herewith (the "Exchange Agreement"), pursuant to which STC has agreed to transfer to HAT substantially all of the assets of the STC Stations, and HAT has agreed to transfer to STC substantially all of the assets of the HAT Stations (as such terms are defined in the Exchange Agreement); WHEREAS, HAT is a direct or indirect wholly-owned subsidiary of the Guarantor; WHEREAS, the Guarantor is receiving direct benefits in connection with the consummation of the transactions contemplated by the Exchange Agreement; and WHEREAS, as an inducement to STC to enter into and consummate the transactions contemplated by the Exchange Agreement, the Guarantor is willing to guarantee the performance obligations of HAT under the Exchange Agreement and under the other HAT Documents (as defined in the Exchange Agreement (collectively, the "Transaction Documents")); NOW, THEREFORE, in consideration of the foregoing, the receipt and adequacy of which are hereby acknowledged, the Guarantor hereby agrees with STC as follows: 1. Guaranty. The Guarantor hereby irrevocably and unconditionally guarantees to STC the prompt and complete performance of each and every obligation of HAT, direct or indirect, now existing or hereafter arising, under the Transaction Documents, including, without limitation, the due and punctual performance and observance by HAT of all of the terms, covenants, and conditions thereunder. Subject to the terms and conditions of this Guaranty, this Guaranty is an absolute, unconditional, continuing guarantee, is in no way conditioned upon any event or contingency, or upon any attempt to enforce HAT's performance under the Transaction Documents or any other right or remedy against HAT to collect from HAT through the commencement of legal proceedings or otherwise, and shall be binding upon and enforceable in full against the Guarantor without regard to the genuineness, regularity, validity or enforceability of the Transaction Documents or any term thereof or lack of capacity, power or authority of any party executing the Transaction Documents or any circumstance which might otherwise constitute a defense available to, or a discharge of, the Guarantor in respect of this Guaranty or the obligations guaranteed hereby. The obligations of the Guarantor hereunder shall not be affected, reduced, impaired, limited or discharged, in whole or in part, by reason of the assertion by HAT of any claim of any kind relating to HAT; provided, however, that the foregoing shall not be deemed to constitute a waiver of any claims against STC available to HAT under the Transaction Documents. The Guarantor hereby acknowledges that it has received and read a copy of each of the Transaction Documents. Notwithstanding anything to the contrary set forth in this Guaranty, the Guarantor's obligations hereunder shall be subject to, and the Guarantor shall have the benefit of, any limitations, qualifications or other contingencies on the obligations and liabilities of HAT under the Transaction Documents, including, without limitation, the provisions of Section 10.4 of the Exchange Agreement. 2. Term. This Guaranty is a continuing guaranty and shall continue in full force and effect until all performance obligations of HAT under the Transaction Documents and all obligations under this Guaranty have been fully and completely satisfied, notwithstanding any act, omission, or thing which might otherwise operate as a legal or equitable discharge of the Guarantor. 3. Obligations Arise Upon Delivery. The obligations of the Guarantor hereunder shall arise absolutely, irrevocably and unconditionally upon execution and delivery of this Guaranty. 4. Modifications to Transaction Documents; Bankruptcy. The obligations of the Guarantor hereunder shall not be reduced, limited, waived or terminated as a result of any amendment, waiver or modification of any Transaction Document. The obligations of the Guarantor shall not be released or affected by voluntary or involuntary proceedings by or against HAT in bankruptcy or for reorganization or other relief under any bankruptcy or insolvency law. -2- 5. Representations and Warranties; Covenants. The Guarantor hereby represents and warrants to STC as follows: (a) the Guarantor is a corporation duly organized and validly existing under the laws of Delaware; (b) the execution, delivery and performance of this Guaranty and of every term, covenant or condition herein provided for are within its corporate power and authority, are duly authorized by all proper and necessary corporate action and are not in conflict with its certificate of incorporation and bylaws or any indenture, contract or agreement to which the Guarantor is a party or by which the Guarantor is bound, or with any statute, rule, regulation, decree, judgment or order binding upon the Guarantor and do not require the consent or approval of any governmental authority or other third party which has not been obtained; (c) this Guaranty has been validly executed by the person authorized to do so by the Guarantor and delivered by the Guarantor to STC and constitutes a legal, valid and binding obligation of the Guarantor and is enforceable against the Guarantor in accordance with its terms except as limited by general principles of equity; and (d) the Guarantor has received adequate, sufficient and valuable consideration for the execution, delivery and performance of this Guaranty. 6. Waivers. The Guarantor hereby waives notice of, and proof of reliance by STC upon and acceptance of this Guaranty, and of nonperformance by HAT of its obligations under the Transaction Documents and of any other notices or demands of any kind whatsoever and any requirement that STC exhaust any right or take any action against HAT or any other person or entity or any collateral. 7. Subrogation. The Guarantor will not exercise any rights which it may acquire by way of subrogation under this Guaranty or otherwise until the performance in full of all obligations guaranteed pursuant to this Guaranty. 8. Independent Obligations. The Guarantor agrees that the obligations of the Guarantor hereunder are irrevocable and are independent of the obligations of HAT under the Transaction Documents; that a separate action or actions may be brought and prosecuted against the Guarantor regardless of whether any action is brought against HAT or whether HAT is joined in any such action or actions; and that the Guarantor waives the benefit of any statute of limitations affecting the liability of the Guarantor hereunder or the enforcement hereof. 9. General Provisions. (a) This Guaranty constitutes the entire agreement of the Guarantor with respect to the subject matter hereof. (b) Failure or delay by STC in exercising any rights or remedies hereunder shall not operate as a waiver thereof. A waiver by STC on any -3- one occasion shall not be deemed a waiver on any subsequent occasion, nor shall any single or partial exercise of any right by STC preclude any other or further exercise thereof or the exercise of any other right. All rights and remedies of STC hereunder, under the Transaction Documents, or any other agreement or instrument, or otherwise available to STC, shall be cumulative. (c) This Guaranty may not be assigned by the Guarantor without the prior written consent of STC. This Guaranty shall inure to the benefit of STC and their successors and assigns permitted by the Transaction Documents, and shall be binding upon and enforceable against the Guarantor and its successors and assigns. (d) The headings herein are for purposes of reference only and shall not be considered in construing this Guaranty. (e) THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The representations and warranties contained herein shall survive the execution and delivery of this Guaranty. (f) Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. (g) All notices, demands or other communications which may or are required to be given hereunder or with respect hereto shall be in writing, shall be delivered personally or sent by nationally recognized overnight delivery service, charges prepaid or by registered or certified mail, return receipt requested, or by telecopier (fax), and shall be deemed to have been given or made when personally delivered, the next business day after delivery to such overnight delivery service, five (5) days after deposited in the mail, first class postage prepaid, or when received if sent by telecopier (fax), addressed or sent as follows: If to Guarantor: Hearst-Argyle Television, Inc. 959 Eighth Avenue New York, New York 10019 Attn: Dean H. Blythe Fax: (212) 489-2314 -4- with copies (which shall not constitute notice) to: Rogers & Wells 200 Park Avenue New York, New York 10166 Attn: Steven A. Hobbs Fax: (212) 878-8375 If to STC: STC Broadcasting, Inc. 3839 4th Street North Suite 420 St. Petersburg, Florida 33703 Attn: David Fitz Fax: (813) 821-8092 with copies (which shall not constitute notice) to: Hogan & Hartson L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004 Attn: William S. Reyner, Jr., Esq. Fax: (202) 637-5910 and to: Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart Fax: (214) 740-7355 or such other address as the addressee may indicate by written notice to the other parties. (h) The Guarantor hereby irrevocably consents to the nonexclusive jurisdiction and venue of the courts of the State of New York and of any federal court located in New York County, New York, in connection with any action, suit or proceeding arising out of or relating to this Guaranty. The Guarantor waives the right to a trial by jury in any action, suit or proceeding arising out of or relating to this Guaranty or the Transaction Documents. The Guarantor agrees that a final judgment in any such action, suit or proceeding shall -5- be conclusive for purposes or enforcement in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. (i) At STC's option, the Guarantor may be joined in any action, suit or proceeding against HAT in connection with the Transaction Documents. The Guarantor shall be conclusively bound by the judgment in any action, suit or proceeding by STC against HAT related to the Transaction Documents as if the Guarantor was a party thereto. The Guarantor shall be so bound even if it is not joined in such action, suit or proceeding. -6- IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the date and year first stated above. HEARST-ARGYLE TELEVISION, INC. By: /s/ Dean H. Blythe ----------------------------------- Name: Dean H. Blythe --------------------------------- Title: Senior Vice President -------------------------------- -7- EX-21 8 LIST OF SUBSIDIARIES OF THE COMPANY EXHIBIT 21 ---------- LIST OF SUBSIDIARIES OF THE COMPANY ----------------------------------- HEARST-ARGYLE TELEVISIONS STATIONS, INC. WAPT HEARST-ARGYLE TELEVISION, INC. KITV HEARST-ARGYLE TELEVISION, INC. KHBS HEARST-ARGYLE TELEVISION, INC. KMBC HEARST-ARGYLE TELEVISION, INC. WBAL HEARST-ARGYLE TELEVISION, INC. WCVB HEARST-ARGYLE TELEVISION, INC. WISN HEARST-ARGYLE TELEVISION, INC. WTAE HEARST-ARGYLE TELEVISION, INC. OHIO/OKLAHOMA HEARST-ARGYLE TELEVISION, INC. JACKSON HEARST-ARGYLE TELEVISION, INC. HAWAII HEARST-ARGYLE TELEVISION, INC. ARKANSAS HEARST-ARGYLE TELEVISION, INC. EX-23.1 9 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-36659) of Hearst-Argyle Television, Inc. and in the related Prospectus of our report dated February 12, 1997, except for the second paragraph of Note 11, as to which the date is March 26, 1997, with respect to the consolidated financial statements and schedule of Argyle Television, Inc. for the year ended December 31, 1996 included in this Annual Report. (Form 10-K) of Hearst-Argyle Television, Inc. for the year ended December 31, 1997. ERNST & YOUNG LLP February 27, 1998 San Antonio, Texas EX-23.2 10 CONSENT OF DELOITTE & TOUCHE LLP Exhibit 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statement No. 333-36659 of Hearst-Argyle Television, Inc. (successor to Argyle Television, Inc.) on Form S-3 and the related prospectus of our report dated February 26, 1998, (March 9, 1998 as to Note 16), relating to the consolidated financial statements and the financial statement schedule appearing in and incorporated by reference in the Annual Report on Form 10-K of Hearst-Argyle Television, Inc. for the year ended December 31, 1997. DELOITTE & TOUCHE LLP New York, New York March 30, 1998 EX-27.1 11 FINANCIAL DATA SCHEDULE
5 EXHIBIT 27.1 FINANCIAL DATA SCHEDULE THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE EIGHT MONTHS ENDED AUGUST 31, 1997 AND THE FOUR MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 8-MOS 4-MOS DEC-31-1997 DEC-31-1997 JAN-01-1997 SEP-01-1997 AUG-31-1997 DEC-31-1997 12,759 0 0 0 89,988 0 0 0 0 0 227,243 0 188,009 0 (90,205) 0 1,044,109 0 71,868 0 405,000 0 0 0 2 0 538 0 326,114 0 1,044,109 0 0 0 51,826 146,440 0 0 0 0 27,610 59,993 0 0 12,749 15,830 (14,539) 40,297 0 16,419 (14,539) 23,878 0 0 0 16,212 0 0 (14,539) 7,666 (1.34) 0.48 (1.34) 0.48
EX-27.2 12 RESTATED FINANCIAL DATA SCHEDULE
5 EXHIBIT 27.2 1997 RESTATED FINANCIAL DATA SCHEDULE THE RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1997, MARCH 31, 1997 AND PRIOR FISCAL YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 3-MOS YEAR DEC-31-1997 DEC-31-1997 DEC-31-1996 APR-01-1997 JAN-01-1997 JAN-01-1996 JUN-30-1997 MAR-31-1997 DEC-31-1996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 21,886 17,879 73,294 0 0 0 0 0 0 10,586 10,781 37,639 0 0 0 4,989 4,418 16,566 (2,093) (6,203) (14,560) 0 0 0 (2,093) (6,203) (14,560) 0 0 0 0 0 0 0 0 0 (2,093) (6,203) (14,560) (0.22) (0.58) (1.37) (0.22) (0.58) (1.37)
EX-27.3 13 RESTATED FINANCIAL DATA SCHEDULE
5 EXHIBIT 27.3 1996 RESTATED FINANCIAL SCHEDULE THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996, JUNE 30, 1996, MARCH 31, 1996 AND PRIOR FISCAL YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 3-MOS 3-MOS YEAR DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1995 JUL-01-1996 APR-01-1996 JAN-01-1996 JAN-01-1995 SEP-30-1996 JUN-30-1996 MAR-31-1996 DEC-31-1995 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 17,439 18,562 15,495 46,944 0 0 0 0 0 0 0 0 9,172 9,474 8,898 23,603 0 0 0 0 4,741 3,804 3,500 12,053 (5,919) (2,788) (4,330) (7,965) 0 0 0 0 (5,919) (2,788) (4,330) (7,965) 0 0 0 0 0 0 0 7,842 0 0 0 0 (5,919) (2,788) (4,330) (15,807) (0.55) (0.26) (0.39) (2.47) (0.55) (0.26) (0.39) (2.47)
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