-----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, UBCLMSUwUDQFIIk7KP9wBYHOEj2g2yP2cWMTAnZ5/Lay0fkQW7EGuJ3D1T3LOq+c kGxRYBC3NAwbY/pMy7MuXQ== 0000950152-02-005535.txt : 20020719 0000950152-02-005535.hdr.sgml : 20020719 20020717162417 ACCESSION NUMBER: 0000950152-02-005535 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 30 FILED AS OF DATE: 20020717 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLOCK COMMUNICATIONS INC CENTRAL INDEX KEY: 0001177238 IRS NUMBER: 344374555 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-96619 FILM NUMBER: 02704865 BUSINESS ADDRESS: STREET 1: 541 N SUPERIOR STREET STREET 2: P O BOX 921 CITY: TOLEDO STATE: OH ZIP: 43697-0921 BUSINESS PHONE: 4197246257 S-4 1 j9521601sv4.txt BLOCK COMMUNICATIONS, INC. AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 2002 REGISTRATION NO. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------- BLOCK COMMUNICATIONS, INC. OHIO 2711 34-4374555 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
SUBSIDIARY GUARANTORS LISTED ON "TABLE OF GUARANTORS" ON FOLLOWING PAGE ---------------------- 541 N. SUPERIOR STREET P.O. BOX 921 TOLEDO, OHIO 43697-0921 (419) 724-6256 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) GARY J. BLAIR 541 N. SUPERIOR STREET P.O. BOX 921 TOLEDO, OHIO 43697-0921 (419) 724-6256 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) ---------------------- COPIES TO: NELSON W. WINTER, ESQ. 435 SIXTH AVENUE PITTSBURGH, PA 15219 (412) 288-3310 ---------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this registration statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration number for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier, effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED OFFERING PROPOSED AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE - --------------------------------------------------------------------------------------------------------------------------------- 9 1/4% Senior Subordinated Notes due 2009..................................... $175,000,000 100% $175,000,000 $16,100 - --------------------------------------------------------------------------------------------------------------------------------- Guarantees of the 9 1/4% Senior Subordinated Notes due 2009.............. (2) (2) (2) (2) - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f). (2) No separate consideration will be received with respect to these guarantees and, therefore, no registration fee is attributable to them. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A) MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF GUARANTORS
STATE OR I.R.S. EMPLOYER JURISDICTION OF IDENTIFICATION PSICC NAME ORGANIZATION NUMBER NUMBER - ---- --------------- --------------- ------ Access Toledo, Ltd.......................................... Ohio 34-1844782 4899 Buckeye TeleSystem, Inc..................................... Ohio 31-1560010 4813 CARS Holding, Inc........................................... Ohio 34-1598596 4899 Community Communication Services, Inc....................... Ohio 34-1555546 7310 Corporate Protection Services, Inc.......................... Ohio 34-1352928 4899 Erie County Cablevision, Inc................................ Ohio 34-1011990 4841 Idaho Independent Television, Inc........................... Idaho 82-0397559 4833 Independence Television Company............................. Pennsylvania 25-1026902 4833 Lima Communications Corporation............................. Ohio 34-1092062 4833 Metro Fiber & Cable Construction Company.................... Ohio 34-1763226 4899 Monroe Cablevision, Inc..................................... Michigan 34-1304304 4841 PG Publishing Company....................................... Pennsylvania 25-0724285 2711 Toledo Area Telecommunications Services, Inc................ Ohio 34-1782825 4899 WLFI-TV, Inc................................................ Indiana 34-1272339 4833 Buckeye Cablevision, Inc.................................... Ohio 34-0963631 4841
SUBJECT TO COMPLETION, DATED JULY , 2002 [BCI LOGO] PROSPECTUS BCI BLOCK COMMUNICATIONS, INC. OFFER TO EXCHANGE 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009
---------------------- The notes offered by this prospectus, in an aggregate principal amount of up to $175,000,000, will be issued in exchange for up to $175,000,000 aggregate principal amount of notes (the "old notes") sold by us in a private placement on April 18, 2002. The exchange notes will be governed by the same indenture as the old notes. The exchange notes will be substantially identical to the old notes, except that the transfer restrictions and registration rights relating to the old notes will not apply to the exchange notes. TERMS OF THE EXCHANGE OFFER: - - The offer expires at 5:00 p.m., New York City time, on , 2002, unless extended. - - We will exchange all old notes that are validly tendered and not withdrawn for an equal principal amount of exchange notes which are registered under the Securities Act. - - The offer is not subject to any conditions other than that it not violate applicable law or any interpretation of the Staff of the SEC. - - You may withdraw tenders of old notes at any time before the exchange offer expires. - - The exchange of notes will not be a taxable event for U.S. federal income tax purposes. - - We will not receive any proceeds from the exchange offer. - - We can amend or terminate the exchange offer. - - You may tender old notes only in multiples of $1,000. TERMS OF THE EXCHANGE NOTES: - - The exchange notes mature on April 15, 2009 and pay interest at a fixed annual rate of 9 1/4% on April 15 and October 15 of each year. - - The exchange notes are guaranteed on a senior subordinated basis by substantially all of our subsidiaries. - - The exchange notes and the guarantees are general unsecured senior subordinated obligations. The exchange notes rank behind all of our and the guarantor's existing and future senior debt. - - We may redeem exchange notes on or after April 15, 2006 at the redemption prices stated herein. - - We may redeem up to 35% of the aggregate principal amount of the notes before April 15, 2005 with the net proceeds of qualified equity offerings. - - If we sell all or substantially all of our assets or experience specific kinds of changes of control, we may be required to offer to repurchase the exchange notes. ---------------------- PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 1 OF THIS PROSPECTUS FOR A DISCUSSION OF RISKS YOU SHOULD CONSIDER WHEN EVALUATING THIS INVESTMENT. We are not making this exchange offer in any state or jurisdiction where it is not permitted. Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved the exchange notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO PROVIDE YOU WITH ANY INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR BUY ANY NOTES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS PROSPECTUS IS CURRENT ONLY AS OF THE DATE ON THE COVER PAGE. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE. --------------------- TABLE OF CONTENTS
PAGE ---- Industry and Market Data.................................... i Forward-Looking Statements.................................. ii Summary..................................................... iii Risk Factors................................................ 1 The Exchange Offer.......................................... 17 Use of Proceeds............................................. 24 Capitalization.............................................. 24 Selected Consolidated Financial Data........................ 25 Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 27 Business.................................................... 38 Regulation.................................................. 64 Management.................................................. 76 Principal Shareholders...................................... 79 Certain Relationships and Related Transactions.............. 80 Description of Senior Credit Facilities..................... 81 Description of Notes........................................ 83 Certain U.S. Federal Income Tax Considerations.............. 118 Plan of Distribution........................................ 119 Legal Matters............................................... 120 Experts..................................................... 120 Where You Can Find More Information......................... 120 Index to Consolidated Financial Statements.................. F-1
--------------------- INDUSTRY AND MARKET DATA In this prospectus, we rely on and refer to information regarding the cable television, newspaper publishing and television broadcasting industries and our market share in the sectors in which we compete. We obtained this information from various industry publications, other publicly available information, market research and our own internal surveys and estimates. Industry publications generally state that the information therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information has not been independently verified and is not guaranteed. Similarly, other publicly available information, market research and our own internal surveys and estimates, while believed to be reliable, have not been independently verified, and we make no representation as to the accuracy or completeness of such information. Throughout this document, circulation data for the Pittsburgh Post-Gazette is based on average paid circulation for the twelve months ended March 31, 1999, 2000 and 2001, and circulation data for The Blade is based on average paid circulation for the twelve months ended September 30, 1999, 2000 and i 2001, in each case as set forth in the Audit Bureau of Circulations ("ABC") Audit Report for such period. There are 210 generally recognized television markets, known as Designated Market Areas, or DMAs, in the United States. DMAs are ranked in size according to various factors based upon actual or potential audience. DMA rankings in this prospectus are from the Nielsen Media Research dated November 2001 as estimated by the A.C. Nielsen Company as published in the BIA Financial Network-Media Access Pro Television Database (BIA Guide). FORWARD-LOOKING STATEMENTS This prospectus contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including: - any projections of earnings, revenues or other financial items; - any statements of our plans, strategies and objectives for our future operations; - any statements concerning proposed new products, services or developments; - any statements regarding future regulatory conditions; - any statements regarding future economic conditions or performance; - any statements of belief; and - any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words "may," "will," "estimate," "intend," "continue," "believe," "expect," "plan" or "anticipate" and other similar words. Such forward-looking statements may be contained in "Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," among other places in this prospectus. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this prospectus. We do not intend, and undertake no obligation, to update any forward-looking statement. We urge you to review carefully "Risk Factors" in this prospectus for a more complete discussion of the risks of an investment in the notes. ii SUMMARY This summary highlights selected information from this document and does not contain all of the information that is important to you. For a more complete understanding of this offering, we encourage you to read this entire prospectus. In this prospectus, unless otherwise indicated, the words the "Company," "our," "us" and "we" refer to Block Communications, Inc., the issuer of the notes, and its subsidiaries; "revenues" are presented net of intercompany eliminations; and EBITDA, when referencing the performance of one of our business segments, is presented net of intercompany eliminations and before corporate general and administrative expense. OUR COMPANY We are a privately held diversified media company with our primary operations in cable television, newspaper publishing and television broadcasting. We are the 23rd largest cable multiple system operator in the United States, with approximately 153,000 subscribers at March 31, 2002. Our primary cable system is located in the greater Toledo, Ohio metropolitan area and serves approximately 134,000 subscribers. Excluding the subscribers acquired in the March 29, 2002 exchange described below, this system is 100% rebuilt to 870 MHz and is served by a single headend. Our Toledo system is one of the largest privately owned urban cable systems in the United States. We publish two daily metropolitan newspapers, the Pittsburgh Post-Gazette in Pittsburgh, Pennsylvania and The Blade in Toledo, each of which is the dominant publication in its market. The combined daily and Sunday average paid circulation of our two newspapers is approximately 381,000 and 603,000, respectively. We also own and operate four television stations: two in Louisville, Kentucky, and one each in Boise, Idaho and Lima, Ohio, and we are a two-thirds owner of a television station in Decatur, Illinois. For the year ended December 31, 2001, we had revenues and EBITDA (as defined on page [28]) of $414.6 million and $50.3 million, respectively, and experienced an operating loss of $445,000 and a net loss of $17.9 million. For the three months ended March 31, 2002, we had revenues and EBITDA of $102.0 million and $13.9 million, respectively, and had operating income of $1.4 million and net income of $13.0 million. Our shareholders, the Block family, have been in the media business for over 100 years. In 1926, the Block family acquired the first of the Company's current holdings, The Blade, which was first published in 1835. We expanded our portfolio of newspapers in 1927 when we became the publisher of the Pittsburgh Post-Gazette. In 1965, we were awarded a franchise in Toledo to develop our cable system, which, with over 36 years of operating history, is one of the oldest continuously owned metropolitan cable systems in the United States. In 1972, we acquired the first of our current television broadcasting stations when we purchased WLIO in Lima. We have an experienced management team and are focused on improving the competitive position of our media properties as well as maximizing synergies between our cable television and newspaper publishing segments. In particular, we seek to capitalize upon our dominance of the cable and newspaper businesses in Toledo -- a unique cross-ownership position for an urban market. We make extensive use of our newspaper and cable system to cross-promote our businesses at very low incremental costs. We can also offer advertisers multiple-media advertising strategies including newspaper, cable and the Internet. The knowledge of our customers and markets gained from our various businesses enables us to identify our customers' needs and tailor solutions to meet their business objectives. CABLE TELEVISION We provide cable television service to the greater Toledo metropolitan area (Buckeye CableSystem) and the Sandusky, Ohio area (Erie County CableSystem). We are the only significant cable operator in each of our markets. In addition to traditional cable television service, we also provide high-speed cable modem Internet access in both systems, and our Toledo system provides digital cable service. Our cable television operations generated revenues, operating income and EBITDA of $89.4 million, $4.8 million and $32.1 million, respectively, in the year ended December 31, 2001, and $25.1 million, $2.3 million and $9.4 million, respectively, in the quarter ended March 31, 2002. iii In 1997, we began the rebuild of the Buckeye system from a one-way coaxial cable plant to an 870 MHz hybrid fiber coaxial (HFC) two-way interactive system. We have completed the rebuild of the cable system's distribution plant and have converted to the new system over 99% of Buckeye's cable customers, excluding those acquired in the exchange described below. The rebuild allows Buckeye to provide advanced cable services that we believe will help us maintain our dominant position in the greater Toledo metropolitan area. These services currently include up to 241 analog and digital video and digital music channels, high-speed Internet and WorldGate interactive service. Future offerings may include video-on-demand, subscription video-on-demand and other services yet to be developed. On March 29, 2002, we completed an asset exchange with Comcast involving the exchange of our cable system in Monroe, Michigan, a lower growth area approximately 15 miles north of Toledo, for Comcast's system in Bedford, Michigan, a Toledo suburb, plus a cash payment to us of $12.1 million. The exchange enables us to expand our subscriber base in a contiguous high-growth suburban area we already partially served and increase the efficiency of our cable cluster by reducing the number of our headends from three to two. See "-- Recent Developments." The following table sets forth certain information regarding our cable systems and subscribers:
MONTHLY SUBSCRIBERS REVENUE PER -------------------------- PREMIUM BASIC CABLE SYSTEMS(1) LOCATION HOMES PASSED(2) BASIC DATA DIGITAL UNITS SUBSCRIBER(3) ---------------- ----------------- --------------- ------- ------ ------- ------- ------------- Buckeye Toledo, OH 203,221 126,184 16,115 9,239 63,143 $55.27 Buckeye Bedford, MI 13,281 7,480 952 602 2,058 52.08 ------- ------- ------ ----- ------ ------ Subtotal 216,502 133,664 17,067 9,841 65,201 55.21 Erie County Sandusky, OH 28,893 19,370 361 -- 4,444 42.46 ------- ------- ------ ----- ------ ------ Total 245,395 153,034 17,428 9,841 69,645 $53.54 ======= ======= ====== ===== ====== ======
- --------------- (1) Information in the table is as of March 31, 2002, except for monthly revenue per basic subscriber which is the average for the three months ended March 31, 2002. (2) Represents the approximate number of single residence homes, apartments and condominium units passed by the cable distribution network in a cable system's service area. (3) Represents average monthly cable revenue for three months ended March 31, 2002 divided by the number of basic subscribers at March 31, 2002, excluding the 5,004 Bedford, Michigan subscribers acquired from Comcast on March 29, 2002. We are pursuing the following cable television strategies: Operate Highly Advanced and Efficient Cable Networks. Through March 31, 2002, we invested approximately $89 million to rebuild the Buckeye system to 870 MHz. Our rebuilt system allows us to offer higher margin advanced services, such as high-speed two-way cable modem and digital television. The rebuild also increased channel capacity to our current 241 analog and digital video and digital music channels, which can be significantly expanded by recapturing some of our 94 analog channels and converting them to digital channels. While most cable system operators have chosen to upgrade their systems to 750 MHz, we invested in the increased bandwidth, which provides additional capacity for future services. Upon conversion of a portion of the acquired Comcast subscribers in Bedford, approximately 86% of our total subscribers will be served by our advanced 870 MHz system from a single headend, which will reduce our operating costs. In addition, our Toledo headend was designed, and includes the necessary fiber interconnections, to serve our Erie County system when we upgrade that system. This would enable us to serve 100% of our subscribers from a single headend. While initially designed to support 500 homes per fiber node, our cable system can easily be divided to an average of 125 homes per fiber node when demand warrants. This allows us to efficiently increase subscribers and provide additional advanced services without sacrificing system performance or reliability. Utilize Significant Marketing Power. Buckeye CableSystem benefits from our dominant position as a multi-media provider in the greater Toledo metropolitan area. We believe we are the only urban cable operator in the United States with cross-ownership of the primary newspaper in its market. The Blade iv provides fill-in advertising space to market our cable services and to promote our brand awareness at a very low incremental cost. Our cable television business also includes our operation and ownership of WB TV5, a WB affiliate cable channel with over 225,000 viewing households in Northwest Ohio. We advertise our services on WB TV5 and on 33 other cable channels -- over 7,000 spots per month in 2001 -- providing us an additional low-cost advertising source. We use these marketing resources to promote existing services, enhance the introduction and roll-out of new services, and build a strong competitive barrier. As evidence of our marketing power, a recent advertising campaign in The Blade and on our cable system has helped increase subscribers to Buckeye's high-speed two-way cable modem service by approximately 15% in the first quarter of 2002, bringing subscribers to over 17,000 at March 31, 2002. Roll-out Advanced Services. Our investment in Buckeye's state-of-the-art cable network combined with our significant marketing power positions us to successfully roll out advanced services and further increase our revenue per subscriber. Similar to the on-going promotion of our cable modem service, we launched in the second quarter of 2002 a marketing campaign utilizing our advertising resources to advance the growth of our digital cable service. Without any significant advertising, we have achieved over 9,800 digital cable subscribers since making our digital cable service available in the fourth quarter of 2001. In addition, we are evaluating new services such as video-on-demand and subscription video-on-demand for possible future deployment. Maintain Superior Customer Satisfaction. Our Service TV(R) brand embodies our total commitment to providing superior cable television service, which has resulted in high levels of customer satisfaction and retention. We strive to provide exceptional programming and signal quality, and we continuously monitor our fiber nodes and power supplies to maintain a highly reliable cable system. We also operate a call center with customer relations representatives available around the clock, maintain convenient customer service locations and offer next day, two-hour appointment windows for installation or in-home repairs. We believe our superior customer service, along with our state-of-the art cable system, provide a significant defensive measure against direct broadcast satellite (DBS) operators and have in part contributed to DBS's low penetration rate in Toledo, which at approximately 9% is half the national average of approximately 18%. NEWSPAPER PUBLISHING Our two daily metropolitan newspapers, the Pittsburgh Post-Gazette and The Blade, are the dominant newspapers in their respective markets. Our newspapers have a combined daily and Sunday average paid circulation of approximately 381,000 and 603,000, respectively. We believe the leading positions of our newspapers result from our long standing presence, our commitment to high standards of journalistic excellence and integrity, and our emphasis on local news, local impacts of national and international news, and service to our communities. Our newspapers have received many national and regional awards for editorial excellence. Our newspaper publishing operations generated revenues, operating income and EBITDA of $264.7 million, $1.9 million and $15.8 million, respectively, in the year ended December 31, 2001, and $61.6 million, $44,000 and $3.1 million, respectively, in the quarter ended March 31, 2002. The Pittsburgh Post-Gazette Founded in 1786, the Pittsburgh Post-Gazette is the leading newspaper in Pittsburgh and Western Pennsylvania and has a long history of service and journalistic excellence. The Post-Gazette has more than twice the circulation of any other newspaper in the Pittsburgh Metropolitan Statistical Area (MSA). The Post-Gazette has a daily average paid circulation of approximately 241,800 and a Sunday average paid circulation of approximately 412,700, resulting in penetration of approximately 43% daily and 64% Sunday in the Pittsburgh city zone (Pittsburgh and nearby suburbs). Our dominant market position allows us to capture advertising revenue significantly greater than that of any other newspaper in this market. v The Blade Founded in 1835, The Blade is the leading newspaper in Northwest Ohio by average paid circulation and has a significant influence on the civic, political, economic and cultural life of its subscribers and the communities it serves. The Blade is the oldest continuing business in Toledo and has no significant newspaper competition. The Blade has a daily average paid circulation of approximately 138,800 and a Sunday average paid circulation of approximately 190,800, resulting in penetration in the Toledo city zone (Toledo and nearby suburbs) of approximately 53% daily and 68% Sunday, the highest city zone penetration rate of any newspaper in Ohio. This combination of high circulation and penetration is central to our success in attracting advertising and maintaining our dominant share of market revenue. We are pursuing the following newspaper publishing strategies: Produce the Highest Quality Newspaper in Our Markets. We believe our reputation for producing high-quality publications is the foundation for our publishing success. We are frequently recognized by our industry for the quality of our journalism. Both newspapers have won numerous awards, including Pulitzer Prizes for Photography awarded to the Post-Gazette in 1992 and 1998 and the Investigative Reporters and Editors Medal awarded to The Blade in 2000. The Pennsylvania Newspaper Publishers Association named the Post-Gazette as Pennsylvania's Newspaper of the Year in 2001. We maintain a highly regarded staff of columnists and editors committed to excellence, and we are continuously seeking to improve our publications. Implement Cost Rationalization Initiatives. To improve cash flow at our newspapers, we have embarked upon a comprehensive review of our cost structure, including labor expenses and other significant operating costs. We are currently reviewing staffing requirements for opportunities to realize labor efficiencies. With respect to other operating costs, our newspapers coordinate purchasing requirements and have achieved favorable terms on newsprint purchases. In addition, we plan to reduce the page width at both of our newspapers from 54 inches to 50 inches by the end of 2004, reducing our annual newsprint consumption by approximately 7%. If this initiative had been completed by January 1, 2001, we would have realized savings of approximately $2.5 million in newsprint costs for the year ended December 31, 2001. Strengthen our Brands by Focusing on Local News and Community Service. Each of our newspapers is a leading local news and information source with strong brand recognition in its market. We believe that maintaining our position as a primary source of local news will continue to provide a powerful platform upon which to serve the local communities and local advertisers. We intend to continue to increase brand awareness and market penetration through local marketing partnerships, creative subscriber campaigns, strong customer service and the use of our two interactive online newspaper editions. These two Web sites, post-gazette.com and toledoblade.com, are the most frequently visited local media sites in their respective markets according to an independent research organization. Our two leading sites increase our market presence and provide an additional source of advertising revenue. Pursue Circulation and Other Revenue Growth Opportunities. We are continuously evaluating ways to expand circulation and increase revenues. We are using new suburban zone coverage, customer service programs and targeted marketing campaigns to increase our circulation. We believe that through the use of zoning (news and advertising directed to a particular local area), research, and demographic studies, our marketing programs better meet the unique needs of individual advertisers, thus maximizing advertising revenues. Capitalizing on our high penetration, we have also launched in Toledo a broad market coverage program in which we deliver preprinted advertising inserts to all subscriber and non-subscriber households in areas targeted by the advertiser. We also plan to grow our revenue by expanding our delivery services for third-party publishers and increasing advertising on our Web sites. TELEVISION BROADCASTING We acquired the first of our current television broadcasting stations in 1972 and currently own and operate four television stations. We are also a two-thirds owner of a fifth station, which is managed by vi LIN Television under a management services agreement. Our television stations are diverse in network affiliation with two Fox stations, one NBC station, one ABC station and one UPN station. We have a duopoly in Louisville, Kentucky (the 50th largest DMA) through our ownership of the Fox and UPN stations. In the year ended December 31, 2001 and the quarter ended March 31, 2002, our television broadcasting operations generated revenues of $35.2 million and $9.0 million, respectively, experienced operating losses of $1.8 million and $55,000, respectively, and generated EBITDA of $3.1 million and $1.0 million, respectively. We seek to maintain a distinct identity at each of our stations by creating quality local programming, such as local news and sports coverage, and by actively sponsoring and promoting community events. This focus positions us to increase our share of local advertising revenues, which are generally more stable than national advertising revenues and which we impact directly through our own local sales force. We currently are conducting a thorough review of our cost structure in light of current weak advertising revenue. We have reduced headcount at our broadcasting operations and believe that through continued cost reduction efforts and effective local programming, we can increase operating margins. OTHER OPERATIONS We own and operate a small facilities-based telephony business that serves mid- to large-size businesses located primarily in the Toledo market serviced by our cable system. We also own and operate a small home security and alarm monitoring business and an alternate distribution advertising business, which are not collectively a significant part of our consolidated operations. RECENT DEVELOPMENTS In November 2001, we entered into an asset exchange agreement with Comcast to make a like-kind exchange of our Monroe, Michigan cable system for Comcast's Bedford, Michigan cable system plus a cash payment to us of $12.1 million. As of the date of the asset exchange agreement, Comcast's Bedford cable system had 5,004 subscribers. The transaction was consummated on March 29, 2002. On April 18, 2002, we sold the $175 million principal of the outstanding 9 1/4% Senior Subordinated Notes due 2009 in a private placement. The net proceeds of $169 million were used to repay senior indebtedness. The exchange offer for the old notes is being made pursuant to a registration rights agreement entered into in connection with the private placement. On May 15, 2002, we entered into new senior credit facilities with a group of lenders providing for aggregate borrowings of up to $200 million. The initial borrowings under the new facilities of $75 million were used primarily to retire the remaining indebtedness under our former senior credit facilities. The new senior credit facilities are guaranteed on a senior basis by our subsidiaries which are also the guarantors of the notes and are secured by pledges of substantially all of our and the guarantor's assets. The new senior credit facilities and the guarantees thereof are senior indebtedness and rank prior to the notes and the guarantees thereof in right of payment. As a result of the refinancing, we will realize prepayment penalties of $6.3 million and a write-off of unamortized finance fees of $2.7 million, less tax benefits of $3.1 million during the second quarter of 2002. See "Capitalization" and "Description of Senior Credit Facilities." --------------------- Our principal offices are located at 541 N. Superior Street, P.O. Box 921, Toledo, Ohio 43697-0921, and our telephone number is (419) 724-6212. vii THE OLD NOTE OFFERING Old Notes..................... We sold our 9 1/4% Senior Subordinated Notes due 2009 to Banc of America Securities LLC, Fleet Securities, Inc., Comerica Securities, NatCity Investments, Inc. and BMO Nesbitt Burns on April 18, 2002 in accordance with the terms of a purchase agreement. These initial purchasers subsequently resold the old notes to qualified institutional buyers in accordance with Rule 144A and outside the United States in accordance with Regulation S under the Securities Act of 1933. Registration Rights........... We and the initial purchasers entered into a Registration Rights Agreement on April 18, 2002, which granted the initial purchasers and any subsequent holders of the old notes certain exchange and registration rights. This exchange offer is intended to satisfy those exchange and registration rights. Except in the limited circumstances described below, after the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to your old notes. THE EXCHANGE OFFER Securities Offered............ Up to $175,000,000 of 9 1/4% Senior Subordinated Notes due 2009. The terms of the exchange notes and the old notes are identical in all material respects, except for certain transfer restrictions and registration rights relating to the old notes. The Exchange Offer............ We are offering to exchange the old notes for a like principal amount of exchange notes. The exchange notes will have guarantees that are identical to the guarantees on the old notes. Old notes may be exchanged only in integral principal multiples of $1,000. Expiration Date; Withdrawal of Tender........................ Our exchange offer will expire 5:00 p.m. New York City time, on , 2002, or a later time if we choose to extend the exchange offer. You may withdraw your tender of old notes at any time prior to the expiration date. All outstanding old notes that are validly tendered and not validly withdrawn will be exchanged. Any old notes not accepted by us for exchange for any reason will be returned to you at our expense as promptly as possible after the expiration or termination of the exchange offer. Resales....................... We believe that you can offer for resale, resell and otherwise transfer the exchange notes without complying with the registration and prospectus delivery requirements of the Securities Act if: - you acquire the exchange notes in the ordinary course of business; - you are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the exchange notes; and - you are not an "affiliate" of ours, as defined in Rule 405 of the Securities Act. viii If any of these conditions is not satisfied and you transfer any exchange notes without qualifying for a registration exemption, you may incur liability under the Securities Act. We do not assume or indemnify you against this liability. Each broker-dealer acquiring exchange notes for its own account in exchange for old notes which it acquired through market-making activities or other trading activities must acknowledge that it will deliver a proper prospectus when any such exchange notes are transferred. After notice to us in writing, a broker-dealer may use this prospectus, as amended or supplemented from time to time, for an offer to resell, a resale or other retransfer of such exchange notes. We have agreed that until , 2003 [180 days from effective date of S-4] we will keep the prospectus current and make it available for this purpose to broker-dealers who request it in writing for such use. Conditions to the Exchange Offer......................... Our obligation to accept for exchange, or to issue the exchange notes in exchange for, any old notes is subject to certain customary conditions relating to compliance with any applicable law, or any applicable interpretation by the staff of the Securities and Exchange Commission, or any order of any governmental agency or court of law. We currently expect that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer -- Conditions to the Exchange Offer." Procedures for Tendering Notes Held in the Form of Book-Entry Interests..................... The old notes were issued as global securities and were deposited upon issuance with the Wells Fargo Bank Minnesota, National Association. The Wells Fargo Bank Minnesota, National Association issued certificateless depositary interests in those outstanding old notes, which represent a 100% interest in those old notes, to The Depository Trust Company. Beneficial interests in the outstanding old notes, which are held by direct or indirect participants in The Depository Trust Company through the certificateless depository interest, are shown on, and transfers of the old notes can only be made through, records maintained in book-entry form by The Depository Trust Company. You may tender your outstanding old notes: - through a computer-generated message transmitted by The Depository Trust Company's Automated Tender Offer Program system and received by the exchange agent and forming a part of a confirmation of book-entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal; or - by sending a properly completed and signed letter of transmittal, which accompanies this prospectus, and other documents required by the letter of transmittal, or a facsimile of the letter of transmittal and other required documents, to the exchange agent at the address on the cover page of the letter of transmittal; ix And either: - a timely confirmation of book-entry transfer of your outstanding old notes into the exchange agent's account at The Depository Trust Company, under the procedure for book-entry transfers described in this prospectus under the heading "The Exchange Offer -- Book Entry Transfers" must be received by the exchange agent on or before the expiration date; or - the documents necessary for compliance with the guaranteed delivery described in "The Exchange Offer -- Guaranteed Delivery Procedures" must be received by the exchange agent on or before the expiration date. Procedures for Tendering Notes held in the Form of Registered Notes......................... If you hold registered old notes, you must tender your registered old notes by sending a properly completed and signed letter of transmittal, together with other documents required by it, and your certificates, to the exchange agent, in accordance with the procedures described in this prospectus under the heading "The Exchange Offer -- Procedures for Tendering Old Notes." United Series Federal Income Tax Considerations............ The exchange offer should not result in any income, gain or loss to the holders of old notes or to us for United States federal income tax purposes. See "Certain U.S. Federal Income Tax Considerations." Use of Proceeds............... We will not receive any proceeds from the issuance of the exchange notes in the exchange offer. The proceeds from the offering of the old notes were used to refinance our existing indebtedness. Exchange Agent................ The Wells Fargo Bank Minnesota, National Association is serving as the exchange agent for the exchange offer. Shelf Registration Statement..................... In limited circumstances, holders of old notes may require us to register their old notes under a shelf registration statement. x THE EXCHANGE NOTES The summary below describes the principal terms of the exchange notes. Some of the terms and conditions described below are subject to important limitations and exceptions. For a more detailed description of the terms and conditions of the exchange notes, see "Description of Notes," beginning on page [82]. The form and terms of the exchange notes are the same as the form and terms of the old notes, except that the exchange notes will be registered under the Securities Act and, therefore, the exchange notes will not be subject to the transfer restrictions, registration rights and provisions for additional interest applicable to the old notes. The exchange notes will evidence the same debt as the old notes, and both the exchange notes and the old notes are governed by the same indenture. Issuer........................ Block Communications, Inc. Securities.................... $175 million in principal amount of 9 1/4% senior subordinated notes due 2009. Maturity...................... April 15, 2009. Interest...................... Annual rate: 9 1/4%. Payment frequency: every six months on April 15 and October 15. First payment: October 15, 2002. The first payment of interest on the exchange notes will include accrued and unpaid interest to the date of the exchange on old notes exchanged in the exchange offer. Ranking....................... The notes and the subsidiary guarantees are general unsecured senior subordinated obligations. Accordingly, they rank: - behind all of our and the guarantors' existing and future senior debt that does not expressly provide that it ranks equally with or is subordinated to the notes; - equally with all of our and the guarantors' future senior subordinated debt that does not expressly provide that it is subordinated to the notes; and - ahead of any of our and the guarantors' future debt that expressly provides it is subordinated to the notes. As of March 31, 2002, after giving effect to the refinancing of our senior credit facilities, the notes would have been subordinated to approximately $78 million of senior debt and approximately $113 million of unused commitments would have remained under our senior credit facilities. See "Capitalization." Guarantees.................... The notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by substantially all of our subsidiaries. If we cannot make payments on the notes when they are due, the guarantors must make them instead. As of March 31, 2002, the subsidiary guarantees would have been subordinated to approximately $75 million of senior debt. Optional Redemption........... On or after April 15, 2006, we may redeem some or all of the notes at any time at the redemption prices listed under "Description of Notes -- Optional Redemption." xi Prior to April 15, 2005, we may redeem up to 35% of the notes with the proceeds of qualified equity offerings at the redemption price listed under "Description of Notes -- Optional Redemption." Mandatory Offer to Repurchase.................... If we sell certain assets or experience certain types of changes of control, we must offer to repurchase the notes at the price listed in the section "Description of Notes -- Repurchase at the Option of Holders." Certain Covenants............. The indenture governing the notes, among other things, restricts our and the ability of our subsidiaries to: - incur or guarantee additional indebtedness; - pay dividends or distributions on, or redeem or repurchase, capital stock; - make investments; - engage in transactions with affiliates; - incur liens; - transfer or sell assets; and - consolidate, merge or transfer all or substantially all of our assets. For more details, see "Description of Notes." Use of Proceeds............... We will not receive any cash proceeds from the exchange offer. The proceeds from the issuance of the old notes were used to refinance outstanding indebtedness. You should refer to the section entitled "Risk Factors" for an explanation of certain risks of investing in the notes. xii SUMMARY CONSOLIDATED FINANCIAL DATA The following table sets forth our financial data and other operating information. The financial data was derived from our consolidated financial statements. The financial data and other operating information that follows is qualified in its entirety by reference to, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes included elsewhere in this prospectus.
(UNAUDITED) ------------------- THREE MONTHS YEAR ENDED DECEMBER 31 ENDED MARCH 31 ---------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2002 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT OPERATING DATA) INCOME STATEMENT DATA: Revenues Cable(1).................................... $ 67,277 $ 71,846 $ 75,414 $ 82,110 $ 89,420 $ 21,148 $ 25,097 Publishing.................................. 260,878 272,107 275,827 286,717 264,679 61,854 61,563 Broadcasting(2)............................. 33,422 36,686 36,293 42,531 35,184 8,727 9,000 Other communications(3)..................... 2,771 3,023 8,682 14,299 25,282 5,149 6,353 -------- -------- -------- -------- -------- -------- -------- Total revenues................................ 364,348 383,662 396,216 425,657 414,565 96,878 102,013 Total expenses................................ 337,793 359,286 375,276 411,543 415,010 99,816 100,583 -------- -------- -------- -------- -------- -------- -------- Operating income (loss)......................... 26,555 24,376 20,940 14,114 (445) (2,938) 1,430 Interest expense, net........................... 9,953 10,316 11,043 14,069 19,439 4,670 4,739 (Gain) on disposition of WLFI-TV, Inc........... -- -- -- (22,339) -- -- -- (Gain) on disposition of Monroe Cablevision..... -- -- -- -- -- -- (21,600) Change in fair value of interest rate swaps..... -- -- -- -- 5,340 1,580 (1,462) -------- -------- -------- -------- -------- -------- -------- Income (loss) before income taxes and minority interest...................................... 16,602 14,060 9,897 22,384 (25,224) (9,188) 19,753 Provision (credit) for income taxes............. 7,495 6,240 4,556 9,176 (7,132) (2,602) 6,793 -------- -------- -------- -------- -------- -------- -------- Income (loss) before minority interest.......... 9,107 7,820 5,341 13,208 (18,092) (6,586) 12,960 Minority interest............................... -- -- -- (427) 235 54 (7) -------- -------- -------- -------- -------- -------- -------- Net income (loss)............................... $ 9,107 $ 7,820 $ 5,341 $ 12,781 $(17,857) $ (6,532) $ 12,953 ======== ======== ======== ======== ======== ======== ======== OTHER DATA: Cable cash flow (unaudited)(4)................ $ 26,179 $ 27,833 $ 28,200 $ 30,063 $ 32,130 $ 7,709 $ 9,375 Publishing cash flow (unaudited)(4)........... 19,290 18,016 25,787 23,851 15,785 84 3,115 Broadcasting cash flow (unaudited)(4)......... 6,576 7,839 5,578 8,009 3,092 462 986 EBITDA (unaudited)(5)......................... 48,575 49,251 56,369 56,873 50,276 7,825 13,918 Depreciation and amortization................. 24,865 28,164 40,551 48,662 55,533 12,089 13,270 Capital expenditures.......................... 30,932 47,234 66,702 80,340 62,154 17,108 5,862 Ratio of earnings to fixed charges(6)......... 2.4x 2.1x 1.7x 2.2x -- -- 4.8x Pro forma as adjusted ratio of total debt to EBITDA (unaudited)(7)....................... 5.0 -- 4.5 Pro forma as adjusted ratio of EBITDA to interest expense, net (unaudited)(7)............ 2.3 -- 2.5 BALANCE SHEET DATA: Cash and cash equivalents..................... $ 5,031 $ 2,053 $ 5,715 $ 4,213 $ 5,883 $ 3,638 $ 3,569 Total assets.................................. 313,030 346,848 388,302 464,190 483,887 464,506 472,887 Total funded debt............................. 110,185 127,706 166,109 213,357 237,264 228,991 219,669 Stockholders' equity.......................... 43,892 48,993 51,198 61,390 37,583 53,622 50,649
xiii
(UNAUDITED) ------------------- THREE MONTHS YEAR ENDED DECEMBER 31 ENDED MARCH 31 ---------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2002 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT OPERATING DATA) CABLE OPERATING DATA (UNAUDITED): Homes passed.................................. 249,394 249,668 250,893 253,903 255,852 254,412 245,395 Basic subscribers............................. 157,356 157,467 159,294 158,537 157,341 158,251 153,034 Basic penetration............................. 63.1% 63.1% 63.5% 62.4% 61.5% 62.2% 62.4% Premium units................................. 62,270 60,827 62,362 69,649 70,909 69,986 69,645 Premium penetration........................... 39.6% 38.6% 39.1% 43.9% 45.1% 44.3% 45.5% Cable modem subscribers....................... -- -- 1,484 7,022 15,221 9,130 17,428 Digital subscribers........................... -- -- -- -- 7,846 -- 9,841 Average monthly revenue per basic subscriber(8)............................... $ 35.63 $ 38.02 $ 39.45 $ 43.16 $ 47.36 $ 44.55 $ 52.89 PUBLISHING OPERATING DATA (UNAUDITED)(9): Daily circulation............................. 387,315 390,171 389,737 381,643 380,646 Sunday circulation............................ 629,814 631,740 631,711 611,005 603,485
- --------------- (1) Includes the results of Monroe CableSystem, the assets of which were disposed of on March 29, 2002 in a like-kind exchange for cable assets in Bedford, Michigan plus a cash payment to us of $12.1 million. See "-- Recent Developments." The revenues of Monroe CableSystem for 1997, 1998, 1999, 2000 and 2001 were $4.5 million, $4.6 million, $5.0 million, $5.6 million and $5.4 million, respectively, and for the three months ended March 31, 2001 and March 29, 2002 were $1.3 million and $1.3 million, respectively. (2) Effective April 1, 2000, we acquired a two-thirds interest in WAND Television, Inc. in exchange for the assets of WLFI-TV, Inc. On March 30, 2001, we purchased WFTE TV. Results of the acquired stations are included from the date of acquisition. (3) Includes the results of Corporate Protection Services, Inc. from its date of acquisition in December 1998 and the results of Access Toledo Ltd. from its date of acquisition in January 2001. Revenues of CPS for 1999, 2000 and 2001 were $4.1 million, $5.7 million and $8.6 million, respectively. Revenues of Access Toledo for 2001 were $2.0 million. (4) Cable, publishing and broadcasting cash flow represents each segment's EBITDA before the effect of corporate general and administrative expenses. (5) EBITDA is defined as net income before provision for income taxes, interest expense, depreciation and amortization (including amortization of broadcast rights), other noncash charges, gains or losses on disposition of assets, and extraordinary items and after payments for broadcast rights. EBITDA is not, and should not be used as, an indicator or alternative to operating income, net income or cash flow as reflected in our financial statements, is not intended to represent funds available for debt service, dividends or other discretionary uses, is not a measure of financial performance under accounting principles generally accepted in the United States and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview -- EBITDA." (6) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income (loss) before taxes and minority interest, plus fixed charges, less interest capitalized during the year, plus current year amortization of capitalized interest. Fixed charges consist of interest expense, capitalized interest, the interest portion of rent expense and amortization of debt issuance costs. In 2001 and for the three months ended March 31, 2001, our earnings were insufficient to cover fixed charges by $25.8 million and $9.1 million, respectively. (7) The pro forma as adjusted information gives effect, as of the beginning of the period presented, to the issuance of the notes, the closing of the our new senior credit facilities and the application of the net proceeds therefrom. See "Capitalization" and "Description of Senior Credit Facilities." For purposes of calculating the pro forma ratios, interest expense, net has been determined after giving effect to interest rate swap agreements entered into with respect to our senior credit facilities and the notes. Pro forma interest expense is $22.3 million for 2001 and $5.6 million for the three months ended March 31, 2002. (8) Average monthly revenue per basic subscriber for the three months ended March 31, 2002 excludes the 5,004 Bedford, Michigan subscribers acquired from Comcast in the March 29, 2002 exchange and includes the 10,129 subscribers of Monroe CableSystem disposed of in the exchange. (9) Circulation numbers are based on the average paid circulation for the 12 months ended March 31 of each year for the Post-Gazette and for the 12 months ended September 30 of each year for The Blade, in each case as set forth in the ABC Audit Report for such period. The ABC Audit Report for the 12 months ended March 31, 2002 is not yet available. xiv RISK FACTORS In evaluating an investment in the notes, you should carefully consider the following risk factors in addition to the other information contained in this prospectus. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. Any of these risks could materially adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your investment. The risk factors discussed below are generally applicable to the old notes as well as to the exchange notes. RISKS RELATING TO OUR INDEBTEDNESS OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES. We now have, and after the exchange offer will continue to have, a significant amount of indebtedness. At March 31, 2002, after giving pro forma effect to the sale of the old notes and the refinancing of our senior credit facilities, we would have had total indebtedness of $253.0 million (of which $175.0 million would have consisted of the notes and the balance would have consisted of senior debt). In 2001, our earnings were insufficient to cover fixed charges by $25.8 million. Our substantial indebtedness could have important consequences to you. For example, it could: - make it more difficult for us to satisfy our obligations with respect to the notes; - increase our vulnerability to general adverse economic and industry conditions; - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; - limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; - place us at a disadvantage compared to competitors that have less debt; and - limit our ability to borrow additional funds. In addition, the indenture and the agreements relating to our senior credit facilities contain, financial and other restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debts. DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD FURTHER EXACERBATE THE RISKS ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE. We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenture and the agreements relating to our senior credit facilities do not fully prohibit us or our subsidiaries from doing so. As of March 31, 2002, after giving pro forma effect to the sale of the old notes and the refinancing of our senior credit facilities, approximately $113 million of unused commitments would have remained under our senior revolving credit facilities, and our senior credit facilities would permit additional borrowing. All borrowings under our senior credit facilities are secured by substantially all of our existing assets and rank senior to the notes and the subsidiary guarantees. If new debt is added to our and our subsidiaries' current debt levels, the leverage-related risks described above could intensify. See "Description of Senior Credit Facilities." 1 TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. Our ability to make payments on and to refinance our indebtedness, including the notes, and to fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. A portion of the indebtedness under our senior credit facilities bears variable rates of interest, and we have entered into interest rate swap agreements that have the effect of causing us to bear variable interest rate risk with respect to a portion of the notes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Quantitative and Qualitative Disclosure about Market Risk." We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or that future borrowings will be available to us under our senior credit facilities in an amount sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity needs. The ability to borrow funds in the future under our senior credit facilities will depend on our meeting the financial covenants in the agreement governing those facilities. We may need to refinance all or a portion of our indebtedness, including the notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our senior credit facilities and the notes, on commercially reasonable terms or at all. THE INDENTURE FOR THE NOTES AND THE CREDIT AGREEMENT GOVERNING OUR SENIOR CREDIT FACILITIES CONTAIN VARIOUS COVENANTS THAT LIMIT OUR MANAGEMENT'S DISCRETION IN THE OPERATION OF OUR BUSINESSES. The indenture governing the notes and the credit agreement governing our senior credit facilities contain various provisions that limit our management's discretion by restricting our ability to: - incur additional debt and issue preferred stock; - pay dividends and make other distributions; - make investments and other restricted payments; - create liens; - sell assets; and - enter into certain transactions with affiliates. These restrictions on our management's ability to operate our businesses in accordance with its discretion could have a material adverse effect on our business. In addition, our senior credit facilities require us to meet certain financial ratios in order to draw funds. If we default under any financing agreements, our lenders could: - elect to declare all amounts borrowed to be immediately due and payable, together with accrued and unpaid interest; and/or - terminate their commitments, if any, to make further extensions of credit. If we are unable to pay our obligations to our senior secured lenders, they could proceed against any or all of the collateral securing our indebtedness to them. The collateral under our senior credit facilities consists of substantially all of our existing assets. In addition, a breach of certain of these restrictions or covenants, or an acceleration by our senior lenders of our obligations to them, would cause a default under the notes. We may not have, or be able to obtain, sufficient funds to make accelerated payments, including payments on the notes, or to repay the notes in full after we pay our senior lenders. See "Description of Senior Credit Facilities," and "Description of Notes." 2 RISKS RELATING TO THE NOTES YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO ALL OF OUR OTHER EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE SUBSIDIARY GUARANTEES OF THE NOTES ARE JUNIOR TO ALL OF OUR GUARANTORS' EXISTING INDEBTEDNESS AND POSSIBLY TO ALL THEIR FUTURE BORROWINGS. The notes and the subsidiary guarantees rank behind all of our and the guarantors' other existing indebtedness (other than trade payables) and all of our and their future borrowings (other than trade payables), except any future indebtedness that expressly provides that it ranks equal with, or subordinated in right of payment to, the notes and the subsidiary guarantees. As a result, upon any distribution to our creditors or the creditors of the guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors or our or their property, the holders of our and the guarantors' senior debt will be entitled to be paid in full in cash or cash equivalents before any payment may be made with respect to the notes or the subsidiary guarantees. In addition, all payments on the notes and the subsidiary guarantees will be blocked in the event of a payment default on senior debt and may be blocked for up to 179 of 360 consecutive days in the event of certain non-payment defaults on senior debt. In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to us or the guarantors, holders of the notes will participate with trade creditors and all other holders of our and the guarantors' subordinated indebtedness in the assets remaining after we and the guarantors have paid all of our senior debt. However, because the indenture requires that amounts otherwise payable to holders of the notes in a bankruptcy, liquidation or reorganization or similar proceeding be paid to holders of senior debt instead, holders of the notes may receive less, ratably, than general unsecured creditors in any such proceeding. In any of these cases, we and the guarantors may not have sufficient funds to pay all of our creditors, including the holders of notes. Assuming we had completed the sale of the old notes and the refinancing of our senior credit facilities on March 31, 2002, the notes would have been subordinated to $78 million of senior debt, the subsidiary guarantees would have been subordinated to $75 million of senior debt, and $113 million would have been available for borrowing as additional senior debt under our senior credit facilities. We will be permitted to borrow substantial additional indebtedness, including senior debt, in the future under the terms of the indenture. FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES AND REQUIRE NOTE HOLDERS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a subsidiary guarantee could be voided, or claims in respect of a subsidiary guarantee could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its subsidiary guarantee: - received less than reasonably equivalent value or fair consideration for the incurrence of such subsidiary guarantee; and - was insolvent or rendered insolvent by reason of such incurrence; or - was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. In addition, any payment by that guarantor pursuant to its subsidiary guarantee could be voided and required to be returned to the guarantor or paid into a fund for the benefit of the creditors of the guarantor. 3 The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if: - the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; or - the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or - it could not pay its debts as they become due. On the basis of historical financial information, recent operating history and other factors, we believe that each guarantor, after giving effect to its subsidiary guarantee of the notes, was not insolvent, did not have unreasonably small capital for the business in which it was engaged and had not incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard. WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all outstanding notes at 101% of the principal amount thereof plus accrued and unpaid interest and additional interest, if any, to the date of repurchase. However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of notes or that restrictions in our senior credit facilities will not allow such repurchases. In addition, certain important corporate events, such as leveraged recapitalizations, that would increase the level of our indebtedness, would not constitute a "Change of Control" under the indenture. See "Description of Notes -- Repurchase at the Option of Holders -- Change of Control." IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP FOR THE EXCHANGE NOTES, YOU MAY NOT BE ABLE TO RESELL THEM. Although the old notes are, and the exchange notes are expected to be, eligible for trading in PORTAL(TM), we cannot assure you that an active trading market for the exchange notes will develop. If no active trading market develops, you may not be able to resell your exchange notes at their fair market value or at all. Future trading prices of the exchange notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. We have been informed by the initial purchasers of the old notes that they intend to make a market in the exchange notes after the exchange offer is completed. However, the initial purchasers may cease their market-making at any time. We do not intend to apply for listing the exchange notes on any securities exchange. THE TRADING PRICE OF THE EXCHANGE NOTES MAY BE VOLATILE. The trading price of the exchange notes could be subject to significant fluctuation in response to, among other factors, variations in operating results, developments in industries in which we do business, general economic conditions, changes in research analysts' recommendations regarding the exchange notes and changes in the market for noninvestment grade securities generally. This volatility may adversely affect the market price of the exchange notes. 4 RISKS RELATING TO OUR BUSINESSES REDUCTIONS IN ADVERTISING COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS. Substantially all of our revenues in our newspaper publishing and television broadcasting businesses are derived from advertisers in many different industries. We rarely obtain long-term commitments from advertisers, and advertisers may cancel, reduce or postpone orders without penalty. Reductions or delays in purchases of advertising could, and often do, occur as a result of a general economic downturn, an economic downturn in one or more industries or one or more geographic areas, or a failure to agree on contractual terms. Since the fourth quarter of 2000, there has been a general slowdown in the advertising industry. If these trends continue, our results of operations will continue to be adversely affected. Additionally, we believe that advertising is a discretionary business expense, meaning that spending on advertising tends to decline disproportionately during an economic recession or downturn as compared to other types of business spending. Consequently, a recession or downturn in the United States economy or the economy of an individual geographic market in which we operate would likely adversely affect our advertising revenues and, therefore, our results of operations. Even in the absence of a general recession or downturn in the economy, an individual business sector that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector experiences a downturn. If that sector's spending represents a significant portion of our advertising revenues, any reduction in its expenditures may affect our revenues. For example, a significant portion of our revenues are derived from retail advertisers, which have historically been sensitive to general economic cycles. Our business, financial condition and results of operations could be materially adversely affected by a downturn in the retail sector. Finally, our newspapers and television stations compete for advertising revenues not only with other newspapers and television stations but also with an expanding variety of other communications media. If a significant amount of newspaper or television advertising were to shift to other communications media as a result of changes in technology, changes in consumer preferences, cost differentials or for other reasons, our businesses could be adversely affected. OUR NEWSPAPER AND TELEVISION CONTENT MAY ATTRACT FEWER READERS AND VIEWERS, LIMITING OUR ABILITY TO GENERATE ADVERTISING AND CIRCULATION REVENUES. In the competitive newspaper publishing and television broadcasting industries, the success of each of our newspapers and television stations is primarily dependent upon its share of the overall advertising revenues within its market. The ability of newspapers and television stations to generate advertising revenues depends to a significant degree upon audience acceptance. Audience acceptance is influenced by many factors, including the content offered, shifts in population, demographics, general economic conditions, public tastes generally, reviews by critics, promotions, the quality and acceptance of other competing content in the marketplace at or near the same time, the availability of alternative forms of entertainment and other intangible factors. All of these factors could change rapidly, and many are beyond our control. In our television broadcasting business, technological innovation and the resulting proliferation of programming alternatives, such as independent broadcast stations, cable television and other multi-channel competitors, pay-per-view, VCRs, DVDs and the Internet, have fragmented television viewing audiences and subjected television broadcasting stations to new types of competition. During the past decade, cable television and independent stations have captured an increasing market share and overall viewership of broadcast network television has declined. Our advertising revenues will suffer if any of our newspapers or stations cannot maintain its audience ratings or market share or cannot continue to command the advertising rates that we anticipate. We cannot assure you that any of our newspaper or television content will be successful or that we can maintain or increase audience ratings, market share or advertising rates. Lack of audience acceptance of 5 our content or a decrease in our market share or advertising rates could have a material adverse effect on our business, financial condition or results of operations. OUR BUSINESSES OPERATE IN HIGHLY COMPETITIVE INDUSTRIES. Our businesses operate in a very competitive environment and are subject to actual and potential competition from various sources. Our ability to compete successfully depends on a number of factors, including our ability to secure high quality editorial content, our ability to achieve high distribution levels and subscriptions and our ability to generate advertising revenues. We cannot assure you that we will be able to compete successfully in the future against existing or potential competitors, or that increased competition will not have material adverse effect on our business, financial condition or results of operations. Cable Television Our cable television systems face competition from: - alternative methods of receiving and distributing video programming, including: -- over-the-air television broadcast stations; -- direct broadcast satellite (DBS); -- satellite master antenna television systems, which use one central antenna to receive and deliver television programming to a concentrated group of viewers, such as in apartments, hotels or hospitals; -- multichannel multipoint distribution systems, which use low power microwave frequencies with increased channel capacity to transmit video programming over the air to customers; - data transmission and Internet service providers; and - other sources of news, information and entertainment such as newspapers, movie theaters, live sporting events, other entertainment events and home video products, including VCRs and DVDs. In the future, our cable systems may face additional competition from new sources, including regional Bell operating companies, other telephone companies, public utility companies and other entities that are in the process of entering the cable television business in other parts of the country; and broadcast digital television, which can deliver high definition television pictures, digital-quality programs and CD-quality audio programming. Since our cable systems are operated under non-exclusive franchises, competing operators of cable systems and other potential competitors, such as municipalities and municipal utility providers, may be granted franchises to build cable systems in markets where we hold franchises. Competition in geographic areas where a secondary franchise is obtained and a cable network is constructed is called "overbuilding." As of March 31, 2002, after giving effect to the Monroe-Bedford exchange, less than 3% of the homes passed by our cable systems were overbuilt. To date, the impact of competition from DBS providers has been more significant than overbuilding by competing cable operators. DBS service consists of television programming transmitted via high-powered satellites to individual homes, each served by a small satellite dish. The channel selection and signal quality of DBS service is comparable to that of our digital cable service. Because DBS signals are delivered via satellite, DBS operators do not face the high initial entry costs that may inhibit overbuilding by a competing cable operator. Legislation permitting DBS operators to transmit local broadcast signals was enacted in November 1999. This eliminated a significant competitive advantage that cable system operators had over DBS operators. DBS operators have begun delivering local broadcast signals in the largest markets, and there are plans to expand such carriage to many more markets over the next few years. DBS operators are currently offering local channels in our Erie County service area, but only upon payment of an additional subscriber fee. We do not know when DBS operators may begin delivering local 6 broadcast channels in the Toledo market. As of March 31, 2002, the penetration rate of DBS in the Toledo market was approximately 9%, compared to an average penetration rate of 18% nationally. If the penetration of DBS in our markets were to increase, our business could be adversely affected. Newspaper Publishing The newspaper publishing industry depends primarily upon the sale of advertising and paid subscriptions to generate revenues. Competition for advertising, subscribers, readers and distribution is intense and comes from local, regional and national newspapers; television broadcasting stations and networks and cable channels; radio; the Internet; direct mail; and other information and advertising media that operate in our newspaper publishing markets. Television Broadcasting Our television stations face competition for audience and advertising revenues from other television broadcasters. Our competitors also include cable television operators, wireless cable systems, direct broadcast satellite systems, telephone company video systems, radio broadcasters and other media, including newspapers, magazines, computer on-line services, movies, direct mail, compact discs, VCRs, DVDs, music videos, the Internet, outdoor advertising and other forms of entertainment and advertising. WE MAY NOT REMAIN COMPETITIVE IF WE DO NOT RESPOND TO THE RAPID CHANGES IN TECHNOLOGY, STANDARDS AND SERVICES THAT CHARACTERIZE THE MEDIA INDUSTRY AND WHICH MAY REQUIRE US TO INVEST A SIGNIFICANT AMOUNT OF CAPITAL TO ADDRESS CONTINUED TECHNOLOGICAL DEVELOPMENT. The media industry is experiencing rapid and significant technological changes, which may result in alternative means of program and content transmission and which could have a material effect on our business, financial condition and results of operations. The continued growth of the Internet has presented alternative content distribution options that compete with traditional media. Advances in technology may increase competition for household audiences and advertisers, and we may be unable to compete for advertising revenues. In recent years, the FCC has adopted rules and policies providing for authorization of new technologies and a more favorable operating environment for certain existing technologies that have the potential to provide additional competition for television stations. For example, the video compression techniques now under development for use with current cable television channels or direct broadcast satellites are expected to reduce the bandwidth which is required for television signal transmission. Further advances in technology, such as video compression, direct broadcast satellites and programming delivered through fiber-optic telephone lines, 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 a very defined audience may alter the competitive dynamics for advertising expenditures. We are unable to predict the effect that technological changes will have on the cable, newspaper publishing or television broadcasting industries or the future results of our operations. We may not be able to compete with existing or newly developed alternative technologies or may be required to acquire, develop or integrate new technologies ourselves. The cost of acquisition, development or implementation of new technologies could be significant, and our ability to fund such implementation may be limited and could have a material adverse effect on our ability to successfully compete in the future. OUR NEED TO COMPLY WITH COMPREHENSIVE, COMPLEX AND SOMETIMES UNPREDICTABLE FEDERAL, STATE AND/OR LOCAL REGULATIONS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESSES. The cable and television broadcasting industries are subject to extensive legislation and regulation at the federal, state and local levels. The rules and regulations governing our businesses have at times had a material adverse effect on our businesses. Federal, state and local regulations have increased the administrative and operational expenses of our businesses. In addition, Congress and the FCC may in the future adopt new laws or modify existing laws and regulations and policies regarding a wide variety of matters. Compliance with these regulations and policies could increase costs. As we continue to introduce 7 additional communications services, we may be required to obtain federal, state and local licenses or other authorizations to offer such services. We may not be able to obtain and retain all necessary governmental authorizations and permits in a timely manner, or at all, or conditions could be imposed upon such authorizations and permits that may not be favorable to us or with which we may not be able to comply. Failure to do so could negatively affect our existing operations and could delay or prevent our proposed operations. We may be required to modify our business plans or operations as new regulations arise. We cannot assure you that we will be able to do so in a cost-effective manner, or at all. The adoption of various measures or the elimination of various existing restrictions could accelerate the existing trend toward vertical integration in the media and home entertainment industries and could cause us to face more formidable competition in the future. Cable Television The federal Telecommunications Act of 1996 substantially changed federal, state and local laws and regulations governing our cable television and telecommunications businesses. There are numerous rulemakings that have been and continue to be undertaken by the FCC to implement the provisions of this law. Furthermore, portions of this law and its interpretations by the FCC have been, and likely will continue to be, challenged in the courts. We cannot predict the outcome of such rulemakings or lawsuits or the short- and long-term effects on us, financial or otherwise, of this law, FCC rulemakings and resulting market developments. FCC regulations limit our ability to set and increase rates for our basic cable television service package and for the provision of cable television-related equipment. The law permits certified local franchising authorities to order refunds of rates paid in the previous 12-month period determined to be in excess of the permitted reasonable rates. Only one of our 32 cable franchising authorities with 59 cable subscribers has been certified for this purpose. The FCC and Congress continue to be concerned that rates for programming services are rising at a rate exceeding inflation. It is therefore possible that notwithstanding the recent elimination of cable programming service tiers rate regulation, Congress may enact legislation in the future to reimpose additional rate controls on cable systems. In addition, the FCC has recently adopted rules which will require cable operators to carry the digital signals of television broadcasting stations. However, the FCC has tentatively decided that cable operators should not be required to carry both the analog and digital services of television broadcasting stations while broadcasters are transitioning from analog to digital transmission. Carrying both the analog and digital services of television broadcasting stations would consume additional cable capacity. As a result, a requirement to carry both analog and digital services of television broadcasting stations could require the removal of popular programming services, which may have materially adverse results for our cable systems. Television Broadcasting The television broadcasting industry is subject to extensive and changing regulation. Among other things, the Communications Act of 1934 and FCC rules and policies require that each television broadcaster must operate in compliance with a license issued by the FCC. Each of our television stations operates pursuant to one or more licenses issued by the FCC that expire at different times. We must file an application with the FCC to renew these licenses, and third parties may challenge those applications. Although we have no reason to believe that our licenses will not be renewed in the ordinary course, there can be no assurance that our licenses will be renewed. In addition, a number of federal rules governing broadcasting have changed significantly in recent years, and additional changes may occur, particularly with respect to the rules governing digital television, multiple ownership and attribution. We cannot predict the effect that these regulatory changes may ultimately have on our operations. Recent and prospective actions by the FCC could cause us to face increased competition. These include: - relaxation of restrictions on the participation by regional telephone operating companies in cable television and other direct-to-home audio and video technologies; 8 - the establishment of a Class A television service for certain low power stations that gives such stations primary status and certain interference protections against full-power stations; and - permission for direct broadcast satellite television to provide the programming of traditional over-the-air stations, including local and out-of-market network stations. OUR ADVERTISING REVENUES ARE SUBJECT TO CYCLICAL AND SEASONAL VARIATIONS. Our business is cyclical in nature. Because we depend upon the sale of advertising for a significant portion of our revenues, our operating results are sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising expenditures. In addition, newspaper publishing is labor intensive and, as a result, newspapers have a relatively high fixed cost structure. During periods of economic contraction, revenues may decrease while some of our costs remain fixed, resulting in decreased earnings. Our business has experienced and is expected to continue to experience significant seasonality due to, among other things, seasonal advertising patterns and seasonal influences on people's viewing and reading habits. Typically, our revenues are lowest during the first quarter, and highest during the fourth quarter, of each calendar year. The revenue of our television broadcasting operations tends to be higher in election years, when national, state and local political advertising is a significant element of advertising revenue for this segment. In non-election years, little if any revenue is obtained from political advertising. A TERRORIST ATTACK COULD HAVE A SEVERE ADVERSE EFFECT ON OUR FINANCIAL POSITION. Because of their public visibility, the facilities of our cable systems, newspapers and television broadcasting stations may be a potential target for a terrorist attack. In the wake of the terrorist attacks of September 11, 2001, when insurance policies are renewed, insurance companies have been unwilling to renew coverage against terrorist attacks or have been willing to provide such coverage only at rates that make the cost of such coverage prohibitive. In addition, insurance costs are expected to rise generally as a result of the events of September 11, 2001. If the facilities of one of our cable systems, newspapers or television broadcasting stations were to suffer significant uninsured damage as a result of a terrorist attack, our financial position and cash flow could be severely adversely affected. IF WE DO NOT RETAIN OUR KEY PERSONNEL AND ATTRACT AND RETAIN OTHER HIGHLY SKILLED EMPLOYEES, OUR BUSINESS WILL SUFFER. We believe that our success will continue to be dependent upon our ability to attract and retain skilled managers and other personnel, including our senior management, senior editors and cable system and station managers. The loss of the services of any key personnel may have a material adverse effect on our results of operations or financial condition. We generally do not have employment agreements with members of our senior management team and other key personnel. We continually need to hire, integrate and retain personnel for customer relations and field operations positions that require a higher level of technical expertise and the ability to communicate technical concepts to our customers. There is no guarantee that we will be able to recruit or retain these skilled workers. Failure to do so could impair our ability to operate efficiently and maintain our reputation for high quality service. This could impair our ability to retain current customers and attract new customers, which could cause our financial performance to decline. THE INTERESTS OF OUR CONTROLLING STOCKHOLDERS MAY NOT BE ALIGNED WITH THE INTERESTS OF THE HOLDERS OF THE NOTES. The Block family owns 100% of our outstanding capital stock. As a result, the Block family controls most of the decisions involving us, including transactions involving a change of control such as a sale or merger. The Block family may also have an interest in pursuing acquisitions, divestitures or other 9 transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to holders of the notes. Circumstances may occur in which the interests of the Block family could be in conflict with the interests of holders of the notes. In addition, the Block family as a whole may be unable to agree on certain business decisions affecting us, which could prevent or delay transactions that are beneficial to our business or results of operations. WE ARE OBLIGATED TO REDEEM STOCK FROM THE ESTATES OF OUR PRINCIPAL SHAREHOLDERS TO THE EXTENT REQUIRED TO PAY DEATH TAXES. IN CERTAIN CIRCUMSTANCES, THESE OBLIGATIONS COULD HAVE SIGNIFICANT ADVERSE EFFECTS ON OUR LIQUIDITY AND FINANCIAL POSITION. The Company and the members of the Block family are parties to an agreement which requires the Company to redeem shares of our non-voting common stock from the estate of a deceased shareholder to the extent such redemption qualifies for sale treatment, rather than dividend treatment, under Section 303 of the Internal Revenue Code (the "Code"). In general, Section 303 allows sale treatment where (1) the value for Federal estate tax purposes of all stock of the Company included in determining the value of the decedent's gross estate exceeds 35% of the excess of the value of the gross estate over certain allowable deductions and (2) the amount paid to redeem the stock does not exceed the sum of all federal and state death taxes (including generation-skipping taxes), plus funeral and administration expenses allowable as deductions for federal estate tax purposes. The initial redemption price under the agreement is the value of the shares for federal estate-tax purposes in the deceased shareholder's estate. In order to qualify for redemption of stock under the agreement, the estate of the deceased shareholder must elect under Section 6166 of the Code to pay the federal estate tax in deferred installments over a period of up to 15 years. In return, the estate is given an option to purchase for $1 per share a number of shares equal to any additional shares required to be redeemed as a result of the deferral election. The Company is also required to pay cash to cover the income tax consequences resulting from the redemption and the option. The amounts the Company might be required to pay under the agreement and the timing of such payments will depend upon the year of death of the shareholders and the value of the stock and the estate tax laws in effect at that time. To satisfy part of its obligation under the agreement, the Company has purchased life insurance on lives of certain shareholders who own significant amounts of our non-voting common stock. The vast majority of the life insurance in force is on the lives of William Block (our major shareholder) and his wife. Net of current policy loans, the amount of the death benefit for Mr. and Mrs. Block is $31.2 million, of which $7.4 million is on the life of William Block, $10.1 million on the life of Mrs. Block and $13.7 million on their joint lives. Although we are unable to determine with any certainty the amounts we may be required to pay under the agreement, we believe that based on the amount of life insurance in force for our major shareholders, combined with our ability to defer redemptions over a 15-year period, the amounts the Company will be required to pay under the agreement will not have a material adverse effect on the Company's liquidity or financial position. In certain circumstances, however, the making of these payments might result in a violation of the fixed charge coverage requirements of our new senior credit facilities. If this were to occur, the effect on the Company's liquidity could be material. RISKS RELATING TO OUR CABLE TELEVISION BUSINESS IF OUR PROGRAMMING COSTS CONTINUE TO INCREASE AND WE CANNOT PASS THEM ALONG TO OUR CUSTOMERS, OUR CASH FLOW WILL DECREASE. Our cable programming costs are increasing. Programming has been and is expected to continue to be our cable operations' largest single cash expense item and accounted for approximately 29% of our total cable operating costs for the year ended December 31, 2001. In recent years, the cable industry has experienced a rapid escalation in the cost of programming, particularly sports programming. This escalation may continue. Because of our size, we are unable to negotiate the more favorable rates that are granted to large national multiple system operators. For 2001, the negative impact on our margins due to higher programming costs was estimated to be 400 to 500 basis points. For competitive reasons, we may not be 10 able to pass programming cost increases on to our subscribers. In addition, as we add programming to our limited basic and expanded basic tiers, we may face additional market constraints on our ability to pass these costs on to our subscribers. We may also find that, as is currently the case with the National Football League's Sunday Ticket (a subscription service which makes out-of-market NFL games available to digital subscribers), exclusive arrangements negotiated by other larger programming outlets may prevent us from offering certain desirable programming. We purchase the majority of our cable programming through the National Cable Television Cooperative. This organization of small- and mid-sized cable companies aggregates more than 10 million cable subscribers for the purpose of obtaining programming at reduced volume-based discounts. We achieve significant savings through participation in this cooperative, as compared to programming rates we could negotiate on our own, thereby lowering our costs of program acquisition. If for any reason we were unable to continue to obtain programming though such buying cooperatives, and we were unable to pass the increase in programming costs on to our subscribers, our results of operations and cash flow would be adversely affected. COPYRIGHT LAW CHANGES COULD INCREASE THE COSTS OF THE LICENSES WE NEED TO OPERATE OUR CABLE SYSTEMS. Cable systems must obtain copyright licenses for the programming they carry. The licensing process is somewhat different for each type of programming we carry on our systems. For non-broadcast cable channels, we typically obtain copyright authorizations as part of the programming contracts we sign with these channels. When we produce or originate our own local programming, we obtain copyright authorizations directly from the copyright holders. Finally, for over-the-air broadcast channels we carry on our systems, we obtain copyrights under a system established by the Copyright Act of 1976. That Act provides a blanket license for copyrighted material on television stations whose signals a cable system retransmits. Cable operators can obtain this license by filing semi-annual reports and paying a percentage of their revenues as a royalty fee to the U.S. Copyright Office, which then distributes the royalty pool to the copyright holders. For larger cable systems, these payments vary with the number and type of distant television stations the system carries. From time to time, Congress considers proposals to alter the blanket copyright license system, some of which could make the license more costly. WE WILL FACE COMPETITION FROM PROVIDERS OF ALTERNATIVES TO OUR HIGH-SPEED INTERNET SERVICES. Competitors, including telephone companies, have introduced digital subscriber line technology (also known as DSL), which allows Internet access over traditional phone lines at data transmission speeds greater than those available by a standard telephone modem. Although these transmission speeds are not as great as the transmission speeds of a cable modem, we believe that the transmission speeds of DSL technology are sufficiently high that such technology will compete with cable modem technology. Competition from wireless broadband Internet services is also being introduced in our service areas. We cannot predict the impact these competing broadband technologies will have on our Internet access services or on our operations. Our high-speed Internet services will also continue to face competition from traditional lower speed dial-up Internet service providers, which have the advantage of lower price and in some cases proprietary content and nationwide marketing. WE MAY BE REQUIRED TO PROVIDE ACCESS TO OUR NETWORKS TO OTHER INTERNET SERVICE PROVIDERS, WHICH COULD SIGNIFICANTLY INCREASE OUR COMPETITION AND ADVERSELY AFFECT OUR ABILITY TO PROVIDE NEW SERVICES. Cable modem services have been subject to only light regulation by the FCC. The FCC recently issued a declaratory ruling affirming that "broadband services should exist in a minimal regulatory environment." Congress and the FCC have been asked to require cable operators to provide "open access" over their cable systems to other Internet service providers. To date, Congress and the FCC have declined to impose these requirements, although the FCC has recently initiated a new rulemaking proceeding on this matter. This same open access issue is also being considered by some local franchising authorities and is being actively litigated in the courts. If we are required to provide open access or face other forms of 11 increased regulation, it could adversely impact our anticipated revenues from high-speed Internet access services and complicate marketing and technical issues associated with the introduction of these services. IF WE ARE UNABLE TO PROCURE THE NECESSARY SOFTWARE AND EQUIPMENT, OUR ABILITY TO OFFER OUR SERVICES COULD BE IMPAIRED. We depend on vendors to supply our cable electronic equipment, such as the set-top converter boxes, fiber and other equipment, as well as the enabling software for analog and digital cable services. This equipment is available from a limited number of suppliers. We typically purchase equipment under purchase orders placed from time to time and do not carry significant inventories of equipment. If there are delays in obtaining software or if demand for equipment exceeds our inventories and we are unable to obtain required software and equipment on a timely basis and at an acceptable cost, our ability to recognize additional revenues and to add additional subscribers from these services could be delayed or impaired. In addition, if there are no suppliers who are able to provide converter devices that comply with evolving Internet and telecommunications standards or that are compatible with other products or components we use, our business may be materially impaired. The computer system and software used by our cable systems for billing and customer service are outdated. While we have budgeted for and scheduled the replacement of this system, in the event of delays or difficulties in procuring or converting to the new computer system, our ability to launch and track new cable services could be adversely affected. AS WE INTRODUCE NEW CABLE SERVICES, A FAILURE TO PREDICT AND REACT TO CONSUMER DEMAND OR SUCCESSFULLY INTEGRATE NEW TECHNOLOGY COULD ADVERSELY AFFECT OUR BUSINESS. Our cable systems are in the early stages of introduction of new cable services such as digital cable and high-speed Internet. Our newly rebuilt Toledo cable system provides the capability to launch other new services in the future. The inability to effectively introduce, market and sell these new services, to anticipate consumer demand for such services or to successfully integrate new technology could have a material adverse effect on our business and results of operations. WE MAY BE ADVERSELY AFFECTED BY STRIKES AND OTHER LABOR PROTESTS. The employees of our Toledo cable system include two collective bargaining units represented by the Brotherhood of Teamsters. One of these includes the technicians responsible for cable service installation and repair and for ongoing maintenance of our cable plant; the other comprises the employees who program our cable converter boxes. The current collective bargaining agreements for these employees expire in 2003 and 2004, respectively. If we were to experience a strike or work stoppage, it would be difficult for us to find a sufficient number of employees with the necessary skills to replace these employees in handling outages and service calls. Any resulting disruptions in service could cause us to lose revenues and customers and might have permanent adverse effects on our business. The employees of our cable construction subsidiary are also represented by the Brotherhood of Teamsters under a collective bargaining agreement which expires in 2003. WE MAY BE ADVERSELY AFFECTED BY CHANGES IN THE LAW OR ECONOMICS RELATING TO OUR PHYSICAL PLANT. Our cable systems depend on physical facilities, including transmission equipment and miles of fiber and coaxial cable. Significant portions of those physical facilities occupy public rights-of-way according to terms of local ordinances. And many miles of the cable are attached to utility poles according to terms of pole-attachment agreements we have with the utilities that own the pole. All of this is subject to governmental regulation. No assurances can be given that we will be able to maintain our facilities in their current locations at the current costs. Changes in governmental regulation of these matters, or changes in the economics of the relationships, could have a material adverse effect on our business and our results of operations. 12 OUR CABLE SYSTEMS MAY EXPERIENCE DISRUPTIONS AS A RESULT OF TECHNICAL FAILURES, STORMS OR NATURAL DISASTERS. The operations of our cable systems involve the receipt of video and other signals at our headends and the distribution of these signals to our customers via cable wires. Programming signals are transmitted to our headends via satellite and fiber interconnect. The transmission of programming signals to our headends, our receipt of these signals at our headends and our distribution of the signals to our customers via our cable networks are each exposed to potential disruptions due to technical failures, storms, fires or other natural disasters. Any disruption in our receipt or distribution of programming can cause loss of revenues and increases in operating expenses and have an adverse effect on customer satisfaction. A significant and extended disruption could materially and adversely affect our business, financial condition or results of operations. RISKS RELATED TO OUR NEWSPAPER PUBLISHING BUSINESS WE MAY BE ADVERSELY AFFECTED BY VARIATIONS IN THE COST OF NEWSPRINT. Newsprint and ink expense represents our largest raw material expenses and, after labor costs, is the most significant operating cost of our newspaper publishing operations. Although we have a long-term contract to supply newsprint for our publishing operations, pricing under the contract varies with market prices. Newsprint costs vary widely from time to time, and price changes in newsprint can significantly affect the overall earnings of our newspaper publishing operations. During 2001, we experienced an approximately 10% increase in the price per ton of newsprint. We cannot assure you that our publishing operations will not be exposed in the future to volatile or increased newsprint costs, which could have a material adverse effect on our business and results of operations. WE MAY BE ADVERSELY AFFECTED BY STRIKES AND OTHER LABOR PROTESTS. Substantially all non-management employees of our newspaper publishing operations are represented by various unions. Collective bargaining agreements with the unions representing our Toledo publishing operations expire in March 2003. The labor agreements with the 10 unions representing our Pittsburgh newspaper employees expired December 31, 2001. On June 27, 2002, we reached tentative agreements with representatives of the 10 Pittsburgh unions on the terms of collective bargaining agreements that would run through December 31, 2006. Those tentative agreements are subject to ratification by union members; the bargaining representatives have pledged their full support in the ratification process and are optimistic, as are we, that the tentative agreements will be ratified. But we cannot assure you that the tentative agreements will be ratified. And we cannot assure you that we will reach successor agreements in Toledo or Pittsburgh when existing agreements expire. If we were to experience a strike or work stoppage at one or both of our papers, any resulting disruptions in operations could cause us to lose subscribers and advertisers and might have permanent adverse effects on our business. 13 REPORTING OF OR THE TAKING OF EDITORIAL POSITIONS ON CONTROVERSIAL ISSUES COULD ADVERSELY AFFECT OUR BUSINESS. Our newspapers report and take editorial positions on issues that are sometimes controversial and that may arouse passions in affected individuals or segments of our communities. This can involve risks of offending advertisers or subscribers, which can result in loss of advertising and subscription revenues, or can on occasion lead to demonstrations and protests, adverse community reaction, boycotts or lawsuits. THE ROLE OF NEWSPAPERS IS THREATENED BY COMPETING COMMUNICATIONS TECHNOLOGIES. For the past several decades, the introduction of new communications technologies has eroded the once dominant position of newspapers as a source of news and information. With the introduction of radio and then television broadcasting, succeeding generations have become accustomed to alternate information sources, and the percentage of the population which regularly subscribe to and read newspapers has declined. Young people, even those with post-secondary education, are reading newspapers less than in previous generations. We expect that the future growth of the Internet and other new communications technologies may cause this trend to continue. Already the Internet has become a significant alternate source of news and information, as well as a competitor to newspapers for classified advertising revenues. While we are making use of the Internet and exploring other strategies to adapt to the future growth of alternate communications technologies, we are unable to predict the extent to which these technologies may adversely affect our newspaper publishing business. RISKS RELATED TO OUR TELEVISION BROADCASTING BUSINESS OUR TELEVISION BROADCASTING OPERATIONS COULD BE ADVERSELY AFFECTED IF WE FAIL TO RENEW OR CONTINUE ON FAVORABLE TERMS, IF AT ALL, OUR NETWORK AFFILIATIONS. We have one affiliation agreement with NBC, one with ABC and one with UPN. The affiliation agreements governing the relationship between Fox and our two Fox-affiliated stations are unsigned. NBC and ABC generally provide our stations affiliated with them from 60 to 90 or more hours of prime time programming per week, while UPN and Fox provide from 11 to 24 hours of prime time programming per week. Our NBC- and ABC-affiliated stations broadcast network-inserted commercials during the programming and receive cash network compensation. Although network affiliates generally have achieved higher ratings than unaffiliated independent stations in the same market, we cannot assure you of the future success of each network's programming or the continuation of that programming. Our network affiliation agreements are subject to termination by the networks under certain circumstances. We believe that we enjoy a good relationship with each of NBC, ABC, Fox and UPN. However, we cannot assure you that our affiliation agreements will be renewed, that Fox will continue its relationship with us or that each network will continue to provide programming or compensation to affiliates on the same basis as it currently provides programming or compensation. The non-renewal or termination of a network affiliation could adversely affect our business. For information about when we must renew our network affiliation agreements, see "Business -- Television Broadcasting -- Network Affiliations." THE SUCCESS OF OUR TELEVISION STATIONS DEPENDS ON THE SUCCESS OF THE NETWORK EACH STATION CARRIES. The ratings of each of the television networks, which are based in large part on their programming, vary from year to year, and this variation can significantly impact a station's revenues. There can be no assurance as to the future success of any network or its programming. THE PLANNED INDUSTRY CONVERSION TO DIGITAL TELEVISION COULD ADVERSELY AFFECT OUR BROADCAST BUSINESS. In April 1998, the FCC assigned each licensed television station a second broadcast channel on which to provide digital television, or DTV service. By May 1, 2002, all commercial television station licensees were required to complete construction and commence operating DTV facilities except to the extent that the FCC extended the deadline in certain cases. Under current FCC guidelines, stations must abandon the 14 present analog format by December 31, 2006, provided that 85% of households within the relevant DMA have the capability to receive a digital signal. WAND met the May 1, 2002 deadline. WFTE has until May 13, 2003 to construct because of FCC delays in issuing the construction permit. KTRV is not required to construct digital facilities until the FCC determines which digital channel KTRV will ultimately utilize. Our remaining stations -- WDRB and WLIO -- requested waivers of the May 1, 2002 deadline. On June 14, 2002, the FCC denied those requests and ordered WDRB and WLIO to construct digital television transmission systems no later than December 1, 2002. The FCC also directed the stations to submit to the FCC, by July 15, 2002, reports setting forth construction plans and a proposed timetable for construction that would meet the December 1, 2002 deadline. Finally, the FCC directed the stations to file by September 13, 2002 interim progress reports regarding their digital construction efforts. In compliance with the FCC's order, the two stations have submitted to the FCC their construction plans and proposed timetable for construction of digital transmission systems. Both stations' plans call for the construction of lower-power digital transmission systems sufficient to provide digital television coverage for the station's city of license -- Lima, Ohio for WLIO, Louisville, Kentucky for WDRB. The timetables call for construction to be completed, and the facilities fully operational, by December 1, 2002. The lower-power construction plans comply with FCC rules and policies regarding digital television transmission, which expressly permit lower-power facilities. We anticipate that, at some point in the future, the FCC will establish a deadline by which such lower-power systems must be upgraded to full power systems that provide coverage to a broader geographic area. When such a deadline is established, we will comply with it by upgrading our facilities. We estimate that approximately $12 million of capital expenditures after March 31, 2002 will be necessary to meet the DTV requirements for all of our stations. The implementation of these regulations will expose our business to the following additional risks: - The digital technology may allow us and our competitors to broadcast multiple channels, compared to only one today. We do not know what impact this will have on the competitive landscape or on our results of operations. We cannot predict whether or at what cost we will be able to obtain programming for the additional channels. Increased revenues from the additional channels may not make up for the conversion cost and additional programming expenses. Also, multiple channels programmed by other stations could increase competition in our markets. - The FCC sought to replicate the coverage area of existing stations' analog signals when it assigned stations' digital channels. Because existing stations operating on very high frequency, or VHF, channels generally have larger geographic service areas than stations operating on ultra high frequency, or UHF, channels, the FCC generally made available to VHF stations digital channel allocations that allow higher power operation in order to replicate those stations' current analog coverage areas. In addition, to achieve a certain level of comparable geographic signal coverage, a station operating on a UHF channel must operate with considerably higher power than a station operating on a VHF channel. Four of our stations presently operate on UHF channels. One of our stations now operates on a VHF channel. One of our stations which currently operates on UHF was allocated a VHF digital channel, and our station which currently operates on VHF was allocated a UHF digital channel. The geographic coverage and power disparities could put us at a disadvantage to at least some of our competitors in certain markets. Furthermore, the higher power required to operate our analog VHF channel that was assigned a UHF digital channel with comparable geographic signal coverage may translate into higher electricity costs for this station. - In some cases, when we convert a station to digital television, the signal may not be received in as large a coverage area, or it may suffer from additional interference. Also, the digital signal may be subject to reception problems to a greater degree than current analog transmissions. As a result, viewers using antennas located inside their homes, as opposed to outdoor, roof-top antennas, may not receive reliable signals. If viewers do not receive high-quality, reliable signals from our stations, 15 our audience viewership may suffer, and in turn, our ability to sell time to advertisers could be impaired. - While the FCC ruled that cable companies are required to carry the signals of digital-only television stations, the agency has tentatively concluded, subject to additional inquiry, that cable companies should not be required to carry both the analog and digital signals of stations during the transition period when stations will be broadcasting in both modes. If the FCC does not require this, cable customers in our broadcast markets may not receive our digital signal, which could negatively impact our stations. WE MAY BE ADVERSELY AFFECTED BY DISRUPTIONS IN OUR ABILITY TO RECEIVE OR TRANSMIT PROGRAMMING. Our stations receive network broadcast feeds by satellite. Satellites are subject to significant risks that may prevent or impair proper commercial operations, including satellite defects, launch failure, destruction and damage and incorrect orbital placement. There can be no assurance that disruptions of transmissions will not occur in the future or that other comparable satellites will be available, or if available, whether a lease agreement with respect to such other satellites could be obtained on favorable terms. The operation of the satellite is outside our control and a disruption of the transmissions could prevent us from receiving our programming content. The transmission of programming is also subject to other risks of equipment failure, including natural disasters, power losses, software errors or telecommunications errors. We own or lease antenna and transmitter space for each of our owned and operated stations. If we were to lose any of our antenna tower leases, we cannot assure you that we would be able to secure replacement leases on commercially reasonable terms, or at all, which could also prevent us from transmitting our programs. Disruptions in our ability to receive or transmit our programming broadcasts could have a material adverse effect on our audience levels, advertising revenues and future results of operations. PROGRAMMING COSTS MAY NEGATIVELY IMPACT OUR OPERATING RESULTS. One of the most significant operating cost components of our television broadcasting operations is programming. There can be no assurance that we will not be exposed in the future to increased programming costs which may adversely affect our operating results. Acquisitions of program rights are usually made two or three years in advance and may require multi-year commitments, making it difficult to accurately predict how a program will perform. In some instances, programs must be replaced before their costs have been fully amortized, resulting in write-offs that increase station operating costs. 16 THE EXCHANGE OFFER TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OUTSTANDING EXCHANGE NOTES On April 18, 2002, we sold the old notes to Banc of America Securities LLC, Fleet Securities, Inc., Comerica Securities, NatCity Investments, Inc. and BMO Nesbitt Burns. These initial purchasers subsequently resold the old notes to qualified institutional buyers in accordance with Rule 144A under the Securities Act and outside the United States in accordance with Regulation S under the Securities Act. When we sold the old notes, we entered into a registration rights agreement with the initial purchasers. The registration rights agreement requires that we register the exchange notes with the Securities and Exchange Commission and offer to exchange the registered exchange notes for the outstanding old notes sold on April 18, 2002. We will accept any old notes that you validly tender and do not withdraw before 5:00 p.m., New York City time, on the expiration date. We will issue $1,000 of principal amount of exchange notes in exchange for each $1,000 principal amount of your outstanding old notes. You may tender some or all of your old notes in the exchange offer, but only in integral multiples of $1,000. The form and terms of the exchange notes are the same as the form and terms of the outstanding old notes except that: (1) the exchange notes being issued in the exchange offer will be registered under the Securities Act and will not have legends restricting their transfer, (2) the exchange notes being issued in the exchange offer will not have the registration rights and liquidated damages provisions applicable to the old notes, and (3) interest on the exchange notes will accrue from the last interest date to which interest was paid on your old notes or, if none, from the date of issuance of your old notes. Outstanding old notes that we accept for exchange will not accrue interest after we complete the exchange offer. The exchange offer will expire at 5:00 p.m., New York City time, on , 2002, unless we extend it. In the case of any extension, we will notify the exchange agent orally (promptly confirmed in writing) or in writing. We will also notify the registered holders of old notes of the extension no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. If we extend the exchange offer, old notes that you have previously tendered will still be subject to the exchange offer, and we may accept them. To the extent we are legally permitted to do so, we reserve the right, in our sole discretion: (1) to delay accepting your old notes, (2) to terminate the exchange offer and not accept any old notes for exchange if any of the conditions have not been satisfied, or (3) to amend the exchange offer in any manner. Any such delay in acceptance, termination or amendment will be followed as promptly as practicable by oral or written notice to the registered holders of old notes. Without limiting the manner by which we may choose to give notice of any extension, delay in acceptance, amendment or termination of the exchange offer, we will have no obligation to publish, advertise or otherwise communicate any public announcement, other than by making a timely release to a financial news service. We will promptly return your old notes without expense to you after the exchange offer expires or terminates if we do not accept them for exchange for any reason. PROCEDURES FOR TENDERING OLD NOTES In general, old notes may be tendered in the exchange offer by you only if you are a registered holder of the old notes, a beneficial owner which has a properly completed bond power from the registered holder, or a Depository Trust Company participant listed on the Depository Trust Company securities position listing with respect to the old notes. If you are a beneficial owner of old notes with respect to which a broker, dealer, commercial bank, trust company or other nominee is listed on the securities position listing of the Depository Trust Company and you wish to tender your old notes, you should contact such Depository Trust Company participant promptly and instruct them to tender on your behalf. Only you may tender your old notes in the exchange offer. To tender your old notes in the exchange offer, you must: (1) complete, sign and date the letter of transmittal which accompanied this prospectus, or a copy of it; (2) have the signature on the letter of transmittal guaranteed if required by the letter of transmittal; and 17 (3) mail, fax or otherwise deliver the letter of transmittal or copy to the exchange agent; OR if the tender of the old notes will be under The Depository Trust Company's book-entry transfer procedures, arrange for DTC to transmit an agent's message to the exchange agent on or before the expiration date. In addition, either: (1) the exchange agent must receive certificates for outstanding old notes and the letter of transmittal; or (2) the exchange agent must receive a timely confirmation of a book-entry transfer of your old notes into the exchange agent's account at The Depository Trust Company, along with the agent's message; or (3) you must comply with the guaranteed delivery procedures described below. An agent's message is a computer-generated message transmitted to the exchange agent by The Depository Trust Company through its Automated Tender Offer Program. To tender old notes effectively, a tendering party must make sure that the exchange agent receives a letter of transmittal and other required documents or an agent's message before the expiration date. When you tender your outstanding old notes and we accept them, the tender will be a binding agreement between you and us in accordance with the terms and conditions in this prospectus and in the letter of transmittal. The method of delivery to the exchange agent of old notes, letters of transmittal and all other required documents is at your election and risk. We recommend that you use an overnight or hand delivery service instead of mail. If you do deliver by mail, we recommend that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow enough time to make sure your documents reach the exchange agent before the expiration date. Do not send a letter of transmittal or notes directly to us. You may request your brokers, dealers, commercial banks, trust companies, or nominees to make the exchange on your behalf. Unless you are a registered holder who requests that the exchange notes to be mailed to you and issued in your name, or unless you are an eligible institution, you must have your signature on a letter of transmittal or a notice of withdrawal guaranteed by an eligible institution. An eligible institution is a firm which is a financial institution that is a member of a registered national securities exchange or a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program. If the person who signs the letter of transmittal and tenders the old notes is not the registered holder of the old notes, the registered holders must endorse the old notes or sign a written instrument of transfer or exchange that is included with the old notes, with the registered holder's signature guaranteed by an eligible institution. We will decide whether the endorsement or transfer instrument is satisfactory. We will decide all questions about the validity, form, eligibility, acceptance and withdrawal of tendered old notes, and our determination will be final and binding on you. We reserve the absolute right to: (1) reject any and all tenders of any particular note not properly tendered; (2) refuse to accept any old note if, in our judgment or the judgment of our counsel, the acceptance would be unlawful; and (3) waive any defects or irregularities or conditions of the exchange offer as to any particular old note either before or after the expiration date. This includes the right to waive the ineligibility of any holder who seeks to tender old notes in the exchange offer. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. You must cure any defects or irregularities in 18 connection with tenders of old notes as we will determine. Neither we, the exchange agent nor any other person will incur any liability for failure to notify you of any defect or irregularity with respect to your tender of old notes. If trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity sign the letter of transmittal or any notes or power of attorney on your behalf, those persons must indicate their capacity when signing, and submit to us with the letter of transmittal satisfactory evidence demonstrating their authority to act on your behalf. To participate in the exchange offer, we require that you represent to us that: (1) you or any other person acquiring exchange notes for your old notes in the exchange offer is acquiring them in the ordinary course of business; (2) neither you nor any other person acquiring exchange notes in exchange for your old notes is engaging in or intends to engage in a distribution of the exchange notes issued in the exchange offer; (3) neither you nor any other person acquiring exchange notes in exchange for your old notes has an arrangement or understanding with any person to participate in the distribution of exchange notes issued in the exchange offer; (4) neither you nor any other person acquiring exchange notes in exchange for your old notes is our "affiliate" as defined under Rule 405 of the Securities Act; and (5) if you or another person acquiring exchange notes for your old notes is a broker-dealer, you will receive exchange notes for your own account, you acquired exchange notes as a result of market-making activities or other trading activities, and you acknowledge that you will deliver a prospectus in connection with any resale of your exchange notes. The delivery of an agent's message to the exchange agent on your behalf will be deemed a representation by you to the effects stated above. By its acceptance of the exchange offer, any broker-dealer that receives exchange notes pursuant to the exchange offer agrees to notify us in writing before using the prospectus in connection with the resale or transfer of exchange notes. The broker-dealer further acknowledges and agrees that, upon receipt of notice from us of the happening of any event which makes any statement in the prospectus untrue in any material respect or which requires the making of any changes in the prospectus to make the statements in the prospectus not misleading or which may impose upon us disclosure obligations that may have a material adverse effect on us, which notice we agree to deliver promptly to the broker-dealer, the broker-dealer will suspend use of the prospectus until we have notified the broker-dealer that delivery of the prospectus may resume and have furnished to the broker-dealer copies of any amendment or supplement to the prospectus. We have agreed in the registration rights agreement that for a period of 180 days after the effective date of the registration statement of which this prospectus is a part we will make this prospectus, as amended or supplemented, available to any broker-dealer who requests it in writing for use in connection with any such resale. If you are our "affiliate," as defined under Rule 405 of the Securities Act, you are a broker-dealer who acquired your old notes in the initial offering and not as a result of market-making or trading activities, or if you are engaged in or intend to engage in or have an arrangement or understanding with any person to participate in a distribution of exchange notes acquired in the exchange offer, you or that person: (1) may not rely on the applicable interpretations of the staff of the Commission; and (2) must comply with the registration and prospectus delivery requirements of the Securities Act when reselling the exchange notes. Broker-dealers who cannot make the representations in item (5) of the paragraph above cannot use this exchange offer prospectus in connection with resales of exchange notes. ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES ISSUED IN THE EXCHANGE OFFER We will accept validly tendered old notes when the conditions to the exchange offer have been satisfied or we have waived them. We will have accepted your validly tendered old notes when we have given oral or written notice to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us. If we do not accept any tendered old notes for exchange because of an invalid tender or other valid reason, the exchange agent will return the certificates, without expense, to the tendering holder. If a holder has tendered old notes by book-entry transfer, we will credit the notes to an account maintained with The Depository Trust Company. We will return certificates or credit the account at The Depository Trust Company as promptly as practicable after the exchange offer terminates or expires. 19 BOOK-ENTRY TRANSFERS The exchange agent will make a request to establish an account at The Depository Trust Company for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in The Depository Trust Company's systems must make book-entry delivery of outstanding old notes by causing The Depository Trust Company to transfer those outstanding old notes into the exchange agent's account at The Depository Trust Company in accordance with The Depository Trust Company's Automated Tender Offer Procedures. The participant should transmit its acceptance to The Depository Trust Company on or before the expiration date or comply with the guaranteed delivery procedures described below. The Depository Trust Company will verify acceptance, execute a book-entry transfer of the tendered outstanding old notes into the exchange agent's account at The Depository Trust Company and then send to the exchange agent confirmation of the book-entry transfer. The confirmation of the book-entry transfer will include an agent's message confirming that The Depository Trust Company has received an express acknowledgment from the participant that the participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against the participant. Delivery of exchange notes issued in the exchange offer may be effected through book-entry transfer at The Depository Trust Company. However, the letter of transmittal or facsimile of it or an agent's message, with any required signature guarantees and any other required documents, must: (1) be transmitted to and received by the exchange agent at the address listed below under "Exchange Agent" on or before the expiration date; or (2) the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES If you are a registered holder of outstanding old notes who desires to tender old notes but your old notes are not immediately available, or time will not permit your old notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, you may effect a tender if: (1) you tender the old notes through an eligible institution; (2) before the expiration date, the exchange agent receives from the eligible institution a notice of guaranteed delivery in the form we have provided. The notice of guaranteed delivery will state the name and address of the holder of the old notes being tendered and the amount of old notes being tendered, that the tender is being made and guarantee that within three New York Stock Exchange trading days after the expiration date, the certificates for all physically tendered old notes, in proper form for transfer, or a book-entry confirmation, together with a properly completed and signed letter of transmittal with any required signature guarantees and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and (3) the certificates for all physically tendered outstanding old notes, in proper form for transfer, or a book-entry confirmation, together with a properly completed and signed letter of transmittal with any required signature guarantees and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the expiration date. WITHDRAWAL RIGHTS You may withdraw your tender of old notes at any time before 5:00 p.m., New York City time, on the expiration date. For a withdrawal to be effective, you must make sure that, before 5:00 p.m., New York City time, on the expiration date, the exchange agent receives a written notice of withdrawal at one of the addresses below or, if you are a participant of The Depository Trust Company, an electronic message using The Depository Trust Company's Automated Tender Offer Program. 20 A notice of withdrawal must: (1) specify the name of the person that tendered the old notes to be withdrawn; (2) identify the old notes to be withdrawn, including the principal amount of the old notes; (3) be signed by the holder in the same manner as the original signature on the letter of transmittal by which the old notes were tendered or be accompanied by documents of transfer; and (4) if you have transmitted certificates for outstanding old notes, specify the name in which the old notes are registered, if different from that of the withdrawing holder, and identify the serial numbers of the certificates. If you have tendered old notes under the book-entry transfer procedure, your notice of withdrawal must also specify the name and number of an account at The Depository Trust Company to which your withdrawn old notes can be credited. We will decide all questions as to the validity, form and eligibility of the notices and our determination will be final and binding on all parties. Any tendered old notes that you withdraw will be not be considered to have been validly tendered. We will return any outstanding old notes that have been tendered but not exchanged, or credit them to The Depository Trust Company account, as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. You may retender properly withdrawn old notes before the expiration date by following one of the procedures described above. CONDITIONS TO THE EXCHANGE OFFER We are not required to accept for exchange, or to issue exchange notes in exchange for, any outstanding old notes, and we may terminate the exchange offer, if at any time before the acceptance of old notes: (1) any law, statute, rule or regulation has been adopted or enacted, or any order of any governmental agency or court of law has been issued, which, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer; (2) if any stop order is threatened or in effect with respect to the registration statement of which this prospectus is a part or the qualification of the indenture under the Trust Indenture Act of 1939; or (3) there is a change in the current interpretation by the staff of the Commission which permits holders who have made the required representations to us to resell, offer for resale, or otherwise transfer exchange notes issued in the exchange offer without registration of the exchange notes and delivery of a prospectus, as discussed above. These conditions are for our sole benefit and we may assert or waive them at any time and for any reason. Our failure to exercise any of the foregoing rights will not be a waiver of our rights. 21 EXCHANGE AGENT You should direct all signed letters of transmittal to the exchange agent, Wells Fargo Bank Minnesota, National Association. You should direct questions, requests for assistance, and requests for additional copies of this prospectus, the letter of transmittal and the notice of guaranteed delivery to the exchange agent addressed as follows:
BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY: BY OVERNIGHT COURIER: Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A. 213 Court Street, Suite 703 213 Court Street, Suite 703 213 Court Street, Suite 703 Middletown, Connecticut 06457 Middletown, Connecticut 06457 Middletown, Connecticut 06457 Attention: Corporate Trust Attention: Corporate Trust Attention: Corporate Trust Services Services Services BY FACSIMILE: (860) 704-6219 Attention: Corporate Trust Services Confirmed by Telephone: (860) 704-6217
Delivery or fax of the letter of transmittal to an address or number other than those above is not a valid delivery of the letter of transmittal. FEES AND EXPENSES We will not make any payment to brokers, dealers, or others soliciting acceptances of the exchange offer except for reimbursement of mailing expenses. We will pay the estimated cash expenses connected with the exchange offer. We estimate that these expenses will be approximately $235,000. ACCOUNTING TREATMENT The exchange notes will be recorded at the same carrying value as the existing old notes, as reflected in our accounting records on the date of exchange. Accordingly, we will recognize no gain or loss for accounting purposes. The expenses of the exchange offer will be expensed over the term of the exchange notes. TRANSFER TAXES If you tender outstanding old notes for exchange you will not be obligated to pay any transfer taxes. However, if you instruct us to register exchange notes in the name of, or request that your old notes not tendered or not accepted in the exchange offer be returned to, a person other than you, you will be responsible for paying any transfer tax owed. YOU MAY SUFFER ADVERSE CONSEQUENCES IF YOU FAIL TO EXCHANGE OUTSTANDING EXCHANGE NOTES If you do not tender your outstanding old notes, you will not have any further registration rights, except for the rights described in the registration rights agreement and described below, and your old notes will continue to be subject to restrictions on transfer when we complete the exchange offer. Accordingly, if you do not tender your notes in the exchange offer, your ability to sell your old notes could be adversely affected. Once we have completed the exchange offer, holders who have not tendered notes will not continue to be entitled to any increase in interest rate that the indenture provides for if we do not complete the exchange offer. Holders of the exchange notes issued in the exchange offer and old notes that are not tendered in the exchange offer will vote together as a single class under the indenture. 22 CONSEQUENCES OF EXCHANGING OUTSTANDING OLD NOTES If you make the representations that we discuss above, we believe that you may offer, sell or otherwise transfer the exchange notes to another party without registration of your notes or delivery of a prospectus. We base our belief on interpretations by the staff of the Commission in no-action letters issued to third parties. If you cannot make these representations, you cannot rely on this interpretation by the Commission's staff and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a resale of the old notes. A broker-dealer that receives exchange notes for its own account in exchange for its outstanding old notes must acknowledge that it acquired the old notes as a result of market making activities or other trading activities and that it will deliver a prospectus in connection with any resale of the exchange notes. Broker-dealers who can make these representations may use this exchange offer prospectus, as supplemented or amended, in connection with resales of exchange notes issued in the exchange offer. We have agreed in the registration rights agreement that for a period of 180 days after the effective date of the registration statement of which this prospectus is a part we will make this prospectus, as amended or supplemented, available to any broker-dealer who requests it in the letter of transmittal for use in connection with any such resale. However, because the Commission has not issued a no-action letter in connection with this exchange offer, we cannot be sure that the staff of the Commission would make a similar determination regarding the exchange offer as it has made in similar circumstances. SHELF REGISTRATION The registration rights agreement also requires that we file a shelf registration statement if: (1) we cannot file a registration statement for the exchange offer because the exchange offer is not permitted by law; or (2) a holder notifies us prior to the 20th day following consummation of the exchange offer that: - law or Commission policy prohibits the holder from participating in the exchange offer; - the holder cannot resell the exchange notes it acquires in the exchange offer without delivering a prospectus and this prospectus is not appropriate or available for resales by the holder; or - the holder is a broker-dealer and holds notes acquired directly from us or one of our affiliates. Old notes will be subject to restrictions on transfer until: (1) a person other than a broker-dealer has exchanged the old notes in the exchange offer; (2) a broker-dealer has exchanged the old notes in the exchange offer and sells them to a purchaser that receives a prospectus from the broker, dealer on or before the sale; (3) the old notes are sold under an effective shelf registration statement that we have filed; or (4) the old notes are sold to the public under Rule 144 of the Securities Act. 23 USE OF PROCEEDS We are making the exchange offer to satisfy our obligation under the registration rights agreement we entered into with the initial purchasers when we issued the old notes. We will not receive any cash proceeds from the issuance of the exchange notes. In consideration for issuing the exchange notes, we will receive an equal principal amount of old notes. The old notes surrendered in exchange for the exchange notes will be retired and cancelled. The proceeds from the issuance and sale of the old notes were $169 million after deducting fees and expenses. The proceeds of offering of the old notes, together with borrowings under our new senior credit facilities, were used to repay in full our former senior credit facilities. See "Capitalization." CAPITALIZATION The following table sets forth our capitalization as of March 31, 2002 on an actual basis and on a pro forma basis after giving effect to the issuance of the old notes, the closing of our new senior credit facilities and the application of the proceeds therefrom. You should read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.
AS OF MARCH 31, 2002 (UNAUDITED) ---------------------- ACTUAL PRO FORMA --------- ---------- (DOLLARS IN THOUSANDS) Debt (includes current maturities): Old revolving credit facility............................. $ 74,139 $ -- Old term loan facility.................................... 75,000 -- Old senior notes.......................................... 67,499 -- New revolving credit facility............................. -- --(1) New delayed-draw term loan A.............................. -- --(1) New term loan B........................................... -- 75,000 Capital leases............................................ 3,031 3,031 -------- -------- Total senior debt....................................... 219,669 78,031 -------- -------- 9 1/4% Senior Subordinated Notes due 2009................. -- 175,000 -------- -------- Total debt.............................................. 219,669 253,031 Total shareholders' equity(2)........................... 50,649 44,718 -------- -------- Total capitalization.................................... $270,318 $297,749 ======== ========
- --------------- (1) As of March 31, 2002, after giving effect to the issuance and sale of the old notes and the closing of the new senior credit facilities, the unused commitments under our senior credit facilities would have been $113.1 million. (2) Reflects the write-off of debt prepayment penalties of $6.3 million and unamortized finance fees of $2.7 million, less tax benefits of $3.1 million. 24 SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth our financial data and other operating data. The financial data was derived from our consolidated financial statements. The financial data and other operating information is qualified in its entirety by reference to, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operation" which follows and the financial statements and related notes included elsewhere in this prospectus.
(UNAUDITED) ------------------- THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2002 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT OPERATING DATA) INCOME STATEMENT DATA: Revenues Cable(1)................................... $ 67,277 $ 71,846 $ 75,414 $ 82,110 $ 89,420 $ 21,148 $ 25,097 Publishing(2).............................. 260,878 272,107 275,827 286,717 264,679 61,854 61,563 Broadcasting(3)............................ 33,422 36,686 36,293 42,531 35,184 8,727 9,000 Other communications(4).................... 2,771 3,023 8,682 14,299 25,282 5,149 6,353 -------- -------- -------- -------- -------- -------- -------- Total revenues............................... $364,348 $383,662 $396,216 $425,657 $414,565 96,878 102,013 Expenses Cable...................................... 47,795 52,765 62,846 74,535 84,578 18,444 22,814 Publishing................................. 254,396 267,489 263,951 277,312 262,799 65,487 61,519 Broadcasting(2)............................ 28,416 30,502 34,221 37,099 36,973 9,179 9,055 Other communications(3).................... 4,867 6,602 12,734 18,445 27,955 6,356 6,244 Corporate general and administrative....... 2,319 1,928 1,524 4,152 2,705 350 951 -------- -------- -------- -------- -------- -------- -------- Total expenses............................... 337,793 359,286 375,276 411,543 415,010 99,816 100,583 Operating income (loss)........................ 26,555 24,376 20,940 14,114 (445) (2,938) 1,430 Interest expense, net.......................... 9,953 10,316 11,043 14,069 19,439 4,670 4,739 (Gain) on disposition of WLFI-TV, Inc.......... -- -- -- (22,339) -- -- -- (Gain) on disposition of Monroe Cablevision.... -- -- -- -- -- -- (21,600) Change in fair value of interest rate swaps.... -- -- -- -- 5,340 1,580 (1,462) -------- -------- -------- -------- -------- -------- -------- Income (loss) before income taxes and minority interest..................................... 16,602 14,060 9,897 22,384 (25,224) (9,188) 19,753 Provision (credit) for income taxes............ 7,495 6,240 4,556 9,176 (7,132) (2,602) 6,793 -------- -------- -------- -------- -------- -------- -------- Income (loss) before minority interest......... 9,107 7,820 5,341 13,208 (18,092) (6,586) 12,960 Minority interest.............................. -- -- -- (427) 235 54 (7) -------- -------- -------- -------- -------- -------- -------- Net income (loss).............................. $ 9,107 $ 7,820 $ 5,341 $ 12,781 $(17,857) $ (6,532) $ 12,953 ======== ======== ======== ======== ======== ======== ======== OTHER DATA: Cable cash flow (unaudited)(4)............... $ 26,179 $ 27,833 $ 28,200 $ 30,063 $ 32,130 $ 7,709 $ 9,375 Publishing cash flow (unaudited)(4).......... 19,290 18,016 25,787 23,851 15,785 84 3,115 Broadcasting cash flow (unaudited)(4)........ 6,576 7,839 5,578 8,009 3,092 462 986 EBITDA (unaudited)(5)........................ 48,575 49,251 56,369 56,873 50,276 7,825 13,918 Depreciation and amortization................ 24,865 28,164 40,551 48,662 55,533 12,089 13,270 Capital expenditures......................... 30,932 47,234 66,702 80,340 62,154 17,108 5,862 Ratio of earnings to fixed charges(6)........ 2.4x 2.1x 1.7x 2.2x -- -- 4.8x BALANCE SHEET DATA: Cash and cash equivalents.................... $ 5,031 $ 2,053 $ 5,715 $ 4,213 $ 5,883 $ 3,638 $ 3,569 Total assets................................. 313,030 346,848 388,302 464,190 483,887 464,506 472,887 Total funded debt............................ 110,185 127,706 166,109 213,356 237,264 228,991 219,669 Stockholders' equity......................... 43,892 48,993 51,198 61,390 37,583 53,622 50,649
25
(UNAUDITED) ------------------- THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------------------------------- ------------------- 1997 1998 1999 2000 2001 2001 2002 -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT OPERATING DATA) CABLE OPERATING DATA (UNAUDITED): Homes passed................................. 249,394 249,668 250,893 253,903 255,852 254,412 245,395 Basic subscribers............................ 157,356 157,467 159,294 158,537 157,341 158,251 153,034 Basic penetration............................ 63.1% 63.1% 63.5% 62.4% 61.5% 62.2% 62.4% Premium units................................ 62,270 60,827 62,362 69,649 70,909 69,986 69,645 Premium penetration.......................... 39.6% 38.6% 39.1% 43.9% 45.1% 44.3% 45.5% Cable modem subscribers...................... -- -- 1,484 7,022 15,221 9,130 17,428 Digital subscribers.......................... -- -- -- -- 7,846 -- 9,841 Average monthly revenue per basic subscriber(7).............................. $ 35.63 $ 38.02 $ 39.45 $ 43.16 $ 47.36 $ 44.55 $ 52.89 PUBLISHING OPERATING DATA (UNAUDITED)(8): Daily circulation............................ 387,315 390,171 389,737 381,643 380,646 Sunday circulation........................... 629,814 631,740 631,711 611,005 603,485
- --------------- (1) Includes the results of Monroe CableSystem, the assets of which were disposed of on March 29, 2002 in a like-kind exchange for cable assets in Bedford, Michigan plus a cash payment to us of $12.1 million. See "Summary --Recent Developments." The revenues of Monroe Cablevision for 1997, 1998, 1999, 2000 and 2001 were $4.5 million, $4.6 million, $5.0 million, $5.6 million and $5.4 million, respectively, and for the three months ended March 31, 2001 and March 29, 2002 were $1.3 million and $1.3 million, respectively. (2) Effective April 1, 2000, we acquired a two-thirds interest in WAND Television, Inc. in exchange for the assets of WLFI-TV, Inc. On March 30, 2001, we purchased WFTE TV. Results of the acquired stations are included from the date of acquisition. (3) Includes the results of Corporate Protection Services, Inc. from its date of acquisition in December 1998 and the results of Access Toledo Ltd. from its date of acquisition in January 2001. Revenues of CPS for 1999, 2000 and 2001 were $4.1 million, $5.7 million and $8.6 million, respectively. Revenues of Access Toledo for 2001 were $2.0 million. (4) Cable, publishing and broadcasting cash flow represents each segment's EBITDA before the effect of corporate general and administrative expenses. (5) EBITDA is defined as net income before provision for income taxes, interest expense, depreciation and amortization (including amortization of broadcast rights), other noncash charges, gains or losses on disposition of assets, and extraordinary items and after payments for broadcast rights. EBITDA is not, and should not be used as, an indicator or alternative to operating income, net income or cash flow as reflected in our financial statements, is not intended to represent funds available for debt service, dividends or other discretionary uses, is not a measure of financial performance under accounting principles generally accepted in the United States and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview -- EBITDA." (6) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income (loss) before taxes and minority interest, plus fixed charges, less interest capitalized during the year, plus current year amortization of capitalized interest. Fixed charges consist of interest expense, capitalized interest, the interest portion of rent expense and amortization of debt issuance costs. In 2001 and for the three months ended March 31, 2001, our earnings were insufficient to cover fixed charges by $25.8 million and $9.1 million, respectively. (7) Average monthly revenue per basic subscriber for the three months ended March 31, 2002 excludes the 5,004 Bedford, Michigan subscribers acquired from Comcast in the March 29, 2002 exchange and includes the 10,129 subscribers of Monroe CableSystem disposed of in the exchange. (8) Circulation numbers are based on the average paid circulation for the 12 months ended March 31 of each year for the Post-Gazette and for the 12 months ended September 30 of each year for The Blade, in each case as set forth in the ABC Audit Report for such period. The ABC Audit Report for the 12 months ended March 31, 2002 is not yet available. 26 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Consolidated Financial Data" and our consolidated financial statements and the notes thereto included elsewhere herein. Significant accounting policies are stated in the applicable footnotes to the audited annual consolidated financial statements. OVERVIEW We are a privately held diversified media company with our primary operations in cable television, newspaper publishing and television broadcasting. We are the 23rd largest cable system operator in the United States, with systems in Toledo, Ohio and nearby areas that had approximately 153,000 subscribers at March 31, 2002. We publish two daily metropolitan newspapers, the Pittsburgh Post-Gazette in Pittsburgh, Pennsylvania, and The Blade in Toledo, Ohio, each of which is the leading publication in its market. The aggregate average daily and Sunday paid circulation of our two newspapers is approximately 381,000 and 603,000, respectively. We own and operate four television stations: two in Louisville, Kentucky, and one each in Boise, Idaho and Lima, Ohio, and we are a two-thirds owner of a television station in Decatur, Illinois. We also have other communication operations including a small telephony business, a home security business and an alternative distribution advertising business. For the year ended December 31, 2001, we had revenues and EBITDA of $414.6 million and $50.3 million, respectively, and experienced an operating loss of $445,000 and a net loss of $17.9 million. Approximately 61% of our EBITDA was generated by our cable television operations, 30% by our newspaper publishing operations, 6% by our television broadcasting business and 3% by our other communications operations, excluding in each case the effect of $2.7 million in corporate general and administrative expenses. Revenues Most cable revenue is derived from monthly subscription fees for our cable services, including basic and digital cable and high-speed data services, installation and equipment rental charges, pay-per-view programming charges, and the sale of available advertising spots on advertiser-supported programming. Cable revenue is affected by the timing of subscriber rate increases, the amount of pay-per-view programming available to us and the demand for that programming, and the demand for advertising spots. The majority of publishing revenue is derived from the sale of advertising space and from subscription and single copy sales of our newspapers. Advertising revenue was 80.7%, 81.6% and 80.1% of newspaper revenue for 1999, 2000 and 2001, respectively, and 79.6% and 79.0% of newspaper revenue for the three months ended March 31, 2001 and 2002, respectively. Publishing revenue fluctuates with the general condition of the local and national economy. Seasonal revenue fluctuations are also common in the newspaper industry, due primarily to fluctuations in expenditure levels by local and national advertisers. The principal source of television broadcasting revenue is the sale of broadcasting time on our stations for advertising. Broadcasting revenue fluctuates with the general condition of the local and national economy. Broadcasting revenue also fluctuates from year to year due to political advertising. Seasonal revenue fluctuations are common in the broadcasting industry, due primarily to fluctuations in expenditure levels by local and national advertisers. Other communication revenue consists of sales in our non-reportable segments, including our telephony, home security and alarm monitoring, conventional dial-up Internet service provider, cable plant construction and alternative distribution advertising businesses. 27 Operating Expenses Cable expenses include programming expenses, salaries and benefits of technical personnel, depreciation and amortization, and selling, general and administrative expenses for customer service functions, accounting and billing services, office administration expenses, property taxes and corporate charges. Programming expenses were 25.1%, 26.9% and 28.0% of cable revenue for 1999, 2000 and 2001, respectively, and 27.5% and 29.0% of cable revenue for the three months ended March 31, 2002 and 2001, respectively. Depreciation and amortization expense relates primarily to the capital expenditures associated with the rebuild and expansion of our cable systems. Publishing expenses include employee salaries and benefits, newsprint and ink expense, depreciation and amortization, and selling, general and administrative expenses. Selling, general and administrative expenses include corporate charges for support functions. Salaries and benefits are the largest operating expense of our newspaper publishing segment. Newsprint, ink and related costs are our second largest operating expense for this segment and accounted for 15.2%, 15.6% and 16.2% of newspaper operating expenses for 1999, 2000 and 2001, respectively, and 12.4% and 14.3% of newspaper operating expenses for the three months ended March 31, 2002 and 2001, respectively. Newsprint prices fluctuate with the market based on the supply and demand for newsprint. Television operating expenses are comprised of employee salaries and commissions, depreciation and amortization, programming expenses, advertising and promotion expenses, and selling, general and administrative expenses. Depreciation and amortization primarily relates to the amortization of broadcast rights. Selling, general and administrative expenses include office administration and charges for corporate support functions. Depreciation and Amortization Depreciation and amortization relates primarily to the capital expenditures associated with the rebuild and expansion of our cable systems, publishing facilities and telephony facilities. As a result of our plan to continue to invest in our cable systems, publishing properties and telephony facilities and to convert our television stations to digital-capable broadcasting, we expect to report higher levels of depreciation and amortization than are reflected in our historical consolidated financial statements. EBITDA We define EBITDA as net income before provision for income taxes, interest expense, depreciation and amortization (including amortization of broadcast rights), other noncash charges, gains or losses on disposition of assets, and extraordinary items and after payments for broadcast rights. When we present EBITDA for our business segments, we exclude certain expenses consisting primarily of corporate general and administrative expenses that have not been allocated to individual segments. Corporate general and administrative expenses were $1.5 million, $4.2 million and $2.7 million for 1999, 2000 and 2001, respectively, and $350,000 and $951,000 for the three months ended March 31, 2001 and 2002, respectively. Other media companies may measure EBITDA in a different manner. We have included EBITDA data because such data is commonly used as a measure of performance for media companies and is also used by investors to measure a company's ability to service debt. EBITDA is not, and should not be used as, an indicator or alternative to operating income, net income or cash flow as reflected in our consolidated financial statements, is not intended to represent funds available for debt service, dividends or other discretionary uses, is not a measure of financial performance under accounting principles generally accepted in the United States and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States. For a reconciliation of EBITDA to net income, see "-- Results of Operations" below. 28 RESULTS OF OPERATIONS The following table summarizes our consolidated historical results of operations and consolidated historical results of operations as a percentage of revenues for the years ended December 31, 1999, 2000 and 2001 and the three months ended March 31, 2001 and 2002. It also provides a reconciliation of net income to EBITDA.
(UNAUDITED) ----------------------------------- YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31, ------------------------------------------------------ ----------------------------------- 1999 2000 2001 2001 2002 ---------------- ---------------- ---------------- ---------------- ---------------- (DOLLARS IN THOUSANDS) Revenues: Cable....................... $ 75,414 19.0% $ 82,110 19.3% $ 89,420 21.6% $ 21,148 21.8% $ 25,097 24.6% Publishing.................. 275,827 69.6 286,717 67.4 264,679 63.4 61,854 63.8 61,563 60.3 Broadcasting................ 36,293 9.2 42,531 10.0 35,184 8.5 8,727 9.0 9,000 8.8 Other communications........ 8,682 2.2 14,299 3.4 25,282 6.1 5,149 5.3 6,353 6.2 -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- $396,216 100.0 $425,657 100.0 $414,565 100.0 96,878 100.0 102,013 100.0 Expenses: Cable....................... 62,846 15.9 74,535 17.5 84,578 20.4 18,444 19.0 22,814 22.4 Publishing.................. 263,951 66.6 277,312 65.2 262,799 63.4 65,487 67.6 61,519 60.3 Broadcasting................ 34,221 8.6 37,099 8.7 36,973 8.9 9,179 9.5 9,055 8.9 Other communications........ 12,734 3.2 18,445 4.3 27,955 6.7 6,356 6.6 6,244 6.1 Corporate general and administrative............ 1,524 0.4 4,152 1.0 2,705 0.7 350 0.4 951 0.9 -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- 375,276 94.7 411,543 96.7 415,010 100.1 99,816 103.0 100,583 98.6 -------- ----- -------- ----- -------- ----- -------- ----- -------- ----- Operating income (loss)....... 20,940 5.3% 14,114 3.3% (445) (0.1%) (2,938) -3.0% 1,430 1.4% Nonoperating income (expense): Interest expense............ (11,243) (14,175) (19,486) (4,676) (4,748) Gain on disposition of WLFI- TV........................ -- 22,339 -- -- -- Gain on disposition of Monroe Cablevision........ -- -- -- -- 21,600 Change in fair value of interest rate swaps....... -- -- (5,340) (1,580) 1,462 Interest income............. 200 106 47 6 9 -------- -------- -------- -------- -------- (11,043) 8,270 (24,779) (6,250) 18,323 -------- -------- -------- -------- -------- Income (loss) before income taxes....................... 9,897 22,384 (25,224) (9,188) 19,753 Provision (credit) for income taxes....................... 4,556 9,176 (7,132) (2,602) 6,793 Minority interest............. -- (427) 235 54 (7) -------- -------- -------- -------- -------- Net income (loss)............. $ 5,341 $ 12,781 $(17,857) $ (6,532) $ 12,953 ======== ======== ======== ======== ========
29
(UNAUDITED) ----------------------------------- YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31, ------------------------------------------------------ ----------------------------------- 1999 2000 2001 2001 2002 ---------------- ---------------- ---------------- ---------------- ---------------- (DOLLARS IN THOUSANDS) Add: Provision for income taxes.... 4,556 9,176 (7,132) (2,602) 6,793 Change in fair value of interest rate swaps......... -- -- 5,340 1,580 (1,462) (Gain) on disposition of WLFI- TV.......................... -- (22,339) -- -- -- (Gain) on disposition of Monroe Cablevision.......... -- -- -- -- (21,600) (Gain) loss on disposal of assets...................... 230 303 23 -- 397 Interest expense.............. 11,243 14,175 19,486 4,676 4,748 Depreciation.................. 30,352 38,865 44,601 9,765 11,323 Amortization of intangibles and deferred charges........ 2,897 3,478 4,422 884 372 Amortization of broadcast rights...................... 7,302 6,319 6,510 1,440 1,574 Less: Payments for broadcast rights...................... (5,552) (5,885) (5,117) (1,386) (1,180) -------- -------- -------- -------- -------- EBITDA (unaudited)............ $ 56,369 $ 56,873 $ 50,276 $ 7,825 $ 13,918 ======== ======== ======== ======== ========
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 Revenues Revenues decreased $11.1 million, or 2.6%, from 2000 to 2001. The decrease in revenues was largely due to decreased advertising revenues in both our publishing and broadcasting operations attributable to a soft advertising market, which was primarily the result of a weak overall economic environment. The decrease was partially offset by increased revenues in our cable and other communications operations. Cable Television. Cable revenue increased $7.3 million, or 8.9%, from 2000 to 2001. The increase in cable revenue was principally a result of an increase of $4.29, or 9.8%, in the average monthly revenue per basic subscriber, partially offset by a slight decrease in basic subscribers. The increase in the average monthly revenue per basic subscriber was primarily a result of an increase in the basic cable service rate charged to subscribers and growth in high-speed cable modem subscribers, as well as an increase in digital cable and pay-per-view services. Newspaper Publishing. Publishing revenue decreased $22.0 million, or 7.7%, from 2000 to 2001. The decrease in publishing revenue was comprised of a $22.2 million, or 9.5%, decrease in advertising revenue to $211.9 million in 2001. This was due to reduced advertising sales, primarily in classified advertising as a result of a decrease in placement of help wanted advertising due to the general economic slowdown, partially offset by advertising rate increases for all categories of advertising. Circulation revenue decreased $693,000, or 1.4%, to $50.0 million in 2001 due to decreased circulation sales. Other revenue, which is comprised of third-party and total market delivery and niche publications, increased $1.4 million, or 101.9%, to $2.8 million. Television Broadcasting. Broadcasting revenue decreased $7.3 million, or 17.3%, from 2000 to 2001. The decrease in broadcasting revenue was primarily a result of lower local and national advertising as a result of the general economic slowdown and greatly reduced political advertising demand due to the lack of political races during 2001. Other Communications. Other communications revenue increased $11.0 million, or 76.8%, from 2000 to 2001. The increase in other communications revenue was primarily a result of a $6.3 million, or 85.2%, increase in telephony services to $13.6 million in 2001, primarily due to increased telephony subscribers and sales of additional services to existing customers. 30 Operating Expenses Operating expenses increased $3.5 million, or 0.8%, from 2000 to 2001. The increase in operating expenses was largely attributable to increased cable and telephony expenses and partially offset by decreased publishing expenses. Cable Television. Cable operating expenses increased $10.0 million, or 13.5%, from 2000 to 2001. The increase was primarily due to a $5.0 million, or 22.7%, increase in depreciation and amortization to $27.2 million in 2001 attributable to capital expenditures associated with the rebuild and expansion of our cable systems. We also recognized an increase of $3.0 million, or 13.7%, in programming costs to $25.1 million, resulting from price increases from programming suppliers and the purchase of additional programming for new cable channels offered on our cable systems. Newspaper Publishing. Publishing operating expenses decreased $14.5 million, or 5.2%, from 2000 to 2001. The decrease in publishing operating expenses was comprised of a $7.3 million decrease in general and administrative expense to $19.8 million in 2001 primarily due to decreases in workers' compensation expense, LIFO inventory reserve, and legal and professional fees. Sales and marketing expenses decreased by $6.9 million to $18.3 million due to overall reduction of promotion and advertising campaigns. Television Broadcasting. Broadcasting operating expenses were substantially the same in 2000 and 2001. Other Communications. Other communications operating expenses increased $9.5 million, or 51.6%, from 2000 to 2001. The largest increase in other communications operating expenses was an increase of $5.2 million, or 53.0%, in telephony expenses resulting from providing telephony services to an expanded customer base. Operating Income Operating income decreased $14.6 million, or 103.2%, from 2000 to 2001. Cable operating income decreased $2.7 million, or 36.1%, from 2000 to 2001. The decrease in cable operating income was primarily due to increased depreciation expense as a result of our rebuilt cable system in Toledo, offset by revenue growth generated by rate increases and the addition of new services. Publishing operating income decreased $7.5 million, or 80.0%, from 2000 to 2001. The decrease in publishing operating income was primarily due to reduced advertising sales, primarily in classified advertising, and partially offset by advertising rate increases. Broadcasting operating income decreased $7.2 million, or 133.0%, from 2000 to 2001. The decrease in broadcasting operating income was primarily due to lower local, national and political advertising demand in our markets. Depreciation and Amortization Depreciation and amortization increased $6.9 million, or 14.1%, from 2000 to 2001. The increase in depreciation and amortization was primarily due to our rebuilt cable system in Toledo and other capital expenditures to maintain our operating assets. EBITDA EBITDA decreased $6.6 million, or 11.6%, from 2000 to 2001. EBITDA as a percent of revenues decreased from 13.3% in 2000 to 12.1% in 2001. The decrease in EBITDA and EBITDA margin from 2000 to 2001 was primarily due to lower total revenues and higher operating costs as described above. Net Interest Expense Net interest expense increased $5.4 million, or 38.2%, from 2000 to 2001. The increase in net interest expense was due to the incurrence of additional debt, primarily to fund cable system capital expenditures. 31 YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Revenues Revenues increased $29.4 million, or 7.4%, from 1999 to 2001. The increase in revenues was largely attributable to increased advertising revenues in both our publishing and broadcasting operations and increased cable revenues. Revenues were also increased by the like-kind exchange of WLFI-TV, Inc. for a two-thirds interest in WAND (TV) Partnership effective April 1, 2000, because of the higher revenues of the acquired station. Cable Television. Cable revenue increased $6.7 million, or 8.9%, from 1999 to 2000. The increase in cable revenue was principally a result of an increase of $3.80, or 9.5%, in the average monthly revenue per basic subscriber primarily due to an increase in the basic cable service rate charged to subscribers and in advertising sales revenue, as well as an increase in high-speed cable modem subscribers and pay-per-view services. Newspaper Publishing. Publishing revenue increased $10.9 million, or 3.9%, from 1999 to 2000. The increase in publishing revenue was comprised of a $11.4 million, or 5.1%, increase in advertising revenue to $234.1 million in 2000 due to increased advertising sales and advertising rate increases. Circulation revenue decreased $779,000, or 1.5%, to $50.7 million in 2000 due to decreased circulation sales. Television Broadcasting. Broadcasting revenue increased $6.2 million, or 17.2%, from 1999 to 2000. The increase in broadcasting revenue was primarily as a result of increased advertising demand, including political advertising, at our television stations. Other Communications. Other communications revenue increased $5.6 million, or 64.7%, from 1999 to 2000. The increase in other communications revenue was primarily a result of a $4.3 million, or 140.3%, increase in telephony services to $7.4 million in 2000 primarily due to increased telephony customers and sale of additional services to existing customers. Operating Expenses Operating expenses increased $36.3 million, or 9.7%, from 1999 to 2000. The increase in operating expense was largely attributable to increased cable and publishing expenses. Cable Television. Cable operating expenses increased $11.7 million, or 18.6%, from 1999 to 2000. The increase was primarily due to a $6.8 million, or 44.6%, increase in depreciation and amortization to $22.2 million in 2000 attributable to capital expenditures associated with the rebuild and expansion of our cable systems and to a $3.1 million, or 16.5%, increase in programming costs to $22.0 million because of increased carriage fees. Newspaper Publishing. Publishing operating expenses increased $13.4 million, or 5.1%, from 1999 to 2000. The increase in publishing operating expenses was due primarily to a $3.1 million, or 7.8%, increase in newsprint cost, ink and storage expenses, a $2.4 million, or 5.9%, increase in editorial expenses due to political coverage during the year, and a $3.2 million, or 14.5%, increase in sales and marketing expenses. Television Broadcasting. Broadcasting operating expenses increased $2.9 million, or 8.4%, from 1999 to 2000. The increase in broadcasting operating expenses was due primarily to approximately $2.0 million of incremental expense resulting from the higher operating expenses of WAND, the station acquired in exchange for WLFI. Other Communications. Other communications operating expenses increased $5.7 million, or 44.8%, from 1999 to 2000. The increase in other communications operating expenses was primarily due to an increase of $3.7 million, or 60.2%, in telephony expenses resulting from the costs of providing telephony service to an expanded customer base. 32 Operating Income Operating income decreased $6.8 million, or 32.6%, from 1999 to 2000. Cable operating income decreased $5.0 million, or 39.7%, from 1999 to 2000. The decrease in cable operating income was primarily due to increased depreciation expense as a result of rebuilding of our cable system in Toledo, offset by revenue growth generated by rate increases and the addition of new services. Publishing operating income decreased $2.5 million, or 20.8%, from 1999 to 2000. The decrease in publishing income was primarily due to increased newsprint and other costs. Broadcasting operating income increased $3.4 million, or 162.2%, from 1999 to 2000 primarily due to $2.2 million of election-year political advertising revenues. Depreciation and Amortization Depreciation and amortization increased $8.1 million, or 20.0%, from 1999 to 2000. The increase in depreciation and amortization was primarily due to the rebuilding of our cable system in Toledo and other capital expenditures to maintain our operating assets. EBITDA As a result of the foregoing, EBITDA increased $508,000, or 0.9%, from 1999 to 2000. EBITDA as a percent of revenues decreased from 14.2% in 1999 to 13.3% in 2000. The decrease in EBITDA margin from 1999 to 2000 was primarily due to the higher increase in operating costs than in revenues as described above. Net Interest Expense Net interest expense increased $3.0 million, or 27.4%, from 1999 to 2000. The increase in net interest expense was due to the incurrence of additional debt, primarily to fund cable system capital expenditures. QUARTER ENDED MARCH 31, 2002 COMPARED TO QUARTER ENDED MARCH 31, 2001 Revenues Total revenues for the quarter ended March 31, 2002 increased $5.1 million, or 5.3%, over the same period of the prior year, to $102.0 million from $96.9 million. This increase was primarily attributable to cable and telephony operations discussed below. Cable Television. Cable revenue increased $3.9 million, or 18.7%, over the same period of the prior year, to $25.1 million. The increase in cable revenue was principally a result of an increase of $7.86, or 17.4%, in the average monthly revenue per basic subscriber. The increase in the average monthly revenue per basic subscriber was primarily the result of an increase in the monthly basic cable service rate charged to subscribers and growth in high-speed cable modem and digital cable subscribers. Newspaper Publishing. Publishing revenue decreased $292,000, or 0.5%, over the same period of the prior year, to $61.6 million from $61.9 million. The decrease was comprised of a $633,000, or 1.3%, decrease in advertising revenue due primarily to a decrease in classified advertising of $1.3 million, or 6.5%, resulting from continued softness in help-wanted advertising. Circulation revenue increased $407,000, or 3.4%, to $12.5 million due to a slight increase in Daily circulation. Other revenue, which is comprised of third party and total market delivery and Internet revenues, was consistent with same period of the prior year. Television Broadcasting. Broadcasting revenue increased $273,000, or 3.1%, over the same period of the prior year to $9.0 million. The increase in broadcasting revenue was due primarily to an increase in national and regional advertising revenue of $51,000, or 2.0%, and $56,000, or 4.0%, respectively. Political advertising revenue increased $459,000 and local advertising revenue decreased $267,000, or 4.5%, from the same period of the prior year. 33 Other Communications. Other communications revenue increased $1.2 million, or 23.4%, over the same period of the prior year to $6.4 million. The increase was primarily a result of a $1.5 million, or 59.1%, increase in telephony services to $4.1 million, primarily due to increased telephony customers and sales of additional services to the existing customer base. Operating Expenses Operating expenses increased $767,000, or 0.8%, over the same period of the prior year to $100.6 million. The increase in operating expense was largely attributable to increased cable expenses, which are partially offset by decreased publishing expenses. Cable Television. Cable operating expenses increased $4.4 million, or 23.7%, over the same period of the prior year, to $22.8 million. The increase was primarily due to a $1.7 million, or 34.0%, increase in depreciation to $6.7 million attributable to the capital expenditures associated with the rebuild of our Toledo cable system and continued roll-out of cable modems and digital cable service. Basic cable programming expenses increased $774,000, or 15.9%, to $5.6 million, due to price increases from programming suppliers. Newspaper Publishing. Publishing operating expenses decreased $4.0 million, or 6.1%, from the same period of the prior year, to $61.5 million. The decrease was principally due to a $1.8 million, or 19.0%, decrease in newsprint and ink, resulting from a weighted-average price per ton decrease of $107.03, or 18.5%, and a 2.2% decrease in consumption from the same period of the prior year. Additional savings resulted from overall cost controls and headcount reductions. Television Broadcasting. Broadcasting operating expenses decreased $124,000, or 1.4%, over the same period of the prior year, to $9.1 million. Operating expenses were held essentially flat due to general cost controls implemented to offset salary and inflationary costs. Other Communications. Other communications operating expenses decreased $112,000, or 1.8%, over the same period of the prior year, to $6.3 million. Operating expenses were flat due to overall cost controls implemented to offset salary and inflationary costs. Operating Income Operating income increased $4.4 million over the same period of the prior year. Cable operating income decreased $421,000 primarily due to increases in depreciation and basic cable programming expenses, partially offset by revenue growth generated from rate increases and roll-out of new services. Publishing operating income increased $3.7 million, primarily due to newsprint savings and the implementation of an overall expense reduction program. Broadcasting operating income increased $398,000 due to revenue growth primarily from political advertising and an overall expense reduction program. Other communications operating income increased $1.3 million due to revenue growth from increased telephony sales. Corporate general and administrative expenses increased $601,000 from prior year due primarily to increases in salary and legal and professional fees. Depreciation and Amortization Depreciation and amortization increased $1.2 million, or 9.8%, over the same period of the prior year. The increase was primarily due to asset additions resulting from the rebuild of our cable system in Toledo and other capital expenditures to maintain operating assets. EBITDA As a result of the foregoing, EBITDA increased $6.1 million, or 77.9%, over the same period of the prior year. EBITDA as a percentage of revenue increased to 13.6% in the first three months of 2002 from 8.1% in the same period of the prior year. The increase in EBITDA margin was primarily due to the continued roll-out of high margin advanced cable products, lower newsprint prices and the implementation of overall expense reduction programs. 34 LIQUIDITY AND CAPITAL RESOURCES Historically, our primary sources of liquidity have been cash flow from operations and borrowings under our senior credit facilities. The need for liquidity arises primarily from capital expenditures and interest payable on the notes and our senior credit facilities. Net cash provided by operating activities was $40.0 million in 1999, $38.7 million in 2000 and $37.8 million in 2001. For the three months ended March 31, 2002 and March 31, 2001, net cash provided by operating activities was $10.4 million and $1.4 million, respectively. Our net cash provided by operating activities is determined by adding back depreciation and amortization to net income or loss and adjusting for other non cash items. These included a $5.3 million loss resulting from the change in fair value of interest rate swaps in 2001 and a $22.3 million gain attributable to our sale of WLFI-TV in 2000. For the three months ended March 31, 2002, other noncash items included a $1.5 million gain resulting from the change in fair value of interest rate swaps and a $21.6 million gain attributable to the exchange of Monroe Cablevision. The cash provided by investing activities was $5.8 million for the three months ended March 31, 2002, compared to cash used by investing activities of $17.6 million from the same period of the prior year. Included in the net cash provided from investing activities in the three months ended March 31, 2002 was $12.1 million of proceeds received from Comcast in the Monroe Cablevision exchange. Our capital expenditures have historically been financed with cash flow from operations and borrowings under our senior credit facilities. Capital expenditures were $62.2 million, $80.3 million and $66.7 million in 1999, 2000 and 2001, respectively. We made capital expenditures of $17.1 million and $6.7 million, including capital leases, for the three months ended March 31, 2001 and 2002, respectively. Capital expenditures through 2001 were primarily used to rebuild our cable system in Toledo and maintain our other operating assets. We expect to make capital expenditures of approximately $31.2 million in the last three quarters of 2002 and $80.1 million in 2003, primarily to complete the upgrade of our cable systems in Erie County, Ohio and Bedford, Michigan, continue the roll-out of new cable services, maintain and upgrade operating assets at our newspapers and convert our television stations to FCC-required digital format. We have historically paid dividends on our capital stock. Dividends paid for 1999, 2000, and 2001 were $1.4 million, $1.4 million and $583,000, respectively. The indenture contains covenants which restrict our ability to pay dividends on our capital stock. See "Description of Notes -- Certain Covenants -- Restricted Payments." Covenants restricting dividends are also contained in the agreement for our new senior credit facilities. If these restrictive covenants had been in effect during the three years ended December 31, 2001, they would not have prevented the payment of dividends in the amounts paid in those years. Financing activities used $18.5 million of cash for the three months ended March 31, 2002, compared to cash provided by financing activities of $15.6 million from the same period of the prior year. During the first three months of 2002, we made $19.0 million in optional pre-payments on our long-term revolving credit agreements. At March 31, 2002, the balances outstanding and available under our existing senior credit facility and senior notes were $216.6 million and $57.0 million, respectively, and the interest rate on the balance outstanding was 9.0%. At March 31, 2001, the balances outstanding and available under our existing senior credit facility and senior notes were $226.5 million and $42.2 million, respectively, and the interest rate on the balance outstanding was 7.5%. The increase in the effective interest rate offset by the decrease in the balance outstanding generated an increase in interest expense of $73,000, or 1.6%. The change in availability reflects a $25 million increase to the revolving credit agreement in December 2001. Subsequent to March 31, 2002, we issued $175.0 million of 9 1/4% senior subordinated notes. The proceeds were used to repay our existing senior term loan and senior notes and prepay a portion of our old senior revolving credit facility. In May 2002, we entered into new senior credit facilities totaling $200.0 million. The new senior credit facilities are guaranteed by substantially all of our present and future domestic subsidiaries and collateralized by a pledge of substantially all of our and the guarantor subsidiaries' material assets. The proceeds from the new senior credit facilities were used to repay the outstanding balance of the old senior revolving credit facility and will be used to fund future capital 35 expenditures. On completion of the refinancing of our senior credit facilities, we had $75.0 million outstanding under the term loan B facility and $113.1 million of availability under a new delayed-draw term loan A and a new revolving credit facility. As a result of the refinancing, we will realize prepayment penalties of $6.3 million and a write-off of unamortized finance fees of $2.7 million, less tax benefits of $3.1 million during the second quarter of 2002. We believe that funds generated from operations and the borrowing availability under our senior credit facilities will be sufficient to finance our current operations, our cash obligations in connection with the planned capital expenditures, and our current and future financial obligations. The credit agreement governing the new senior credit facilities will require us to maintain certain financial leverage and interest coverage ratios. See "Description of Senior Credit Facilities." QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Our revolving credit and term loan agreements bear interest at floating rates. Accordingly, we are exposed to potential losses related to changes in interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes; however, in order to manage our exposure to interest rate risk, we have entered into interest rate swaps. As of March 31, 2002, our interest rate swap agreements expire in varying amounts through April 2009. Upon issuance of the notes and after giving effect to the refinancing of our senior credit facilities, the fair market value of $75.0 million of our long-term debt approximates its carrying value as it bears interest at floating rates. As of March 31, 2002, the estimated fair value of our interest rate swap agreements was $5.1 million, which amount represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. As of March 31, 2002, interest rate swaps were in place for $121.0 million, or 81.5%, of the outstanding amounts on our revolving credit and term loan agreements. Subsequently, we entered into an interest rate swap agreement that has the economic effect of substantially offsetting $55.0 million notional amount of the $121.0 million notional amount of swap agreements relating to our revolving credit and term loan agreements. In addition, we entered into an interest rate swap agreement with respect to $100.0 million principal amount of the notes. Accordingly, as of March 31, 2002, after giving effect to the new interest rate swap agreements, the issuance of the $175.0 million principal amount of the notes and the closing of the new senior credit facilities, a hypothetical 100 basis point increase in interest rates along the entire interest rate yield curve would have increased our annual interest expense by approximately $1.1 million. CRITICAL ACCOUNTING POLICIES AND ESTIMATES We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures. We base our estimates and judgments on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate these estimates and judgments on a continual basis. Actual results may differ from these estimates and judgments. We believe the following critical accounting policies affect our significant estimates and judgments used in the preparation of the consolidated financial statements. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to change, resulting in an impairment of their ability to make payments, additional allowances could be required. We maintain various employment related liabilities, such as workers' compensation and medical reserves, based on historical performance and current trends. Actual results could differ from estimates resulting in adjustments to the recorded liability. Actuarial 36 assumptions have a significant impact on the determination of net periodic pension costs and credits and other post-employment benefits. If actual experience differs from these assumptions, future periodic pension and post-employment costs could be adversely affected. RECENT ACCOUNTING PRONOUNCEMENTS Effective January 1, 2001, we adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement Nos. 137 and 138, which requires us to record all derivatives on the balance sheet at fair value. We have three interest rate swap agreements and have not elected to implement hedge accounting. As of January 1, 2001, we recorded a transition adjustment liability of $2.1 million with an offset to other comprehensive loss, net of $758,000 of deferred income taxes. The change in derivative fair values and the amortization of the transition adjustment are recognized in earnings as a change in fair value of interest rate swaps. These items resulted in a non-cash derivative valuation loss of $5.3 million in 2001, a loss of $1.5 million in the quarter ended March 31, 2001 and a gain of $1.6 million in the quarter ended March 31, 2002. The fair value of the derivatives recorded on our balance sheet equaled a $6.7 million liability as of December 31, 2001 and a $5.1 million liability as of March 31, 2002. Effective January 1, 2002, we adopted SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. Purchased goodwill and indefinite lived intangible assets are no longer amortized but reviewed annually for impairment, or more frequently if impairment indicators arise. Intangible assets with lives restricted by contractual, legal or other means will continue to be amortized over their useful lives. For fiscal years 2001, 2000 and 1999, the Company recognized amortization expense relating to goodwill and other indefinite-lived intangibles of $3,347,486, $3,022,615 and $2,497,615, respectively. Adjustment for the non-amortization provisions of SFAS 142 results in net income (loss) of $(14,509,377), $15,803,111 and $7,838,714 for 2001, 2000 and 1999, respectively. During the three month period ended March 31, 2001, we recognized $837,035 of amortization expense related to goodwill, resulting in net loss of $5,695,109 when adjusted for the non-amortization provisions of SFAS No. 142. We have completed our initial impairment analysis of existing goodwill. No impairment charges will be recognized as a result of this testing. Effective January 1, 2002, we adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and provides a single accounting model for long-lived assets to be disposed of. The adoption of this standard has had no effect on our consolidated results of operations or financial position for the three months ended March 31, 2002. Subsequent to March 31, 2002, the Financial Accounting Standards Board issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, under which a gain or loss related to the extinguishment of debt will no longer be recorded as an extraordinary item. The Company has elected early adoption as encouraged by SFAS No. 145, which would not otherwise require adoption until fiscal year 2003. As a result, second quarter losses related to the refinancing of our senior credit facilities will be included in income from continuing operations. 37 BUSINESS We are a privately held diversified media company with our primary operations in cable television, newspaper publishing and television broadcasting. We are the 23rd largest cable multiple system operator in the United States, with approximately 153,000 subscribers at March 31, 2002. Our primary cable system is located in the greater Toledo, Ohio metropolitan area and serves approximately 134,000 subscribers. Excluding the subscribers acquired in the March 29, 2002 exchange described below, this system is 100% rebuilt to 870 MHz and is served by a single headend. Our Toledo system is one of the largest privately owned urban cable systems in the United States. We publish two daily metropolitan newspapers, the Pittsburgh Post-Gazette in Pittsburgh, Pennsylvania and The Blade in Toledo, each of which is the dominant publication in its market. The combined daily and Sunday average paid circulation of our two newspapers is approximately 381,000 and 603,000, respectively. We also own and operate four television stations: two in Louisville, Kentucky, and one each in Boise, Idaho and Lima, Ohio, and we are a two-thirds owner of a television station in Decatur, Illinois. For the year ended December 31, 2001, we had revenues and EBITDA (as defined on page [28]) of $414.6 million and $50.3 million, respectively, and experienced an operating loss of $445,000 and a net loss of $17.9 million. For the three months ended March 31, 2002, we had revenues and EBITDA of $102.0 million and $13.9 million, respectively, and had operating income of $1.4 million and net income of $13.0 million. Our shareholders, the Block family, have been in the media business for over 100 years. In 1926, the Block family acquired the first of the Company's current holdings, The Blade, which was first published in 1835. We expanded our portfolio of newspapers in 1927 when we became the publisher of the Pittsburgh Post-Gazette. In 1965, we were awarded a franchise in Toledo to develop our cable system, which, with over 36 years of operating history, is one of the oldest continuously owned metropolitan cable systems in the United States. In 1972, we acquired the first of our current television broadcasting stations when we purchased WLIO in Lima. We have an experienced management team and are focused on improving the competitive position of our media properties as well as maximizing synergies between our cable television and newspaper publishing segments. In particular, we seek to capitalize upon our dominance of the cable and newspaper businesses in Toledo -- a unique cross-ownership position for an urban market. We make extensive use of our newspaper and cable system to cross-promote our businesses at very low incremental costs. We can also offer advertisers multiple-media advertising strategies including newspaper, cable and the Internet. The knowledge of our customers and markets gained from our various businesses enables us to identify our customers' needs and tailor solutions to meet their business objectives. CABLE TELEVISION We provide cable television service to the greater Toledo metropolitan area (Buckeye CableSystem) and the Sandusky, Ohio area (Erie County CableSystem). We are the only significant cable operator in each of our markets. In addition to traditional cable television service, we also provide high-speed cable modem Internet access in both systems, and our Toledo system provides digital cable service. Our cable television operations generated revenues, operating income and EBITDA of $89.4 million, $4.8 million and $32.1 million, respectively, in the year ended December 31, 2001, and $25.1 million, $2.3 million and $9.4 million, respectively, in the quarter ended March 31, 2002. In 1997, we began the rebuild of the Buckeye system from a one-way coaxial cable plant to an 870 MHz hybrid fiber coaxial (HFC) two-way interactive system. We have completed the rebuild of the cable system's distribution plant and have converted to the new system over 99% of Buckeye's cable customers, excluding those acquired in the exchange described below. The rebuild allows Buckeye to provide advanced cable services that we believe will help us maintain our dominant position in the greater Toledo metropolitan area. These services currently include up to 241 analog and digital video and digital music channels, high-speed Internet and WorldGate interactive service. Future offerings may include video-on-demand, subscription video-on-demand and other services yet to be developed. 38 On March 29, 2002, we completed an asset exchange with Comcast involving the exchange of our cable system in Monroe, Michigan, a lower growth area approximately 15 miles north of Toledo, for Comcast's system in Bedford, Michigan, a Toledo suburb, plus a cash payment to us of $12.1 million. The exchange enables us to expand our subscriber base in a contiguous high-growth suburban area we already partially served and increase the efficiency of our cable cluster by reducing the number of our headends from three to two. See "Summary -- Recent Developments." CABLE TELEVISION BUSINESS STRATEGY We are pursuing the following cable television strategies: Operate Highly Advanced and Efficient Cable Networks. Through March 31, 2002, we invested approximately $89 million to rebuild the Buckeye system to 870 MHz. Our rebuilt system allows us to offer higher margin advanced services, such as high-speed two-way cable modem and digital television. The rebuild also increased channel capacity to our current 241 analog and digital video and digital music channels, which can be significantly expanded by recapturing some of our 94 analog channels and converting them to digital channels. While most cable system operators have chosen to upgrade their systems to 750 MHz, we invested in the increased bandwidth, which provides additional capacity for future services. Upon conversion of a portion of the acquired Comcast subscribers in Bedford, approximately 86% of our total subscribers will be served by our advanced 870 MHz system from a single headend, which will reduce our operating costs. In addition, our Toledo headend was designed, and includes the necessary fiber interconnections, to serve our Erie County system when we upgrade that system. This would enable us to serve 100% of our subscribers from a single headend. While initially designed to support 500 homes per fiber node, our cable system can easily be divided to an average of 125 homes per fiber node when demand warrants. This allows us to efficiently increase subscribers and provide additional advanced services without sacrificing system performance or reliability. Utilize Significant Marketing Power. Buckeye CableSystem benefits from our dominant position as a multi-media provider in the greater Toledo metropolitan area. We believe we are the only urban cable operator in the United States with cross-ownership of the primary newspaper in its market. The Blade provides fill-in advertising space to market our cable services and to promote our brand awareness at a very low incremental cost. Our cable television business also includes our operation and ownership of WB TV5, a WB affiliate cable channel with over 225,000 viewing households in Northwest Ohio. We advertise our services on WB TV5 and on 33 other cable channels -- over 7,000 spots per month in 2001 -- providing us an additional low-cost advertising source. We use these marketing resources to promote existing services, enhance the introduction and roll-out of new services, and build a strong competitive barrier. As evidence of our marketing power, a recent advertising campaign in The Blade and on our cable system has helped increase subscribers to Buckeye's high-speed two-way cable modem service by approximately 15% in the first quarter of 2002, bringing subscribers to over 17,000 at March 31, 2002. Roll-out Advanced Services. Our investment in Buckeye's state-of-the-art cable network combined with our significant marketing power positions us to successfully roll out advanced services and further increase our revenue per subscriber. Similar to the on-going promotion of our cable modem service, we launched in the second quarter of 2002 a marketing campaign utilizing our advertising resources to advance the growth of our digital cable service. Without any significant advertising, we have achieved over 9,800 digital cable subscribers since making our digital cable service available in the fourth quarter of 2001. In addition, we are evaluating new services such as video-on-demand and subscription video-on-demand for possible future deployment. Maintain Superior Customer Satisfaction. Our Service TV(R) brand embodies our total commitment to providing superior cable television service, which has resulted in high levels of customer satisfaction and retention. We strive to provide exceptional programming and signal quality, and we continuously monitor our fiber nodes and power supplies to maintain a highly reliable cable system. We also operate a call center with customer relations representatives available around the clock, maintain convenient customer 39 service locations and offer next day, two-hour appointment windows for installation or in-home repairs. We believe our superior customer service, along with our state-of-the art cable system, provide a significant defensive measure against direct broadcast satellite (DBS) operators and have in part contributed to DBS's low penetration rate in Toledo, which at approximately 9% is half the national average of approximately 18%. CABLE TELEVISION SERVICES We offer our customers traditional cable television services and programming as well as new and advanced high bandwidth services currently consisting of high-speed Internet access and, in our Toledo system, digital cable service. We plan to continue to enhance these services by adding new programming and other advanced services as they are developed. Core Cable Television Services Our basic channel line-up and additional channel offerings for each system are designed according to demographics, programming preferences, channel capacity, competition and price sensitivity. Our core cable television service offerings include the following: Limited Basic Service. Our limited basic service includes, for a monthly fee, local broadcast channels, including network and independent stations, limited satellite-delivered programming, and local public, government, home-shopping and leased access channels. Expanded Basic Service. Our expanded basic service includes, for an additional monthly fee, various satellite-delivered networks such as CNN, MTV, USA Network, ESPN, Lifetime, Nickelodeon and TNT. Premium Service. Our premium services are satellite-delivered channels consisting principally of feature films, original programming, live sports events, concerts and other special entertainment features, usually presented without commercial interruption. HBO, Cinemax, Showtime and The Movie Channel are typical examples. Such premium programming services are offered both on a per-channel basis and as part of premium service packages designed to enhance customer value. The significant expansion of bandwidth capacity resulting from the rebuild of our Buckeye system will allow us to expand the use of multichannel packaging strategies for marketing and promoting premium and niche programming services. We believe that these packaging strategies will increase basic and premium penetration as well as revenue per subscriber. Pay-Per-View Service. Our pay-per-view services allow customers to pay to view a single showing of a feature film, live sporting event, concert or other special event, on an unedited, commercial-free basis. Advanced Analog Services Buckeye CableSystem offers advanced analog cable services to customers who do not subscribe to the higher priced digital cable service. This service utilizes a converter box that is substantially less expensive than a digital box. Buckeye's advanced analog services include: - up to 94 analog video channels including 10 multiplexed premium channels and eight pay-per-view channels; - four additional video channels that can be purchased a la carte or as a bundled package; - a new product tier consisting of eight basic-type video channels and 32 digital music channels; and - an interactive on-screen program guide to help customers navigate the program choices and receive information about the programming. 40 Digital Cable Services Digital video technology offers significant advantages. Most importantly, this technology allows us to greatly increase our channel offerings through the use of compression, which converts one analog channel into six to 12 digital channels. The implementation of digital technology has significantly enhanced and expanded the video and other service offerings we provide to our customers. Buckeye's customers currently have available digital cable programming services that include: - 73 analog video channels; - up to 29 bundled digital basic channels; - up to 32 multiplexed premium channels; - up to 62 pay-per-view movie and sports channels; - up to 45 digital music channels; and - an interactive on-screen program guide to help customers navigate the new digital choices and receive information about the programming. Digital cable services are available on 100% of Buckeye's system, representing approximately 86% of our total subscribers excluding those acquired in the Monroe-Bedford exchange. When we upgrade our Erie County system and complete the rebuild of the portion of the acquired Bedford system not currently passed by Buckeye's system, planned to be completed in 2003, 100% of our systems will have full-featured digital offerings, creating an opportunity to increase monthly revenue per subscriber. HIGH-SPEED INTERNET ACCESS Our broadband cable networks enable data to be transmitted up to 35 times faster than traditional telephone modem technologies. This high-speed capability allows cable modem customers to receive and transmit large files from the Internet in a fraction of the time required when using the traditional telephone modem. It also allows much quicker response times when surfing the Internet, providing a richer experience for the customer. In addition, the two-way cable modem service offered by Buckeye's system eliminates the need for a telephone line for Internet service, is always activated and does not require a customer to dial into the Internet service provider and await authorization. Two-way cable modem service is available on 100% of Buckeye's system, representing approximately 86% of our total subscribers excluding those acquired in the Monroe-Bedford exchange. Our Erie County system employs a one-way telco-return cable modem. When we upgrade the Erie County system, we will offer two-way cable modem service on that system. TELEVISION BASED INTERNET ACCESS Buckeye offers residential customers Internet access and email over the television using a set-top box and a wireless keyboard. Buckeye offers Internet over the television through WorldGate. ADVERTISING We receive revenue from the sale of local advertising on satellite-delivered channels such as CNN, MTV, USA Network, ESPN, Lifetime, Nickelodeon and TNT. We have an in-house production facility and a sales force covering our markets. Advertising sales accounted for 7.7% of our combined cable revenue for the year ended December 31, 2001 and 6.7% of our combined cable revenue for the quarter ended March 31, 2002. 41 FUTURE SERVICES Interactive Services. Buckeye's rebuilt cable network has the capacity to deliver various interactive television services, such as the following: - Video-on-demand and subscription video-on-demand which provide movies, programs, or special events on demand with the ability to fast forward, pause and rewind a program at will. Companies providing video-on-demand services include Concurrent Computer Corporation, DIVA Systems, Intertainer, N-Cube, Sea Change International and others. - Interactive viewing services enabled by middleware vendors such as Open TV and Liberate that provide viewers options such as various camera angles on sports broadcasts, access to ancillary programming, access to customer account information on the television, and the ability to play interactive games individually or against other subscribers. - Personal video recording that provides subscribers VCR-like capabilities to one touch record programs, pause and replay live television, and fast forward through commercials on recorded programs. This service also permits a subscriber to search for and record programming that matches the subscriber's preferences. - Walled garden Internet access that provides restricted Internet access to sites created for television delivery that may feature local weather, news, or community events. - Cable modem Internet protocol second line telephone service that provides subscribers a non-lifeline phone line. - Tailored advertising that could allow cable networks to transmit advertisements tailored to several target audiences simultaneously during a single program transmission. - Enhanced programming information, interactive advertising and impulse sales enabled by application providers such as Wink Communications and Gemstar that allow subscribers to click on-screen icons for ancillary program information and e-commerce transactions. High Definition Television. In addition to interactive services, Buckeye is also testing high definition television services. The availability of this new programming format will keep us competitive with DBS. We intend to offer a package of both local and satellite-derived high definition television channels for our high-end customers. PRICING OF OUR SERVICES Our cable revenues are derived primarily from the monthly fees our customers pay for cable services. Our rates vary by the market served and by the type of service selected and are usually adjusted annually. As of December 31, 2001, our monthly fees for expanded basic cable service were $30.99 for Buckeye and $30.15 for Erie County. Effective January 1, 2002, we increased our average monthly fees for expanded basic service to $34.24 for Buckeye and $33.15 for Erie County. A one-time installation fee is charged to new customers, but may be waived during certain promotions. We believe our rate practices are in accordance with the FCC guidelines and are consistent with industry practices. 42 Our service offerings vary by market because of differences in the bandwidth of our cable networks and franchise requirements. The current monthly price ranges for our cable services on a stand-alone basis are as follows:
SERVICE PRICE RANGE - ------- --------------- Limited basic cable service................................. $10.00 - $11.65 Expanded basic cable service................................ $33.15 - $34.24 Premium services............................................ $ 8.95 - $12.95 Pay-Per-View (per event).................................... $ 3.95 - $49.95 Digital cable packages...................................... $41.19 - $83.24 High-speed cable modem: Residential (cable subscriber)....................... $39.99 - $44.99 Residential (cable nonsubscriber -- Buckeye only).... $54.99 Commercial........................................... $79.99 WorldGate Internet service.................................. $12.95
We also offer packages of cable services at discounts from the stand-alone rates for each individual service. 43 CABLE SYSTEMS The following table sets forth selected financial, operating and technical information regarding our cable systems:
BUCKEYE BUCKEYE BUCKEYE CABLESYSTEM, CABLESYSTEM, CABLESYSTEM ERIE COUNTY MONROE TOLEDO, OH BEDFORD, MI(1) SUBTOTAL CABLESYSTEM CABLESYSTEM(1) TOTALS ------------ -------------- ----------- ----------- --------------- -------- FINANCIAL DATA: Revenue (in thousands) Year ended December 31, 2001....................... $ 73,922 $ 449 $ 74,371 $ 9,635 $ 5,414 $ 89,420 3 months ended March 31, 2002....................... $ 20,923 $ 387 $ 21,310 $ 2,467 $ 1,320 $ 25,097 Average monthly revenue per basic subscriber(2): Year ended December 31, 2001....................... $ 49.02 N/A $ 48.55 $ 41.11 $ 44.39 $ 47.36 3 months ended March 31, 2002....................... $ 55.27 $ 52.08 $ 55.21 $ 42.46 $ 43.42 $ 52.89 CABLE OPERATING DATA (AS OF MARCH 31, 2002): BASIC: Homes passed(3).............. 203,221 13,281 216,502 28,893 -- 245,395 Subscribers.................. 126,184 7,480 133,664 19,370 -- 153,034 Penetration(4)............... 62.1% 56.3% 61.7% 67.0% -- 62.4% PREMIUM: Units(5)..................... 63,143 2,058 65,201 4,444 -- 69,645 Penetration(6)............... 50.0% 27.5% 48.8% 22.9% -- 45.5% DIGITAL: Digital-ready basic subscribers(7)............. 126,184 5,476 131,660 -- -- 131,660 Subscribers.................. 9,239 602 9,841 -- -- 9,841 Penetration(8)............... 7.3% 11.0% 7.5% -- -- 7.5% CABLE MODEM: Homes passed(3).............. 203,221 7,686 210,907 28,893 -- 239,800 Subscribers.................. 16,115 952 17,067 361 -- 17,428 Penetration(4)............... 7.9% 12.4% 8.1% 1.2% -- 7.3% CABLE NETWORK DATA(9): Miles of plant............... 1,981 248 2,229 370 -- 2,599 Density...................... 103 54 97 78 -- 94 Plant bandwidth 870 MHz.................... 100.0% 58.5% 95.4% -- -- 81.8% 450 MHz.................... -- 41.5% 4.6% -- -- 4.0% 430 MHz.................... -- -- -- 100.0% -- 14.2%
- --------------- (1) On March 29, 2002, we completed the exchange of the assets of Monroe CableSystem for the assets of Comcast's Bedford, Michigan cable system. The Bedford, Michigan cable operating data for Buckeye CableSystem includes the pre-existing Bedford subscribers serviced by Buckeye CableSystem and the 5,004 new subscribers acquired from Comcast. The revenue information includes only the pre-exchange Bedford, Michigan subscribers. The information for Monroe CableSystem relates to the system disposed of in the exchange. (2) Represents average monthly revenues for the period divided by the number of basic subscribers at the end of the period. (3) Represents the number of living units, such as single residence homes, apartments and condominiums, passed by the cable television distribution network in a given cable system service area to which we offer the named service. (4) Represents subscribers to the named service as a percentage of homes passed. (5) Represents the number of subscriptions to premium services. A subscriber may purchase more than one premium service, each of which is counted as a separate premium service unit. (6) Represents premium service units as a percentage of basic subscribers. This ratio may be greater than 100% if the average basic subscriber subscribes to more than one premium service unit. (7) Represents basic subscribers to whom digital service is available. (8) Represents digital subscribers as a percentage of digital-ready basic subscribers. 44 (9) Density represents homes passed divided by miles of plant. Plant bandwidth represents the percentage of plant mileage within a system served by the indicated plant bandwidth. MARKETS SERVED Greater Toledo Metropolitan Area. As of March 31, 2002, Buckeye's system passed approximately 217,000 homes and served approximately 134,000 basic subscribers. The 25 franchises served by Buckeye have a combined population of approximately 554,000. With a population of 618,203, the three-county Toledo Metropolitan Statistical Area is the 69th largest MSA in the country. Toledo's major non-governmental employers include ProMedica Health Systems, Mercy Health Partners, Daimler-Chrysler, Bowling Green State University, The University of Toledo, Seaway FoodTown, Inc., General Motors, Sauder Woodworking and the Medical College of Ohio. Other significant Toledo-based companies include Dana Corporation, Owens-Illinois and Pilkington Glass. Sandusky, Ohio. As of March 31, 2002, our Erie County system passed approximately 29,000 homes and served approximately 19,000 basic subscribers. The 10 franchises served by our Erie County system have a combined population of approximately 73,000. Sandusky's major non-governmental employers include Cedar Fair/Cedar Point, Delphi Automotive System, Visteon Automotive Systems and Firelands Community Hospital. SYSTEM DESIGN The architecture of Buckeye's recently completed 870 MHz HFC system consists of approximately 2,475 route miles, including 2,127 route miles of fiber-optic cable, passing approximately 217,000 households and serving approximately 134,000 customers. The system includes a single headend serving all pre-existing Buckeye subscribers who have been converted to the new system and which will serve the acquired Bedford subscribers when converted. We have substantially completed conversion of the acquired Bedford system subscribers who are currently passed by our Buckeye system. Conversion of the remaining subscribers will require extension of the rebuilt Buckeye system. The new headend was completed at the beginning of 1997 to coincide with the beginning of the system rebuild. Thirteen hubs located throughout the greater Toledo metropolitan area are connected by redundant fiber-optic cable rings back to the master headend, thereby reducing the frequency and size of service outages. From each of these thirteen hubs, fiber-optic cable extends to nodes, each serving on average 500 homes. Coaxial cable connects the node to each customer's home or building. The system was also designed to provide a clean migration path to future system needs by allowing additional spectrum to be allocated to interactive services as conditions require. The system provides for 12 strands of fiber to each node with two strands activated and 10 strands reserved for future services. Moreover, the 500-home fiber nodes can easily be divided to an average of 125 homes per fiber node when demand warrants. As more individualized services are offered, this additional bandwidth will reduce the need for future construction and will provide great flexibility in our provision of services to our customers. The rebuilt system currently offers 94 analog video channels on our advanced analog service and approximately 241 analog and digital video and digital music channels on our digital cable service. The system offers the ability to significantly increase channel capacity by recapturing some of the analog channels and converting them to digital channels. We believe our HFC architecture provides higher capacity, superior signal quality, greater network reliability, certain operating cost savings and more reserve capacity for the addition of future services than the traditional coaxial network design. This will permit our customers to send and receive signals over the cable network so that interactive services, such as video on demand and subscription video on demand, will be accessible. We monitor all of the fiber nodes and power supplies in Buckeye's cable network 24 hours per day, seven days per week, providing reliable service and high customer satisfaction. The cost of this monitoring is shared by our cable and telephone operations. In addition, we have a supporting power system that was 45 built to provide battery backup for four to six hours in the event of a local power outage. For more extended power outages, generators can be used to provide power indefinitely. This is critical as "always on" services such as cable modems and other two-way telecommunications services become more prevalent. Our Erie County system currently operates on a 430 MHz one-way coaxial cable plant with approximately 370 route miles, including 33 route miles of fiber-optic cable. We plan to upgrade our Erie County system to a 750 MHz two-way interactive system. When this occurs, our Erie County system, which currently operates primarily through its own headend, will receive most of its programming and services through the Toledo headend, thereby reducing operating costs. SALES AND MARKETING Buckeye markets its cable services through the use of our dominant advertising resources in the greater Toledo metropolitan area. Because of our advertising strength, most of Buckeye's cable television service sales result from customer and potential customer inquiries. We invest a significant amount of time, effort and financial resources in the training and evaluation of our marketing professionals and customer relations representatives. Our customer sales representatives use their frequent contact with our customers as opportunities to sell our new services. As a result, we can accelerate the introduction of new services to our customers and achieve high success rates in attracting and retaining customers. Buckeye also has its own telemarketing staff for outbound sales calls and a door-to-door sales team utilizing in-house and outsourced personnel. Erie County markets its cable services through use of its advertising availability rights on its cable channels for spot advertising, as well as through bill inserts, direct mail and radio and print media advertising. PROGRAMMING We believe that providing a large selection of conveniently scheduled programming is an important factor influencing a customer's decision to subscribe to and retain our cable services. To appeal to both existing and potential customers, we devote considerable resources to obtaining access to a wide range of programming. We determine channel offerings in each of our markets by reviewing market research and examining customer demographics and local programming preferences. We have various contracts to obtain programming for our systems, payment for which is typically based on a fixed fee per customer per month. These contracts are typically for a fixed period of time and are subject to negotiated renewal. We purchase the majority of our cable programming through the National Cable Television Cooperative ("NCTC"). This organization aggregates more than 10 million cable subscribers for the purpose of obtaining programming at volume-based discounts. We also purchase programming directly from suppliers who do not have agreements with the NCTC or if they can provide better terms than through the NCTC. Along with the rest of the cable industry, we have felt the impact of increasing programming costs. Programming is our cable systems' largest cash operating expense. Our programming costs increased by 16.5% in 2000 and by 13.7% in 2001. This is primarily due to increasing costs for sports programming and our need for new channels to match satellite competition. Because of our size, we are unable to negotiate the more favorable rates that are granted to large national multiple system operators. For 2001, the negative impact on our cable margins due to higher programming costs was estimated to be 400 to 500 basis points. In 1989, Buckeye launched TV5, a locally programmed channel that is run in the same manner as a broadcast station -- obtaining its own programming through syndicators, arranging for coverage of local and regional sports contests and doing its own independent marketing. TV5 was conceived to provide us with a competitive advantage should an overbuilder become active in our service area. In 1995, TV5 became the exclusive market affiliate for the WB network, the first cable channel in the country to be so designated. Its popularity continues to increase. Buckeye has contracted to provide WB TV5 to cable operators in other cities in the Toledo DMA, which adds to its popularity and provides more viewers for advertising. WB TV5 is currently distributed to more than 225,000 cable households. 46 Buckeye also operates a Community Channel on which locally produced programming is shown free of charge if it is deemed of sufficient interest. In addition to programming provided by outsiders, Buckeye provides live coverage of Toledo City Council meetings and produces about 24 high school football and basketball games each year. These are shown once on the Community Channel and once on WB TV5. We have also offered to cablecast a select number of council and trustees meetings from other franchise areas. The Communications Act authorizes franchising authorities to require cable operators to set aside channel capacity for public, educational and government (PEG) use. Rather than provide a PEG channel for each of the franchise areas in which we operate, all of our franchise agreements contain language permitting each governmental entity to join the Northwest Ohio Distance Learning Consortium (NODLC), a network of public schools, the local university, and the Public Broadcasting Foundation. The NODLC operates a two-way interactive distance learning network via our Buckeye TeleSystem, Inc. subsidiary. Buckeye CableSystem has offered the NODLC access to a cable channel of its own for programming it would like to show beyond the bounds of its own network. FRANCHISES Cable television systems are constructed and operated under fixed-term, non-exclusive franchises or other types of operating permits granted by local governmental authorities. Franchises typically contain many conditions, such as: - time limitations on commencement and completion of system construction; - conditions of service, including mix of programming required to meet the needs and interests of the community; - the provision of free service to schools and certain other public institutions; - the maintenance of insurance and indemnity bonds; and - the payment of fees to communities. Certain provisions of these local franchises are subject to limits imposed by federal law. We hold a total of 35 franchises, including three acquired in the Monroe-Bedford exchange. These franchises require the payment of fees to the issuing authorities ranging from 3% to 5% of gross revenues (as defined by each franchise agreement) from the related cable system. The Cable Communications Policy Act of 1984 ("1984 Cable Act") prohibits franchising authorities from imposing annual franchise fees in excess of 5% of gross annual revenues and permits the cable television system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances that render performance commercially impracticable. All of Buckeye's 22 pre-exchange franchises were renewed during the period 1997-2000, 21 of them, including the City of Toledo, for terms of 20 years and the remaining one for 15 years. The three franchises acquired in the exchange expire in 2012, 2019 and 2022. The largest of Erie CableSystem's 10 franchises, the City of Sandusky, and two other franchises which collectively cover 52% of Erie CableSystem's subscribers, expire in 2011. Negotiations are substantially complete with respect to other franchises covering an additional 41% of Erie CableSystem's subscribers. When finalized, these are subject to ratification by the applicable governing body. The remaining franchises, which cover 7% of Erie CableSystem's subscribers, expire in 2003 and 2004 and are in the process of being renegotiated. The 1984 Cable Act and the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") provide, among other things, for an orderly franchise renewal process, which limits a franchising authority's ability to deny a franchise renewal if the incumbent operator follows prescribed renewal procedures. In addition, the 1984 and 1992 Cable Acts establish comprehensive renewal procedures, which require, when properly elected by an operator, that an incumbent franchisee's renewal application be assessed on its own merits and not as part of a comparative process with competing applications. Upon a franchise renewal request, however, a franchise authority may seek to add new and 47 more onerous requirements upon the cable operator, such as significant upgrades in facilities and services or increased franchise fees, as a condition of renewal. We believe that our relationships with local franchise authorities are excellent. COMPETITION -- CABLE TELEVISION SERVICES Cable television systems face competition from alternative methods of distributing video programming and from other sources of news, information and entertainment. These include off-air television broadcast programming, direct broadcast satellite, newspapers, movie theaters, live sporting events, interactive online computer services and home video products, including VCRs and DVDs. The extent to which a cable television system is competitive depends, in part, upon that system's ability to provide, at a reasonable price to customers, a greater variety of programming and other communications services than those available off-air or through alternative delivery sources and upon superior technical performance and customer service. Off-Air Broadcast Television. Viewers who do not wish to pay for television programming have the option of receiving broadcast signals directly from local television broadcasting stations. The extent to which a cable system competes with over-the-air broadcasting depends upon the quality and quantity of the broadcast signals available by direct antenna reception compared to the quality and quantity of such signals and alternative services offered by the cable system. Viewers in the service area of Buckeye's system are able to receive over-the-air signals of varying quality from up to 14 broadcast stations, and viewers in the service area of our Erie County system are able to receive such signals from up to 11 broadcast stations. Direct Broadcast Satellites. The fastest growing method of satellite distribution is by high-powered direct broadcast satellites utilizing video compression technology, which provides programming comparable to our digital cable service. Direct broadcast satellite service can be received virtually anywhere in the United States through small rooftop or side-mounted dish antennae that are generally not subject to local restrictions on location and use. Direct broadcast satellite service is presently being heavily marketed on a nationwide basis by DirecTV and EchoStar. Both of these providers offer service in the Toledo and Erie County markets. Direct broadcast satellite systems offer multichannel video programming packages which are similar to our packages of video services. However, they do not currently offer local channels in the Toledo area and offer them in Erie County only at an additional monthly cost. At March 31, 2002, the rate of penetration of direct broadcast satellite nationally was 18%. At the same date, the penetration rate was approximately 9% in the zip codes in which Buckeye operates and approximately 12% in the zip codes in which Erie County operates. Competing Franchises. Cable television systems generally operate pursuant to franchises granted on a non-exclusive basis. Franchising authorities may not unreasonably deny requests for additional franchises and may operate cable television systems themselves. Well-financed businesses from outside the cable television industry (such as the public utilities that own the poles to which cable is attached) may become competitors for franchises or providers of competing services. In the Toledo market, Buckeye faces cable competition from Adelphia in a few outlying areas where the two systems have overbuilt plant passing approximately 6,600 homes, or less than 3% of the total homes passed by our cable systems. We believe that the capital costs of matching Buckeye's rebuilt system, together with our advertising dominance and our customer service reputation, pose a formidable competitive barrier. In its market, Erie County does not currently face competition from competing cable operators. Satellite Master Antenna Television Systems. Cable television operators also face competition from private satellite master antenna television systems that serve condominiums, apartment and office complexes and private residential developments. As long as they do not use public rights-of-way, satellite master antenna television systems can interconnect non-commonly owned buildings without having to comply with many of the local, state and federal regulations that are imposed on cable television systems. We are aware of one SMATV operator, which has approximately 125 subscribers, in the Toledo area. We are not aware of any SMATV operators in our Erie County service area. 48 Local Multipoint Distribution Service. Local multipoint distribution service, a new wireless service, can deliver over 100 channels of programming directly to consumers' homes. It is uncertain whether this spectrum will be used to compete with franchised cable television systems. Multichannel Multipoint Distribution Systems. Multichannel multipoint distribution systems use low power microwave frequencies to transmit video programming over the air to customers. Wireless distribution services provide many of the same programming services as cable television systems, and digital compression technology is likely to increase significantly the channel capacity of their systems. We are aware of only one competitor offering this service at this time. Local Exchange Carriers. The Telecommunications Act of 1996 ("1996 Telecom Act") allows local exchange carriers and others to compete with cable television systems and other video services in their telephone service territory, subject to certain regulatory requirements. Unlike cable television systems, local exchange carriers are not required, under certain circumstances, to obtain local franchises to deliver video services and are not subject to certain obligations imposed under such franchises. Local exchange carriers use a variety of distribution methods, including both broadband wire facilities and wireless transmission facilities within and outside of their telephone service areas. Local exchange carriers and other telephone companies have an existing relationship with the households in their service areas and have substantial financial resources. Local exchange carriers do not currently offer television cable service in any of our markets, and we are not aware of any plans for such service to be provided. Other New Technologies. Other new technologies may compete with cable television systems. Advances in communications technology, as well as changes in the marketplace and the regulatory and legislative environments, are constantly occurring. We are not, therefore, able to predict the effect that current or future developments might have on the cable industry or on our operations. See "Forward-Looking Statements." COMPETITION -- INTERNET SERVICES We first began to offer broadband Internet access in mid-1999. At the end of March 2002, we had approximately 17,500 broadband Internet subscribers, primarily in the Toledo area. Competition for broadband Internet services in our markets includes digital subscriber line services provided by or through local telephone exchange carriers and wireless broadband Internet services provided by wireless communications companies. Digital subscriber line technology, known as DSL, allows Internet access to subscribers over conventional telephone lines at data transmission speeds comparable to those of cable modems, putting it in direct competition with cable modem service. Numerous companies, including telephone companies, have introduced DSL service, and certain telephone companies are seeking to provide high-speed broadband services, including interactive online services, without regard to present service boundaries and other regulatory restrictions. DSL and wireless broadband services have only recently begun to be offered in limited portions of our service area. We are unable to predict the likelihood of success of these competing broadband Internet services. However, we believe that our technology, local customer service reputation and ability to package bundled video and Internet services will provide us with competitive advantages. Our broadband Internet services also compete for customers with traditional slower-speed dial-up Internet service providers, commonly known as ISPs. Traditional dial-up ISP services have the advantages of lower price, earlier market entry, and in some cases nationwide marketing and proprietary content. We believe that over time the rapid development of rich broadband content will persuade more and more customers of the advantages of a broadband connection. Recently, a number of ISPs have asked local authorities and the FCC to give them rights of access to cable systems' broadband infrastructure so that they can deliver their services directly to cable systems' customers. Many local franchising authorities have been examining the issue, and a few in other parts of the country have required cable operators to provide such access. Several Federal courts have ruled that localities are not authorized to require such access. 49 The FCC has initiated a rulemaking proceeding into the appropriate regulatory treatment of Internet offered on cable systems. We are unable to predict the outcome of this proceeding or its effects upon our business. NEWSPAPER PUBLISHING Our two daily metropolitan newspapers, the Pittsburgh Post-Gazette and The Blade, are the dominant newspapers in their respective markets. Our newspapers have a combined daily and Sunday average paid circulation of approximately 381,000 and 603,000, respectively. We believe the leading positions of our newspapers result from our long standing presence, our commitment to high standards of journalistic excellence and integrity, and our emphasis on local news, local impacts of national and international news, and service to our communities. Our newspapers have received many national and regional awards for editorial excellence. Our newspaper publishing operations generated revenues, operating income and EBITDA of $264.7 million, $1.9 million and $15.8 million, respectively, in the year ended December 31, 2001, and $61.6 million, $44,000 and $3.1 million, respectively, in the quarter ended March 31, 2002. We are pursuing the following newspaper publishing strategies: Produce the Highest Quality Newspaper in Our Markets. We believe our reputation for producing high-quality publications is the foundation for our publishing success. We are frequently recognized by our industry for the quality of our journalism. Both newspapers have won numerous awards, including Pulitzer Prizes for Photography awarded to the Post-Gazette in 1992 and 1998 and the Investigative Reporters and Editors Medal awarded to The Blade in 2000. The Pennsylvania Newspaper Publishers Association named the Post-Gazette as Pennsylvania's Newspaper of the Year in 2001. We maintain a highly regarded staff of columnists and editors committed to excellence, and we are continuously seeking to improve our publications. Implement Cost Rationalization Initiatives. To improve cash flow at our newspapers, we have embarked upon a comprehensive review of our cost structure, including labor expenses and other significant operating costs. We are currently reviewing staffing requirements for opportunities to realize labor efficiencies. With respect to other operating costs, our newspapers coordinate purchasing requirements and have achieved favorable terms on newsprint purchases. In addition, we plan to reduce the page width at both of our newspapers from 54 inches to 50 inches by the end of 2004, reducing our annual newsprint consumption by approximately 7%. If this initiative had been completed by January 1, 2001, we would have realized savings of approximately $2.5 million in newsprint costs for the year ended December 31, 2001. Strengthen our Brands by Focusing on Local News and Community Service. Each of our newspapers is a leading local news and information source with strong brand recognition in its market. We believe that maintaining our position as a primary source of local news will continue to provide a powerful platform upon which to serve the local communities and local advertisers. We intend to continue to increase brand awareness and market penetration through local marketing partnerships, creative subscriber campaigns, strong customer service and the use of our two interactive online newspaper editions. These two Web sites, post-gazette.com and toledoblade.com, are the most frequently visited local media sites in their respective markets according to an independent research organization. Our two leading sites increase our market presence and provide an additional source of advertising revenue. Pursue Circulation and Other Revenue Growth Opportunities. We are continuously evaluating ways to expand circulation and increase revenues. We are using new suburban zone coverage, customer service programs and targeted marketing campaigns to increase our circulation. We believe that through the use of zoning (news and advertising directed to a particular local area), research, and demographic studies, our marketing programs better meet the unique needs of individual advertisers, thus maximizing advertising revenues. Capitalizing on our high penetration, we have also launched in Toledo a broad market coverage program in which we deliver preprinted advertising inserts to all subscriber and non-subscriber households in areas targeted by the advertiser. We also plan to grow our revenue by expanding our delivery services for third-party publishers and increasing advertising on our Web sites. 50 THE PITTSBURGH POST-GAZETTE Founded in 1786, the Pittsburgh Post-Gazette is the leading newspaper in Pittsburgh and Western Pennsylvania and has a long history of service and journalistic excellence. The Post-Gazette has more than twice the circulation of any other newspaper in the Pittsburgh Metropolitan Statistical Area (MSA). The Post-Gazette has a daily average paid circulation of approximately 241,800 and a Sunday average paid circulation of approximately 412,700, resulting in penetration of approximately 43% daily and 64% Sunday in the Pittsburgh city zone (Pittsburgh and nearby suburbs). Our dominant market position allows us to capture advertising revenue significantly greater than that of any other newspaper in this market. The Post-Gazette is a morning daily and Sunday newspaper covering 16 counties in Western Pennsylvania, Northern West Virginia and Western Maryland, including the greater Pittsburgh metropolitan area. With a population of 2.4 million, the six-county Pittsburgh MSA is currently the 22nd largest MSA in the United States. The population of the 16-county area served by the Post-Gazette is approximately 2.9 million. Pittsburgh's major non-governmental employers include UPMC Health System, US Airways, West Penn Allegheny Health System, the University of Pittsburgh, Mellon Financial Corporation, PNC Financial Services Group and United States Steel Corporation. Other significant Pittsburgh-based companies include H.J. Heinz Company, PPG Industries, Federated Investors, Alcoa and FreeMarkets. The following table sets forth certain circulation, advertising lineage and operating revenue information for the Post-Gazette for the past three years:
1999 2000 2001 -------- -------- -------- Circulation(1): Daily (excluding Saturday).............................. 244,310 241,524 241,827 Sunday.................................................. 431,172 417,815 412,691 Advertising lineage (in thousands of inches): Retail.................................................. 722 670 613 General................................................. 136 144 143 Classified.............................................. 770 787 671 -------- -------- -------- Total................................................... 1,628 1,601 1,427 Part run................................................ 217 208 204 -------- -------- -------- Total inches....................................... 1,845 1,809 1,631 ======== ======== ======== Operating revenues (in thousands): Third-party advertising................................. $153,377 $160,611 $147,735 Circulation............................................. 34,252 33,800 32,663 Other................................................... 805 1,076 1,518 -------- -------- -------- Total revenues..................................... $188,434 $195,487 $181,916 ======== ======== ========
- --------------- (1) From the ABC Audit Reports as of March 31 of each year. The Post-Gazette concentrates on local and regional news of Pittsburgh and Western Pennsylvania and has 248 full-time and 31 part-time editors, reporters and photographers on its staff. It draws upon the news reporting facilities of the major wire services and, with The Blade, maintains a four-person bureau in Washington, D.C. The Post-Gazette also maintains a news bureau in Harrisburg, Pennsylvania, the state capital, and five local news bureaus in the Pittsburgh metropolitan area. The Post-Gazette publishes and distributes all of its newspapers from its printing facilities in downtown Pittsburgh to 19 distribution centers located throughout the greater Pittsburgh area. Sophisticated computer systems are used for writing, editing, composing and producing the printing plates used in each edition. The Post-Gazette has seven letterpress presses with new color flexo units on each press. The flexo units provide state-of-the-art color to the fronts and backs of most sections. Daily inserts 51 are assembled at our downtown facility. Sunday inserts are assembled at a separate plant, five miles from our downtown plant, and transported directly to our distribution centers. Our five-year capital plan includes a reconfiguration and renovation of our press lines and mailroom in 2003 and 2004. The Post-Gazette is distributed primarily through independent home delivery carriers and single-copy dealers. Home delivery accounted for approximately 76% of circulation for the daily editions and approximately 59% of circulation for the Sunday edition during 2001. The newsstand price is $0.50 for the daily paper and $1.50 for the Sunday edition. Annual rates for direct payment subscriptions are $140.92 for daily and Sunday, $96.20 for Saturday and Sunday, $78.00 for Sunday only and $78.00 for Monday through Friday. THE BLADE Founded in 1835, The Blade is the leading newspaper in Northwest Ohio by average paid circulation and has a significant influence on the civic, political, economic and cultural life of its subscribers and the communities it serves. The Blade is the oldest continuing business in Toledo and has no significant newspaper competition. The Blade has a daily average paid circulation of approximately 138,800 and a Sunday average paid circulation of approximately 190,800, resulting in penetration in the Toledo city zone (Toledo and nearby suburbs) of approximately 53% daily and 68% Sunday, the highest city zone penetration rate of any newspaper in Ohio. This combination of high circulation and penetration is central to our success in attracting advertising and maintaining our dominant share of market revenue. The Blade is a morning daily and Sunday newspaper covering 14 counties in northwest Ohio and southeast Michigan, including the greater Toledo metropolitan area. With a population of 618,203, the three-county Toledo MSA is currently the 69th largest MSA in the United States. The combined population of the 14-county area served by The Blade is approximately 1,261,000. Toledo's major non- governmental employers include ProMedica Health Systems, Mercy Health Partners, Daimler-Chrysler, Bowling Green State University, The University of Toledo, Seaway FoodTown, General Motors, Sauder Woodworking and the Medical College of Ohio. Other significant Toledo-based companies include Dana Corporation, Owens-Illinois, HCR ManorCare and Pilkington Glass. The following table sets forth certain circulation, advertising lineage and operating revenue information for The Blade for the past three years:
1999 2000 2001 -------- -------- -------- Circulation(1): Daily (including Saturday).............................. 145,427 140,119 138,819 Sunday.................................................. 200,539 193,190 190,794 Advertising lineage (in thousands of inches): Retail.................................................. 622 563 484 General................................................. 75 80 79 Classified.............................................. 437 460 395 -------- -------- -------- Total inches....................................... 1,134 1,103 958 ======== ======== ======== Operating revenues (in thousands): Advertising............................................. $ 74,461 $ 80,362 $ 69,431 Intercompany advertising................................ (5,198) (6,913) (5,262) Circulation............................................. 17,200 16,873 17,317 Other................................................... 930 908 1,277 -------- -------- -------- Total revenues..................................... $ 87,393 $ 91,230 $ 82,763 ======== ======== ========
- --------------- (1) From the ABC Audit Reports as of September 30 of each year. 52 The Blade concentrates on local and regional news of northwest Ohio, and extensive coverage of state government. It has 148 full-time and 21 part-time editors, reporters and photographers on its staff. It draws upon the news reporting facilities of the major wire services and, with the Post-Gazette, maintains a four-person bureau in Washington, D.C. The Blade also maintains a news bureau in Columbus, Ohio, the state capital, and three local news offices in the Toledo metropolitan area. The Blade publishes and distributes all of its newspapers from its printing facility in downtown Toledo to eight distribution centers throughout the metropolitan Toledo area. Sophisticated computer systems are used for writing, editing, composing and producing each edition. The Blade has three color flexo presses, each with nine press units, which produce state-of-the-art color, and clean, clear images. Daily and Sunday inserts are assembled at a downtown facility near The Blade's main production plant. The Blade is distributed primarily through independent home delivery carriers and single-copy dealers. Home delivery accounted for approximately 80% of circulation for the daily editions and approximately 73% of circulation for the Sunday edition during 2001. The newsstand price is $0.50 for the daily paper and $1.50 for the Sunday edition. Annual subscription rates are $135.20 for daily and Sunday, $78.00 for Sunday only and $70.20 for daily only. ADVERTISING Substantially all of our advertising revenues are derived from local and national retailers and classified advertisers. Advertising rates and rate structures vary between our newspapers and are based, among other things, on advertising effectiveness, local market conditions, circulation, readership and type of advertising (whether classified, national or retail). Our advertising revenues are not reliant upon any one company or industry, but rather are supported by a variety of companies and industries, including realtors, car dealerships, grocery stores and other local businesses. Our largest single advertiser accounted for 4.2% of our publishing segment's total net advertising revenues in 2001. The contributions of retail, classified and national advertising to third-party advertising revenues for the past three years were as follows:
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------ ------------------- 1999 2000 2001 2001 2002 -------- -------- -------- -------- -------- Advertising revenues: Retail....................... $110,813 $116,504 $108,694 $ 22,850 $ 23,231 Classified................... 91,195 94,943 78,944 20,464 19,490 National..................... 25,830 29,526 29,528 7,612 6,586 -------- -------- -------- -------- -------- Total................... 227,838 240,973 217,166 50,926 49,307 Intercompany advertising..... (5,198) (6,913) (5,262) (1,677) (691) -------- -------- -------- -------- -------- Total net advertising... $222,640 $234,060 $211,904 $ 49,249 $ 48,616 ======== ======== ======== ======== ========
ONLINE EDITIONS The Post-Gazette's Internet Web site, post-gazette.com, reaches over a million unique users per month with over 15 million page views. The Blade's Internet Web site, toledoblade.com, reaches over 175,000 unique users per month with over 2.7 million page views. Each site contains breaking news, summaries of articles from the print editions, information produced specifically for the Web site and portions of the classified advertising from the print editions. The Web sites contribute to our revenues by expanding our classified marketplace and providing new partnership and advertising opportunities for retailers. An independent study conducted by Belden Research in the spring of 2001 found that people who visit the Post-Gazette Web site are more likely to increase rather than to decrease their readership of the print edition. 53 COMPETITION We face competition for advertising revenue from television, radio, the Internet and direct-mail programs, as well as competition for both advertising and circulation from suburban neighborhood, local and national newspapers and other publications. Competition for advertising is based on circulation levels, readership demographics, advertising rates and advertiser results. Competition for circulation is generally based upon content, journalistic quality and price. The following table shows the average daily and Sunday paid circulation of the Post-Gazette as compared to average paid circulations of other newspapers in the Pittsburgh MSA:
PITTSBURGH MSA ------------------------------ AUDIT DAILY SUNDAY PERIOD(1) ------- ------- ---------- Pittsburgh Post-Gazette..................................... 229,717 371,404 3/2001 Greensburg Tribune Review................................... 82,624 168,272 3/2001 Beaver County Times......................................... 41,943 48,304 6/2001 Observer Reporter........................................... 30,716 34,783 12/2001 Butler Eagle................................................ 27,818 29,119 6/2001 Uniontown Herald Standard................................... 26,649 28,787 6/2001 Valley News Dispatch........................................ 24,324 24,215 3/2001 USA Today................................................... 24,069 -- 12/2000 McKeesport Daily News....................................... 20,756 -- 3/2001 The Wall Street Journal..................................... 16,552 -- 3/2001 The New York Times.......................................... 5,015 7,901 9/2000
- --------------- (1) Based on average paid circulation as set forth in the ABC Audit Report for each newspaper for the indicated audit period. The following table shows the average daily and Sunday paid circulation of The Blade as compared to average paid circulations of other newspapers in the Toledo MSA:
TOLEDO MSA ------------------------------ AUDIT DAILY SUNDAY PERIOD(1) ------- ------- ---------- The Blade................................................... 111,777 145,987 9/2001 Bowling Green Sentinel-Tribune.............................. 11,590 -- 9/2001 USA Today................................................... 9,098 -- 12/2000 The Wall Street Journal..................................... 4,362 -- 3/2001 The Detroit News/Free Press................................. 1,910 1,812 3/2001 Findlay Courier............................................. 901 -- 6/2001 Defiance Crescent-News...................................... 894 924 6/2001 The New York Times.......................................... 419 588 9/2000
- --------------- (1) Based on average paid circulation as set forth in the ABC Audit Report for each newspaper for the indicated audit period. RAW MATERIALS Newsprint and ink are our newspaper publishing segment's largest expense after labor costs and accounted for $42.5 million, or 16.2%, of the segment's operating expenses in 2001. During 2001, we used approximately 65,000 metric tons of newsprint in our production processes at an estimated total cost for newsprint of approximately $37 million. In the last three years, our weighted average cost per ton of newsprint has varied from a low of $499 per metric ton in 1999 to a high of $572 per metric ton in 2001. All of our newsprint is supplied under a long-term sole-supplier contract expiring at the end of 2004. Pricing under the contract varies with market prices. The contract provides for a discount as long as we use the contract vendor as our sole supplier of newsprint. 54 In addition to maximizing layout efficiency and minimizing waste, we plan to reduce our page width by the end of 2004, reducing our annual newsprint consumption by approximately 7%. If this initiative had been completed by January 1, 2001, we would have realized savings of approximately $2.5 million in newsprint costs for the year ended December 31, 2001. SEASONALITY Newspaper companies tend to follow a distinct and recurring seasonal pattern, with higher advertising revenues generally occurring in the second and fourth quarters of each year as a result of increased advertising activity during the Easter holiday and spring advertising season and during the Thanksgiving and Christmas periods. The first quarter is historically the weakest quarter for advertising revenues. TELEVISION BROADCASTING We acquired the first of our current television broadcasting stations in 1972, when we purchased WLIO in Lima, and currently own and operate four television stations. We are also a two-thirds owner of a fifth station, which is managed by LIN Television under a management services agreement. Our television stations are diverse in network affiliation with two Fox stations, one NBC station, one ABC station and one UPN station. We have a duopoly in Louisville, Kentucky (the 50th largest DMA) through our ownership of the Fox and UPN stations. In the year ended December 31, 2001 and the quarter ended March 31, 2002, our television broadcasting operations generated revenues of $35.2 million and $9.0 million, respectively, experienced operating losses of $1.8 million and $55,000, respectively, and generated EBITDA of $3.1 million and $1.0 million, respectively. We own the following broadcast properties:
COMMERCIAL CHANNEL DMA STATIONS IN STATION NUMBER MARKET RANK(1) AFFILIATION DMA(2) - ------- ------- ------ ------- ----------- ----------- WDRB 41 Louisville, KY 50 Fox 7 WFTE 58 Louisville, KY(3) 50 UPN 7 WAND(4) 17 Champaign-Springfield and Decatur, IL 82 ABC 5 KTRV 12 Boise, ID(5) 121 Fox 5 WLIO 35 Lima, OH 191 NBC 2
- --------------- (1) Ranking of DMA served by a station among all DMAs is measured by the number of television households based within the DMA in the November 2001 Nielsen estimates. (2) The term "commercial station" means a television broadcasting station and does not include non-commercial television stations, cable program services or networks, or stations that do not meet the minimum Nielsen reporting standards. (3) Licensed to Salem, Indiana. (4) We have a two-thirds ownership interest in WAND, which is managed by LIN Television. (5) Licensed to Nampa, Idaho. We seek to maintain a distinct identity at each of our stations by creating quality local programming, such as local news and sports coverage, and by actively sponsoring and promoting community events. This focus positions us to increase our share of local advertising revenues, which are generally more stable than national advertising revenues and which we impact directly through our own local sales force. We currently are conducting a thorough review of our cost structure in light of current weak advertising revenue. We have reduced headcount at our broadcasting operations and believe that through continued cost reduction efforts and effective local programming, we can increase operating margins. MARKETS SERVED The following is a description of each of our stations and their markets. In the description, information concerning estimates of population, total market revenues and average household income has been derived from the BIA Guide, which is a leading compilation of demographic and broadcast industry data. In the description, the term "commercial station" means a television broadcasting station and does 55 not include non-commercial television stations, cable program services or networks, or stations that do not meet the minimum Nielsen reporting standards and the term "audience share" means the audience share from 8:00 a.m. to midnight as reported in the BIA Guide. Louisville, Kentucky is the 50th-largest DMA in the United States, with a population of approximately 1.5 million and approximately 599,000 television households. The average household income in the Louisville DMA is approximately $43,500. Total Market Revenues in the Louisville DMA in 2001 were approximately $109 million. Cable penetration in the market is estimated to be 64%. In March 2001, we acquired from Kentuckiana Broadcasting, the assets of WFTE, which we had previously operated under a joint-sales agreement. For the November 2001 ratings period, WDRB ranked fourth in the Louisville DMA with an audience share of 8%, and WFTE ranked fifth, tying with one other station, in the Louisville DMA with an audience share of 4%. There are five other commercial television stations, owned by Cosmos Broadcasting, Cascade Broadcasting, Word Broadcasting, Belo Corp. and Hearst-Argyle TV, and three public television stations licensed within the Louisville DMA. Champaign-Springfield and Decatur, Illinois is the 82nd-largest DMA in the United States, with a population of approximately 900,000 and approximately 362,000 television households. The average household income in this DMA is approximately $45,000. Total Market Revenues for television in this DMA in 2001 were approximately $44 million. Cable penetration in the market is estimated to be 75%. In March 2000, we acquired a two-thirds interest in WAND from LIN Television. LIN continues to own a one-third interest in WAND and provides management services. For the November 2001 ratings period, WAND ranked third in its market with an audience share of 12%. There are four other commercial television stations, owned by Nexstar Broadcasting Group, Sinclair Broadcast Group, Acme Television and Bahakel Communications, and four public television stations licensed within the Champaign-Springfield and Decatur DMA. Boise, Idaho is the 121st-largest DMA in the United States, with a population of approximately 550,000 and approximately 220,000 television households. The average household income in the Boise DMA is approximately $44,500. Total Market Revenues in the Boise DMA in 2001 were approximately $37 million. Cable penetration in the market is estimated to be 46%. For the November 2001 ratings period, KTRV ranked second in its market, tying with two other stations, with an audience share of 11%. There are four other commercial television stations, owned by Fisher Broadcasting, Journal Broadcasting Group, Banks Broadcasting and Belo Corp., and one public television station licensed within the Boise DMA. Lima, Ohio is the 191st-largest DMA in the United States, with a population of approximately 107,000 and approximately 57,000 television households. The average household income in the Lima DMA is approximately $39,700. Total Market Revenues in the Lima DMA in 2001 were approximately $4.6 million. Cable penetration in the market is estimated to be 82%. For the November 2001 ratings period, WLIO ranked first in its market with an audience share of 24%. There is one other commercial television station, owned by Greg Phipps, and one public television station licensed within the Lima DMA. INDUSTRY Television station revenues are primarily derived from local, regional and national advertising and, to a lesser extent, from network compensation and revenues from commercial production activities. Advertising rates are based upon a variety of factors, including a program's popularity among the viewers an advertiser wishes to attract, the number of advertisers competing for the available time, the size and demographic makeup of the market served by the station, the availability of alternative advertising media in the market area and the effectiveness of the station's sales force. Rates are also determined by a station's overall ratings and share in its market, as well as the station's ratings and share among particular demographic groups which an advertiser may be targeting. Advertising revenues are positively affected by strong local economies, national and regional political election campaigns, and certain events such as the Olympic Games or the Super Bowl. Because television stations rely on advertising revenues, declines in advertising budgets, particularly in recessionary periods, adversely affect the revenues of television stations. 56 ADVERTISING SALES All network-affiliated stations are required to carry spot advertising sold by their networks, which reduces the amount of advertising spots available for sale by our stations. Our stations sell all of the remaining advertising to be inserted in network programming and all of the advertising in non-network programming, retaining the revenues received from these sales. In 2001, approximately 99% of our broadcasting revenues came from the sale of time to national and local advertisers. Approximately 65% of our broadcast revenues came from local advertising, 34% came from national advertising, none came from political advertising and our remaining revenues came from network compensation payments under our network affiliate agreements and miscellaneous sources. A national syndicated program distributor will often retain a portion of the available advertising time for programming it supplies in exchange for no fees or reduced fees charged to the stations for such programming. These arrangements are called barter programming. Local Sales. Local advertising time is sold by each station's local sales staff who call upon advertising agencies and local businesses, which typically include car dealerships, retail stores and restaurants. Compared to revenues from national advertising accounts, revenues from local advertising are generally more stable and more controllable. We seek to attract new advertisers to television, and to increase the amount of advertising time sold to existing local advertisers, by relying on experienced local sales forces with strong community ties, producing news and other programming with local advertising appeal and sponsoring or co-promoting local events and activities. National Sales. National advertising time is sold through national sales representative firms which call upon advertising agencies, whose clients typically include automobile manufacturers and dealer groups, telecommunications companies, fast food franchisers and national retailers (some of which may advertise locally). NETWORK AFFILIATIONS Whether or not a station is affiliated with one of the four major networks (NBC, ABC, CBS or Fox) has a significant impact on the composition of the station's revenues, expenses and operations. Except for Fox, a major network affiliate receives the majority of its programming each day from the network. Our stations are affiliated with their networks pursuant to an affiliation agreement, with the exception of our Fox stations that are governed by affiliation agreements that remain unsigned. WDRB and KTRV are affiliated with Fox; WAND is affiliated with ABC; WLIO is affiliated with NBC; and WFTE is affiliated with UPN. Our affiliation agreements provide the affiliated station with the right to broadcast all programs transmitted by the network with which it is affiliated. In exchange, the network has the right to sell a substantial majority of the advertising time during these broadcasts. In addition, for each hour that the station elects to broadcast network programming, the network pays the station a fee (with the exception of Fox and UPN), specified in the affiliation agreement, which varies with the time of day. Typically, "prime-time" programming generates the highest hourly rates. Our ABC affiliation agreement for WAND expires on September 4, 2005. The NBC affiliation agreement for WLIO expires on December 31, 2010. Our UPN affiliation agreement for WFTE expires on January 12, 2003. DIGITAL TELEVISION The digital television, or DTV, transmission system delivers video and audio signals of higher quality (including high definition television) than the existing analog transmission system. DTV also has substantial capabilities for multiplexing (the broadcast of several programs concurrently) and data transmission. Digital television will require consumers to purchase new televisions that are capable of receiving and displaying DTV signals or adapters to receive DTV signals and convert them into analog signals for display on existing receivers. 57 In April 1998, the FCC assigned each licensed television station a second broadcast channel on which to provide DTV service. In general, the DTV channels assigned to television stations are intended to allow stations to have their DTV coverage area replicate their analog coverage area, although a number of variables will ultimately determine the extent to which a station's DTV operation will provide such replication. By May 1, 2002, all commercial television station licensees were required to complete construction and commence operating DTV facilities except to the extent that the FCC extended the deadline in certain cases. WAND met the May 1, 2002 deadline. WFTE has until May 13, 2003 to construct because of FCC delays in issuing the construction permit. KTRV is not required to construct digital facilities until the FCC determines which digital channel KTRV will ultimately utilize. Our remaining stations -- WDRB and WLIO -- requested waivers of the May 1, 2002 deadline. On June 14, 2002, the FCC denied those requests and ordered WDRB and WLIO to construct digital television transmission systems no later than December 1, 2002. The FCC also directed the stations to submit to the FCC, by July 15, 2002, reports setting forth construction plans and a proposed timetable for construction that would meet the December 1, 2002 deadline. Finally, the FCC directed the stations to file by September 13, 2002 interim progress reports regarding their digital construction efforts. In compliance with the FCC's order, the two stations have submitted to the FCC their construction plans and proposed timetable for construction of digital transmission systems. Both stations' plans call for the construction of lower-power digital transmission systems sufficient to provide digital television coverage for the station's city of license -- Lima, Ohio for WLIO, Louisville, Kentucky for WDRB. The timetables call for construction to be completed, and the facilities fully operational, by December 1, 2002. The lower-power construction plans comply with FCC rules and policies regarding digital television transmission, which expressly permit lower-power facilities. We anticipate that, at some point in the future, the FCC will establish a deadline by which such lower-power systems must be upgraded to full power systems that provide coverage to a broader geographic area. When such a deadline is established, we will comply with it by upgrading our facilities. We estimate that approximately $12 million of capital expenditures after March 31, 2002 will be necessary to meet the DTV requirements for all of our stations. Once a station begins broadcasting its DTV signal, it may broadcast both its analog and DTV signals until December 31, 2006, after which, subject to certain conditions described below, the FCC expects to reclaim one of the channels and broadcasters will operate a single DTV channel allocation. Starting April 1, 2003, commercial station operators must simulcast at least 50 percent of the video programming broadcast on their analog channel on their DTV channel. The required simulcast percentage increases annually until April 1, 2005, when an operator must simulcast 100 percent of its programming on its analog and DTV channels. COMPETITION Television broadcasting stations face competition for advertising revenue, audience share and programming. Our competitive position depends, in part, on our signal coverage and assigned frequency and is materially affected by new and changing technologies, regulations passed by federal agencies, including the FCC and the Federal Trade Commission, and other entertainment and communication industries. Our stations compete for advertising revenues with other television broadcasting stations in their respective markets and, to a lesser extent, with other advertising media such as newspapers, radio stations, magazines, outdoor advertising, yellow page directories, direct mail, and local cable systems serving the same market. Competition for advertising dollars in the television broadcasting industry occurs primarily within individual markets. Stations compete for viewership generally against other leisure activities in which one could choose to engage rather than watch television. Broadcast stations compete for audience share specifically on the basis of program popularity, which has a direct effect on advertising rates. A portion of our broadcast 58 programming is supplied by the network affiliated with our station and during that time period, our ability to attract viewers is dependent on the performance of the network programming. During non-network time periods, we broadcast a combination of self-produced news, public affairs and other entertainment programming including syndicated programs. The development of new methods of video transmission, and in particular the growth of cable television and increases in the transmission range of over-the-air television broadcasting signals, has significantly altered competition for audience share in the television industry by increasing the number of stations available to viewers. Home entertainment systems such as VCRs, DVDs and television game devices also compete for audience share. Future sources of competition include the transmission of video programming over broadband Internet and specialized "niche" programming targeted at very narrowly defined audiences. In acquiring programming to supplement network programming, network affiliates compete with other broadcasting stations in their markets. Competition for programming involves negotiating with national program distributors or syndicators that sell first-run and rerun packages of programming. Our stations compete for exclusive access to off-network reruns (such as "Friends") and first-run products (such as "Jeopardy") in their respective markets. AOL/Time Warner, Viacom and News Corp., each of which has a television network or cable broadcast stations, also own or control major production studios, which are the primary source of programming for the networks. It is uncertain whether in the future such programming, which is generally subject to short-term agreements between the studios and the networks, will be made available to broadcast stations not affiliated with the studio. Television broadcasters also compete for non-network programming unique to the markets they serve. As such, stations strive to provide exclusive news stories, unique features such as investigative reporting and coverage of community events, and to secure broadcast rights for regional and local sporting events. OTHER OPERATIONS Buckeye TeleSystem, Inc. is a competitive local exchange carrier which provides facilities-based business telephony primarily in the Toledo market serviced by Buckeye CableSystem. Our telephony system offers services ranging from business voice lines to high bandwidth data lines to mid- to large-size businesses. Buckeye TeleSystem generated revenues and EBITDA of $13.6 million and $1.5 million, respectively, for the year ended December 31, 2001 and $4.2 million and $1.2 million, respectively, for the three months ended March 31, 2002. Corporate Protection Services, based in Toledo, designs and installs residential and light commercial security and fire alarm systems primarily in Toledo but also in other locations throughout the country. From its Toledo monitoring facility, CPS provides 24-hour monitoring services for security systems in Toledo and elsewhere. For the year ended December 31, 2001, CPS generated revenues of $8.6 million and negative EBITDA of $166,000. For the three months ended March 31, 2002, CPS generated revenues of $2.1 million and EBITDA of $34,000. Access Toledo provides conventional dial-up Internet access over telephone lines. It has approximately 6,600 subscribers in the greater Toledo metropolitan area. Access Toledo generated revenues and EBITDA of $2.0 million and $963,000, respectively, for the year ended December 31, 2001. In 2002, Access Toledo's operations were absorbed into Buckeye CableSystem and Buckeye TeleSystem. Community Communication Services, Inc. provides printing and door-to-door delivery of advertising circulars in the greater Toledo metropolitan area. For the year ended December 31, 2001, CCS generated revenues of $839,000 and negative EBITDA of $921,000. For the three months ended March 31, 2002, CCS generated revenues of $122,000 and negative EBITDA of $159,000. EMPLOYEES As of March 31, 2002, we had approximately 3,020 full- and part-time employees. Of these, approximately 400 were employed in cable television, 2,117 in newspaper publishing, 243 in television broadcasting and 260 in other operations and general corporate. 59 Substantially all non-management employees of our both newspapers are represented by various labor unions. The labor agreements with the 10 unions representing the employees of the Post-Gazette expired December 31, 2001. On June 27, 2002, we reached tentative agreements with representatives of the 10 Pittsburgh unions on the terms of collective bargaining agreements that would run through December 31, 2006. Those tentative agreements are subject to ratification by union members; the bargaining representatives have pledged their full support in the ratification process and are optimistic, as are we, that the tentative agreements will be ratified. However, there can be no assurances that ratification will occur. The employees of The Blade are represented by eight unions under labor agreements that expire in March 2003. We believe that our relations with our newspaper employees are good. In addition to our newspaper employees, as of March 31, 2002 we had approximately 150 employees in cable television and related services who were represented by the Brotherhood of Teamsters under collective bargaining agreements which expire in 2003 and 2004. We believe that overall our employee relations are good. LEGAL PROCEEDINGS In the ordinary course of our business, we are involved in a number of lawsuits and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or liquidity. PROPERTIES Our principal executive offices are located at 541 N. Superior Street, Toledo, Ohio. The types of properties required to support cable television operations include offices, operations centers and hub sites where signals are received and distributed, and related warehouse space. The types of properties required to support newspaper publishing include offices, facilities for printing presses and production and storage, and depots for distribution. The types of properties required to support television broadcasting stations include offices, studios, transmitter sites and antennas sites. A station's studios are generally housed with its offices. The transmitter sites and antenna are generally located in elevated areas to provide optimal signal strength and coverage. 60 The following table sets forth certain information regarding our significant properties: CABLE TELEVISION
OWNED OR APPROXIMATE EXPIRATION COMPANY/PROPERTY LOCATION USE LEASED SIZE OF LEASE - ------------------------- --- -------- ----------- -------------- Buckeye CableSystem Toledo, OH................ Office space Leased 1,430 sf September 2005 Toledo, OH................ Office space Leased 1,600 sf July 2005 Toledo, OH................ Office space Owned 35,690 sf -- Toledo, OH................ Operations center (headend) Owned 36,000 sf -- Toledo, OH................ Operations center warehouse Owned 9,200 sf -- Toledo, OH................ Warehouse Leased 31,080 sf December 2002 Toledo, OH................ Hub site Owned 800 sf -- Toledo, OH................ Hub site Owned 720 sf -- Toledo, OH................ Hub site Owned 300 sf -- Toledo, OH................ Hub site Owned 160 sf -- Toledo, OH................ Hub site Leased 60 sf February 2023 Toledo, OH................ Hub site Leased 60 sf November 2023 Toledo, OH................ Hub site Leased 60 sf August 2022 Toledo, OH................ Hub site Leased 60 sf August 2022 Toledo, OH................ Hub site Leased 60 sf October 2022 Toledo, OH................ Hub site Leased 60 sf April 2023 Toledo, OH................ Hub site Leased 160 sf September 2022 Toledo, OH................ Hub site Leased 160 sf November 2022 Toledo, OH................ Hub site Leased 160 sf February 2023 Toledo, OH................ Hub site Leased 160 sf June 2022 Toledo, OH................ Hub site Leased 120 sf June 2003 Toledo, OH................ Hub site Owned 240 sf -- Erie County CableSystem Sandusky, OH.............. Office space Leased 16,750 sf June 2015 Erie Co., OH.............. Headend Owned 2,823 sf -- Sandusky, OH.............. Warehouse Owned 1,536 sf -- Sandusky, OH.............. Warehouse Leased 17,000 sf April 2003
61 PUBLISHING
OWNED OR APPROXIMATE EXPIRATION COMPANY/PROPERTY LOCATION USE LEASED SIZE OF LEASE - ------------------------- --- -------- -------------- ---------- Pittsburgh Post-Gazette: Pittsburgh, PA............ Printing plant/office Owned 230,400 sf -- Pittsburgh, PA............ Office space Leased 360 sf March 2004 Greensburg, PA............ Office space Leased 450 sf June 2003 Pittsburgh, PA............ Inserting facility Owned 33,565 sf -- Pittsburgh, PA............ Garage Owned 19,655 sf -- Bethel Park, PA........... Distribution center Leased 10,000 sf July 2005 Carnegie, PA.............. Distribution center Leased 10,300 sf May 2003 Coraopolis, PA............ Distribution center Leased 8,800 sf February 2004 Cranberry, PA............. Distribution center Leased 9,000 sf April 2004 Donora, PA................ Distribution center Leased 10,000 sf December 2002 Gibsonia, PA.............. Distribution center Leased 10,000 sf February 2006 Houston, PA............... Distribution center Leased 10,000 sf June 2003 Lawrence, PA.............. Distribution center Leased 10,200 sf September 2004 McKeesport, PA............ Distribution center Leased 10,000 sf May 2004 Monaca, PA................ Distribution center Leased 7,500 sf August 2003 Monroeville, PA........... Distribution center Leased 10,600 sf July 2003 Pittsburgh, PA............ Distribution center Leased 14,700 sf March 2007 Pittsburgh, PA............ Distribution center Leased 12,000 sf Month to month Pittsburgh, PA............ Distribution center Leased 13,500 sf April 2003 Pittsburgh, PA............ Distribution center Leased 10,000 sf December 2003 Sharpsburg, PA............ Distribution center Leased 10,200 sf March 2006 Tarentum, PA.............. Distribution center Leased 7,500 sf September 2003 West Mifflin, PA.......... Distribution center Leased 10,100 sf November 2002 Wilkinsburg, PA........... Distribution center Leased 17,000 sf May 2005 The Blade: Toledo, OH................ Main building and printing plant Owned 160,000 sf -- Toledo, OH................ Inserting facility Leased 20,000 sf June 2009 Holland, OH............... Distribution center Leased 10,900 sf March 2012 Holland, OH............... Distribution center Leased 9,600 sf Month to month Northwood, OH............. Distribution center Leased 9,800 sf January 2010 Perrysburg, OH............ Distribution center Leased 10,000 sf August 2002 Sylvania Twp., OH......... Distribution center Leased 10,000 sf March 2008 Toledo, OH................ Distribution center Leased 10,800 sf August 2002 Toledo, OH................ Distribution center Leased 12,500 sf September 2005 Toledo, OH................ Distribution center Leased 10,000 sf June 2009 Toledo, OH................ Distribution center Leased 9,800 sf April 2012 Toledo, OH................ Circulation department Owned 1,300 sf -- Toledo, OH................ Office space Owned 35,000 sf --
TELEVISION BROADCASTING
OWNED OR APPROXIMATE EXPIRATION COMPANY/PROPERTY LOCATION USE LEASED SIZE OF LEASE - ------------------------- --- -------- -------------- ---------- Independence Television Co. Louisville, KY............ Office space Owned 35,000 sf -- Floyd County, IN.......... Tower Owned 72 acres -- Floyd County, IN.......... Satellite dish site Leased 1 acre 2015 Idaho Independent Television Boise County, ID.......... Tower site Leased 200 sf July 2006 Nampa, ID................. Site for satellite dishes Leased 10,000 sf October 2005 Nampa, ID................. Office space and tower Owned 10,000 sf -- Lima Communications Corp. Lima, OH.................. Office space and tower Owned 10,890 sf -- WLFI-TV, Inc. (WAND) Decator, IL............... Office space, entertainment and tower Owned 18,500 sf -- Argenta, IL............... Tower Owned 2,200 sf -- Danville, IL.............. Equipment Leased 240 sf March 2003
62 MISCELLANEOUS
OWNED OR APPROXIMATE EXPIRATION COMPANY/PROPERTY LOCATION USE LEASED SIZE OF LEASE - ------------------------- --- -------- -------------- ---------- Block Communications, Inc. Toledo, OH................ Condominiums Owned 3,000 sf -- Corporate Protection Service Toledo, OH................ Office space Leased 12,000 sf March 2003 Toledo, OH................ Office and warehouse space Leased 20,000 sf June 2006 Community Comm. Services Holland, OH............... Office and warehouse space Leased 22,000 sf June 2004
Many of these properties are subject to liens securing our senior credit facilities. 63 REGULATION REGULATION OF CABLE TELEVISION The cable television industry is regulated by the FCC, some state governments and substantially all local governments. In addition, various legislative and regulatory proposals under consideration from time to time by the Congress and various federal agencies have in the past, and may in the future, materially affect us and the cable television industry. The following is a summary of federal laws and regulations materially affecting the growth and operation of the cable television industry and a description of certain state and local laws. We believe that the regulation of the cable television industry remains a matter of interest to Congress, the FCC and other regulatory authorities. There can be no assurance as to what, if any, future actions such legislative and regulatory authorities may take or the effect thereof on us. FEDERAL LEGISLATION The principal federal statute governing the cable television industry is the Communications Act of 1934, as amended. As it affects the cable television industry, the Communications Act has been significantly amended on three occasions: by the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996 Telecom Act altered the regulatory structure governing the nation's telecommunications providers. It removed barriers to competition in both the cable television market and the local telephone market. Among other things, it also reduced the scope of cable rate regulation. FEDERAL REGULATION The FCC is the principal federal regulatory agency with jurisdiction over cable television. It has adopted regulations covering such areas as cross-ownership between cable television systems and other communications businesses, carriage of television broadcast programming, cable rates, consumer protection and customer service, leased access, indecent programming, programmer access to cable television systems, programming agreements, technical standards, consumer electronics equipment compatibility, ownership of home wiring, program exclusivity, equal employment opportunity, consumer education and lockbox enforcement, origination cablecasting and sponsorship identification, political programming and advertising, advertising during children's programming, signal leakage and frequency use, maintenance of various records, and antenna structure notification, marking and lighting. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. A brief summary of certain of these federal regulations as adopted to date follows. Rate Regulation. Where a cable television system is not subject to effective competition, the rates for the basic service tier (the lowest level of cable programming service which must include local broadcast channels and public access channels) may be regulated by the local franchising authority at its option. Rates for cable programming service tiers, which generally include programming other than the channels carried on the basic service tier, and for programming offered on a per-channel or per-program basis, are not subject to governmental regulations. If local franchising authorities choose to regulate basic service rates, they may order reductions and, in certain circumstances, refunds of existing monthly rates and charges for associated equipment. In carrying out their rate regulatory authority, however, local officials are subject to certain FCC standards such as the obligation to evaluate rates in accordance with FCC approved benchmark formulas or cost-of-service showings. Future rates of regulated cable systems may not exceed an inflation-indexed amount, plus increases in certain costs beyond the cable operator's control, such as taxes, franchise fees and increased programming costs. Cost-based adjustments to these capped rates also can be made in the event a cable television operator adds or deletes channels. There is also a streamlined cost-of-service methodology available to justify a rate increase for "significant" system rebuilds or upgrades. With the exception of one franchise covering 59 cable subscribers, we are currently not being regulated for basic services, installation and equipment rates in any of our franchise areas. 64 In June 2002, the FCC initiated a new rulemaking proceeding that examines many issues related to its cable rate regulation rules and will consider whether any existing regulations should be eliminated or revised in an attempt to streamline the regulatory process while still providing protection to consumers. We are unable to predict the outcome of this proceeding or its effects upon our business. Existing regulations require cable television systems to permit customers to purchase video programming on a per channel or a per program basis without the necessity of subscribing to any tier of service, other than the basic service tier, unless the cable television system is technically incapable of doing so. Generally, this exemption from compliance with the statute for cable television systems that do not have such technical capability is available until a cable television system obtains the capability, but not later than December 2002. Our cable systems have this capability. Carriage of Television Broadcasting Signals. The 1992 Cable Act contains signal carriage requirements which allow full-power commercial television broadcasting stations that are "local" to a cable television system (i.e., the system is located in the station's designated market area) to elect every three years whether to require the cable television system to carry the station, subject to certain exceptions, or whether the cable television system will have to negotiate for "retransmission consent" to carry the station. The next election between must-carry and retransmission consent will be October 1, 2002. A cable television system is generally required to devote up to one-third of its activated channel capacity for the carriage of local commercial television stations whether pursuant to the mandatory carriage requirements or retransmission consent requirements of the 1992 Cable Act. Local non-commercial television stations are also given mandatory carriage rights, subject to certain exceptions, on cable systems with the principal head-end located within the larger of: (i) a 50-mile radius from the station's city of license or (ii) the station's Grade B contour (a measure of signal strength). Unlike commercial stations, noncommercial stations are not given the option to negotiate retransmission consent for the carriage of their signal. In addition, cable television systems have to obtain retransmission consent for the carriage of all "distant" commercial broadcast stations, except for certain "superstations" (i.e., commercial satellite-delivered independent stations such as WGN). To date, compliance with the "retransmission consent" and "must carry" provisions of the 1992 Cable Act has not had a material effect on us, although this result may change in the future depending on such factors as market conditions, channel capacity and similar matters when such arrangements are renegotiated. The FCC has initiated a rulemaking proceeding on the carriage of television signals in high definition and digital formats. The outcome of this proceeding could have a material effect on the number of services that a cable operator will be required to carry. Renewal of Franchises and Franchise Fees. The 1984 Cable Act established renewal procedures and criteria designed to protect incumbent franchisees against arbitrary denials of renewal. While these formal procedures are not mandatory unless timely invoked by either the cable television operator or the franchising authority, they can provide substantial protection to incumbent franchisees. Even after the formal renewal procedures are invoked, franchising authorities and cable television operators remain free to negotiate a renewal outside the formal process. Nevertheless, renewal is by no means assured, as the franchisee must meet certain statutory standards. Even if a franchise is renewed, a franchising authority may impose new and more onerous requirements such as upgrading cable-related facilities and equipment and complying with voluntary commitments, although the municipality must take into account the cost of meeting such requirements. In the case of franchises in effect prior to the effective date of the 1984 Cable Act, franchising authorities may enforce requirements contained in the franchise relating to facilities, equipment and services, whether or not cable-related. The 1984 Cable Act, under certain limited circumstances, permits a cable operator to obtain modifications of franchise obligations. Franchises have generally been renewed for cable television operators that have provided satisfactory services and have complied with the terms of their franchises. Franchising authorities may also consider the "level" of programming service provided by a cable television operator in deciding whether to renew. For alleged franchise violations occurring after December 29, 1984, franchising authorities have the right to deny renewal because of an operator's failure to substantially comply with the material terms of the franchise even if the franchising authority has "effectively acquiesced" to such past violations. The franchising authority is, however, precluded from denying renewal unless the franchising authority has provided the 65 cable operator with notice and the opportunity to cure, or in any case in which it is documented that the franchising authority has waived its right to object, or in which the cable operator gives written notice of a failure or inability to cure and the franchising authority fails to object within a reasonable time. Courts may not reverse a denial of renewal based on procedural violations found to be "harmless error." Historically, we have not experienced any material problems renewing our franchises for our cable television systems. We are not aware of any current or past material failure on our part to comply with our franchise agreements. We believe that we have generally complied with the terms of our franchises and have provided quality levels of service. Franchising authorities may generally impose franchise fees of up to 5% of a cable television system's annual gross revenues, excluding revenues derived from telecommunications services. In addition, state and local governments may also be able to exact some compensation for the use of public rights-of-way. In March 2002, the FCC ruled that cable modem service, which provides high-speed access to the Internet, is not a cable television service. Subsequently, several large cable operators around the nation have taken the position that, in view of the FCC's order, franchise fees are inapplicable to the cable operator's charges for cable modem service. Because the FCC's ruling expresses only tentative conclusions regarding the collection of franchise fees on cable modem services, and is subject to further FCC rulemaking, we have not suspended our collection of such franchise fees. We are in discussion with the various municipalities with whom we have franchises in an effort to address this issue as forthrightly as possible The FCC's order is currently under appeal before the U.S. Circuit Court for the Ninth Circuit in California. A ruling on the appeal may occur in late 2002 or early 2003. Channel Set-Asides. The 1984 Cable Act permits local franchising authorities to require cable television operators to set aside certain television channels for public, educational and governmental access programming. The 1984 Cable Act further requires cable television systems with thirty-six or more activated channels to designate a portion of their channel capacity for commercial leased access by unaffiliated third parties to provide programming that may compete with services offered by the cable television operator. The 1992 Cable Act requires leased access rates to be set according to a formula determined by the FCC. Copyright Matters. Cable systems must obtain copyright licenses for programming and television signals they carry. Copyright authority for programming on non-broadcast networks typically is obtained from the networks in question, and copyright authority for programming originated locally by the cable system must be obtained directly from copyright holders. The Copyright Act provides a blanket license for copyrighted material on television stations whose signals a cable system retransmits. Cable operators can obtain this license by filing semi-annual reports and paying a percentage of their revenues as a royalty fee to the U.S. Copyright Office, which then distributes the royalty pool to copyright holders. For larger cable systems, these payments vary with the numbers and type of distant television stations the system carries. From time to time, Congress considers proposals to alter the blanket copyright license, some of which could make the license more costly. Pole Attachments. The Communications Act requires the FCC to regulate the rates, terms and conditions imposed by public utilities for use of utility poles and conduit space unless state authorities have certified to the FCC that they adequately regulate pole attachment rates, as is the case in Ohio and Michigan where the Company's cable systems operate. In the absence of state certification, the FCC regulates pole attachment rates, terms and conditions only in response to a formal complaint. Where states such as Ohio and Michigan regulate pole attachments, they generally do so by following the FCC's substantive rules. The Communications Act also requires that a utility provide cable systems and telecommunications carriers with nondiscriminatory access to any pole, conduit or right-of-way controlled by the utility. The FCC's pole attachment rate formulas govern the maximum rate certain utilities may charge cable operators and telecommunications carriers for attachments to the utility's poles and conduits. Effective February 2001, a formula now governs the maximum attachment rate for companies providing telecommunications services, including cable operators, which results in a higher maximum attachment 66 rate for telecommunications services compared to cable services. The increase in attachment rates applicable to telecommunications services resulting from the FCC's new rate formula will be phased in over a five-year period. In early 2002, the U.S. Supreme Court affirmed that the FCC's authority to regulate rates for attachments to utility poles extended to attachments by cable operators and telecommunications carriers that are used to provide Internet service or wireless telecommunication service. This development protects cable television operators that also provide Internet access services from facing more onerous rates, terms and conditions imposed by utilities for pole attachments. In June 2002, a federal court of appeals struck down two FCC rules that related to pole attachments. The court held that the Federal Pole Attachment Act did not extend to electric transmission facilities and, therefore, struck the FCC's rule that required electric utilities to provide access to that type of facilities. The court also rejected an FCC rule that would require electric utilities to expand facility capacity to meet the needs of attaching entities. We do not believe that the court's ruling would have a material negative impact on our business operations. Local Television/Cable Cross-Ownership Rule. An FCC rule prohibits any cable television system (including all parties under common control) from carrying the signal of any television broadcasting station that has a predicted service area that overlaps, in whole or in part, the cable system's service area, if the cable system (or any of its attributable principals) has an attributable interest in the television station. But in February 2002, the Court of Appeals for the District of Columbia Circuit held that the FCC's decision to retain this rule was unlawful and, therefore, vacated the rule. In June 2002, the Court generally refused to reconsider its earlier ruling overturning the FCC's rule, but did agree to modify the standard by which the FCC must use should it attempt to re-justify the rule. The Company cannot predict what steps, if any, the FCC will take in response to these court decisions. Local Exchange Carriers/Cable Television Cross-Ownership. The 1996 Act generally restricts local exchange carriers and cable operators from holding more than a 10% financial interest or any management interest in the other's operations within their service area or from entering joint ventures or partnerships with cable operators in the same market. These "buy-out" restrictions are subject to four general exceptions, which include population density and competitive market tests. The FCC may waive the buyout restrictions if it determines that: - the cable operator or LEC would be subject to undue economic distress by enforcement of the restrictions; - the cable system or LEC facilities would not be economically viable if the provisions were enforced; - the anti-competitive effects of the proposed transaction clearly would be outweighed by the public interest in serving the community; and - the local franchising authority approves the waiver. General Ownership Limitations. The Communications Act generally prohibits the Company from owning and/or operating a Satellite Master Antenna Television System (SMATV) or a wireless cable system in any area where the Company provides franchised cable service. However, the cable/SMATV and the cable/wireless cable cross-ownership rules are inapplicable in any franchise area where the operator faces "effective competition," or where the cable operator owned the SMATV system prior to the 1992 Cable Act. In addition, the FCC's rules permit a cable operator to offer service through SMATV systems in the operator's existing franchise area so long as the service is offered according to the terms and conditions of the cable operator's local franchise agreement. 67 Other Statutory Provisions. One of the underlying competitive policy goals of the 1992 Cable Act is to limit the ability of vertically integrated program suppliers to favor affiliated cable operators over unaffiliated program distributors. Consequently, with certain limitations, federal law generally: - precludes any satellite video programmer affiliated with a cable company, or with a common carrier providing video programming directly to its subscribers, from favoring an affiliated company over competitors; - requires such programmers to sell their programming to other multichannel video distributors; and - limits the ability of such programmers to offer exclusive programming arrangements to their affiliates. The Communications Act requires cable operators, upon the request of a subscriber, to scramble or otherwise fully block any adult channel the subscriber does not wish to receive. The Communications Act also contains restrictions on the transmission by cable operators of obscene or indecent programming. A three-judge federal district court determined that certain statutory restrictions regarding channels primarily dedicated to sexually oriented programming were unconstitutional, and the United States Supreme Court recently affirmed the lower court's ruling. The Communications Act and the FCC's rules also include provisions concerning, among other things: - customer service; - subscriber privacy; - marketing practices; - equal employment opportunity; and - the regulation of technical standards and equipment compatibility. Inside Wiring Regulations. The FCC adopted cable inside wiring rules to provide specific procedures for the disposition of residential home wiring and internal building wiring where a subscriber terminates service or where an incumbent cable operator is forced by a building owner to terminate service in a multiple dwelling unit (MDU) building. The FCC is also considering additional rules relating to inside wiring that, if adopted, may disadvantage incumbent cable operators. Unless operators retain rights under state statutory or common law to maintain ownership rights in the wiring, MDU owners could use these new rules to pressure cable operators without MDU service contracts to either sell, abandon or remove internal wiring carrying voice as well as video communications and to terminate service to MDU subscribers. Consumer Equipment. The FCC adopted regulations to implement provisions of the 1992 Cable Act regarding compatibility between cable systems and consumer electronics equipment. The 1996 Act directed the FCC to establish only minimal standards regarding compatibility between television sets, video cassette recorders and cable systems. Pursuant to this statutory mandate, the FCC adopted rules to assure the competitive availability of customer premises equipment, such as set-top converters or other navigation devices, which are used to access services offered by cable systems and other multichannel video programming distributors. The FCC's rules allow consumers to attach compatible equipment to the Company's cable facilities, so long as the equipment does not harm the Company's network, does not interfere with the services purchased by other subscribers and is not used to receive unauthorized services. Effective July 1, 2000, cable operators were required to separate security from non-security functions in subscriber premises equipment by making available modular security components that would function in set-top units purchased or leased from retail outlets. The requirement to separate security and non-security functions is inapplicable to equipment that uses only an analog conditional access mechanism and that is incapable of providing access to any digital transmission or other digital service. Effective January 1, 2005, the Company will be prohibited from selling or leasing new navigation devices or converter boxes that integrate both security and non-security functions. The Company, however, will not be required to 68 discontinue the leasing of older converters that include integrated security functions if those converters were provided to subscribers before January 1, 2005. STATE AND LOCAL REGULATION Cable television systems generally are operated pursuant to nonexclusive franchises, permits or licenses granted by a municipality or other state or local government entity. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction. Franchises generally contain provisions governing fees to be paid to the franchising authority, length of the franchise term, renewal, sale or transfer of the franchise, territory of the franchise, design and technical performance of the system, use and occupancy of public streets and number and types of cable television services provided. The 1992 Cable Act prohibits exclusive franchises and allows franchising authorities to regulate customer service and rates. States and local franchising authorities may adopt certain restrictions on cable television systems ownership. Franchising authorities in Michigan may operate their own multichannel video distribution system without a franchise. Ohio recently enacted legislation placing many of the same restrictions on municipalities that private cable systems operate under. The Ohio law includes provisions outlining equal franchise agreements, restrictions on selling cable TV outside the municipality, advance notice of building a municipal cable system, full cost accounting language and establishment of an arbitration process for private sector/governmental cable disputes. The foregoing summarizes the material cable television industry regulations with which we must comply. However, it does not purport to describe all present and proposed federal, state and local regulations and legislation relating to the cable television industry, some of which are subject to judicial and legislative review and change, and their impact on the cable television industry or us cannot be predicted at this time. FEDERAL REGULATION OF TELEVISION BROADCASTING The following is a brief discussion of certain provisions of the Communications Act of 1934, as amended, and the FCC's regulations and policies that affect the business operations of television broadcasting stations. For more information about the nature and extent of FCC regulation of television broadcasting stations you should refer to the Communications Act of 1934 and the FCC's rules, public notices, and rulings. Over the years Congress and the FCC have added, amended and deleted statutory and regulatory requirements to which station owners are subject. Some of these changes have a minimal business impact, whereas others may significantly affect the business or operation of individual stations or the broadcast industry as a whole. The following discussion summarizes certain federal requirements concerning the television broadcast industry that currently are in effect. License Grant and Renewal. Television broadcasting licenses are granted for a maximum term of eight years and are subject to renewal upon application to the FCC. The FCC is required to grant an application for license renewal if during the preceding term the station served the public interest, the licensee did not commit any serious violations of the Communications Act or the FCC's rules, and the licensee committed no other violations of the Communications Act or the FCC's rules which, taken together, would constitute a pattern of abuse. The vast majority of renewal applications are routinely renewed under this standard. If a licensee fails to meet this standard, the FCC may still grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the normal eight-year period. During certain limited periods after a renewal application is filed, interested parties, including members of the public, may file petitions to deny a renewal application, to which the licensee/renewal applicant is entitled to respond. After reviewing the pleadings, if the FCC determines that there is a substantial and material question of fact whether grant of the renewal application would serve the public interest, the FCC is required to hold a trial-type hearing on the issues presented. If, after the hearing, the FCC determines that the renewal applicant has met the renewal standard, the FCC must grant the 69 renewal application. If the licensee/renewal applicant fails to meet the renewal standard or show that there are mitigating factors entitling it to renewal subject to appropriate sanctions, the FCC can deny the renewal application. In the vast majority of cases where a petition to deny is filed against a renewal, the FCC ultimately grants the renewal without a hearing. No competing application for authority to operate a station and replace the incumbent licensee may be filed against a renewal application unless the FCC first determines that the incumbent licensee is not entitled to license renewal. In addition to considering rule violations in connection with a license renewal application, the FCC may sanction a station licensee at any time during the license term for failing to observe FCC rules and policies, including the imposition of a monetary forfeiture. The FCC prohibits the assignment or the transfer of control of a broadcasting licensee without prior FCC approval. Ownership Matters. FCC rules establish limits on the ownership of broadcast stations. The ownership limits apply only to attributable interests in a station licensee that are held by an individual, corporation, partnership or other entity. In the case of corporations, officers, directors and voting stock interests of five percent or more (twenty percent or more in the case of qualified investment companies, such as insurance companies and bank trust departments) are considered attributable interests. For partnerships, all general partners and non-insulated limited partners are attributable. Limited liability companies are treated the same as partnerships. Under its "equity/debt plus" rule, the FCC attributes otherwise non-attributable interests held by a party who also provides over fifteen percent of a station's total weekly broadcast programming or who has an attributable interest in a radio station, television station, or daily newspaper in the same market. Subject to the equity/debt plus rule, a minority voting interest in a media property is not cognizable if there is a single holder of more than 50 percent of that media property's outstanding voting stock. Finally, the FCC attributes (i.e., counts towards the local ownership limits) another in-market broadcast station to the licensee of a broadcast station who provides more than 15 percent of the other station's weekly broadcast programming pursuant to a local marketing agreement or a time brokerage agreement. Local Ownership (Duopoly Rule). Prior to August 1999, no party could have attributable interests in two television stations if those stations had overlapping service areas (which generally meant one station per market), although the FCC did not attribute local marketing agreements involving a second station with an overlapping service area. In August 1999, the FCC adopted new rules which allowed the ownership of two stations in a single market (defined using Nielsen Media Research's DMAs) if (1) the two stations do not have overlapping service areas, or (2) after the combination there are at least eight independently owned and operating full-power television stations and one of the commonly owned stations is not ranked among the top four stations in the DMA. The FCC will consider waivers of the rule to permit the ownership of a second market station in cases where the second station is failed, failing or unbuilt. Absent these circumstances, ownership of only one television station in a market is permitted. "Satellite" stations were an exception to the prior FCC local ownership/duopoly rules and remain an exception under the new rules. None of the markets in which we currently operate stations have the eight or more independently owned television stations that allow a person to own two stations in the market. We own two stations in the Louisville market under a permanent waiver granted by the FCC. In April 2002, the U.S. Court of Appeals for the District of Columbia Circuit remanded the television local ownership rule to the FCC for further consideration. The court held that the FCC had not adequately explained its decision to consider as "voices" only television broadcast stations, while excluding other media outlets such as newspapers and cable television. The court currently is considering a petition for rehearing. On remand, the FCC may change its local television ownership rule to permit consideration of other media outlets in addition to television stations for purposes of a "voices" test, and/or it may change the number of independently owned "voices" that must remain in a market after consolidation. 70 Depending upon the outcome of the pending rehearing petition, the FCC has announced that it expects to adopt an order addressing this and other broadcast ownership rules in the Spring of 2003. National Ownership. There is no nationwide limit on the number of television stations which a party may own. However, no party may have an attributable interest in television stations which, in the aggregate, reach more than 35% of all U.S. television households. In calculating the national audience reach, ownership of a VHF station is counted as reaching 100% of the households in such station's market, and ownership of a UHF station is counted as 50% of the households in such station's market. The stations we own have a combined national audience reach of approximately 1% of television households. In February 2002, the U.S. Court of Appeals for the District of Columbia Circuit determined that the FCC's statutorily required biennial review of its national ownership rule had been arbitrary and capricious, and it, therefore, remanded the rule to the FCC for its further review and consideration. The court currently is considering a petition for rehearing of its decision. Depending upon the outcome of the pending rehearing petition, the FCC has announced that it expects to adopt an order addressing this and other broadcast ownership rules in the Spring of 2003. Radio Television Cross-Ownership Rule. The "one-to-a-market" rule limits the common ownership or control of radio and television stations in the same market. In August 1999, the FCC amended its rules to increase the number of stations that may be commonly owned, subject to standards based on the number of independently owned media voices that would remain in the market after the combination. In markets with at least twenty independently owned media outlets, ownership of one television station and up to seven radio stations, or two television stations (if allowed under the television duopoly rule) and six radio stations is permitted. If the number of independently owned media outlets is fewer than twenty but greater than or equal to ten, ownership of one television station (or two if allowed) and four radio stations is permitted. In markets with fewer than ten independent media voices, ownership of one television station (or two if allowed) and one radio station is permitted. In calculating the number of independent media voices, the FCC includes all radio and television stations, independently owned cable systems (counted as one voice if cable is generally available in the market), and independently owned daily newspapers which have circulation that exceeds five percent of the households in the market. Local Television/Cable Cross-Ownership Rule. An FCC rule prohibits a cable television system (including all parties under common control) from carrying the signal of a television station that has a predicted Grade B service area that overlaps, in whole or in part, the cable system's service area, if the cable system (or any of its attributable principals) has an attributable interest in the television station. But in February 2002, the U.S. Court of Appeals for the District of Columbia Circuit held that the FCC's decision to retain this rule was unlawful. The court vacated the rule because it concluded that the FCC was unlikely to be able to justify the rule under any circumstances. Local Television/Newspaper Cross-Ownership Rule. The FCC prohibits any party from having an attributable interest in a television station and a daily newspaper if the television station's Grade A signal contour encompasses the entire community in which the newspaper is published. A similar rule applies to radio/newspaper combinations. In September 2001, the FCC launched a formal proceeding examining whether to retain, modify or eliminate the television/newspaper and radio/newspaper cross-interest rules. The FCC is expected to complete this proceeding in the Spring of 2003. Foreign Ownership Restrictions. The Communications Act restricts the ability of foreign entities or individuals to own or hold certain interests in broadcast licenses. As a holder of several broadcast licenses, we are restricted from having more than one-fourth of our stock owned or voted directly or indirectly by non-U.S. citizens or their representatives, foreign governments, representatives of foreign governments, or foreign corporations. Cable "Must-Carry" or Retransmission Consent Rights. Every three years, television broadcasters are required to make an election whether they choose to exercise their "must-carry" or retransmission consent rights in connection with the carriage of their analog signal on cable television systems within their DMA. The most recent election was made by October 1, 1999, and is effective for the three-year period 71 beginning January 1, 2000. The next election date is October 1, 2002, for the three-year period beginning January 1, 2003. If a broadcaster chooses to exercise its must-carry rights, it may request cable system carriage on its over-the-air channel or another channel on which it was carried on the cable system as of a specified date. A cable system generally must carry the station's signal in compliance with the station's carriage request, and in a manner that makes the signal available to all cable subscribers. However, must-carry rights are not absolute, and whether a cable system is required to carry the station on its system, or in the specific manner requested, depends on a number of variables such as the number of activated channels of the cable system, the number of subscribers served by the cable system, the strength of the station's signal at the cable system's headend, the extent to which the station's programming duplicates the programming of another station carried on the system, and other factors. If a broadcaster chooses to exercise its retransmission consent rights, a cable television system which is subject to that election may not carry the station's signal without the broadcaster's written consent. This generally requires the cable system and television station operator to negotiate the terms under which the television station will consent to the cable system's carriage of the station. There is, however, a risk associated with a station electing to exercise its retransmission consent rights in that a cable operator may lawfully refuse to carry the broadcaster's station on its cable system if the parties cannot agree to the terms of such carriage. Our stations generally have elected to exercise their retransmission consent status and have entered into retransmission consent agreements with local cable operators. Direct-to-Home Satellite Services and Must-Carry. In November 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999, or SHVIA. This statute authorizes providers of direct broadcast satellite services such as Direct TV and EchoStar to carry the signals of local television stations within such stations' local markets ("local-into-local" service). In addition, SHVIA imposes must-carry requirements on satellite providers with respect to the markets in which they provide local-into-local service. Television stations in such markets may elect between must-carry and retransmission consent in a manner similar to that applicable in the cable context. At this time, DirecTV and EchoStar are not providing local-into-local service in our stations' markets, and we cannot predict when or if such service will be provided in the future. Under federal copyright law, satellite providers may retransmit the signal of an out-of-market broadcast network affiliate to "unserved" households. An "unserved" household is one that cannot receive, using a conventional outdoor rooftop antenna, a "Grade B" or better signal of a local television station affiliated with the same network as the out-of-market television station. Satellite providers generally are not permitted to import distant network signals to any subscribers other than those that qualify as "unserved" residential households. Network Affiliate Issues. FCC rules impose restrictions on network affiliation agreements. Among other things, such rules prohibit a television station from entering into any affiliation agreement that: - requires the station to clear time for network programming that the station had previously scheduled for other use; or - precludes the preemption of any network programs that the station believes to be unsuitable for its audience or that precludes the substitution of network programming with programming that the station believes to be of greater local or national importance (this is the "right to reject rule"). The FCC is currently reviewing its rules governing the relationship between television broadcasting networks and their affiliates under a long-pending formal inquiry and a more recent petition filed by trade associations representing affiliates of some of the broadcast networks. We are unable to predict when and how the FCC will resolve these issues. Other Regulations Affecting Broadcast Stations. General. The Communications Act of 1934 requires broadcasters to serve "the public interest." Since the late 1970s, the FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast of certain 72 types of programming responsive to the needs of a station's community of license. However, television station licensees are still required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. The FCC may consider complaints from viewers concerning programming when it evaluates a station's license renewal application, although viewer complaints also may be filed and considered by the FCC at any time. There are other FCC rules and policies, and rules and policies of other federal agencies, that regulate matters such as the ability of stations to obtain exclusive rights to air syndicated programming, cable and satellite systems' carriage of syndicated and network programming on distant stations, political advertising practices, application procedures and other areas affecting the business or operations of broadcast stations. Public Interest Programming. Broadcasters are required to air programming addressing the needs and interests of their communities of license, and to place quarterly "issues/programs lists" in their public inspection files reporting such programming. Children's Television Programming. The Children's Television Act of 1990 limits the permissible amount of commercial matter that may be broadcast during children's programming, and it requires each television station to present "educational and informational" children's programming. The FCC has adopted license renewal processing guidelines effectively requiring television stations to broadcast an average of three hours per week of children's educational programming. Closed Captioning/Video Description. The FCC has adopted rules requiring closed captioning of broadcast television programming. By January 1, 2006, subject to certain exceptions, television broadcasters must provide closed captioning for 100% of their programming. Television Violence. Under the 1996 Telecommunications Act, the television industry developed a voluntary program ratings system that the FCC subsequently approved. In addition, the 1996 Telecommunications Act requires that all television license renewal applications contain summaries of written comments and suggestions concerning violent programming that were received by the station during the license term. Equal Employment Opportunity. In April 1998, the U.S. Court of Appeals for the D.C. Circuit concluded that certain affirmative action requirements of the FCC's Equal Employment Opportunity ("EEO") regulations were unconstitutional. The FCC responded to the court's ruling in September 1998 by suspending certain reporting requirements and commencing a proceeding to consider new rules that would not be subject to the court's constitutional objections. The FCC did not suspend its general prohibition on employment discrimination based on race, color, religion, national origin or sex. In January 2000, the FCC adopted new EEO rules, but the same court struck down these rules in January 2001. The FCC thereafter suspended its new rules. The FCC has opened a new proceeding to develop new EEO rules that would meet the requirements of the court. We cannot predict the results or timing of the outcome of this proceeding. Restrictions on Broadcast Advertising. The advertising of cigarettes on broadcast stations has been banned for many years. The broadcast advertising of smokeless tobacco products has more recently been banned by Congress. Certain Congressional committees have examined legislative proposals to prohibit or severely restrict the advertising of beer, wine, and liquor. We cannot predict whether any proposal will be enacted into law and, if so, what the final form of such law might be. The elimination or restriction of advertisements for beer and wine could have an adverse effect on our stations' revenues and operating profits. Digital Television. The digital television, or DTV, transmission system delivers video and audio signals of higher quality (including high definition television) than the existing analog transmission system. DTV also has substantial capabilities for multiplexing (the broadcast of several programs concurrently) and data transmission. Digital television will require consumers to purchase new televisions that are capable of receiving and displaying DTV signals or adapters to receive DTV signals and convert them into analog signals for display on existing receivers. 73 In April 1998, the FCC assigned each licensed television station a second broadcast channel on which to provide DTV service. In general, the DTV channels assigned to television stations are intended to allow stations to have their DTV coverage area replicate their analog coverage area, although a number of variables will ultimately determine the extent to which a station's DTV operation will provide such replication. By May 1, 2002, all commercial television station licensees were required to complete construction and commence operating DTV facilities except to the extent that the FCC extended the deadline in certain cases. WAND met the May 1, 2002 deadline. WFTE has until May 13, 2003 to construct because of FCC delays in issuing the construction permit. KTRV is not required to construct digital facilities until the FCC determines which digital channel KTRV will ultimately utilize. Our remaining stations -- WDRB and WLIO -- requested waivers of the May 1, 2002 deadline. On June 14, 2002, the FCC denied those requests and ordered WDRB and WLIO to construct digital television transmission systems no later than December 1, 2002. The FCC also directed the stations to submit to the FCC, by July 15, 2002, reports setting forth construction plans and a proposed timetable for construction that would meet the December 1, 2002 deadline. Finally, the FCC directed the stations to file by September 13, 2002 interim progress reports regarding their digital construction efforts. In compliance with the FCC's order, the two stations have submitted to the FCC their construction plans and proposed timetable for construction of digital transmission systems. Both stations' plans call for the construction of lower-power digital transmission systems sufficient to provide digital television coverage for the station's city of license -- Lima, Ohio for WLIO, Louisville, Kentucky for WDRB. The timetables call for construction to be completed, and the facilities fully operational, by December 1, 2002. The lower-power construction plans comply with FCC rules and policies regarding digital television transmission, which expressly permit lower-power facilities. We anticipate that, at some point in the future, the FCC will establish a deadline by which such lower-power systems must be upgraded to full power systems that provide coverage to a broader geographic area. When such a deadline is established, we will comply with it by upgrading our facilities. We estimate that approximately $12 million of capital expenditures after March 31, 2002 will be necessary to meet the DTV requirements for all of our stations. Once a station begins broadcasting its DTV signal, it may broadcast both its analog and DTV signals until December 31, 2006, after which, subject to certain conditions described below, the FCC expects to reclaim one of the channels and broadcasters will operate a single DTV channel. Starting April 1, 2003, commercial station operators must simulcast at least 50 percent of the video programming broadcast on their analog channel on their DTV channel. The required simulcast percentage increases annually until April 1, 2005, when an operator must simulcast 100 percent of its programming on its analog and DTV channels. Channels now used for analog broadcasts range from 2 through 69. The FCC designated Channels 2 through 51 as the "core" Channels which will be used for DTV broadcasts. However, because of the limited number of core DTV channels currently available, the FCC assigned many stations DTV Channels above Channel 51 (Channels 52 through 69) for use during the transition period from simultaneous digital and analog transmission to DTV only operation. At the end of the transition period these stations will have to change their DTV operation to one of the DTV core channels. This has created three categories of television stations with respect to their analog and DTV channel assignments: (1) stations with both their analog and DTV Channels within the "core" channels; (2) stations with either an analog or DTV channel inside the core and the other outside the core; and (3) stations with both their analog and DTV Channels outside the core. All of our stations currently fall within the first or second group; none of our stations have both analog and DTV Channels outside the core. Stations with both their analog and DTV Channels inside the core will be required to select which of the two Channels they will use for permanent DTV operation at the end of the transition period. The FCC has not yet established the permanent DTV channel selection process for stations (including one of our stations) that fall into the second group. 74 The Communications Act provides that under certain conditions the DTV transition period may be extended beyond December 31, 2006. The transition is to be extended in any market in which one of the following conditions is met: (1) a station licensed to one of the four largest networks (ABC, CBS, NBC and Fox) is not broadcasting a digital signal and that station has qualified for an extension of the FCC's DTV construction deadline; (2) digital-to-analog converter technology is not generally available in the market; or (3) fifteen percent or more of the television households in the market do not subscribe to a multichannel video programming distributor (cable, direct broadcast satellite) that carries the digital channel of each of the television stations in the market broadcasting a DTV channel, and do not have at least one television receiver capable of receiving DTV broadcasts or an analog television receiver equipped with a digital-to-analog converter capable of receiving DTV broadcasts. We cannot predict whether the DTV transition period will be extended in any of our markets. Television stations that are broadcasting both analog and DTV signals may continue to elect either must-carry status or retransmission consent for their analog signals, but they may only choose retransmission consent for their digital signals. A television station may assert must-carry rights for its DTV signal if it only operates a DTV signal or if it returns its analog channel to the FCC and converts to DTV operations only. The exercise of must-carry rights by a television station for its DTV signal applies only to a single programming stream and other program-related content. If a television station is concurrently broadcasting more than one program stream on its DTV signal, it may select which program stream is subject to its must-carry election. Cable systems are not required to carry Internet, e-commerce or other ancillary services provided over DTV signals if those services are not related to the station's primary video programming carried on the cable system. The same DTV carriage rules are generally applicable to satellite providers with respect to markets in which they provide local-into-local service. Television station operators may use their DTV signals to provide ancillary services, such as computer software distribution, Internet, interactive materials, e-commerce, paging services, audio signals, subscription video, or data transmission services. To the extent a station provides such ancillary services, it is subject to the same regulations as are applicable to other analogous services under the FCC's rules and policies. Commercial television stations also are required to pay the FCC five percent of the gross revenue derived from all ancillary services provided over their DTV signal for which the station received a fee in exchange for the service or received compensation from a third party in exchange for transmission of material from that third party, not including commercial advertisements used to support broadcasting. Proposed Legislation and Regulations. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation and ownership of our stations. In addition to the changes proposed and noted above, other matters that could affect our broadcast properties include technological innovations affecting the mass communications industry such as spectrum allocation matters (including assignment by the FCC of Channels for additional television stations), low power television stations, and multichannel video program service providers (including cable television, direct broadcast satellite and wireless cable systems). The foregoing summarizes the material television broadcasting industry regulations with which we must comply. However, it does not purport to describe all present and proposed federal, state and local regulations and legislation relating to the television broadcast industry, some of which are subject to judicial and legislative review and change. The impact of any such development on the television broadcast industry or on us cannot be predicted at this time. 75 MANAGEMENT The table below sets forth information about our executive officers and Board of Directors:
DIRECTOR NAME AGE SINCE POSITIONS WITH THE COMPANY - ---- --- -------- -------------------------- William Block, Jr.*... 57 1985 Chairman of the Board of Directors Allan J. Block*....... 47 1985 Managing Director of the Company; Director John R. Block*........ 47 1985 Vice Chairman, Editorial Director; Director Diana E. Block*....... 29 2002 Systems and Technology Director, Pittsburgh Post-Gazette; Director William Block......... 86 1940 Retired Chairman of the Company; Director David G. Huey......... 54 2002 President; Director Gary J. Blair......... 56 1999 Vice President and Chief Financial Officer; Director Jodi L. Miehls........ 30 -- Treasurer; Principal Accounting Officer Fritz Byers........... 47 1999 Secretary; General Counsel; Director Karen D. Johnese...... 55 1991 Director of Public Affairs, Pittsburgh Post-Gazette; Director Donald G. Block....... 48 1985 Director Mary G. Block......... 70 1987 Director Cyrus P. Block........ 56 1991 Director
- --------------- * Denotes members of the Executive Committee William Block, Jr., is a Director and member of the Executive Committee and was appointed Chairman of the Board and Chairman of the Executive Committee effective January 1, 2002. He served as President of the Company from 1987 through 2001. Mr. Block holds a B.A. degree from Trinity College and a J.D. from Washington and Lee University. Allan J. Block is a Director and member of the Executive Committee and was appointed Managing Director effective January 1, 2002. Prior to becoming Managing Director, he directed our cable and broadcast divisions from 1989 through 2001. Mr. Block holds a B.A. degree from the University of Pennsylvania. John R. Block is a Director and member of the Executive Committee and was appointed Vice Chairman of the Board and publisher of our two newspapers effective January 1, 2002. Prior to that he directed the news and editorial functions of our two newspapers from 1989 through 2001. Mr. Block holds a B.A. from Yale University. Diana E. Block was appointed a Director and member of the Executive Committee in 2002 and since January 2002 has served as the Director of Systems and Technology for the Pittsburgh-Post Gazette. She attended Carnegie Mellon University from 2000 to 2001, where she received her master's degree. Previously, she held several positions with the Pittsburgh Post-Gazette beginning in 1998 and before that taught high school English. Ms. Block also holds a B.A. from Yale University and a master's degree from the University of Virginia. William Block, a Director, served as co-publisher of our two newspapers from 1941 to 1989, and as Chairman of the Board from 1987 to 2001. Mr. Block holds a B.A. degree from Yale University. David G. Huey was promoted to President and a Director effective January 1, 2002. Prior to that, he served as President of our cable operations since 1990. Mr. Huey holds a B.S. degree from the University of Toledo. Gary J. Blair has served as Vice President and Chief Financial Officer since 1990 and is a Director. Prior to that he served as Finance Director. Mr. Blair holds a B.S. degree and an M.B.A. from Bowling Green State University. Jodi L. Miehls was appointed Treasurer in April 2002. Prior to that she served as Assistant Treasurer and Director of Finance. Ms. Miehls holds a B.S.B.A. degree from The Ohio State University. 76 Fritz Byers has served as Secretary since 1990 and is a Director. He has also served as Corporate Counsel since 1990. Mr. Byers holds a B.A. degree from Duke University and a J.D. from Harvard University. Karen Block Johnese is a Director and has served as Director of Community Affairs for the Pittsburgh Post-Gazette since 1995. Before that, she held a similar position with the Monterey Herald. Ms. Johnese holds a B.A. from the University of Rochester, and a M.S.W. and an M.E.D. from the University of Pittsburgh. Donald G. Block is a Director. He is the Executive Director of the Greater Pittsburgh Literacy Council. Mr. Block holds a B.A. degree from Yale University and an M.A. from Indiana University. Mary G. Block is a Director and is the widow of Paul Block, Jr., who served as Chairman of the Board from 1942-1987. Cyrus P. Block is a Director. He is a cinematographer with a long resume of well-known movies, television programs, and related work. Mr. Block holds a B.A. from Lewis and Clark College. EXECUTIVE COMMITTEE Under our Close Corporation Operating Agreement, a four-member Executive Committee, comprised of two representatives of the families of each of the two sons of the Company's founder, functions as chief executive officer and, except for certain powers specifically reserved to the Board of Directors, also exercises the powers normally exercised by a board of directors. Decisions of the Executive Committee are made by majority vote. In the event of a tie, the agreement provides for the deciding vote to be cast by Charles T. Brumback, former Chairman and Chief Executive Officer of the Tribune Corporation, Chicago, Illinois. FAMILY RELATIONSHIPS Allan J. Block and John R. Block are brothers, and Cyrus P. Block is their half-brother. Their father, Paul Block, Jr., was the brother of William Block. Mary G. Block, the widow of Paul Block, Jr., is the step-mother of Allan J., John R. and Cyrus P. Block. William Block is the father of William Block, Jr., Karen D. Johnese and Donald G. Block, who are brothers and sister. Diana E. Block is the daughter of William Block, Jr. EXECUTIVE COMPENSATION The following table sets forth information concerning the compensation paid for 2001 to our five most highly compensated executive officers (the "named officers"):
ANNUAL COMPENSATION(1) ------------------- ALL OTHER NAME AND PRINCIPAL POSITIONS HELD SALARY BONUS COMPENSATION(2) - --------------------------------- -------- -------- --------------- William Block, Jr., Chairman of the Board of Directors... $455,000 -- $49,103 Allan J. Block, Managing Director and Director........... $455,000 -- $14,343 John R. Block, Vice Chairman, Editorial Director and Director............................................... $455,000 -- $34,131 William Block, Retired Chairman and Director............. $350,000 -- -- David G. Huey, President and Director.................... $285,000 $102,600 $23,430
- --------------- (1) The incremental cost of personal benefits provided to any named officer did not exceed the lesser of $50,000 or 10% of aggregate salary and bonus. (2) The amounts reported in this column consist of (1) life insurance premiums of $38,903 for William Block, Jr., $4,143 for Allan J. Block, $23,931 for John R. Block and $78 for Mr. Huey and (2) employer contributions to a 401(k) plan and a supplemental deferred compensation plan of $10,200 for William Block, Jr., $10,200 for Allan J. Block, $10,200 for John R. Block and $23,352 for Mr. Huey. Mr. Huey participates in a Phantom Stock Plan under which the Executive Committee may award to key employees phantom stock units representing values determined by the Company of a hypothetical 77 percentage interest in one of our divisions or subsidiaries. Phantom stock unit awards vest in increments of 25% for each year of employment after the date of the award and are payable in cash after eight years from the date of the award based on the value of the units at that time. No dividends or dividend equivalents are paid on phantom stock awards. No phantom stock awards were made to Mr. Huey in 2001. As of December 31, 2001, the most recent valuation date, the book value of the phantom stock units held by Mr. Huey was $177,000. RETIREMENT PLANS A member of the Executive Committee who is a full-time employee of the Company and who retires at age 60 or later after at least ten years of service, or at an earlier age after at least thirty years of service, will receive an annual pension benefit equal to 70% of the average of his or her total annual compensation for the last five years of employment. We have a defined benefit pension plan and supplemental retirement plans in which our other executive officers participate. The following table shows the estimated annual benefits payable under these plans upon normal retirement at age 65 to participating employees, including executive officers, in selected compensation and years-of-service categories:
5-YEAR AVERAGE COMPENSATION ---------------------------------------------------- YEARS OF SERVICE $200,000 $300,000 $400,000 $500,000 $600,000 - ---------------- -------- -------- -------- -------- -------- 5........ $ 25,000 $ 37,500 $ 50,000 $ 62,500 $ 75,000 10....... 50,000 75,000 100,000 125,000 150,000 15....... 75,000 112,500 150,000 187,500 225,000 20....... 100,000 150,000 200,000 250,000 300,000 25....... 125,000 187,500 250,000 312,500 375,000 30....... 150,000 225,500 300,000 375,500 450,000
The amounts shown in the table are straight-life annuity amounts, assuming no election of any available survivorship option, and are subject to offset for social security benefits. Benefits under the plans are based on the average of the participant's covered compensation for the five years preceding retirement, with covered compensation consisting of salary and bonus. As of December 31, 2001, Mr. Huey had 16.8 years of credited service under these plans. COMPENSATION OF DIRECTORS Except for the General Counsel, Directors who are not employees receive a payment of $1,000 for each Board of Directors meeting attended. Cyrus P. Block, a director, is paid a fee of $50,000 per year for certain consulting services. 78 PRINCIPAL SHAREHOLDERS The following table shows as of July 2, 2002 the amount and nature of beneficial ownership of each class of our outstanding capital stock by (1) each director (2) each executive officer named in the above Summary Compensation Table, (3) each beneficial owner of 5% or more of our Voting Common Stock and (4) all directors and executive officers as a group:
NON-VOTING VOTING COMMON STOCK COMMON STOCK CLASS A STOCK ---------------------- ---------------------- ---------------------- AMOUNT AND AMOUNT AND AMOUNT AND NATURE OF PERCENT NATURE OF PERCENT NATURE OF PERCENT BENEFICIAL OF BENEFICIAL OF BENEFICIAL OF NAME OWNERSHIP(1) CLASS OWNERSHIP(1) CLASS OWNERSHIP(1) CLASS - ---- ------------ ------- ------------ ------- ------------ ------- William Block, Jr................... 7,350 25.0% 37,085 8.7% 1,300 10.3% Allan J. Block...................... 7,350 25.0% 127,042(2) 29.7% 515 4.1% John R. Block....................... 7,350 25.0% 127,042(2) 29.7% 515 4.1% Diana E. Block...................... -- -- 1,382 0.3% 320 2.5% William Block....................... 7,350 25.0% 228,026 53.3% -- -- David G. Huey....................... -- -- -- -- -- -- Gary J. Blair....................... -- -- -- -- -- -- Jodi L. Miehls...................... -- -- -- -- -- -- Fritz Byers......................... -- -- -- -- -- -- Karen D. Johnese.................... -- -- 362 0.1% -- -- Donald G. Block..................... -- -- 8,677 1.9% 1,980 15.7% Mary G. Block....................... -- -- 8,330 2.0% 1,297 10.3% Cyrus P. Block...................... -- -- 122,484(2) 28.6% 2,970 23.5% All directors and executive officers as a group (13 persons)........... 29,400 100.0% 415,878 97.2% 8,897 70.5%
- --------------- (1) Under regulations of the Securities and Exchange Commission, a person is considered the "beneficial owner" of a security if the person has or shares with others the power to vote the security (voting power) or the power to dispose of the security (investment power). In the table, beneficial ownership of our stock is determined in accordance with these regulations and does not necessarily indicate that the person listed as a beneficial owner has an economic interest in the shares listed as beneficially owned. (2) Includes 122,224 shares as to which Allan J. Block, John R. Block and Cyrus P. Block share voting and investment power. (3) Less than 0.1% of the outstanding shares. 79 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS STOCK REDEMPTION AGREEMENT The Company and the members of the Block family are parties to an agreement which requires the Company to redeem shares of our Non-Voting Common Stock from the estate of a deceased shareholder to the extent such redemption qualifies for sale treatment, rather than dividend treatment, under Section 303 of the Internal Revenue Code (the "Code"). In general, Section 303 allows sale treatment where (1) the value for Federal estate tax purposes of all stock of the Company included in determining the value of the decedent's gross estate exceeds 35% of the excess of the value of the gross estate over certain allowable deductions and (2) the amount paid to redeem the stock does not exceed the sum of all federal and state death taxes (including generation-skipping taxes), plus funeral and administration expenses allowable as deductions for federal estate tax purposes. The initial redemption price under the agreement is the value of the shares for federal estate-tax purposes in the deceased shareholder's estate. In order to qualify for redemption of stock under the agreement, the estate of the deceased shareholder must elect under Section 6166 of the Code to pay the federal estate tax in deferred installments over a period of up to 15 years. In return, the estate is given an option to purchase for $1 per share a number of shares equal to any additional shares required to be redeemed as a result of the deferral election. The Company is also required to pay cash to cover the income tax consequences resulting from the redemption and the option. The amounts the Company might be required to pay under the agreement and the timing of such payments will depend upon the year of death of the shareholders and the value of the stock and the estate tax laws in effect at that time. To satisfy part of its obligation under the agreement, the Company has purchased life insurance on lives of certain shareholders who own significant amounts of our non-voting common stock. The vast majority of the life insurance in force is on the lives of William Block (our major shareholder) and his wife. Net of current policy loans, the amount of the death benefit for Mr. and Mrs. Block is $31.2 million, of which $7.4 million is on the life of William Block, $10.1 million on the life of Mrs. Block and $13.7 million on their joint lives. Although we are unable to determine with any certainty the amounts we may be required to pay under the agreement, we believe that based on the amount of life insurance in force for our major shareholders, combined with our ability to defer redemptions over a 15-year period, the amounts the Company will be required to pay under the agreement will not have a material adverse effect on the Company's liquidity or financial position. In certain circumstances, however, the making of these payments might result in a violation of the fixed charge coverage requirements of our new senior credit facilities. If this were to occur, the effect on the Company's liquidity could be material. RELATED PARTY TRANSACTION In 1996, Karen Block Johnese, a director of the Company, borrowed $100,000 from the Company under a promissory note bearing interest at the rate of 8% per annum. Ms. Johnese has repaid $40,000 of the principal amount. Sixty thousand dollars in principal, together with accrued interest in the current amount of approximately $50,000, remain outstanding and are overdue, which amounts are the largest amounts outstanding at any time since January 1, 2001. 80 DESCRIPTION OF SENIOR CREDIT FACILITIES On May 15, 2002, we entered into a new senior credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of other lenders providing for aggregate borrowings of up to $200 million. Our senior credit facilities under the credit agreement consist of: - a $40 million delayed-draw seven-year term loan A facility; - a $75 million seven-and-one-half-year term loan B facility; and - a $85 million seven-year reducing revolving credit facility. In addition, to the extent that we desire to, and are able to, identify lending institutions willing to make additional loans, the new senior credit agreement provides for a discretionary facility in an amount up to $100 million in the form of additional revolving credit availability or a term loan C facility. The initial borrowings under our new senior credit facilities were used to refinance our prior senior revolving credit facilities. The remaining availability under the new senior credit facilities will be used for additional borrowings to finance capital expenditures and acquisitions and for other general corporate purposes. As of March 31, 2002, we had approximately $113 million of unused borrowing capacity under our senior credit facilities. All of our subsidiaries other than WAND (TV) Partnership have guaranteed our senior credit facilities. In addition, our new senior credit facilities are secured by: - all of the equity interests of each of our subsidiaries; and - substantially all of our other assets and those of our subsidiaries other than WAND (TV) Partnership. Our borrowings under our senior credit facilities bear interest at a floating rate, which can be either a base rate plus an applicable margin or, at our option, LIBOR as specified in our senior credit facilities, plus an applicable margin. Base rate is defined as the higher of (x) the Bank of America prime rate and (y) the federal funds effective rate, plus 0.5% per annum. The applicable base rate and LIBOR margins will vary depending upon our consolidated total leverage ratio. The interest rate payable under our new senior credit facilities will increase by 2% per annum during the continuance of an event of default. The commitment fees on unused commitments under our senior credit facilities is either 0.75% or 0.50% depending on the amount of unborrowed commitments. Prior to the maturity date, funds under our revolving credit facility may be borrowed, repaid and reborrowed, without premium or penalty. Our revolving credit facility is due in full at maturity. The commitments under our revolving credit facility will reduce quarterly by the following annual amounts, with final termination of the commitments occurring at final maturity:
YEAR REDUCTION AMOUNT - ---- ---------------- Loan year 3................................................. 5.0% Loan year 4................................................. 15.0% Loan year 5................................................. 25.0% Loan year 6................................................. 27.5% Loan year 7................................................. 27.5%
Borrowings under our senior term loan A facility may be made from time to time prior to December 31, 2003. If we have not borrowed at least $20 million under this facility by June 30, 2003, availability for additional borrowings under the facility will be reduced by an amount equal to the difference between $20 million and the amount borrowed under the facility by that date. The principal amount of our senior term loan A facility will be subject to quarterly amortization so as to reduce the 81 principal amount by the following annual amounts, with final termination of the commitments occurring at final maturity:
YEAR REDUCTION AMOUNT - ---- ---------------- Loan year 3................................................. 5.0% Loan year 4................................................. 15.0% Loan year 5................................................. 25.0% Loan year 6................................................. 27.5% Loan year 7................................................. 27.5%
The principal amount of our senior term loan B facility will be subject to quarterly amortization so as to reduce the principal amount by 1% in each of loan years 1 through 7, with the remaining outstanding principal payable at final maturity. Voluntary prepayments of amounts outstanding under our senior credit facilities will be permitted at any time, so long as we give notice as required by the facility. However, if a prepayment is made with respect to a LIBOR loan on a date other than an interest payment date, we must pay a fee to compensate the lenders for losses and expenses incurred as a result of the prepayment. We are required to prepay amounts outstanding under our new senior credit facilities in an amount equal to: - 100% of the net proceeds of any equity issuances; - 100% of all insurance recoveries in excess of amounts used to replace or restore any properties, subject to a basket; - 50% of our excess cash flow when the total leverage ratio is equal to or greater than 4x, commencing with the year ending December 31, 2002; and - 100% of the net proceeds of asset sales, subject to certain exclusions. The proceeds of any mandatory prepayment will be applied pro rata with respect to amounts outstanding under the term loan A facility, term loan B facility and the revolving credit facility. With respect to prepayments of the revolving credit facility and, to the extent that the term loan A facility commitment has not expired, prepayments of the term loan A facility, there will be an automatic corresponding reduction in the revolving credit facility and the term loan A facility. Our new senior credit facilities require us to meet certain financial tests, including, without limitation, a maximum senior leverage ratio, a maximum total leverage ratio, a minimum fixed charge coverage ratio and a minimum interest coverage ratio. In addition, our senior credit facilities contain certain covenants that, among other things, limit the incurrence of additional indebtedness, investments, dividends, transactions with affiliates, asset sales, acquisitions, capital expenditures, mergers and consolidations, liens and encumbrances and other matters customarily restricted in such agreements. Our new senior credit facilities contain customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency, judgments in excess of specified amounts, ERISA defaults, failure of any guaranty or security document supporting our new senior credit facilities to be in full force and effect and change of control. 82 DESCRIPTION OF NOTES You can find the definitions of certain terms used in this description under the subheading "Certain Definitions." In this description, the word "Block" refers only to Block Communications, Inc. and not to any of its subsidiaries. Unless otherwise indicated, the term "notes" includes both the exchange notes and the old notes. Block issued the old notes, and will issue the exchange notes, under an indenture among itself, the Guarantors and Wells Fargo Bank Minnesota, National Association, as trustee. The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. The following description is a summary of the material provisions of the indenture. It does not restate that agreement in its entirety. We urge you to read the indenture because it, and not this description, defines your rights as Holders of the notes. Certain defined terms used in this description but not defined below under "-- Certain Definitions" have the meanings assigned to them in the indenture. The registered Holder of a note will be treated as the owner of it for all purposes. Only registered Holders will have rights under the indenture. BRIEF DESCRIPTION OF THE NOTES AND THE SUBSIDIARY GUARANTEES THE NOTES The notes: - are general unsecured obligations of Block; - are subordinated in right of payment to all existing and future Senior Debt of Block; - are pari passu in right of payment with any future senior subordinated Indebtedness of Block; and - are unconditionally guaranteed by the Guarantors. THE SUBSIDIARY GUARANTEES The notes are guaranteed by all of Block's Domestic Subsidiaries, other than WAND (TV) Partnership. Each guarantee of the notes: - is a general unsecured obligation of the Guarantor; - is subordinated in right of payment to all existing and future Senior Debt of that Guarantor; and - is pari passu in right of payment with any future senior subordinated Indebtedness of that Guarantor. As of March 31, 2002, after giving effect to the refinancing of Block's senior credit facilities, Block and the Guarantors would have had total Senior Debt of approximately $78 million. As indicated above and as discussed in detail below under the caption "-- Subordination," payments on the notes and under these guarantees are subordinated to the payment of Senior Debt. The indenture will permit us and the Guarantors to incur additional Senior Debt. As of the date of this prospectus, all of our subsidiaries are "Restricted Subsidiaries." However, under the circumstances described below under the subheading "-- Certain Covenants -- Designation of Restricted and Unrestricted Subsidiaries," we will be permitted to designate certain of our subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the indenture. Our Unrestricted Subsidiaries will not guarantee the notes. PRINCIPAL, MATURITY AND INTEREST The principal amount of the notes presently outstanding is, and after the exchange offer will be, $175.0 million. We may, without the consent of the holders, increase such principal amount in the future on the same terms and conditions and with the same CUSIP number(s) as the notes being offered hereby. Any offering of additional notes is subject to the covenants of the indenture described below, including the 83 covenant described under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock." The notes and any additional notes subsequently issued under the indenture may be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Block will issue notes in denominations of $1,000 and integral multiples of $1,000. The notes will mature on April 15, 2009. Interest on the notes will accrue at the rate of 9 1/4% per annum and will be payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2002. Block will make each interest payment to the Holders of record on the immediately preceding April 1 and October 1. Interest on the notes will accrue from the date of original issuance or, if interest has already been paid, from the date to which it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. METHODS OF RECEIVING PAYMENTS ON THE NOTES If a Holder has given wire transfer instructions to Block, Block will pay all principal, interest and premium and Additional Interest, if any, on that Holder's notes in accordance with those instructions. All other payments on notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless Block elects to make interest payments by check mailed to the Holders at their address set forth in the register of Holders. PAYING AGENT AND REGISTRAR FOR THE NOTES The trustee will initially act as paying agent and registrar. Block may change the paying agent or registrar without prior notice to the Holders of the notes, and Block or any of its Subsidiaries may act as paying agent or registrar. TRANSFER AND EXCHANGE A Holder may transfer or exchange notes in accordance with the indenture. The registrar and the trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of notes. Holders will be required to pay all taxes due on transfer. Block is not required to transfer or exchange any note selected for redemption. Also, Block is not required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed. SUBSIDIARY GUARANTEES The notes are guaranteed by each of Block's current and future Domestic Subsidiaries, other than WAND (TV) Partnership. These Subsidiary Guarantees are joint and several obligations of the Guarantors. Each Subsidiary Guarantee is subordinated to the prior payment in full in cash or Cash Equivalents of all Senior Debt of that Guarantor. The obligations of each Guarantor under its Subsidiary Guarantee are limited with the intention of preventing that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors -- Federal and State statutes allow courts, under specific circumstances, to void guarantees and require note holders to return payments received from guarantors." A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than Block or another Guarantor, unless: (1) immediately after giving effect to that transaction, no Default or Event of Default exists; and (2) if the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger is a Restricted Subsidiary immediately following such transaction, such Person assumes all the obligations of that Guarantor under the indenture, its Subsidiary Guarantee and the registration rights agreement pursuant to a supplemental indenture satisfactory to the trustee. 84 The Subsidiary Guarantee of a Guarantor will be released: (1) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of Block, if the sale or other disposition complies with the "Asset Sale" and the other provisions of the indenture; (2) in connection with any sale of the Capital Stock of a Guarantor to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of Block with the effect that immediately following such transaction such Guarantor is no longer a Restricted Subsidiary of Block, if the sale complies with the "Asset Sale" and the other provisions of the indenture; or (3) if Block designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture. See "-- Repurchase at the Option of Holders -- Asset Sales." SUBORDINATION The payment of principal, interest and premium and Additional Interest, if any, on the notes is subordinated to the prior payment in full in cash or Cash Equivalents of all Senior Debt of Block, including Senior Debt incurred after the date of the indenture. The holders of Senior Debt will be entitled to receive payment in full in cash or Cash Equivalents of all Obligations due in respect of Senior Debt (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Debt) before the Holders of notes will be entitled to receive any payment with respect to the notes (except that Holders of notes may receive and retain Permitted Junior Securities and payments made from the trust described under "-- Legal Defeasance and Covenant Defeasance"), in the event of any distribution to creditors of Block: (1) in a liquidation or dissolution of Block; (2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to Block or its property; (3) in an assignment for the benefit of creditors; or (4) in any marshaling of Block's assets and liabilities. Block also may not make any payment in respect of the notes (except in Permitted Junior Securities or from the trust described under "-- Legal Defeasance and Covenant Defeasance") if: (1) a payment default on Designated Senior Debt occurs and is continuing beyond any applicable grace period; or (2) any other default occurs and is continuing on any series of Designated Senior Debt that permits holders of that series of Designated Senior Debt to accelerate its maturity and the trustee receives a notice of such default (a "Payment Blockage Notice") from the holders of any Designated Senior Debt. Payments on the notes may and will be resumed: (1) in the case of a payment default, upon the date on which such default is cured or waived; and (2) in the case of a nonpayment default, upon the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated. No new Payment Blockage Notice may be delivered unless and until: (1) 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice; and (2) all scheduled payments of principal, interest and premium and Additional Interest, if any, on the notes that have come due have been paid in full in cash. 85 No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the trustee will be, or be made, the basis for a subsequent Payment Blockage Notice. If the trustee or any Holder of the notes receives a payment in respect of the notes (except in Permitted Junior Securities or from the trust described under "-- Legal Defeasance and Covenant Defeasance") when the payment is prohibited by these subordination provisions, the trustee or the Holder, as the case may be, will hold the payment in trust for the benefit of the holders of Senior Debt. Upon the proper written request of the holders of Senior Debt, the trustee or the Holder, as the case may be, will deliver the amounts in trust to the holders of Senior Debt or their proper representative. Block must promptly notify holders of Senior Debt if payment of the notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a bankruptcy, liquidation or reorganization of Block, Holders of notes may recover less ratably than creditors of Block who are holders of Senior Debt. See "Risk Factors -- Your right to receive payments on the notes is junior to all of our other existing indebtedness and possibly all of our future borrowings. Further, the subsidiary guarantees of the notes are junior to all of our guarantors' existing indebtedness and possibly to all their future borrowings." OPTIONAL REDEMPTION At any time prior to April 15, 2005, Block may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture at a redemption price of 109.250% of the principal amount, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of one or more Qualified Equity Offerings; provided that: (1) at least 65% of the aggregate principal amount of notes issued under the indenture remains outstanding immediately after the occurrence of such redemption (excluding notes held by Block and its Subsidiaries); and (2) the redemption occurs within 45 days of the date of the closing of such Qualified Equity Offering. Except pursuant to the preceding paragraph, the notes will not be redeemable at Block's option prior to April 15, 2006. After April 15, 2006, Block may redeem all or a part of the notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:
YEAR PERCENTAGE - ---- ---------- 2006........................................................ 104.625% 2007........................................................ 102.313% 2008 and thereafter......................................... 100.000%
MANDATORY REDEMPTION Block is not required to make mandatory redemption or sinking fund payments with respect to the notes. REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL If a Change of Control occurs, each Holder of notes will have the right to require Block to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's notes pursuant to a Change of Control Offer on the terms set forth in the indenture. In the Change of Control Offer, Block will offer a Change of Control Payment in cash equal to 101% of the aggregate principal amount of notes 86 repurchased plus accrued and unpaid interest and Additional Interest, if any, on the notes repurchased, to the date of purchase. Within ten days following any Change of Control, Block will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase notes on the Change of Control Payment Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the indenture and described in such notice. Block will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the indenture, Block will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the indenture by virtue of such conflict. On the Change of Control Payment Date, Block will, to the extent lawful: (1) accept for payment all notes or portions of notes properly tendered pursuant to the Change of Control Offer; (2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions of notes properly tendered; and (3) deliver or cause to be delivered to the trustee the notes properly accepted together with an officers' certificate stating the aggregate principal amount of notes or portions of notes being purchased by Block. The paying agent will promptly mail to each Holder of notes properly tendered the Change of Control Payment for such notes, and the trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any; provided that each new note will be in a principal amount of $1,000 or an integral multiple of $1,000. Prior to complying with any of the provisions of this "Change of Control" covenant, but in any event within 90 days following a Change of Control, Block will either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of notes required by this covenant. Block will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The provisions described above that require Block to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the indenture are applicable. Except as described above with respect to a Change of Control, the indenture does not contain provisions that permit the Holders of the notes to require that Block repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction. Block will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by Block and purchases all notes properly tendered and not withdrawn under the Change of Control Offer. The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the properties or assets of Block and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of notes to require Block to repurchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of Block and its Subsidiaries taken as a whole to another Person or group may be uncertain. 87 ASSET SALES Block will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) Block (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (2) the fair market value is determined by Block's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an officers' certificate delivered to the trustee; and (3) at least 75% of the consideration received in the Asset Sale by Block or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash: (a) any liabilities, as shown on Block's most recent consolidated balance sheet, of Block or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases Block or such Restricted Subsidiary from further liability; and (b) any securities, notes or other obligations received by Block or any such Restricted Subsidiary from such transferee that are converted within ninety days by Block or such Restricted Subsidiary into cash or Cash Equivalents, to the extent of the cash or Cash Equivalents received in that conversion. The 75% limitation referred to in clause (3) above will not apply to any Asset Sale in which the cash or Cash Equivalents portion of the consideration received therefrom, determined in accordance with the preceding provision, is equal to or greater than what the after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation. Notwithstanding the foregoing, Block or any Restricted Subsidiary will be permitted to consummate an Asset Sale without complying with the foregoing if: (1) Block or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of; (2) the fair market value is determined by Block's Board of Directors and is evidenced by a resolution of the Board of Directors set forth in an officers' certificate to the trustee; and (3) at least 75% (or 50% in the case of the sale of all of the Capital Stock owned by Block of WAND (TV) Partnership) of the consideration for such Asset Sale constitutes a controlling interest in a Permitted Business, assets used or useful in a Permitted Business and/or cash; provided that any cash (other than any amount deemed cash under clause (3)(a) of the preceding paragraph) received by Block or such Restricted Subsidiary in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Proceeds subject to the provisions of the next paragraph. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, Block may apply those Net Proceeds at its option: (1) to repay Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business; (3) to make a capital expenditure; or (4) to acquire other non-current assets that are used or useful in a Permitted Business. 88 Pending the final application of any Net Proceeds, Block may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, Block will make an Asset Sale Offer to all Holders of notes and all holders of other Indebtedness that is pari passu with the notes containing provisions similar to those set forth in the indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, Block may use those Excess Proceeds for any purpose not otherwise prohibited by the indenture. If the aggregate principal amount of notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the trustee will select the notes and such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. Block will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of the indenture, Block will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the indenture by virtue of such conflict. The agreement governing Block's outstanding Senior Debt prohibits Block from purchasing any notes, and also provides that certain change of control or asset sale events with respect to Block would constitute a default under the agreement. Any future credit agreements or other agreements relating to Senior Debt to which Block becomes a party may contain similar restrictions and provisions. In the event a Change of Control or Asset Sale occurs at a time when Block is prohibited from purchasing notes, Block could seek the consent of its senior lenders to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If Block does not obtain such a consent or repay such borrowings, Block will remain prohibited from purchasing notes. In such case, Block's failure to purchase tendered notes would constitute an Event of Default under the indenture which would, in turn, constitute a default under such Senior Debt. In such circumstances, the subordination provisions in the indenture would likely restrict payments to the Holders of notes. SELECTION AND NOTICE If less than all of the notes are to be redeemed at any time, the trustee will select notes for redemption as follows: (1) if the notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the notes are listed; or (2) if the notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the trustee deems fair and appropriate. No notes of $1,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture. Notices of redemption may not be conditional. If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount of that note that is to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the Holder of notes upon cancellation of the original note. Notes called for redemption become due on the date fixed for 89 redemption. On and after the redemption date, interest ceases to accrue on notes or portions of them called for redemption. CERTAIN COVENANTS RESTRICTED PAYMENTS Block will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of Block's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving Block or any of its Restricted Subsidiaries) or to the direct or indirect holders of Block's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Block or to Block or a Restricted Subsidiary of Block); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving Block) any Equity Interests of Block or any direct or indirect parent of Block; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the notes or the Subsidiary Guarantees, except a payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; and (2) Block would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to the Debt to Cash Flow Ratio test set forth in the first paragraph of the covenant described below under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock;" and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made after the date of the indenture (other than the Restricted Payments made pursuant to clauses (1) through (7) and (9) of the following paragraph) shall not exceed, at the date of determination, the sum of (a) an amount equal to Block's Consolidated Cash Flow from the date of the indenture to the end of Block's most recently ended full fiscal quarter for which internal financial statements are available, taken as a single accounting period, less the product of 1.4 times Block's Consolidated Interest Expense from the date of the indenture to the end of Block's most recently ended full fiscal quarter for which internal financial statements are available, taken as a single accounting period, plus (b) an amount equal to the net cash proceeds received by Block from the sale of Equity Interests after the date of the indenture (other than (i) sales of Disqualified Stock and (ii) Equity Interests sold to any of Block's Restricted Subsidiaries) plus (c) to the extent that any Restricted Investment that was made after the date of the indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment plus (4) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the date of the indenture, the fair market value of such Subsidiary as of the date of such redesignation. 90 So long as no Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of the indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of Block or any Guarantor or of any Equity Interests of Block in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of Block) of, Equity Interests of Block (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded from clause (3)(b) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of Block or any Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend by a Restricted Subsidiary of Block to the holders of its common Equity Interests on a pro rata basis; (5) the payment of any dividends by Block to holders of its common Equity Interests not to exceed $2.0 million in any twelve-month period; (6) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Block or any Restricted Subsidiary of Block held by any member of Block's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement, stock option agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $750,000 in any twelve-month period (with unused amounts in any twelve month period being available to be so utilized in succeeding twelve month periods); (7) Restricted Payments made solely with the net cash proceeds to Block or any Restricted Subsidiary of any "key man" life insurance proceeds (i) to repurchase, redeem or otherwise acquire or retire for value any Equity Interests of Block or any Restricted Subsidiary of Block held by any member of Block's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement, stock option agreement or similar agreement or (ii) to repurchase, redeem or otherwise acquire or retire for value any Equity Interests of Block held by members of the Block family pursuant to the Amendment to and the Restatement of the Shareholders Agreement, dated as of December 12, 1991, as in effect on the date of the indenture, with such changes that from time to time do not materially adversely affect Block and its Restricted Subsidiaries taken as a whole or increase the amounts payable thereunder; (8) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Block held by members of the Block family pursuant to the Amendment to and the Restatement of the Shareholders Agreement, dated as of December 12, 1991, as in effect on the date of the indenture, with such changes that from time to time do not materially adversely affect Block and its Restricted Subsidiaries taken as a whole or increase the amounts payable thereunder, other than repurchases, redemptions, acquisitions or retirements made for similar purposes pursuant to clause (7) above; and (9) other Restricted Payments not to exceed $2.5 million in the aggregate. The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by Block or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant will be determined by the Board of Directors whose resolution with respect thereto will be delivered to the trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment 91 banking firm of national standing if the fair market value exceeds $10.0 million. Not later than the date of making any Restricted Payment, Block will deliver to the trustee an officers' certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this "Restricted Payments" covenant were computed, together with a copy of any fairness opinion or appraisal required by the indenture. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK Block will not, and will not permit any of its Restricted Subsidiaries to, directly, or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and Block will not issue any Disqualified Stock and will not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that Block may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if Block's Debt to Cash Flow Ratio at the time of incurrence of such Indebtedness or the issuance of such Disqualified Stock, after giving pro forma effect to such incurrence or issuance as of such date and to the use of proceeds therefrom as if the same had occurred at the beginning of the most recently ended four full fiscal quarter period of Block for which internal financial statements are available, would have been no greater than (a) 7.0 to 1, if such incurrence or issuance is on or prior to April 15, 2005 and (b) 6.5 to 1, if such incurrence or issuance is after April 15, 2005. The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by Block and any of its Restricted Subsidiaries of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1)(with letters of credit being deemed to have a principal amount equal to the maximum potential liability of Block and its Restricted Subsidiaries thereunder) not to exceed $200.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by Block or any of its Restricted Subsidiaries since the date of the indenture to repay any Indebtedness under a Credit Facility and effect a corresponding commitment reduction thereunder pursuant to the covenant described above under the caption "-- Repurchase at the Option of Holders -- Asset Sales;" (2) the incurrence by Block and its Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by Block and the Guarantors of Indebtedness represented by the notes and the related Subsidiary Guarantees to be issued on the date of the indenture and the exchange notes and the related Subsidiary Guarantees to be issued pursuant to the registration rights agreement; (4) the incurrence by Block or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of Block or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (4), not to exceed $10.0 million at any time outstanding; (5) the incurrence by Block or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the indenture to be incurred under the first paragraph of this covenant or clauses (2), (3), (4), (5), or (10) of this paragraph; (6) the incurrence by Block or any of its Restricted Subsidiaries of intercompany Indebtedness between or among Block and any of its Restricted Subsidiaries; provided, however, that: (a) if Block or any Guarantor is the obligor on such Indebtedness and the obligee under such Indebtedness is neither Block nor a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the notes, in the case of Block, or the Subsidiary Guarantee, in the case of a Guarantor; and 92 (b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than Block or a Restricted Subsidiary of Block and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either Block or a Restricted Subsidiary of Block; will be deemed, in each case, to constitute an incurrence of such Indebtedness by Block or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by Block or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of the indenture to be outstanding; (8) the guarantee by Block or any of the Guarantors of Indebtedness of Block or a Restricted Subsidiary of Block that was permitted to be incurred by another provision of this covenant; (9) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; (10) Indebtedness incurred by Block or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (11) Indebtedness consisting of customary indemnification, adjustments of purchase price or similar obligations, in each case, incurred or assumed in connection with the acquisition of any business or assets; (12) Obligations in respect of performance and surety bonds and completion guarantees provided by Block or any Restricted Subsidiary in the ordinary course of business; and (13) the incurrence by Block or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (13), not to exceed $10.0 million. For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (13) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, Block will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this covenant. Accrual of interest, accretion or amortization of original issue discount and the accretion of accreted value will not be deemed to be an incurrence of Indebtedness for purposes of this covenant. Indebtedness under Credit Facilities outstanding on the date on which notes are first issued and authenticated under the indenture will be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt. NO SENIOR SUBORDINATED DEBT Block will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of Block and senior in any respect in right of payment to the notes. No Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor's Subsidiary Guarantee. For purposes of this covenant, the foregoing limitations shall not apply to distinctions between categories of 93 Senior Debt of Block that exist by reason of any Liens or Guarantees arising or created in respect of some but not all such Senior Debt. LIENS Block will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness or trade payables on any asset now owned or hereafter acquired, except Permitted Liens, unless all payments due under the indenture and the notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES Block will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to Block or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Block or any of its Restricted Subsidiaries; (2) make loans or advances to Block or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to Block or any of its Restricted Subsidiaries. However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (1) agreements governing Existing Indebtedness and Credit Facilities as in effect on the date of the indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture; (2) the indenture, the notes and the Subsidiary Guarantees; (3) applicable law; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by Block or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred; (5) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (6) purchase money obligations (including Capital Lease Obligations) for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (3) of the preceding paragraph; (7) contracts for the sale of assets, including any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (8) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; 94 (9) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of the covenant described above under the caption "-- Liens" that limit the right of the debtor to dispose of the assets subject to such Liens; (10) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business; and (11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. MERGER, CONSOLIDATION OR SALE OF ASSETS Block may not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not Block is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of Block and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: (1) either: (a) Block is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than Block) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than Block) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of Block under the notes, the indenture and the registration rights agreement pursuant to agreements reasonably satisfactory to the trustee; (3) immediately after such transaction, no Default or Event of Default exists; and (4) Block or the Person formed by or surviving any such consolidation or merger (if other than Block), or to which such sale, assignment, transfer, conveyance or other disposition has been made will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow Ratio set forth in the first paragraph of the covenant described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock." In addition, Block may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This "Merger, Consolidation or Sale of Assets" covenant will not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among Block and any Guarantor. In the event of any transaction (other than a lease) described in and complying with the conditions listed in the immediately preceding paragraph in which Block is not the surviving Person and the surviving Person is to assume all the obligations of Block under the notes and the indenture pursuant to a supplemental indenture, such surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Block, and Block would be discharged from its obligations under the indenture and the notes; provided that solely for the purpose of calculating amounts described in clause (2) of the second paragraph under the caption "-- Restricted Payments," any such surviving Person shall only be deemed to have succeeded to and be substituted for Block with respect to the period subsequent to the effective time of such transaction (and Block (before giving effect to such transaction) shall be deemed to be the "Company" for such purposes for all prior periods). TRANSACTIONS WITH AFFILIATES Block will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets 95 from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) the Affiliate Transaction is on terms that are no less favorable to Block or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Block or such Restricted Subsidiary with an unrelated Person; and (2) Block delivers to the trustee: (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors set forth in an officers' certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to Block of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph: (1) any compensation paid to employees, including pursuant to any employment agreement, entered into by Block or any of its Restricted Subsidiaries in the ordinary course of business of Block or such Restricted Subsidiary; (2) transactions between or among Block and/or its Restricted Subsidiaries; (3) loans, advances, payment of reasonable fees, indemnification of directors or similar arrangements to officers, directors, employees and consultants who are not otherwise Affiliates of Block; (4) sales of Equity Interests (other than Disqualified Stock) of Block to Affiliates of Block; (5) Restricted Payments and Permitted Investments that are permitted by the provisions of the indenture described above under the caption "-- Restricted Payments;" and (6) transactions, including the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Block held by members of the Block family, pursuant to the Amendment to and the Restatement of the Shareholders Agreement, dated as of December 12, 1991, as in effect on the date of the indenture, with such changes that from time to time do not materially adversely affect Block and its Restricted Subsidiaries taken as a whole or increase the amounts payable thereunder. ADDITIONAL SUBSIDIARY GUARANTEES If Block or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of the indenture, other than a Subsidiary that has properly been designated as an Unrestricted Subsidiary in accordance with the indenture for so long as they continue to constitute Unrestricted Subsidiaries, then that newly acquired or created Domestic Subsidiary will become a Guarantor and execute a supplemental indenture and deliver an opinion of counsel satisfactory to the trustee within 10 Business Days of the date on which it was acquired or created. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by Block and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of the covenant described above under the caption "--Restricted Payments" or Permitted 96 Investments, as determined by Block. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. BUSINESS ACTIVITIES Block will not, and will not permit any Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to Block and its Subsidiaries taken as a whole. PAYMENTS FOR CONSENT Block will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the notes unless such consideration is offered to be paid and is paid to all Holders of the notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. REPORTS Whether or not required by the Commission, so long as any notes are outstanding, Block will furnish to the Holders of notes, within the time periods specified in the Commission's rules and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if Block were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by Block's certified independent accountants; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if Block were required to file such reports. In addition, following the consummation of the exchange offer described in this prospectus, whether or not required by the Commission, Block will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, Block and the Subsidiary Guarantors have agreed that, for so long as any notes remain outstanding, they will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. If Block has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of Block and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of Block. EVENTS OF DEFAULT AND REMEDIES Each of the following is an "Event of Default:" (1) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the notes whether or not prohibited by the subordination provisions of the indenture; (2) default in payment when due of the principal of, or premium, if any, on the notes, whether or not prohibited by the subordination provisions of the indenture; (3) failure by Block or any of its Restricted Subsidiaries to comply with the provisions described under the captions "-- Repurchase at the Option of Holders -- Change of Control," 97 (4) failure by Block or any of its Restricted Subsidiaries for 30 days after notice from the trustee or holders of at least 25% in principal amount of the notes to comply with the provisions described under the captions "-- Repurchase at the Option of Holders -- Asset Sales," "-- Certain Covenants -- Restricted Payments," "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock;" (5) failure by Block or any of its Restricted Subsidiaries for 60 days after notice from the trustee or holders of at least 25% in principal amount of the notes to comply with any of the other agreements in the indenture; (6) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Block or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Block or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the indenture, if that default: (a) is caused by a failure to pay principal of such Indebtedness at the final stated maturity thereof (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (7) failure by Block or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million not covered by insurance, which judgments are not paid, discharged or stayed for a period of 60 days; (8) except as permitted by the indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (9) certain events of bankruptcy or insolvency described in the indenture with respect to Block or any of its Restricted Subsidiaries. In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to Block, all outstanding notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the trustee or the Holders of at least 25% in principal amount of the then outstanding notes may declare all the notes to be due and payable immediately. In the event of a declaration of acceleration of the notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (6) of the definition of Event of Default, the declaration of acceleration of the notes shall be automatically annulled if the holders of any Indebtedness described in clause (6) of the definition of Event of Default have rescinded the declaration of acceleration in respect of the Indebtedness within 30 days of the date of the declaration and if: (1) the annulment of the acceleration of notes would not conflict with any judgment or decree of a court of competent jurisdiction; and (2) all existing Events of Default, except nonpayment of principal or interest on the notes that became due solely because of the acceleration of the notes, have been cured or waived. Holders of the notes may not enforce the indenture or the notes except as provided in the indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from Holders of the notes notice of any continuing Default or Event of Default if it determines that withholding notes is in their 98 interest, except a Default or Event of Default relating to the payment of principal or interest or Additional Interest. The Holders of a majority in aggregate principal amount of the notes then outstanding by notice to the trustee may on behalf of the Holders of all of the notes waive any existing Default or Event of Default and its consequences under the indenture except a continuing Default or Event of Default in the payment of interest or Additional Interest on, or the principal of, the notes. In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of Block with the intention of avoiding payment of the premium that Block would have had to pay if Block then had elected to redeem the notes pursuant to the optional redemption provisions of the indenture, an equivalent premium will also become and be immediately due and payable to the extent permitted by law upon the acceleration of the notes. If an Event of Default occurs prior to April 15, 2006, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of Block with the intention of avoiding the prohibition on redemption of the notes prior to April 15, 2006, then the premium specified in the indenture will also become immediately due and payable to the extent permitted by law upon the acceleration of the notes. Block is required to deliver to the trustee annually a statement regarding compliance with the indenture. Upon becoming aware of any Default or Event of Default, Block is required to deliver to the trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of Block or any Guarantor, as such, will have any liability for any obligations of Block or the Guarantors under the notes, the indenture, the Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Block may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding notes and all obligations of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal Defeasance") except for: (1) the rights of Holders of outstanding notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on such notes when such payments are due from the trust referred to below; (2) Block's obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust; (3) the rights, powers, trusts, duties and immunities of the trustee, and Block's and the Guarantor's obligations in connection therewith; and (4) the Legal Defeasance provisions of the indenture. In addition, Block may, at its option and at any time, elect to have the obligations of Block and the Guarantors released with respect to certain covenants that are described in the indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "-- Events of Default and Remedies" will no longer constitute an Event of Default with respect to the notes. 99 In order to exercise either Legal Defeasance or Covenant Defeasance: (1) Block must irrevocably deposit with the trustee, in trust, for the benefit of the Holders of the notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on the outstanding notes on the stated maturity or on the applicable redemption date, as the case may be, and Block must specify whether the notes are being defeased to maturity or to a particular redemption date; (2) in the case of Legal Defeasance, Block has delivered to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that (a) Block has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the Holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, Block has delivered to the trustee an opinion of counsel reasonably acceptable to the trustee confirming that the Holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the indenture) to which Block or any of its Subsidiaries is a party or by which Block or any of its Subsidiaries is bound; (6) Block must deliver to the trustee an officers' certificate stating that the deposit was not made by Block with the intent of preferring the Holders of notes over the other creditors of Block with the intent of defeating, hindering, delaying or defrauding creditors of Block or others; and (7) Block must deliver to the trustee an officers' certificate and an opinion of counsel, which opinion may be subject to customary assumptions and exclusions, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. The agreements governing Block's outstanding Senior Debt prohibit Block from defeasing any notes. Any future credit agreements or other agreements relating to Senior Debt to which Block becomes a party may contain similar restrictions and provisions. In the event Block elects to exercise its Legal Defeasance or Covenant Defeasance options at a time when Block is prohibited from defeasing notes, Block could seek the consent of its senior lenders to the defease the notes or could attempt to refinance the borrowings that contain such prohibition. If Block does not obtain such a consent or repay such borrowings, Block will remain prohibited from defeasing the notes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next three succeeding paragraphs, the indenture or the notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes), and any existing default or compliance with any provision of the indenture or the notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes). 100 Without the consent of each Holder affected, an amendment or waiver may not (with respect to any notes held by a non-consenting Holder): (1) reduce the principal amount of notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the redemption of the notes (other than provisions relating to the covenants described above under the caption "-- Repurchase at the Option of Holders"); (3) reduce the rate of or change the time for payment of interest on any note; (4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on the notes (except a rescission of acceleration of the notes by the Holders of at least a majority in aggregate principal amount of the notes and a waiver of the payment default that resulted from such acceleration); (5) make any note payable in money other than that stated in the notes; (6) make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of Holders of notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on the notes; (7) waive a redemption payment with respect to any note (other than a payment required by one of the covenants described above under the caption "-- Repurchase at the Option of Holders"); or (8) make any change in the preceding amendment and waiver provisions. In addition, any amendment to, or waiver of, the provisions of the indenture relating to (i) subordination that adversely affects the rights of the Holders of the notes or (ii) the release of any Guarantor from any of its obligations under its Subsidiary Guarantee or the indenture, except in accordance with the terms of the indenture, will require the consent of the Holders of at least 75% in aggregate principal amount of notes then outstanding. Notwithstanding the preceding, without the consent of any Holder of notes, Block, the Guarantors and the trustee may amend or supplement the indenture or the notes: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated notes in addition to or in place of certificated notes; (3) to provide for the assumption of Block's obligations to Holders of notes in the case of a merger or consolidation or sale of all or substantially all of Block's assets; (4) to make any change that would provide any additional rights or benefits to the Holders of notes or that does not adversely affect the legal rights under the indenture of any such Holder; (5) to comply with requirements of the Commission in order to effect or maintain the qualification of the indenture under the Trust Indenture Act; (6) to provide for the issuance of additional notes in accordance with the limitations set forth in the indenture as of its date; or (7) to allow any Guarantor to execute a supplemental indenture and/or a Subsidiary Guarantee with respect to the notes. 101 SATISFACTION AND DISCHARGE The indenture will be discharged and will cease to be of further effect as to all notes issued thereunder, when: (1) either: (a) all notes that have been authenticated, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in trust and thereafter repaid to Block, have been delivered to the trustee for cancellation; or (b) all notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and Block or any Guarantor has irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the notes not delivered to the trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default has occurred and is continuing on the date of the deposit or will occur as a result of the deposit and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which Block or any Guarantor is a party or by which Block or any Guarantor is bound; (3) Block or any Guarantor has paid or caused to be paid all sums payable by it under the indenture; and (4) Block has delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the notes at maturity or the redemption date, as the case may be. In addition, Block must deliver an officers' certificate and an opinion of counsel, which opinion may be subject to customary assumptions and exclusions, to the trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. CONCERNING THE TRUSTEE If the trustee becomes a creditor of Block or any Guarantor, the indenture limits its right to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee, subject to certain exceptions. The indenture provides that in case an Event of Default occurs and is continuing, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any Holder of notes, unless such Holder has offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this prospectus may obtain a copy of the indenture without charge by writing to Block Communications, Incorporated, 541 North Superior Street, Toledo, Ohio 43660; Attention: Treasurer. 102 BOOK-ENTRY, DELIVERY AND FORM The notes will be issued in registered, global form in minimum denominations of $1,000 and integral multiples of $1,000 in excess of $1,000. The notes will be represented by one or more notes in registered, global form without interest coupons (collectively, the "Global Notes"). The Global Notes will be deposited upon issuance with the trustee as custodian for The Depository Trust Company ("DTC"), in New York, New York, and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below. Except as set forth below, the Global Notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for notes in certificated form except in the limited circumstances described below. See "-- Exchange of Global Notes for Certificated Notes." Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of notes in certificated form. In addition, transfers of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of DTC and its direct or indirect participants (including, if applicable, those of Euroclear and Clearstream), which may change from time to time. DEPOSITORY PROCEDURES The following description of the operations and procedures of DTC, Euroclear and Clearstream are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. Block takes no responsibility for these operations and procedures and urges investors to contact the system or their participants directly to discuss these matters. DTC has advised Block that DTC is a limited-purpose trust company created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. DTC has also advised Block that, pursuant to procedures established by it: (1) upon deposit of the Global Notes, DTC will credit the accounts of Participants designated by the initial purchasers with portions of the principal amount of the Global Notes; and (2) ownership of these interests in the Global Notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Global Notes). Investors in the Global Notes who are Participants in DTC's system may hold their interests therein directly through DTC. Investors in the Global Notes who are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants in such system. Euroclear and Clearstream will hold interests in the Global Notes on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositories, which are Euroclear Bank S.A./N.V., as operator of Euroclear, and Citibank, N.A., as operator of Clearstream. All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems. The 103 laws of some states require that certain Persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE. Payments in respect of the principal of, and interest and premium and Additional Interest, if any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered Holder under the indenture. Under the terms of the indenture, Block and the trustee will treat the Persons in whose names the notes, including the Global Notes, are registered as the owners of the notes for the purpose of receiving payments and for all other purposes. Consequently, neither Block, the trustee nor any agent of Block or the trustee has or will have any responsibility or liability for: (1) any aspect of DTC's records or any Participant's or Indirect Participant's records relating to or payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTC's records or any Participant's or Indirect Participant's records relating to the beneficial ownership interests in the Global Notes; or (2) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. DTC has advised Block that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the trustee or Block. Neither Block nor the trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the notes, and Block and the trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Subject to the transfer restrictions set forth under "Notice to Investors," transfers between Participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures. Subject to compliance with the transfer restrictions applicable to the notes described herein, cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream. DTC has advised Block that it will take any action permitted to be taken by a Holder of notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global 104 Notes and only in respect of such portion of the aggregate principal amount of the notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes for legended notes in certificated form, and to distribute such notes to its Participants. Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate transfers of interests in the Global Notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. Neither Block nor the trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES A Global Note is exchangeable for definitive notes in registered certificated form ("Certificated Notes") if: (1) DTC (a) notifies Block that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be a clearing agency registered under the Exchange Act and, in either case, Block fails to appoint a successor depositary; (2) in the case of a Global Note held for an account of Euroclear or Clearstream, Euroclear or Clearstream, as the case may be, (A) is closed for business for a continuous period of 14 days (other than by reason of statutory or other holidays), or (B) announces an intention permanently to cease business or does in fact do so; (3) Block, at its option, notifies the trustee in writing that it elects to cause the issuance of the Certificated Notes; or (4) there has occurred and is continuing a Default or Event of Default with respect to the notes. In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures) and will bear the applicable restrictive legend referred to in "Notice to Investors," unless that legend is not required by applicable law. EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the transferor first delivers to the trustee a written certificate (in the form provided in the indenture) to the effect that such transfer will comply with the appropriate transfer restrictions applicable to such notes. See "Notice to Investors." SAME DAY SETTLEMENT AND PAYMENT Block will make payments in respect of the notes represented by the Global Notes (including principal, premium, if any, interest and Additional Interest, if any) by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. Block will make all payments of principal, interest and premium and Additional Interest, if any, with respect to Certificated Notes by wire transfer of immediately available funds to the accounts specified by the Holders of the Certificated Notes or, if no such account is specified, by mailing a check to each such Holder's registered address. The notes represented by the Global Notes are expected to be eligible to trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC to be settled in immediately available funds. Block expects that secondary trading in any Certificated Notes will also be settled in immediately available funds. 105 Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised Block that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream participant to a Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTC's settlement date. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Additional Interest" means all additional interest then owing pursuant to Section 5 of the registration rights agreement. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, conveyance or other disposition of all or substantially all of the assets of Block and its Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption "-- Repurchase at the Option of Holders -- Change of Control" and/or the provisions described above under the caption "-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; and (2) the issuance of Equity Interests in any of Block's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries. Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million; (2) a transfer of assets between or among Block and its Restricted Subsidiaries, (3) an issuance of Equity Interests by a Restricted Subsidiary to Block or to another Restricted Subsidiary; (4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents; (6) the sale and leaseback of any assets within 90 days of the acquisition; 106 (7) foreclosures on assets; (8) the disposition of equipment no longer used or useful in the business of Block or a Restricted Subsidiary; (9) the licensing of intellectual property; and (10) a Restricted Payment or Permitted Investment that is permitted by the covenant described above under the caption "-- Certain Covenants -- Restricted Payments." "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning. "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person serving a similar function. "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than six months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition; and 107 (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Block and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal; (2) the adoption of a plan relating to the liquidation or dissolution of Block; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of Block, measured by voting power rather than number of shares; or (4) the first day on which a majority of the members of the Board of Directors of Block are not Continuing Directors. "Commission" means the Securities and Exchange Commission. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus (5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, minus (6) programming rights payments made during such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Subsidiary of Block will be added to Consolidated Net Income to compute Consolidated Cash Flow of Block only to the extent that a corresponding amount would be permitted at the date of determination to be dividended or otherwise paid to Block by such Subsidiary without prior governmental approval (that has not been obtained), and 108 without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Indebtedness" means, with respect to any Person as of any date of determination, the sum, without duplication, of (i) the total amount of Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total amount of Indebtedness of any other Person, to the extent that such Indebtedness has been Guaranteed by the referent Person or one or more of its Restricted Subsidiaries or is secured by a Lien on assets of the referent Person or any of its Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified Stock of such Person and all preferred stock of Restricted Subsidiaries of such Person, in each case, determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of the referent Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of the referent Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is guaranteed by the referent Person or one of its Restricted Subsidiaries or secured by a Lien on assets of the referent Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of such Person (other than Disqualified Stock) or to such Person or any of its Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of the referent Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person; (2) the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition will be excluded; and (4) the cumulative effect of a change in accounting principles will be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of Block who: (1) was a member of such Board of Directors on the date of the indenture; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. 109 "Credit Agreement" means that certain Revolving Credit Agreement, dated as of December 29, 1998, by and among the Company, the Lenders referred to therein, Mellon Bank, N.A., as Administrative Agent, and The Huntington National Bank, as Documentation Agent, as amended, and that certain 364-Day Standby Term Loan Agreement, dated as of December 29, 1998, by and among the Company, the Lenders referred to therein, Mellon Bank, N.A., as Administrative Agent, and The Huntington National Bank, as Documentation Agent, as amended, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Debt to Cash Flow Ratio" means, as of any date of determination, the ratio of (a) the Consolidated Indebtedness of Block as of such date to (b) the Consolidated Cash Flow of Block for the four most recent full fiscal quarters ending immediately prior to such date for which internal financial statements are available, determined on a pro forma basis after giving effect to all acquisitions or dispositions of assets made by Block and its Restricted Subsidiaries from the beginning of such four-quarter period through and including such date of determination (including any related financing transactions) as if such acquisitions and dispositions had occurred at the beginning of such four-quarter period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by Block or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Designated Senior Debt" means: (1) any Indebtedness outstanding under the Credit Agreement; and (2) after payment in full of all Obligations under the Credit Agreement, any other Senior Debt permitted under the indenture the principal amount of which is $25.0 million or more and that has been designated by Block as "Designated Senior Debt." "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require Block to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that Block may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with the covenant described above under the caption "-- Certain Covenants -- Restricted Payments." Capital Stock subject to redemption by virtue of the Amendment to and the Restatement of the Shareholders Agreement, dated as of December 12, 1991, as in effect on the date of the indenture, shall not be "Disqualified Stock" solely by virtue of such redemption. 110 "Domestic Subsidiary" means any Restricted Subsidiary of Block that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of Block. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Indebtedness" means Indebtedness of Block and its Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date of the indenture, until such amounts are repaid. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" means each of: (1) all Domestic Subsidiaries of Block, other than WAND (TV) Partnership; and (2) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the indenture; and their respective successors and assigns. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person. 111 The amount of any Indebtedness outstanding as of any date will be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness. "Interest Payment Date" means the dates for payment of interest as set forth in the indenture and the notes. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If Block or any Restricted Subsidiary of Block sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of Block such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of Block, Block will be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of Block's Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "-- Certain Covenants -- Restricted Payments." "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss. "Net Proceeds" means the aggregate cash proceeds received by Block or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements and amounts required to be applied to the repayment of Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets that were the subject of such Asset Sale. "Non-Recourse Debt" means Indebtedness: (1) as to which neither Block nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of Block or any of its Restricted 112 Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of Block or any of its Restricted Subsidiaries. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Permitted Business" means any business engaged in by Block or the Restricted Subsidiaries as of the Closing Date or any business reasonably related, ancillary or complementary thereto. "Permitted Investments" means: (1) any Investment in Block or in a Restricted Subsidiary of Block that is a Guarantor; (2) any Investment by Block in WAND (TV) Partnership; provided, however that: (a) WAND (TV) Partnership is designated as a Restricted Subsidiary on the date of such Investment; (b) on the date of such Investment there does not exist any consensual encumbrance or restriction (other than those in or contemplated by the Partnership Agreement of WAND (TV) Partnership as in effect on the date of the indenture with such changes that from time to time do not materially adversely affect Block or its Restricted Subsidiaries (other than WAND (TV) Partnership) or increase the scope or substance of any such encumbrances or restrictions) on the ability of WAND (TV) Partnership to (i) pay dividends or make any other distributions on its Capital Stock to Block or any other Restricted Subsidiary, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to Block or any other Restricted Subsidiary; (ii) make loans or advances to Block or any other Restricted Subsidiary; or (iii) transfer any of its properties or assets to Block or any other Restricted Subsidiary; and (c) senior management of Block reasonably believes that such Investment is prudent to operate WAND (TV) Partnership's business in the ordinary course of its business; (3) any Investment in Cash Equivalents; (4) any Investment by Block or any Restricted Subsidiary of Block in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of Block and a Guarantor; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Block or a Restricted Subsidiary of Block that is a Guarantor; (5) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "-- Repurchase at the Option of Holders -- Asset Sales"; (6) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of Block; (7) any Investments received in compromise of obligations of trade creditors or customers that were incurred in the ordinary course of Block's or any of its Restricted Subsidiaries' business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; (8) Hedging Obligations; and (9) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (9) since the date of the indenture not to exceed $5.0 million. 113 "Permitted Junior Securities" means: (1) Equity Interests in Block or any Guarantor; or (2) debt securities that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the notes and the Subsidiary Guarantees are subordinated to Senior Debt under the indenture. "Permitted Liens" means: (1) Liens securing Senior Debt that was permitted by the terms of the indenture to be incurred; (2) Liens in favor of Block or the Guarantors; (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with Block or any Subsidiary of Block; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Block or the Subsidiary; (4) Liens on property existing at the time of acquisition of the property by Block or any Subsidiary of Block, provided that such Liens were in existence prior to the contemplation of such acquisition; (5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with such Indebtedness; (7) Liens existing on the date of the indenture; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; (9) Liens securing Permitted Refinancing Indebtedness; provided, however that (a) such new Lien shall be limited to all or part of the same assets that secured the original Lien (plus improvements on such property) and (b) the Indebtedness secured by such Lien at such time is not increased (other than by an amount necessary to pay fees and expenses, including premiums, related to the refinancing, refunding, extension, renewal or replacement of such Indebtedness); (10) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred or imposed, as applicable, in the ordinary course of business and consistent with industry practices; (11) any interest or title of a lessor under any Capital Lease Obligation; (12) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to letters of credit and products and proceeds thereof; (13) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty, including rights of offset and set-off; (14) Liens securing Hedging Obligations which Hedging Obligations relate to indebtedness that is otherwise permitted under the indenture; (15) leases or subleases granted to others; (16) Liens under licensing agreements; (17) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (18) judgment Liens not giving rise to an Event of Default; 114 (19) Liens encumbering property of Block or a Restricted Subsidiary consisting of carriers, warehousemen, mechanics, materialmen, repairmen and landlords and other Liens arising by operation of law and incurred in the ordinary course of business for sums which are not overdue or which are being contested in good faith by appropriate proceedings and (if so contested) for which appropriate reserves with respect thereto have been established and maintained on the books of Block or a Restricted Subsidiary in accordance with GAAP; (20) Liens encumbering property of Block or a Restricted Subsidiary incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance, or other forms of governmental insurance or benefits, or to secure performance of bids, tenders, statutory obligations, leases, and contracts (other than for Indebtedness) entered into in the ordinary course of business of Block or a Restricted Subsidiary; and (21) Liens incurred in the ordinary course of business of Block or any Subsidiary of Block with respect to obligations that do not exceed $5.0 million at any one time outstanding. "Permitted Refinancing Indebtedness" means any Indebtedness of Block or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of Block or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the notes on terms at least as favorable to the Holders of notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by Block or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Principals" means members of the Block family. "Qualified Equity Offerings" means, any issuance of Capital Stock (other than Disqualified Stock) by Block to any Person or Persons other than an Affiliate of Block in a single transaction resulting in gross proceeds to Block in excess of $50.0 million. "Related Party" means: (1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member or legal guardian (in the case of an individual) of any Principal; (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause (1); or (3) the estate of any deceased or incompetent Principal. "Restricted Investment" means an Investment other than a Permitted Investment. 115 "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means: (1) all Indebtedness of Block or any Guarantor outstanding under Credit Facilities and all Hedging Obligations with respect thereto; (2) any other Indebtedness of Block or any Guarantor permitted to be incurred under the terms of the indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the notes or any Subsidiary Guarantee; and (3) all Obligations with respect to the items listed in the preceding clauses (1) and (2). Notwithstanding anything to the contrary in the preceding, Senior Debt will not include: (1) any liability for federal, state, local or other taxes owed or owing by Block; (2) any intercompany Indebtedness of Block or any of its Subsidiaries to Block or any of its Affiliates; (3) any trade payables; or (4) the portion of any Indebtedness that is incurred in violation of the indenture. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "Subsidiary Guarantee" means, the Guarantee by each Guarantor of Block's payment obligations under the indenture and the notes, executed pursuant to the terms of the indenture. "Unrestricted Subsidiary" means any Subsidiary of Block that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with Block or any Restricted Subsidiary of Block unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Block or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Block; (3) is a Person with respect to which neither Block nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Block or any of its Restricted Subsidiaries; and 116 (5) has at least one director on its Board of Directors that is not a director or executive officer of Block or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of Block or any of its Restricted Subsidiaries. Any designation of a Subsidiary of Block as an Unrestricted Subsidiary will be evidenced to the trustee by filing with the trustee a certified copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under the caption "-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of Block as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," Block will be in default of such covenant. The Board of Directors of Block may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of Block of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant described under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. 117 CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS The following discussion, including the opinion of counsel described below, is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judicial authority and administrative rulings and practice as of the date hereof. The Internal Revenue Service may take a contrary view, and no ruling from the Service has been or will be sought. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the following statements and conditions. Any changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. The discussion does not address all the tax consequences that may be relevant to a particular holder or to certain holders subject to special treatment under U.S. federal income tax laws (including, but not limited to, certain financial institutions, tax-exempt organizations, insurance companies, broker-dealers, and persons that have a functional currency other than the U.S. Dollar or persons in special circumstances, such as those who have elected to mark securities to market or those who hold notes as part of a straddle, hedge, conversion transaction, or other integrated investment). Reed Smith LLP has advised us that, in its opinion, the exchange of the old notes for exchange notes pursuant to the exchange offer will not be treated as an "exchange" for federal income tax purposes because the exchange notes will not be considered to differ materially in kind or extent from the old notes. Rather, the exchange notes received by a holder will be treated as a continuation of the old notes in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging old notes for exchange notes pursuant to the exchange offer. This discussion is for general information only. We recommend that each holder consult his own tax advisor as the particular tax consequences of exchanging such holder's old notes for exchange notes, including the applicability and effect of any state, local or foreign tax law. 118 PLAN OF DISTRIBUTION Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of exchange notes. Broker-dealers may use this prospectus, as it may be amended or supplemented from time to time, in connection with resales of exchange notes received in exchange for old notes if the broker-dealer acquired the old notes as a result of market-making activities or other trading activities. We have agreed that for a period of 180 days after the effective date of the registration statement of which this prospectus is a part we will make this prospectus, as amended or supplemented, available to any broker-dealer who requests it in the letter of transmittal for use in connection with any such resale. In addition, until , 2002, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus. We will not receive any proceeds from any sale of exchange notes by broker-dealers or other persons. Broker-dealers may from time to time sell exchange notes received for their own accounts in the exchange offer in one or more transactions: - in the over-the-counter market; - in negotiated transactions; - through the writing of options on the exchange notes or a combination of such methods of resale; - at market prices prevailing at the time of resale; - at prices related to such prevailing market prices; or - at negotiated prices. Broker-dealers may resell exchange notes directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer and/or the purchasers of the exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of the exchange notes may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on any resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. We have agreed to pay all expenses incident to our performance of, or compliance with, the registration rights agreement and will indemnify the holders of the notes (including any broker-dealers) against liabilities under the Securities Act. By its acceptance of the exchange offer, any broker-dealer that receives exchange notes pursuant to the exchange offer agrees to notify us in writing before using the prospectus in connection with the sale or transfer of exchange notes. The broker-dealer further acknowledges and agrees that, upon receipt of notice from us of the happening of any event which makes any statement in the prospectus untrue in any material respect or which requires the making of any changes in the prospectus to make the statements in the prospectus not misleading or which may impose upon us disclosure obligations that my have a material adverse effect on us, which notice we agree to deliver promptly to the broker-dealer, the broker-dealer will suspend use of the prospectus until we have notified the broker-dealer that delivery of the prospectus may resume and have furnished to the broker-dealer copies of any amendment or supplement to the prospectus. We have agreed in the registration rights agreement that for a period of 180 days after the effective date of the registration statement of which this prospectus is a part we will make this prospectus, as amended or supplemented, available to any broker-dealer who requests it in writing for use in connection with any such resale. 119 LEGAL MATTERS Certain legal matters with regard to the validity of the notes will be passed upon for us by Reed Smith LLP, Pittsburgh, Pennsylvania and by Fritz Byers, Toledo, Ohio. Mr. Byers is a director of the Company and serves as Secretary and General Counsel to the Company. EXPERTS Our consolidated financial statements as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001, appearing in this prospectus and registration statement, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report appearing elsewhere herein, and are included in this prospectus in reliance upon such report, given on the authority of such firm as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION This prospectus is part of a registration statement on Form S-4 that we have filed with the SEC under the Securities Act. This prospectus does not contain all of the information set forth in the registration statement. For further information about us and the notes, you should refer to the registration statement. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have filed these documents as exhibits to our registration statement. The Company has not previously been subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934. In connection with the exchange offer, the Company will become subject to these requirements and will file reports and other information with the SEC. You may read and copy any reports and other information the Company files at the public reference facilities of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain copies of those materials from the SEC by mail at prescribed rates. You should direct requests to the SEC at the SEC's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or by calling (800) SEC-0330. The SEC also maintains a website (www.sec.gov) that will contain the reports and other information filed by the Company. In addition, for so long as any of the notes remains outstanding, we have agreed to make available to any prospective purchaser of the notes or beneficial owner of the notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act. 120 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES: Audited Financial Statements: Report of Independent Auditors.............................. F-2 Consolidated Balance Sheets as of December 31, 2001 and 2000...................................................... F-3 Consolidated Statements of Income for the years ended December 31, 2001, 2000 and 1999.......................... F-5 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2001, 2000 and 1999.............. F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.......................... F-7 Notes to Consolidated Financial Statements.................. F-8 Interim Financial Statements (Unaudited): Condensed Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001..................................... F-29 Condensed Consolidated Statements of Income for the three months ended March 31, 2002 and 2001...................... F-31 Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2002 and 2001........ F-32 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2001................ F-33 Notes to Condensed Consolidated Financial Statements........ F-34
F-1 REPORT OF INDEPENDENT AUDITORS Board of Directors Block Communications, Inc. We have audited the accompanying consolidated balance sheets of Block Communications, Inc. (the Company) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Block Communications, Inc. and subsidiaries at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States. As discussed in Note 1 to the consolidated financial statements, in 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. ERNST & YOUNG LLP February 22, 2002 Toledo, Ohio F-2 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 --------------------------- 2001 2000 ------------ ------------ ASSETS Current assets: Cash and cash equivalents................................. $ 5,882,732 $ 4,212,970 Receivables, less allowances for doubtful accounts and discounts of $4,861,094 and $4,673,533, respectively... 44,225,634 48,814,918 Recoverable income taxes.................................. 4,483,300 3,210,786 Inventories............................................... 5,548,784 10,443,933 Prepaid expenses.......................................... 3,703,756 3,077,961 Broadcast rights.......................................... 6,083,782 6,103,312 Deferred income taxes..................................... 9,803,800 8,696,300 ------------ ------------ Total current assets........................................ 79,731,788 84,560,180 Property, plant and equipment: Land and land improvements................................ 12,194,446 9,654,743 Buildings and leasehold improvements...................... 41,186,933 39,775,332 Machinery and equipment................................... 209,196,143 197,409,282 Cable television distribution systems and equipment....... 187,804,505 148,719,101 Security alarm and video systems installation costs....... 5,923,280 4,948,828 Construction in progress.................................. 11,495,916 34,652,447 ------------ ------------ 467,801,223 435,159,733 Less allowances for depreciation and amortization......... 204,605,517 189,727,851 ------------ ------------ 263,195,706 245,431,882 Other assets: Intangibles, less accumulated amortization of $26,281,955 and $39,610,669, respectively.......................... 83,913,101 85,041,014 Deferred income taxes..................................... 12,946,900 7,881,000 Prepaid pension costs..................................... 11,145,446 8,319,540 Cash value of life insurance, net of policy loans of $12,735,560 and $5,346,266, respectively............... 10,691,105 16,675,979 Pension intangibles....................................... 7,230,030 4,630,209 Broadcast rights, less current portion.................... 6,217,880 3,079,580 Deferred financing costs.................................. 5,676,725 3,738,265 Other..................................................... 3,138,246 4,832,531 ------------ ------------ 140,959,433 134,198,118 ------------ ------------ $483,886,927 $464,190,180 ============ ============
See accompanying notes. F-3 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
DECEMBER 31 --------------------------- 2001 2000 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 12,355,122 $ 21,320,671 Salaries, wages and payroll taxes......................... 16,321,468 17,569,856 Workers' compensation and medical reserves................ 9,184,074 10,683,321 Other accrued liabilities................................. 32,279,367 24,547,445 Current maturities of long-term debt...................... 9,908,334 21,435,963 ------------ ------------ Total current liabilities................................... 80,048,365 95,557,256 Long-term debt, less current maturities..................... 227,355,513 191,920,705 Other long-term obligations................................. 126,635,551 102,823,699 Minority interest........................................... 12,264,398 12,499,020 Stockholders' equity: 5% Non-cumulative, non-voting Class A Stock, par value $100 a share (entitled in liquidation to $100 per share in priority over Common Stock) -- 15,680 shares authorized; 12,620 shares issued and outstanding........................................ 1,262,000 1,262,000 Common Stock, par value $.10 a share: Voting Common Stock -- 29,400 shares authorized, issued and outstanding............................... 2,940 2,940 Non-voting Common Stock -- 588,000 shares authorized; 427,786 and 430,123 shares issued and outstanding, respectively........................ 42,779 43,012 Accumulated other comprehensive loss...................... (4,725,589) (521,942) Additional paid-in capital................................ 771,274 771,274 Retained earnings......................................... 40,229,696 59,832,216 ------------ ------------ 37,583,100 61,389,500 ------------ ------------ $483,886,927 $464,190,180 ============ ============
See accompanying notes. F-4 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31 ------------------------------------------ 2001 2000 1999 ------------ ------------ ------------ Revenue: Publishing....................................... $264,678,678 $286,717,128 $275,827,043 Cable............................................ 89,420,000 82,110,320 75,413,714 Broadcasting..................................... 35,183,897 42,531,103 36,293,428 Other Communications............................. 25,282,312 14,298,551 8,681,928 ------------ ------------ ------------ 414,564,887 425,657,102 396,216,113 Expense: Publishing....................................... 262,798,933 277,312,265 263,951,460 Cable............................................ 84,578,461 74,535,841 62,845,134 Broadcasting..................................... 36,972,664 37,098,498 34,221,483 Other Communications............................. 27,954,522 18,444,805 12,734,197 Corporate general and administrative............. 2,705,412 4,151,939 1,523,760 ------------ ------------ ------------ 415,009,992 411,543,348 375,276,034 ------------ ------------ ------------ Operating income (loss)............................ (445,105) 14,113,754 20,940,079 Nonoperating income (expense): Interest expense................................. (19,486,186) (14,174,830) (11,243,454) Gain on disposition of WLFI-TV................... -- 22,338,881 -- Change in fair value of interest rate swaps...... (5,340,046) -- -- Interest income.................................. 47,452 105,897 200,021 ------------ ------------ ------------ (24,778,780) 8,269,948 (11,043,433) ------------ ------------ ------------ Income (loss) before income taxes and minority Interest......................................... (25,223,885) 22,383,702 9,896,646 Provision (credit) for income taxes: Federal: Current....................................... (3,680,000) 445,000 3,500,000 Deferred...................................... (3,809,400) 8,029,500 261,500 ------------ ------------ ------------ (7,489,400) 8,474,500 3,761,500 State and local.................................. 357,000 701,686 794,047 ------------ ------------ ------------ (7,132,400) 9,176,186 4,555,547 ------------ ------------ ------------ Income (loss) before minority interest............. (18,091,485) 13,207,516 5,341,099 Minority interest.................................. 234,622 (427,020) -- ------------ ------------ ------------ Net income (loss).................................. $(17,856,863) $ 12,780,496 $ 5,341,099 ============ ============ ============
See accompanying notes. F-5 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY THREE YEARS ENDED DECEMBER 31, 2001
COMMON STOCK ----------------------------------- ACCUMULATED CLASS A STOCK VOTING NON-VOTING OTHER ADDITIONAL ------------------- --------------- ----------------- COMPREHENSIVE PAID-IN SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT LOSS CAPITAL ------ ---------- ------ ------ ------- ------- ------------- ---------- Balances at January 1, 1999........ 13,000 $1,300,000 29,400 $2,940 436,251 $43,625 $ (674,801) $697,843 Net income........................ Change in net minimum pension liability (net of $88,000 of deferred income taxes).......... 156,480 Total comprehensive income........ Cash dividends declared: Class A stock -- $5.00 a share......................... Common stock: Voting -- $2.85 a share....... Non-voting -- $2.85 a share... Redemption of: Class A stock at $41.50 a share......................... (380) (38,000) Non-voting common shares at $453.00 a share............... (1,410) (141) Non-voting common shares at $494.58 a share............... (2,531) (253) ------ ---------- ------ ------ ------- ------- ----------- -------- Balances at December 31, 1999...... 12,620 1,262,000 29,400 2,940 432,310 43,231 (518,321) 697,843 Net income........................ Change in net minimum pension liability (net of $2,000 of deferred income taxes).......... (3,621) Total comprehensive income........ Cash dividends declared: Class A stock -- $5.00 a share......................... Common stock: Voting -- $3.00 a share....... Non-voting -- $3.00 a share... Executive stock incentives at $494.58 a share................. 147 15 73,431 Redemption of non-voting common shares at $518.59 a share....... (2,334) (234) ------ ---------- ------ ------ ------- ------- ----------- -------- Balances at December 31, 2000...... 12,620 1,262,000 29,400 2,940 430,123 43,012 (521,942) 771,274 Net loss.......................... Change in net minimum pension liability (net of $1,860,500 of deferred income taxes).......... (3,307,662) Fair value of interest rate swaps at January 1, 2001, less accumulated amortization of $706,638 (net of deferred taxes of $503,500).................... (895,985) Total comprehensive loss.......... Cash dividends declared: Class A stock -- $2.50 a share......................... Common stock: Voting -- $1.20 a share....... Non-voting -- $1.20 a share... Redemption of non-voting common shares at $497.61 a share....... (2,337) (233) ------ ---------- ------ ------ ------- ------- ----------- -------- Balances at December 31, 2001...... 12,620 $1,262,000 29,400 $2,940 427,786 $42,779 $(4,725,589) $771,274 ====== ========== ====== ====== ======= ======= =========== ======== RETAINED EARNINGS TOTAL ----------- ----------- Balances at January 1, 1999........ $47,623,561 $48,993,168 Net income........................ 5,341,099 5,341,099 Change in net minimum pension liability (net of $88,000 of deferred income taxes).......... 156,480 ----------- Total comprehensive income........ 5,497,579 Cash dividends declared: Class A stock -- $5.00 a share......................... (64,050) (64,050) Common stock: Voting -- $2.85 a share....... (83,790) (83,790) Non-voting -- $2.85 a share... (1,238,385) (1,238,385) ----------- ----------- (1,386,225) (1,386,225) Redemption of: Class A stock at $41.50 a share......................... 22,230 (15,770) Non-voting common shares at $453.00 a share............... (638,589) (638,730) Non-voting common shares at $494.58 a share............... (1,251,529) (1,251,782) ----------- ----------- Balances at December 31, 1999...... 49,710,547 51,198,240 Net income........................ 12,780,496 12,780,496 Change in net minimum pension liability (net of $2,000 of deferred income taxes).......... (3,621) ----------- Total comprehensive income........ 12,776,875 Cash dividends declared: Class A stock -- $5.00 a share......................... (63,100) (63,100) Common stock: Voting -- $3.00 a share....... (88,200) (88,200) Non-voting -- $3.00 a share... (1,297,371) (1,297,371) ----------- ----------- (1,448,671) (1,448,671) Executive stock incentives at $494.58 a share................. 73,446 Redemption of non-voting common shares at $518.59 a share....... (1,210,156) (1,210,390) ----------- ----------- Balances at December 31, 2000...... 59,832,216 61,389,500 Net loss.......................... (17,856,863) (17,856,863) Change in net minimum pension liability (net of $1,860,500 of deferred income taxes).......... (3,307,662) Fair value of interest rate swaps at January 1, 2001, less accumulated amortization of $706,638 (net of deferred taxes of $503,500).................... (895,985) ----------- Total comprehensive loss.......... (22,060,510) Cash dividends declared: Class A stock -- $2.50 a share......................... (31,550) (31,550) Common stock: Voting -- $1.20 a share....... (35,280) (35,280) Non-voting -- $1.20 a share... (516,147) (516,147) ----------- ----------- (582,977) (582,977) Redemption of non-voting common shares at $497.61 a share....... (1,162,680) (1,162,913) ----------- ----------- Balances at December 31, 2001...... $40,229,696 $37,583,100 =========== ===========
See accompanying notes. F-6 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 ----------------------------------------- 2001 2000 1999 ------------ ----------- ------------ OPERATING ACTIVITIES Net income (loss)........................................... $(17,856,863) $12,780,496 $ 5,341,099 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation............................................ 44,601,107 38,864,632 30,351,578 Amortization of intangibles and deferred charges........ 4,421,315 3,478,025 2,896,817 Amortization of broadcast rights........................ 6,510,196 6,318,878 7,302,463 Payments for broadcast rights........................... (5,117,113) (5,884,612) (5,552,457) Gain on sale of WLFI-TV................................. -- (22,338,881) -- Deferred income taxes (credit).......................... (3,809,400) 8,029,500 261,500 Provision for bad debts................................. 5,065,784 2,286,533 2,034,113 Minority interest....................................... (234,622) 427,020 -- Change in fair value of interest rate swaps............. 5,340,046 -- -- Loss on disposal of property and equipment.............. 23,117 303,434 229,890 Changes in operating assets and liabilities: Receivables........................................... (367,929) (8,782,363) (3,146,908) Inventories........................................... 4,895,149 (3,683,991) (18,531) Prepaid expenses...................................... (626,695) (341,126) 203,500 Accounts payable...................................... (8,958,999) 4,419,035 804,927 Salaries, wages, payroll taxes and other accrued liabilities........................................ 2,678,519 2,611,953 1,697,353 Other assets.......................................... (7,077,120) (1,288,464) (313,544) Postretirement benefits and other long-term obligations........................................ 8,296,980 1,465,690 (2,043,153) ------------ ----------- ------------ Net cash provided by operating activities................... 37,783,472 38,665,759 40,048,647 INVESTING ACTIVITIES Additions to property, plant and equipment.................. (62,153,533) (80,340,116) (66,702,099) Payments for acquisitions................................... (1,640,000) (200,000) (1,900,000) Change in cash value of life insurance...................... 5,984,874 (2,244,465) (2,052,789) Proceeds from disposal of property and equipment............ 50,499 83,678 532,070 ------------ ----------- ------------ Net cash used in investing activities....................... (57,758,160) (82,700,903) (70,122,818) FINANCING ACTIVITIES Borrowings on term loan agreement........................... 62,500,000 12,500,000 -- (Payments) borrowings on long-term revolving credit agreement................................................. (23,000,000) 41,500,000 44,000,000 (Payments) borrowings on short-term revolving credit agreement................................................. (2,620,229) (2,062,771) 2,977,000 Payments on senior notes payable............................ (12,667,000) (6,167,000) (9,914,128) Payment on agreements not to compete........................ (503,000) -- -- Cash dividends paid......................................... (582,977) (1,448,671) (1,386,225) Payments on redemption of shares............................ (1,162,913) (1,210,390) (1,906,282) Payments on notes payable and capital leases................ (319,431) (578,185) (33,989) ------------ ----------- ------------ Net cash provided by financing activities................... 21,644,450 42,532,983 33,736,376 ------------ ----------- ------------ Increase (decrease) in cash and cash equivalents............ 1,669,762 (1,502,161) 3,662,205 Cash and cash equivalents at beginning of year.............. 4,212,970 5,715,131 2,052,926 ------------ ----------- ------------ Cash and cash equivalents at end of year.................... $ 5,882,732 $ 4,212,970 $ 5,715,131 ============ =========== ============
See accompanying notes. F-7 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 1. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION Block Communications, Inc. (the Company) operates primarily in the publishing, cable and broadcasting industries through its newspapers, cable systems and television stations located primarily in the Midwest. The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of commercial accounts and interest-bearing bank deposits and are carried at cost, which approximates current value. Items are considered to be cash equivalents if the original maturity is three months or less. INVENTORIES Inventories principally relate to newsprint and security alarm system components and are stated at the lower of cost or market. Costs are determined by either the first-in, first-out (FIFO) or last-in, first-out (LIFO) method. Inventories valued on the LIFO method (newsprint inventories) comprise approximately 64% and 84% of total inventories at December 31, 2001 and 2000, respectively. If the FIFO method had been used, such inventories would have been approximately $914,000, $2,324,000 and $1,007,000 higher than reported at December 31, 2001, 2000 and 1999, respectively. BROADCAST RIGHTS Broadcast rights represent the cost of the rights to broadcast films and syndicated programming for specified periods of time. Such costs are capitalized and amortized on the straight-line method over the number of estimated showings. Broadcast rights payable represent the related liabilities under these long- term, non-interest bearing contracts. Additions to the broadcast rights were $9,629,589, $3,161,712 and $6,900,178 in 2001, 2000 and 1999, respectively. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded on the basis of cost. Expenditures for additions and improvements that add materially to productive capacity or extend the useful life of an asset are capitalized, and expenditures for maintenance and repairs are charged to earnings. When properties are retired or otherwise disposed of, the related accounts for cost and depreciation are relieved, and any gain or loss resulting from the disposal is included in operations. Depreciation is computed by the straight-line and declining-balance methods. The cost of buildings and leasehold improvements is depreciated over 7 to 40 years, machinery and equipment over 3 to 11 years and cable television and security alarm systems over 8 to 12.5 years. GOODWILL AND OTHER INTANGIBLES Intangibles acquired after October 31, 1970 primarily include licenses, network affiliation agreements, subscriber lists, agreements not to compete, and amortizable goodwill and are being amortized using the straight-line method over their estimated useful lives which range from 10 to 40 years. Intangibles F-8 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) acquired prior to October 31, 1970 include $3,964,262 of the excess of the purchase price over the book value and circulation, franchise, and goodwill that arose in connection with a reorganization of the Company in 1934. The pre-1970 intangibles are not being amortized because, in the opinion of the Company's management, there has been no diminution in value. LONG-LIVED ASSETS The carrying value of long-lived assets is reviewed annually to determine if facts and circumstances suggest that the assets may be impaired or that the depreciable life may need to be changed. If various external factors or the projected undiscounted cash flows of the Company over the remaining amortization period indicate that the asset will not be recoverable, the carrying value will be adjusted to the estimated fair value. As of December 31, 2001, the Company does not believe there is any indication that the carrying value or the amortization period of its assets needs to be adjusted. REVENUE RECOGNITION The Company recognizes revenue primarily from advertising, newspaper subscriptions and cable and other services. Advertising revenue is recorded when the related advertisements are published by the newspapers or are provided by broadcast or cable services. Newspaper subscriptions and cable and other services are either (1) billed to customers in advance and recognized as revenue over the period of the newspaper subscriptions and services provided, or (2) billed to customers and recognized as revenue when the newspapers and services are provided. OTHER COMPREHENSIVE INCOME (LOSS) The Company's comprehensive income (loss) is defined as net income (loss) adjusted for the change in net minimum pension liability and the effect of the interest rate swaps in the current year. Accumulated other comprehensive loss of $4,725,589 at December 31, 2001 includes net minimum pension liability of $3,829,604 and net remaining fair value of swaps of $895,985 while the accumulated other comprehensive loss of $521,942 at December 31, 2000 includes only the net minimum pension liability. RECLASSIFICATIONS Certain balances in prior years have been reclassified to conform to the presentation adopted in the current year. ACCOUNTING CHANGE Effective January 1, 2001, the Company adopted Statement of the Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement Nos. 137 and 138, (collectively, SFAS No. 133), which requires the Company to record all derivatives on the balance sheet at fair value. The Company has three interest rate swap agreements for which the Company has not elected to implement hedge accounting. As of January 1, 2001, the Company recorded the transition adjustment as a liability of $2,106,123 with an offset to other comprehensive loss, net of $758,000 of deferred income taxes, which is being amortized over the remaining life of the swap agreements, with notional amounts of $121,000,000. The agreements expire on July 28, 2003 -- $36,000,000, April 10, 2006 -- $55,000,000 and February 1, 2008 -- $30,000,000. The 2001 decrease in derivative fair values of $4,633,408 and 2001 amortization of the transition adjustment of $706,638 are recognized in earnings as change in fair value of interest rate swaps. NEW ACCOUNTING STANDARDS Effective January 1, 2002, the Company is required to adopt SFAS No. 142, Goodwill and Other Intangible Assets, which requires goodwill and indefinite lived intangible assets to no longer be amortized but reviewed annually for impairment, or more frequently if impairment indicators arise. Intangible assets F-9 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) with lives restricted by contractual, legal or other means will continue to be amortized over their useful lives. Amortization of goodwill and other intangibles for 2001 was $2,645,287 and $1,509,274, respectively. The Company has not yet determined the impact of the adoption of SFAS No. 142. Effective January 1, 2002, the Company is required to adopt SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and provides a single accounting model for long-lived assets to be disposed of. The Company does not expect the adoption of SFAS No. 144 to have a material effect on its consolidated results of operations or financial position. 2. ACQUISITIONS In November 2001, the Company entered into an asset exchange agreement with Comcast Corporation to exchange Monroe Cablevision Inc. for Comcast's cable system in Bedford, Michigan, plus a cash payment to the Company of approximately $12 million. The exchange transaction is expected to become effective March 29, 2002. Effective March 30, 2001, the Company purchased the broadcast license for WFTE and other assets of Kentuckiana Broadcasting, Inc. for $400,000. The Company previously had an operating agreement to manage WFTE. Effective January 1, 2001, the Company purchased the remaining membership interest of Access Toledo, Ltd. for $990,000 in cash. The net assets were recorded at fair value and related primarily to goodwill and other intangibles. The Company also obtained agreements not to compete from the former members and recorded additional intangibles and related obligations of $1,355,000. This acquisition has been accounted for as a purchase, and results of operations are included from the date of acquisition. Effective April 1, 2000, the Company consummated an asset exchange agreement and a general partnership agreement with LIN Television Corporation (LIN) which resulted in an exchange of 100% of the assets of WLFI-TV, Inc. (WLFI), a wholly owned subsidiary of the Company, for an equal value of assets of WAND Television, Inc. (WAND), a wholly owned subsidiary of LIN. The Company and LIN contributed their respective assets to a general partnership, WAND (TV) Partnership (WAND TV), which owns and operates 100% of the assets of the station. The Company recorded a $22.3 million gain on the disposition of WLFI resulting from the difference between the fair value and the net book value of the assets exchanged. For tax reporting, the transaction has been treated as a like-kind exchange, and the gain has been deferred. The operations of WLFI are included in the Company's financial statements through March 31, 2000. The Company is a 66% owner of the general partnership and has controlling interest of the Board of Representatives; therefore, WAND TV has been consolidated for financial statement purposes with the appropriate minority interest recorded since April 1, 2000. The net assets of WAND TV were recorded at their fair value and primarily relate to property and equipment of $6.5 million and intangibles of $29.3 million, offset by minority interest of $12.1 million. On December 11, 1998, the Company acquired all of the outstanding shares of stock of Corporate Protection Services, Inc. (CPS), which is primarily involved in selling, leasing, monitoring and installing commercial and residential security alarm and video systems. The aggregate purchase price for the stock acquired was $2,300,000 in cash ($400,000 in 1998 and $1,900,000 in 1999) plus contingent payments for each of the five calendar years following 1998. There was no contingency payment for 2001. The contingency payments were $250,000 and $200,000 for 2000 and 1999, respectively. These payments were made in the subsequent year and have been recorded as additions to goodwill. F-10 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. INCOME TAXES A reconciliation of the federal statutory rate to the Company's effective tax rate follows:
YEARS ENDED DECEMBER 31 ------------------------------------- 2001 2000 1999 ----------- ---------- ---------- Federal statutory rate.......................... $(8,828,400) $7,834,300 $3,463,800 State and local taxes, net of federal tax benefit....................................... 232,000 456,100 516,100 Amortization of intangibles..................... 785,400 784,400 697,900 Valuation allowance............................. 586,800 -- -- Other........................................... 91,800 101,386 (122,253) ----------- ---------- ---------- Provision (credit) for income taxes............. $(7,132,400) $9,176,186 $4,555,547 =========== ========== ==========
Total income taxes paid amounted to $802,000, $1,955,150 and $5,626,000 in 2001, 2000 and 1999, respectively. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
DECEMBER 31 ------------------------- 2001 2000 ----------- ----------- Deferred tax assets: Postretirement benefits other than pensions.............. $28,879,000 $28,314,000 Tax loss and credit carryforwards........................ 7,616,000 948,000 Deferred compensation and severance...................... 5,210,000 5,008,000 Insurance................................................ 3,470,000 3,871,000 Vacation pay............................................. 3,083,000 2,971,000 Fair value of interest rate swaps........................ 2,426,000 -- Intangibles.............................................. 965,000 1,178,000 Other.................................................... 1,067,700 322,300 ----------- ----------- 52,716,700 42,612,300 Valuation allowance...................................... (587,000) -- ----------- ----------- 52,129,700 42,612,300
DECEMBER 31 ------------------------- 2001 2000 ----------- ----------- Deferred tax liabilities: Tax over book depreciation and amortization.............. 19,944,000 15,093,000 Intangibles.............................................. 7,296,000 7,595,000 Net pension costs........................................ 2,139,000 3,347,000 ----------- ----------- 29,379,000 26,035,000 ----------- ----------- Net deferred tax assets.................................... $22,750,700 $16,577,300 =========== ===========
At December 31, 2001, the Company has unused alternative minimum tax (AMT) credits of $445,000. In addition, the Company has net operating loss and charitable contribution carryforwards of $18,288,000 and $1,630,000, respectively. These credits have been recognized in computing deferred income taxes. The AMT credits are available indefinitely to offset regular income tax in excess of AMT. The net operating loss carryforwards will expire in 2020. The Company has recorded a valuation allowance of $587,000 to recognize the uncertainty of realizing the deferred tax asset related to charitable contribution carryforwards that expire in 2005. F-11 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. GOODWILL AND OTHER INTANGIBLES Goodwill and other intangibles are as follows:
DECEMBER 31 ------------------------- 2001 2000 ----------- ----------- Goodwill................................................... $52,461,687 $53,684,315 FCC licenses............................................... 14,054,851 14,172,763 Network affiliation agreements............................. 13,302,578 13,659,301 Subscriber lists........................................... 1,029,372 1,364,314 Agreements not to compete.................................. 977,750 -- Program rights............................................. 958,200 983,000 Other...................................................... 1,128,663 1,177,321 ----------- ----------- $83,913,101 $85,041,014 =========== ===========
5. OTHER ACCRUED LIABILITIES Other accrued liabilities are as follows:
DECEMBER 31 ------------------------- 2001 2000 ----------- ----------- Deferred revenue........................................... $ 6,531,999 $ 6,357,591 Broadcast rights payable................................... 4,766,956 3,748,973 Interest................................................... 4,485,814 3,756,196 Local taxes................................................ 4,298,879 2,985,515 Carriage fees.............................................. 2,750,014 2,316,491 Other...................................................... 9,445,705 5,382,679 ----------- ----------- $32,279,367 $24,547,445 =========== ===========
6. RETIREMENT AND PENSION PLANS The Company and certain subsidiaries have several defined benefit pension plans covering substantially all active and retired employees. Benefits are generally based on compensation and length of service. F-12 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of the benefit obligation, plan assets and funded status of the defined benefit pension plans are as follows:
DECEMBER 31 --------------------------- 2001 2000 ------------ ------------ Change in benefit obligation: Benefit obligation, beginning of year.................. $167,287,400 $161,835,686 Service cost........................................... 4,919,777 4,487,612 Interest cost.......................................... 12,380,775 11,542,029 Plan amendments........................................ -- 991,497 Actuarial loss (gain).................................. 10,723,581 (1,002,999) Benefits paid.......................................... (10,746,532) (10,566,425) ------------ ------------ Benefit obligation, end of year........................ $184,565,001 $167,287,400 ============ ============ Change in plan assets: Fair value of plan assets, beginning of year........... $176,527,565 $164,382,679 Contributions.......................................... 4,626,900 4,777,798 Actual return on plan assets........................... (16,572,969) 17,933,513 Benefits paid.......................................... (10,746,532) (10,566,425) ------------ ------------ Fair value of plan assets, end of year................. $153,834,964 $176,527,565 ============ ============ Reconciliation of funded status: Funded status of the plans............................. $(30,730,037) $ 9,240,165 Unrecognized net loss (gain)........................... 28,295,476 (14,679,309) Unrecognized prior year service cost................... 9,479,138 10,786,531 Unrecognized net transition obligation................. (98,250) (162,478) ------------ ------------ Net amount recognized.................................. $ 6,946,327 $ 5,184,909 ============ ============
The net amount recognized above is recorded in the consolidated balance sheets as follows:
DECEMBER 31 --------------------------- 2001 2000 ------------ ------------ Prepaid pension costs.................................... $ 11,145,446 $ 8,319,540 Pension liabilities...................................... (17,412,753) (8,580,282) Intangible pension asset................................. 7,230,030 4,630,209 Net minimum pension liability............................ 5,983,604 815,442 ------------ ------------ ....................................................... $ 6,946,327 $ 5,184,909 ============ ============
The weighted-average assumptions used at December 31, 2001 and 2000 are discount rate of 7.2% and 7.7%, respectively, expected return on plan assets of 9.0% and rate of compensation increase of 5.0% and 4.6%, respectively. Plan assets primarily include marketable equity securities and government and corporate debt securities. Certain defined benefit pension plans have a projected benefit obligation that exceeds the fair value of plan assets. The aggregate projected benefit obligation and fair value of plan assets for these plans are $159,491,252 and $127,045,311, respectively, at December 31, 2001 and $64,076,067 and $58,175,920, respectively, at December 31 2000. Certain plans have an accumulated benefit obligation that exceeds the fair value of plan assets. The aggregate accumulated benefit obligation and fair value of plan assets for these plans are $127,706,510 and $115,349,390, respectively, at December 31, 2001 and $6,690,842 and $1,580,731, respectively, at December 31, 2000. F-13 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of the net periodic pension cost are as follows:
YEARS ENDED DECEMBER 31 ------------------------------------------ 2001 2000 1999 ------------ ------------ ------------ Service cost............................... $ 4,919,777 $ 4,487,612 $ 5,204,778 Interest cost.............................. 12,380,775 11,542,029 11,237,949 Expected return on plan assets............. (15,312,255) (14,258,254) (13,616,922) Amortization of transition asset........... (64,228) (64,228) (64,228) Amortization of prior service cost......... 1,307,393 1,292,092 1,292,475 Actuarial (gain) loss recognized........... (365,980) (313,468) 71,740 ------------ ------------ ------------ Net periodic pension cost.................. $ 2,865,482 $ 2,685,783 $ 4,125,792 ============ ============ ============
The Company and certain subsidiaries also sponsor defined contribution plans and participate in several multi-employer and jointly-trusteed defined benefit pension plans. Total payments to the defined contribution and multi-employer and jointly-trusteed defined benefit plans were approximately $5,404,279, $5,373,882 and $5,343,750 in 2001, 2000 and 1999, respectively. The portions of plan assets and benefit obligations for the multi-employer and jointly-trusteed plans, which are applicable to employees of the Company and its subsidiaries, have not been determined. 7. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company and certain subsidiaries provide access to health care benefits for certain active and retired employees. The components of the nonpension retirement benefit obligation and amounts accrued are as follows:
DECEMBER 31 --------------------------- 2001 2000 ------------ ------------ Change in accumulated postretirement benefit obligation: Benefit obligation, beginning of year.................. $ 71,915,000 $ 71,785,000 Service cost........................................... 1,474,000 1,334,000 Interest cost.......................................... 5,246,000 5,060,000 Actuarial loss (gain).................................. 13,395,000 (1,325,000) Benefits paid.......................................... (4,428,000) (4,939,000) ------------ ------------ Benefit obligation, end of year........................ $ 87,602,000 $ 71,915,000 ============ ============ Funded status of plan.................................... $(87,602,000) $(71,915,000) Unrecognized actuarial loss (gain)....................... 6,778,000 (6,736,000) ------------ ------------ Accrued benefit cost..................................... $(80,824,000) $(78,651,000) ============ ============
The components of the nonpension retirement benefit expense are as follows:
YEARS ENDED DECEMBER 31 ------------------------------------ 2001 2000 1999 ---------- ---------- ---------- Service cost..................................... $1,474,000 $1,334,000 $1,356,000 Actuarial gain recognized........................ (125,000) (12,000) (43,000) Interest cost.................................... 5,246,000 5,060,000 4,406,000 ---------- ---------- ---------- Net nonpension retirement benefit expense........ $6,595,000 $6,382,000 $5,719,000 ========== ========== ==========
For measurement purposes, a 7% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2002 through 2004. The rate was assumed to decrease gradually to 5% for 2010 and remain at that level thereafter. A 1% increase in these rates would have increased the net nonpension F-14 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) retirement benefit expense by $1,208,000 and the benefit obligation by $10,462,000. A 1% decrease in these rates would have decreased the net nonpension retirement expense by $1,408,000 and the benefit obligation by $8,814,000. The weighted-average discount rate used in determining the accumulated nonpension retirement benefit obligation was 7.25% in 2001 and 7.75% in 2000. 8. LONG-TERM DEBT AND CREDIT ARRANGEMENTS Long-term obligations are as follows:
DECEMBER 31 --------------------------- 2001 2000 ------------ ------------ Senior notes payable: 1996 issues............................................ $ 35,000,000 $ 35,000,000 1994 issue............................................. 4,999,000 6,666,000 1993 issues............................................ 19,500,000 26,000,000 1991 issue............................................. 8,000,000 12,500,000 ------------ ------------ 67,499,000 80,166,000 Revolving credit agreements.............................. 92,500,000 118,120,229 Term loan agreement...................................... 75,000,000 12,500,000 Capital leases........................................... 2,264,847 2,570,439 ------------ ------------ 237,263,847 213,356,668 Less current maturities: Senior notes payable................................... 5,833,334 18,500,334 Term loan agreement.................................... 3,750,000 -- Revolving credit agreements............................ -- 2,620,229 Capital leases......................................... 325,000 315,400 ------------ ------------ 9,908,334 21,435,963 ------------ ------------ $227,355,513 $191,920,705 ============ ============
Maturities of long-term obligations for five years subsequent to December 31, 2001 are: 2002 -- $9,908,334, 2003 -- $47,575,666, 2004 -- $38,073,334, 2005 -- $62,408,334, 2006 -- $78,658,332. The Company has various fixed rate senior notes payable to Teachers Insurance and Annuity Association of America (TIAA), The Travelers Companies (Travelers) and Massachusetts Mutual Life Insurance Company (Massachusetts Mutual) as described below. The Company may prepay all or part of these senior notes plus a redemption premium based on the amount and time of prepayment. The senior notes payable and revolving credit agreements are guaranteed by the Company and its subsidiaries. At December 31, 2001, the senior notes payable are as follows: Massachusetts Mutual 1996 issue -- Interest at 9.92% is payable semi-annually with principal payments of $2,500,000 due in 2002, $5,000,000 in 2003 and $2,500,000 annually from 2004 through 2006. Travelers 1996 issue -- Interest at 9.92% is payable semi-annually with principal payments of $1,666,667 due in 2002, $3,333,334 in 2003 and $1,666,667 annually from 2004 through 2006. TIAA 1996 issue -- Interest at 9.92% is payable semi-annually with principal payments of $1,666,667 due in 2002, $3,333,334 in 2003 and $1,666,667 annually from 2004 through 2006. TIAA 1994 issue -- Interest at 10.28% is payable semi-annually with principal payments of $3,334,000 due in 2003 and $1,665,000 in 2004. F-15 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Travelers 1993 issue -- Interest at 10.38% is payable semi-annually with principal payments of $7,000,000 due in 2003 and $3,500,000 in 2004. TIAA 1993 issue -- Interest at 10.38% is payable semi-annually with principal payments of $6,000,000 due in 2003 and $3,000,000 in 2004. TIAA 1991 issue -- Interest at 11.29% is payable semi-annually with a principal payment of $8,000,000 due in 2003. The Company has a revolving credit agreement with nine banks to borrow up to $150,000,000 at the banks' prime rate of interest plus applicable margin ranging from 1.875% to 2.625% or LIBOR plus applicable margin ranging from 3.0% to 3.75%. The agreement provides for the payment of a commitment fee of 0.50% per annum on the unborrowed portion of the revolving credit agreement. The margin ranges step-up through 2002, remaining at the highest rate thereafter. The amount of credit committed will be reduced at each quarter-end beginning December 31, 2002, with final maturity on December 31, 2006. Principal payments will be due at each quarter-end, to the extent that total borrowings outstanding at the quarter-end exceeds the reduced credit committed. The credit committed reductions range from $5,625,000 to $11,250,000 each quarter. The outstanding debt relating to this agreement is $92,500,000 at December 31, 2001, with a weighted-average interest rate of 5.17%. The Company also has a term loan agreement with eight banks to borrow up to $75,000,000 at the banks' prime rate of interest plus applicable margin ranging from 1.875% to 2.625% or LIBOR plus applicable margin ranging from 3.0% to 3.75%. The amount of credit committed will be reduced at each quarter-end beginning December 31, 2002, with final maturity on December 31, 2006. Principal payments will be due at each quarter-end, to the extent that total borrowings outstanding at the quarter-end exceeds the reduced credit committed. The credit committed reductions range from $2,812,500 to $5,625,000 each quarter. The outstanding debt relating to this agreement is $75,000,000 at December 31, 2001, with a weighted-average interest rate of 5.84%. The Company has three interest rate swap agreements with notional amounts of $121,000,000. The swap agreements effectively convert this portion of the Company's borrowings from variable rate debt to a fixed rate, thus reducing the impact of interest rate changes on future income. The average interest rate for the Company's borrowings related to the swap agreements at December 31, 2001 was 5.91%, with a weighted-average remaining period of 4.4 years. The fair value of the swap agreements of $6,739,531 is recorded in other long-term obligations at December 31, 2001. The Company has a short-term revolving credit agreement with a bank to borrow up to $5,000,000 evidenced by revolving credit notes at the bank's prime rate of interest or LIBOR plus applicable margin ranging from 3.0% to 3.75%. Daily cash balances on deposits in excess of a predetermined amount are credited against the outstanding line of credit balance. If daily cash balances are less than the predetermined amount, the Company draws against the line of credit to increase the cash balance to the predetermined level. The revolving credit agreement matures on June 30, 2002. No borrowings are outstanding at December 31, 2001. The terms of the debt agreements include covenants, which provide, among other things, restrictions on leverage and indebtedness, and minimums on earnings before interest, taxes, depreciation and amortization and maximums on capital expenditures. The carrying amounts of the revolving credit agreements and term note approximate their fair value. The fair values of the senior notes payable are estimated using discounted cash flows analyses based on the F-16 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company's current incremental borrowing rates for new long-term debt. The fair values of such fixed obligations are as follows:
2001 2000 ------------------------- ------------------------- RECORDED FAIR RECORDED FAIR VALUE VALUE VALUE VALUE ----------- ----------- ----------- ----------- TIAA senior notes payable: 1996 issue..................... $10,000,000 $ 9,953,146 $10,000,000 $ 9,482,355 1994 issue..................... 4,999,000 5,084,729 6,666,000 6,566,425 1993 issue..................... 9,000,000 9,432,308 12,000,000 12,266,609 1991 issue..................... 8,000,000 8,463,445 12,500,000 12,876,671 Massachusetts Mutual Life senior note payable -- 1996 issue 15,000,000 14,981,373 15,000,000 14,223,532 Travelers senior notes payable: 1996 issue.................. 10,000,000 9,953,146 10,000,000 9,482,355 1993 issue.................. 10,500,000 11,004,359 14,000,000 14,311,044 ----------- ----------- ----------- ----------- $67,499,000 $68,872,506 $80,166,000 $79,208,991 =========== =========== =========== ===========
Total interest paid was $19,197,316, $13,361,000 and $12,956,000 in 2001, 2000 and 1999, respectively. The Company capitalized, $985,000, $1,490,000 and $945,000 of interest in 2001, 2000 and 1999, respectively. 9. COMMITMENTS AND CONTINGENCIES On March 15, 1987, a shareholder owning 50 percent of the Company's outstanding voting common stock died. The Company had an agreement with the shareholder which provided that upon his death, the estate of the deceased shareholder (the Estate) could require the Company to redeem shares owned by such shareholder to the extent necessary to provide his estate with funds to pay estate taxes. In 2001, 2000 and 1999, the Company made payments of $1,162,913, $1,210,390 and $1,251,782 to redeem 2,337, 2,334 and 2,531 non-voting shares based on a per share value of $497.61, $518.59 and $494.58, respectively. Through December 31, 2001, the Company has redeemed 153,694 non-voting shares for approximately $45.0 million. The Company does not expect the Estate to redeem additional shares subsequent to December 31, 2001. The Company has the same agreement with other shareholders. The Company has an Executive Stock Incentive Plan for three executives to receive non-voting common shares based on attaining certain levels of operating profit. The Company issued 147 shares related to this plan in 2000, and the related cost of $148,374 was expensed during the year ended December 31, 1999. No shares were earned or issued related to years ended December 31, 2001 and 2000. The Company is involved in matters associated with several libel lawsuits and other legal matters arising out of the normal course of business. Management of the Company believes, based upon information now known, that the ultimate liability of the Company relating to these matters will not have a material adverse effect on its financial position and results of operations. The Company intends to vigorously defend these matters; however, the ultimate outcome of the actions cannot be predicted with certainty at the present time. The Company has outstanding irrevocable letters of credit from a bank totaling $11,500,000, with annual fees ranging from 1.125% to 2.00%. Two subsidiaries of the Company have entered into agreements for future broadcast rights, which become available in 2002 or later. Total payments required for those rights are $9,500,900. F-17 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company and its subsidiaries incurred rental expense of approximately $4,064,000, $3,529,000 and $3,274,000 for 2001, 2000 and 1999, respectively. Future rental commitments subsequent to December 31, 2001 are: 2002 -- $1,383,439, 2003 -- $951,145, 2004 -- $455,859, 2005 -- $244,784, 2006 and thereafter -- $159,113. 10. BUSINESS SEGMENT INFORMATION The Company has three reportable segments -- publishing, cable and broadcasting. The publishing segment operates two daily newspapers located in Ohio and Pennsylvania. The cable segment includes three cable companies located in Ohio and Michigan. The broadcasting segment has five television stations located in Idaho, Illinois, Indiana, Kentucky, and Ohio. The "Other Communications" category includes non-reportable segments and corporate items. The non-reportable segments provide services such as telephony, security systems and monitoring, internet connection, cable plant construction and distributed advertising services. The accounting policies of the reportable segments are consistent with those policies described in Note 1. Revenues are mostly from external customers with some intersegment revenues, primarily due to newspaper advertising, as shown in the intersegment amount under revenues. Operating income (loss) represents gross revenues before intersegment eliminations, less operating expenses. Operating expenses are mostly from external vendors with some intersegment expenses, primarily due to newspaper advertising and telephony services. The intersegment operating income (loss) is the net of the intersegment revenues and intersegment expenses. Certain corporate general and administrative expenses are included in operating income (loss) and are not allocated to individual segments. Nonoperating income (expense) includes interest expense and income, change in fair value of interest rate swaps and gain on F-18 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) sale of WLFI-TV and are not allocated to segments. The following tables present certain financial information for the three reportable segments and the other category.
2001 2000 1999 ------------ ------------ ------------ Revenues: Publishing............................... $269,940,958 $293,630,370 $281,025,282 Intersegment............................. (5,262,280) (6,913,242) (5,198,239) ------------ ------------ ------------ External Publishing...................... 264,678,678 286,717,128 275,827,043 Cable.................................... 89,420,000 82,110,320 75,413,714 Broadcasting............................. 35,183,897 42,531,103 36,293,428 Other Communications..................... 25,282,312 14,298,551 8,681,928 ------------ ------------ ------------ $414,564,887 $425,657,102 $396,216,113 ============ ============ ============ Operating income (loss): Publishing............................... $ 6,009,107 $ 14,512,223 $ 16,077,046 Intersegment............................. (4,129,362) (5,107,360) (4,294,527) ------------ ------------ ------------ Net Publishing........................... 1,879,745 9,404,863 11,782,519 Cable.................................... 509,415 2,064,005 8,239,109 Intersegment............................. 4,332,124 5,510,474 4,029,390 ------------ ------------ ------------ Net Cable................................ 4,841,539 7,574,479 12,268,499 Broadcasting............................. (1,788,767) 5,432,605 2,071,945 Corporate expenses....................... (2,705,412) (4,151,939) (1,095,579) Other Communications..................... (2,672,210) (4,146,254) (4,087,305) ------------ ------------ ------------ Operating income (loss).................... (445,105) 14,113,754 20,940,079 Nonoperating income (expense).............. (24,778,780) 8,269,948 (11,043,433) ------------ ------------ ------------ Income (loss) before income taxes and minority interest........................ $(25,223,885) $ 22,383,702 $ 9,896,646 ============ ============ ============ Depreciation: Publishing............................... $ 11,381,856 $ 11,978,341 $ 11,506,684 Cable.................................... 27,165,658 22,123,154 15,282,275 Broadcasting............................. 2,528,464 1,927,714 1,685,408 Other Communications..................... 3,525,129 2,835,423 1,875,749 ------------ ------------ ------------ $ 44,601,107 $ 38,864,632 $ 30,350,116 ============ ============ ============ Amortization of intangibles and deferred charges: Publishing............................... $ 2,485,915 $ 2,485,947 $ 2,485,920 Cable.................................... 44,047 45,894 45,894 Broadcasting............................. 780,734 598,102 56,033 Other Communications..................... 1,110,619 348,082 310,432 ------------ ------------ ------------ $ 4,421,315 $ 3,478,025 $ 2,898,279 ============ ============ ============
F-19 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 2000 1999 ------------ ------------ ------------ Capital expenditures: Publishing............................... $ 4,294,832 $ 4,792,075 $ 7,390,171 Cable.................................... 52,548,163 62,898,219 47,798,296 Broadcasting............................. 1,268,908 2,222,327 2,199,711 Other Communications..................... 4,041,630 10,427,495 9,313,921 ------------ ------------ ------------ $ 62,153,533 $ 80,340,116 $ 66,702,099 ============ ============ ============ Assets: Publishing............................... $174,713,665 $188,967,117 $193,071,400 Cable.................................... 164,556,366 140,530,843 99,580,214 Broadcasting............................. 64,662,625 62,634,898 29,893,236 Other Communications..................... 79,954,271 72,057,322 65,757,107 ------------ ------------ ------------ $483,886,927 $464,190,180 $388,301,957 ============ ============ ============
11. SUPPLEMENTAL GUARANTOR INFORMATION (UNAUDITED) Subsequent to year-end, the Company anticipates refinancing the entirety of its debt outstanding at December 31, 2001. The new debt is expected to include an undetermined amount of senior credit facilities consisting of a revolver and term loan. The new credit facilities will be guaranteed jointly and severally by all of the Company's wholly owned subsidiaries (collectively, the Guarantors). Such guarantees are full and unconditional. WAND (TV) Partnership, a partially owned subsidiary of the Company will not be a guarantor of the new credit facilities. Supplemental consolidating financial information of the Company, specifically including such information for the Guarantors, is presented below. Financial information for the Parent Company includes both the Holding Company and its one division, The Toledo Blade Company. Investments in subsidiaries are presented using the cost method of accounting and eliminated. Separate financial statements of the Guarantors are not provided as the consolidating financial information contained herein provides a more meaningful disclosure to allow investors to determine the nature of assets held and the operations of the combined groups. F-20 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED BALANCE SHEET DECEMBER 31, 2001
UNCONSOLIDATED ------------------------------------------- PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------- ------------- ------------ ASSETS: Current assets........ $ 15,717,915 $ 55,969,309 $ 4,138,933 $ 3,905,631 $ 79,731,788 Property, plant and equipment, net...... 28,992,144 228,208,431 5,962,544 32,587 263,195,706 Intangibles, net...... 4,784,698 50,860,955 28,068,959 198,489 83,913,101 Cash value of life insurance, net...... 10,486,057 205,048 -- -- 10,691,105 Prepaid pension costs............... 1,852,686 9,276,267 -- 16,493 11,145,446 Pension intangibles... 645,495 6,584,535 -- -- 7,230,030 Investments in subsidiaries........ 211,745,229 -- -- (211,745,229) -- Other................. 10,366,210 17,627,480 2,554 (16,493) 27,979,751 ------------ ------------ ----------- ------------- ------------ $284,590,434 $368,732,025 $38,172,990 $(207,608,522) $483,886,927 ============ ============ =========== ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities... $ 24,017,694 $ 50,444,551 $ 1,773,706 $ 3,812,414 $ 80,048,365 Long-term debt........ 227,355,513 -- -- -- 227,355,513 Other long-term obligations......... 21,238,306 242,620,050 -- (137,222,805) 126,635,551 Minority interest..... -- -- -- 12,264,398 12,264,398 Stockholders' equity.............. 11,978,921 75,667,424 36,399,284 (86,462,529) 37,583,100 ------------ ------------ ----------- ------------- ------------ $284,590,434 $368,732,025 $38,172,990 $(207,608,522) $483,886,927 ============ ============ =========== ============= ============
F-21 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED BALANCE SHEET DECEMBER 31, 2000
UNCONSOLIDATED ------------------------------------------- PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------- ------------- ------------ ASSETS: Current assets........ $ 18,382,802 $ 60,827,651 $ 2,825,000 $ 2,524,727 $ 84,560,180 Property, plant and equipment, net...... 30,256,960 207,758,356 6,340,000 1,076,566 245,431,882 Intangibles, net...... 3,806,948 52,191,377 28,803,000 239,689 85,041,014 Cash value of life insurance, net...... 16,442,672 233,307 -- -- 16,675,979 Prepaid pension costs............... 2,202,973 6,116,567 -- -- 8,319,540 Pension intangibles... -- 4,630,209 -- -- 4,630,209 Investments in subsidiaries........ 202,965,217 -- -- (202,965,217) -- Other................. (977,221) 20,508,597 -- -- 19,531,376 ------------ ------------ ----------- ------------- ------------ $273,080,351 $352,266,064 $37,968,000 $(199,124,235) $464,190,180 ============ ============ =========== ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities... $ 36,557,375 $ 55,616,283 $ 858,000 $ 2,525,598 $ 95,557,256 Long-term debt........ 191,920,705 -- -- -- 191,920,705 Other long-term obligations......... 12,069,969 219,425,671 -- (128,671,941) 102,823,699 Minority interest..... -- -- -- 12,499,020 12,499,020 Stockholders' equity.............. 32,532,302 77,224,110 37,110,000 (85,476,912) 61,389,500 ------------ ------------ ----------- ------------- ------------ $273,080,351 $352,266,064 $37,968,000 $(199,124,235) $464,190,180 ============ ============ =========== ============= ============
F-22 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2001
UNCONSOLIDATED ------------------------------------------- PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------- ------------ ------------ Revenue................ $ 88,025,044 $335,123,103 $6,088,943 $(14,672,203) $414,564,887 Expenses............... 88,035,944 333,724,744 6,836,328 (13,587,024) 415,009,992 ------------ ------------ ---------- ------------ ------------ Operating income (loss)............... (10,900) 1,398,359 (747,385) (1,085,179) (445,105) Nonoperating income (expense)............ (23,684,342) (1,130,848) 36,410 -- (24,778,780) ------------ ------------ ---------- ------------ ------------ Income (loss) before income taxes and minority interest.... (23,695,242) 267,511 (710,975) (1,085,179) (25,223,885) Provision (credit) for income taxes......... (7,818,800) 686,400 -- -- (7,132,400) ------------ ------------ ---------- ------------ ------------ Income (loss) before minority interest.... (15,876,442) (418,889) (710,975) (1,085,179) (18,091,485) Minority interest...... -- -- -- 234,622 234,622 ------------ ------------ ---------- ------------ ------------ Net income (loss)...... $(15,876,442) $ (418,889) $ (710,975) $ (850,557) $(17,856,863) ============ ============ ========== ============ ============
F-23 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2000
UNCONSOLIDATED ------------------------------------------ PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ----------- ------------ ------------- ------------ ------------ Revenue................. $98,142,356 $334,949,406 $6,363,000 $(13,797,660) $425,657,102 Expenses................ 95,322,378 329,511,832 5,069,000 (18,359,862) 411,543,348 ----------- ------------ ---------- ------------ ------------ Operating income (loss)................ 2,819,978 5,437,574 1,294,000 4,562,202 14,113,754 Nonoperating income (expense)............. 10,429,240 2,067,508 -- (4,226,800) 8,269,948 ----------- ------------ ---------- ------------ ------------ Income before income taxes and minority interest.............. 13,249,218 7,505,082 1,294,000 335,402 22,383,702 Provision for income taxes................. 5,301,986 3,874,200 -- -- 9,176,186 ----------- ------------ ---------- ------------ ------------ Income (loss) before minority interest..... 7,947,232 3,630,882 1,294,000 335,402 13,207,516 Minority interest....... -- -- -- (427,020) (427,020) ----------- ------------ ---------- ------------ ------------ Net income (loss)....... $ 7,947,232 $ 3,630,882 $1,294,000 $ (91,618) $ 12,780,496 =========== ============ ========== ============ ============
F-24 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1999
UNCONSOLIDATED ------------------------------------------ PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ----------- ------------ ------------- ------------ ------------ Revenue................. $92,590,971 $313,833,215 $-- $(10,208,073) $396,216,113 Expenses................ 86,320,343 301,995,968 -- (13,040,277) 375,276,034 ----------- ------------ -- ------------ ------------ Operating income (loss)................ 6,270,628 11,837,247 -- 2,832,204 20,940,079 Nonoperating income (expense)............. (8,305,056) (241,077) -- (2,497,300) (11,043,433) ----------- ------------ -- ------------ ------------ Income (loss) before income taxes and minority interest..... (2,034,428) 11,596,170 -- 334,904 9,896,646 Provision (credit) for income taxes.......... (398,353) 4,953,900 -- -- 4,555,547 ----------- ------------ -- ------------ ------------ Income (loss) before minority interest..... (1,636,075) 6,642,270 -- 334,904 5,341,099 Minority interest....... -- -- -- -- -- ----------- ------------ -- ------------ ------------ Net income (loss)....... $(1,636,075) $ 6,642,270 $-- $ 334,904 $ 5,341,099 =========== ============ == ============ ============
F-25 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2001
UNCONSOLIDATED ------------------------------------------- PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------- ------------ ------------ Net cash provided by (used in) operating activities............. $(12,059,185) $48,669,183 $2,446,601 $(1,273,127) $37,783,472 Additions to property, plant and equipment........................ (2,826,823) (59,784,679) (586,010) 1,043,979 (62,153,533) Other investing activities......... 5,975,472 (1,580,099) -- -- 4,395,373 ------------ ----------- ---------- ----------- ----------- Net cash provided by (used in) investing activities............. 3,148,649 (61,364,778) (586,010) 1,043,979 (57,758,160) Borrowing on term loan agreement... 49,833,000 -- -- -- 49,833,000 Payments on revolving credit agreements....................... (25,620,229) -- -- -- (25,620,229) Cash dividends paid................ (582,977) -- -- -- (582,977) Other financing activities......... (13,555,080) 11,340,588 -- 229,148 (1,985,344) ------------ ----------- ---------- ----------- ----------- Net cash provided by financing activities....................... 10,074,714 11,340,588 -- 229,148 21,644,450 ------------ ----------- ---------- ----------- ----------- Increase (decrease) in cash and equivalents...................... 1,164,178 (1,355,007) 1,860,591 -- 1,669,762 Cash and equivalents at beginning of year.......................... 2,021,900 1,290,070 901,000 -- 4,212,970 ------------ ----------- ---------- ----------- ----------- Cash and equivalents at end of year............................. $ 3,186,078 $ (64,937) $2,761,591 $ -- $ 5,882,732 ============ =========== ========== =========== ===========
F-26 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2000
UNCONSOLIDATED ------------------------------------------ PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ----------- ------------ ------------- ------------ ------------ Net cash provided by (used in) operating activities.............. $(6,274,442) $43,244,477 $1,319,000 $376,724 $38,665,759 Additions to property, plant and equipment......................... (2,948,550) (76,757,964) (257,000) (376,602) (80,340,116) Other investing activities.......... -- (2,360,787) -- -- (2,360,787) ----------- ----------- ---------- -------- ----------- Net cash provided by (used in) investing activities.............. (2,948,550) (79,118,751) (257,000) (376,602) (82,700,903) Borrowing on term loan agreement.... 6,333,000 -- -- -- 6,333,000 Payments on revolving credit agreements........................ 39,120,229 -- -- 317,000 39,437,229 Cash dividends paid................. (1,448,671) -- -- -- (1,448,671) Other financing activities.......... (33,635,423) 32,007,970 (161,000) (122) (1,788,575) ----------- ----------- ---------- -------- ----------- Net cash provided by financing activities........................ 10,369,135 32,007,970 (161,000) 316,878 42,532,983 ----------- ----------- ---------- -------- ----------- Increase (decrease) in cash and equivalents....................... 1,146,143 (3,866,304) 901,000 317,000 (1,502,161) Cash and equivalents at beginning of year.............................. 875,757 5,156,374 -- (317,000) 5,715,131 ----------- ----------- ---------- -------- ----------- Cash and equivalents at end of year.............................. $ 2,021,900 $ 1,290,070 $ 901,000 $ -- $ 4,212,970 =========== =========== ========== ======== ===========
F-27 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1999
UNCONSOLIDATED ------------------------------------------ PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ----------- ------------ ------------- ------------ ------------ Net cash provided by (used in) operating activities.............. $(4,298,282) $43,973,525 $ -- $ 373,404 $40,048,647 Additions to property, plant and equipment......................... (3,495,253) (62,833,442) -- (373,404) (66,702,099) Other investing activities.......... (1,639,569) (1,781,150) -- -- (3,420,719) ----------- ----------- -------- ----------- ----------- Net cash provided by (used in) investing activities.............. (5,134,822) (64,614,592) -- (373,404) (70,122,818) Borrowing on term loan agreement.... (9,667,000) (247,128) -- -- (9,914,128) Payments on revolving credit agreements........................ 44,000,000 -- -- 2,977,000 46,977,000 Cash dividends paid................. (1,386,225) -- -- -- (1,386,225) Other financing activities.......... (23,812,567) 21,872,296 -- -- (1,940,271) ----------- ----------- -------- ----------- ----------- Net cash provided by financing activities........................ 9,134,208 21,625,168 -- 2,977,000 33,736,376 ----------- ----------- -------- ----------- ----------- Increase (decrease) in cash and equivalents....................... (298,896) 984,101 -- 2,977,000 3,662,205 Cash and equivalents at beginning of year.............................. 1,174,653 4,172,273 -- (3,294,000) 2,052,926 ----------- ----------- -------- ----------- ----------- Cash and equivalents at end of year.............................. $ 875,757 $ 5,156,374 $ -- $ (317,000) $ 5,715,131 =========== =========== ======== =========== ===========
F-28 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31 DECEMBER 31 2002 2001 ------------ ------------ (UNAUDITED) (NOTE 1) ASSETS Current assets: Cash and cash equivalents................................. $ 3,569,383 $ 5,882,732 Receivables, less allowances for doubtful accounts and discounts of $5,081,970 and $4,861,094, respectively... 38,880,133 44,225,634 Recoverable income taxes.................................. 7,534,749 4,483,300 Inventories............................................... 6,325,211 5,548,784 Prepaid expenses.......................................... 3,638,793 3,703,756 Broadcast rights.......................................... 5,662,144 6,083,782 Deferred income taxes..................................... 9,325,259 9,803,800 ------------ ------------ Total current assets........................................ 74,935,672 79,731,788 Property, plant and equipment: Land and land improvements.................................. 12,196,346 12,194,446 Buildings and leasehold improvements........................ 41,941,374 41,186,933 Machinery and equipment................................... 209,561,241 209,196,143 Cable television distribution systems and equipment....... 186,943,569 187,804,505 Security alarm and video systems installation costs....... 6,030,869 5,923,280 Construction in progress.................................. 13,841,712 11,495,916 ------------ ------------ 470,515,111 467,801,223 Less allowances for depreciation and amortization......... 210,822,886 204,605,517 ------------ ------------ 259,692,225 263,195,706 Other assets: Intangibles, net.......................................... 91,950,870 83,913,101 Deferred income taxes..................................... 3,166,419 12,946,900 Prepaid pension costs..................................... 11,201,365 11,145,446 Cash value of life insurance, net of policy loans of $12,735,560............................................ 11,104,991 10,691,105 Pension intangibles....................................... 7,230,030 7,230,030 Broadcast rights, less current portion.................... 5,071,314 6,217,880 Deferred financing costs.................................. 5,486,677 5,676,725 Other..................................................... 3,047,747 3,138,246 ------------ ------------ 138,259,413 140,959,433 ------------ ------------ $472,887,310 $483,886,927 ============ ============
See accompanying notes. F-29 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
MARCH 31 DECEMBER 31 2002 2001 ------------ ------------ (UNAUDITED) (NOTE 1) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 10,500,284 $ 12,355,122 Salaries, wages and payroll taxes......................... 14,436,501 16,321,468 Workers' compensation and medical reserves................ 9,005,393 9,184,074 Other accrued liabilities................................. 29,180,853 32,279,367 Current maturities of long-term debt...................... 10,121,057 9,908,334 ------------ ------------ Total current liabilities................................... 73,244,088 80,048,365 Long-term debt, less current maturities..................... 209,548,004 227,355,513 Other long-term obligations................................. 127,174,685 126,635,551 Minority interest........................................... 12,271,572 12,264,398 Stockholders' equity: 5% Non-cumulative, non-voting Class A Stock, par value $100 a share (entitled in liquidation to $100 per share in priority over Common Stock) -- 15,680 shares authorized; 12,620 shares issued and outstanding........................................ 1,262,000 1,262,000 Common Stock, par value $.10 a share: Voting Common Stock -- 29,400 shares authorized, issued and outstanding............................... 2,940 2,940 Non-voting Common Stock -- 588,000 shares authorized; 427,786 shares issued and outstanding.... 42,779 42,779 Accumulated other comprehensive loss...................... (4,612,430) (4,725,589) Additional paid-in capital................................ 771,274 771,274 Retained earnings......................................... 53,182,398 40,229,696 ------------ ------------ 50,648,961 37,583,100 ------------ ------------ $472,887,310 $483,886,927 ============ ============
See accompanying notes. F-30 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ---------------------------- 2002 2001 ------------- ------------ Revenue: Publishing................................................ $ 61,562,804 $61,854,437 Cable..................................................... 25,096,835 21,147,906 Broadcasting.............................................. 9,000,653 8,727,210 Other Communications...................................... 6,352,744 5,148,690 ------------ ----------- 102,013,036 96,878,243 Expense: Publishing................................................ 61,519,313 65,487,481 Cable..................................................... 22,813,956 18,444,193 Broadcasting.............................................. 9,055,039 9,179,226 Other Communications...................................... 6,243,737 6,355,613 Corporate general and administrative...................... 951,280 350,035 ------------ ----------- 100,583,325 99,816,548 ------------ ----------- Operating income (loss)..................................... 1,429,711 (2,938,305) Nonoperating income (expense): Interest expense.......................................... (4,748,149) (4,675,626) Gain on disposition of Monroe Cablevision................. 21,600,189 -- Change in fair value of interest rate swaps............... 1,461,826 (1,579,820) Interest income........................................... 8,831 6,120 ------------ ----------- 18,322,697 (6,249,326) ------------ ----------- Income (loss) before income taxes and minority interest..... 19,752,408 (9,187,631) Provision (credit) for income taxes: Federal: Current................................................ 3,192,616 (1,181,915) Deferred............................................... 3,260,301 (1,294,715) ------------ ----------- 6,452,917 (2,476,630) State and local........................................... 339,615 (125,199) ------------ ----------- 6,792,532 (2,601,829) ------------ ----------- Income (loss) before minority interest...................... 12,959,876 (6,585,802) Minority interest........................................... (7,174) 53,658 ------------ ----------- Net income (loss)........................................... $ 12,952,702 $(6,532,144) ============ ===========
See accompanying notes. F-31 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2002 AND 2001
COMMON STOCK ----------------------------------- ACCUMULATED CLASS A STOCK VOTING NON-VOTING OTHER ADDITIONAL ------------------- --------------- ----------------- COMPREHENSIVE PAID-IN SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT LOSS CAPITAL ------ ---------- ------ ------ ------- ------- ------------- ---------- Balances at January 1, 2002................ 12,260 $1,262,000 29,400 $2,940 427,786 $42,779 $(4,725,589) $771,274 Net income............................... Amortization of fair value of interest rate swaps at January 1, 2001 (net of deferred tax of $63,500)............... 113,159 Total comprehensive income................. ------ ---------- ------ ------ ------- ------- ----------- -------- Balances at March 31, 2002................. 12,620 $1,262,000 29,400 $2,940 427,786 $42,779 $(4,612,430) $771,274 ====== ========== ====== ====== ======= ======= =========== ======== Balances at January 1, 2001................ 12,620 $1,262,000 29,400 $2,940 430,123 $43,012 $ (521,942) $771,274 Net loss................................. Fair value of interest swaps at January 1, 2001, less accumulated amortization of $176,559 (net of deferred tax of $694,500).............................. (1,234,964) Total comprehensive loss................. ------ ---------- ------ ------ ------- ------- ----------- -------- Balance at March 31, 2001.................. 12,260 $1,262,000 29,400 $2,940 430,123 $43,012 $(1,756,906) $771,274 ====== ========== ====== ====== ======= ======= =========== ======== RETAINED EARNINGS TOTAL ----------- ----------- Balances at January 1, 2002................ $40,229,696 $37,583,100 Net income............................... 12,952,702 12,952,702 Amortization of fair value of interest rate swaps at January 1, 2001 (net of deferred tax of $63,500)............... 113,159 ----------- Total comprehensive income................. 13,065,861 ----------- ----------- Balances at March 31, 2002................. $53,182,398 $50,648,961 =========== =========== Balances at January 1, 2001................ $59,832,216 $61,389,500 Net loss................................. (6,532,144) (6,532,144) Fair value of interest swaps at January 1, 2001, less accumulated amortization of $176,559 (net of deferred tax of $694,500).............................. (1,234,964) ----------- Total comprehensive loss................. (7,767,108) ----------- ----------- Balance at March 31, 2001.................. $53,300,072 $53,622,392 =========== ===========
See accompanying notes. F-32 BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31 --------------------------- 2002 2001 ------------ ------------ OPERATING ACTIVITIES Net income (loss)........................................... $ 12,952,702 $ (6,532,144) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation........................................... 11,323,191 9,765,174 Amortization of intangibles and deferred charges....... 372,526 884,407 Amortization of broadcast rights....................... 1,573,871 1,439,660 Payments for broadcast rights.......................... (1,179,886) (1,386,000) Gain on sale of Monroe Cablevision..................... (21,600,189) -- Deferred income taxes (credit)......................... 3,260,301 (1,294,715) Provision for bad debts................................ 220,876 1,013,157 Minority interest...................................... 7,174 (53,658) Change in fair value of interest rate swaps............ (1,461,826) 1,579,820 Loss on disposal of property and equipment............. 396,866 -- Changes in operating assets and liabilities: Receivables.......................................... 5,093,222 9,319,671 Inventories.......................................... (891,359) 3,743,607 Prepaid expenses..................................... (71,640) (519,237) Accounts payable..................................... (1,862,245) (8,094,428) Salaries, wages, payroll taxes and other accrued liabilities....................................... (4,261,833) (6,607,1005) Other assets......................................... 4,023,251 (2,157,361) Postretirement benefits and other long-term obligations....................................... 2,457,531 310,820 ------------ ------------ Net cash provided by operating activities................... 10,352,533 1,411,668 INVESTING ACTIVITIES Additions to property, plant and equipment.................. (5,862,022) (17,107,918) Change in cash value of life insurance...................... (413,886) (513,363) Proceeds from sale of Monroe Cablevision.................... 12,059,115 -- Proceeds from disposal of property and equipment............ 3,247 -- ------------ ------------ Net cash provided by (used in) investing activities......... 5,786,454 (17,621,548) FINANCING ACTIVITIES (Payments) borrowings on long-term revolving credit agreement................................................. (19,000,000) 20,000,000 Net borrowings on short-term revolving credit agreement..... 639,126 2,214,799 Payments on senior notes payable............................ -- (6,500,000) Payment on notes payable and capital leases................. (91,462) (80,248) ------------ ------------ Net cash provided by (used in) financing activities......... (18,452,336) 15,634,551 ------------ ------------ Increase (decrease) in cash and cash equivalents............ (2,313,349) (575,329) Cash and cash equivalents at beginning of year.............. 5,882,732 4,212,970 ------------ ------------ Cash and cash equivalents at end of year.................... $ 3,569,383 $ 3,637,641 ============ ============ Non-cash borrowings under capital lease..................... $ 857,550 -- ============ ============
See accompanying notes. F-33 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Block Communications, Inc. (the Company) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the December 31, 2001 audited consolidated financial statements and footnotes thereto included elsewhere in this prospectus. The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. NEW ACCOUNTING STANDARDS Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement Nos. 137 and 138, (collectively, SFAS No. 133), which requires the Company to record all derivatives on the balance sheet at fair value. The Company has three interest rate swap agreements for which it has not elected to implement hedge accounting. The Company has recognized a non-cash derivative valuation gain (loss) of $1,461,826 and $(1,579,820) during the three-month periods ended March 31, 2002 and 2001, respectively. Effective January 1, 2002, the Company adopted SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. Purchased goodwill and indefinite lived intangible assets are no longer amortized but reviewed annually for impairment, or more frequently if impairment indicators arise. Intangible assets with lives restricted by contractual, legal or other means will continue to be amortized over their useful lives. During the three month period ended March 31, 2001, the Company recognized $837,035 of amortization expense related to goodwill, resulting in net loss of $5,695,109 when adjusted for the non-amortization provisions of SFAS No. 142. Subsequent to March 31, 2002 the Company has completed the initial impairment testing required by SFAS No. 142. No impairment charges will be recognized based on the results of this testing. Effective January 1, 2002, the Company adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and provides a single accounting model for long-lived assets to be disposed of. The adoption of this standard has had no effect on the Company's consolidated results of operations or financial position for the three months ended March 31, 2002. Subsequent to March 31, 2002, SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, was issued and requires a gain or loss related to the extinguishment of debt to no longer be recorded as an extraordinary item. The Company has elected early adoption as encouraged by SFAS No. 145, which would not otherwise require adoption until fiscal year 2003. As a result, second quarter losses related to the refinancing discussed below will be included in income from continuing operations. F-34 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) NOTE 2 -- ACQUISITION Effective March 29, 2002, the Company consummated an asset exchange agreement with Comcast Corporation which resulted in an exchange of 100% of the assets of Monroe Cablevision for 100% of the assets of Comcast's Bedford, Michigan operations and $12.1 million cash. The Company recorded a $21.6 million gain on the disposition of Monroe Cablevision resulting from the difference in fair value versus the net book value of assets exchanged. For tax reporting, the transaction has been treated as a like kind exchange and the amount of the gain in excess of the cash received has been deferred. The operations of Monroe Cablevision are included in the Company's financial statements through March 28, 2002. The net assets of the acquired Bedford system have been recorded at their fair value and relate primarily to the cable distribution system and intangibles. The operations of the Bedford system have been included in the Company's financial statements since March 29, 2002. NOTE 3 -- LONG-TERM DEBT In April 2002, the Company issued $175 million of 9 1/4% senior subordinated notes, the proceeds of which where used to pay off the existing senior term loan and senior notes and a portion of the balance outstanding under the revolving credit agreement. The subordinated notes mature April 15, 2009. On May 15, 2002 the Company completed the refinancing of the remainder of its senior credit facilities. The new senior credit facilities include a $40 million delayed draw term loan A, a $75 million term loan B, and an $85 million revolver. Term loan A matures May 2009, however the availability is reduced if required withdrawals are not made ($20 million by June 2003 and $20 million by December 2003). Term loan B matures November 2009. The term loan A and revolving credit agreements provide for scheduled reductions beginning September 2004, with a final maturity date of May 2009. Only the availability under term loan B was drawn at the date of the refinancing. In conjunction with the refinancing of existing debt, the Company will recognize a second quarter pre-tax loss of $9.0 million consisting of prepayment penalties and unamortized deferred financing costs relating to the refinanced debt. As noted above, this amount will be reported as a component of income from continuing operations as the Company has elected early adoption of SFAS No. 145. NOTE 4 -- OTHER LONG-TERM OBLIGATIONS Other long-term obligations consist of the following:
MARCH 31, DECEMBER 31, 2002 2001 ------------ ------------ Other postretirement benefits............................. $ 81,396,816 $ 80,824,000 Pension liabilities....................................... 17,984,049 17,412,753 Deferred compensation obligations......................... 14,805,960 13,594,736 Broadcast rights payable.................................. 5,575,149 6,446,520 Interest rate swap liability.............................. 5,101,047 6,739,531 Other..................................................... 2,311,664 1,618,011 ------------ ------------ $127,174,685 $126,635,551 ============ ============
NOTE 5 -- BUSINESS SEGMENT INFORMATION The Company has three reportable segments -- publishing, cable and broadcasting. The publishing segment operates two daily newspapers located in Ohio and Pennsylvania. The cable segment includes two cablevision companies located in Ohio. The broadcasting segment has five television stations located in Idaho, Illinois, Indiana, Kentucky, and Ohio. The "Other Communications" category includes non- F-35 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) reportable segments and corporate items. The non-reportable segments provide services such as telephony, security systems and monitoring, cable plant construction and distributed advertising services. The following table presents certain financial information for the three reportable segments and the other category:
THREE MONTHS ENDED MARCH 31 ---------------------------- 2002 2001 ------------ ------------ Revenues: Publishing............................................ $ 62,253,335 63,531,677 Intersegment.......................................... 690,531 1,677,240 ------------ ------------ External Publishing................................... 61,562,804 61,854,437 Cable................................................. 25,096,835 21,147,906 Broadcasting.......................................... 9,000,653 8,727,210 Other Communications.................................. 6,352,744 5,148,690 ------------ ------------ 102,013,036 96,878,243 Operating income (loss): Publishing............................................ 690,357 (2,444,204) Intersegment.......................................... 646,866 1,188,840 ------------ ------------ Net Publishing........................................ 43,491 (3,633,044) Cable................................................. 1,601,490 1,568,183 Intersegment.......................................... (681,389) (1,340,930) ------------ ------------ Net Cable............................................. 2,282,879 2,909,113 Broadcasting.......................................... (54,386) (452,016) Corporate expenses.................................... (951,280) (350,035) Other Communications.................................. 109,007 (1,412,323) ------------ ------------ 1,429,711 (2,938,305) Nonoperating income (expense)........................... 18,322,697 (6,249,326) ------------ ------------ Income (loss) before income taxes and minority interest.............................................. $ 19,752,408 (9,187,631) ============ ============
NOTE 6 -- SUPPLEMENTAL GUARANTOR INFORMATION The new credit facilities referred to in Note 3 to these financial statements are guaranteed jointly and severally by all of the Company's wholly owned subsidiaries (collectively, the Guarantors). Such guarantees are full and unconditional. WAND (TV) Partnership, a partially owned subsidiary of the Company, is not a guarantor of the credit facilities. Supplemental consolidating financial information of the Company, specifically including such information for the Guarantors, is presented below. Financial information for the Parent Company includes both the Holding Company and its one division, The Toledo Blade Company. Investments in subsidiaries are presented using the cost method of accounting and eliminated. Separate financial statements of the Guarantors are not provided as the consolidating financial information contained herein provides a more meaningful disclosure to allow investors to determine the nature of assets held and the operations of the combined groups. F-36 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) CONSOLIDATING CONDENSED BALANCE SHEET MARCH 31, 2002
UNCONSOLIDATED ------------------------------------------- PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------- ------------- ------------ ASSETS: Current assets........ $ 25,881,392 $ 46,043,263 $ 2,966,741 $ 44,276 $ 74,935,672 Property, plant and equipment, net...... 28,886,484 224,462,480 5,953,174 390,087 259,692,225 Intangibles, net...... 4,658,948 59,024,474 28,068,959 198,489 91,950,870 Cash value of life insurance, net...... 10,899,943 205,048 -- -- 11,104,991 Prepaid pension costs............... 1,743,945 9,457,420 -- -- 11,201,365 Pension intangibles... 645,495 6,584,535 -- -- 7,230,030 Investments in subsidiaries........ 211,056,074 -- -- (211,056,074) -- Other................. (4,424,565) 21,267,501 (70,779) -- 16,772,157 ------------ ------------ ----------- ------------- ------------ $279,347,716 $367,044,721 $36,918,095 $(210,423,222) $472,887,310 ============ ============ =========== ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities... $ 23,839,844 $ 48,914,290 $ 497,071 $ (7,117) $ 73,244,088 Long-term debt........ 209,548,004 -- -- -- 209,548,004 Other long-term obligations......... 19,664,479 235,785,680 -- (128,275,474) 127,174,685 Minority interest..... -- -- -- 12,271,572 12,271,572 Stockholders' equity.............. 26,295,389 82,344,751 36,421,024 (94,412,203) 50,648,961 ------------ ------------ ----------- ------------- ------------ $279,347,716 $367,044,721 $36,918,095 $(210,423,222) $472,887,310 ============ ============ =========== ============= ============
F-37 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) CONSOLIDATING CONDENSED BALANCE SHEET DECEMBER 31, 2001
UNCONSOLIDATED ------------------------------------------- PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------- ------------- ------------ ASSETS: Current assets........ $ 15,717,915 $ 55,969,309 $ 4,138,933 $ 3,905,631 $ 79,731,788 Property, plant and equipment, net...... 28,992,144 228,208,431 5,962,544 32,587 263,195,706 Intangibles, net...... 4,784,698 50,860,955 28,068,959 198,489 83,913,101 Cash value of life insurance, net...... 10,486,057 205,048 -- -- 10,691,105 Prepaid pension costs............... 1,852,686 9,276,267 -- 16,493 11,145,446 Pension intangibles... 645,495 6,584,535 -- -- 7,230,030 Investments in subsidiaries........ 211,745,229 -- -- (211,745,229) -- Other................. 10,366,210 17,627,480 2,554 (16,493) 27,979,751 ------------ ------------ ----------- ------------- ------------ $248,590,434 $368,732,025 $38,172,990 $(207,608,522) $483,886,927 ============ ============ =========== ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities... $ 24,017,694 $ 50,444,551 $ 1,773,706 $ 3,812,414 $ 80,048,365 Long-term debt........ 227,355,513 -- -- -- 227,355,513 Other long-term obligations......... 21,238,306 242,620,050 -- (137,222,805) 126,635,551 Minority interest..... -- -- -- 12,264,398 12,264,398 Stockholders' equity.............. 11,978,921 75,667,424 36,399,284 (86,462,529) 37,583,100 ------------ ------------ ----------- ------------- ------------ $284,590,434 $368,732,025 $38,172,990 $(207,608,522) $483,886,927 ============ ============ =========== ============= ============
F-38 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF INCOME THREE MONTHS ENDED MARCH 31, 2002
UNCONSOLIDATED ------------------------------------------ PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ----------- ------------ ------------- ------------ ------------ Revenue................... $19,069,026 $83,275,369 $1,812,798 $(2,144,157) $102,013,036 Expenses.................. 20,857,528 80,579,846 1,647,608 (2,501,657) 100,583,325 ----------- ----------- ---------- ----------- ------------ Operating income (loss)... (1,788,502) 2,695,523 165,190 357,500 1,429,711 Nonoperating income....... 18,316,482 2,208 4,007 -- 18,322,697 ----------- ----------- ---------- ----------- ------------ Income before income taxes and minority interest... 16,527,980 2,697,731 169,197 357,500 19,752,408 Provision for income taxes................... 5,778,662 1,013,870 -- -- 6,792,532 ----------- ----------- ---------- ----------- ------------ Income before minority interest................ 10,749,318 1,683,861 169,197 357,500 12,959,876 Minority interest......... -- -- -- (7,174) (7,174) ----------- ----------- ---------- ----------- ------------ Net income................ $10,749,318 $ 1,683,861 $ 169,197 $ 350,326 $ 12,952,702 =========== =========== ========== =========== ============
F-39 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF INCOME THREE MONTHS ENDED MARCH 31, 2001
UNCONSOLIDATED ------------------------------------------ PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ----------- ------------ ------------- ------------ ------------ Revenue.................... $20,671,037 $78,498,175 $1,581,882 $(3,872,851) $96,878,243 Expenses................... 21,667,460 80,296,014 1,744,481 (3,891,407) 99,816,548 ----------- ----------- ---------- ----------- ----------- Operating income (loss).... (996,423) (1,797,839) (162,599) 18,556 (2,938,305) Nonoperating expense....... (6,248,269) (1,057) -- -- (6,249,326) ----------- ----------- ---------- ----------- ----------- Income (loss) before income taxes and minority interest................. (7,244,692) (1,798,896) (162,599) 18,556 (9,187,631) Provision (credit) for income taxes............. (3,270,744) 668,915 -- -- (2,601,829) ----------- ----------- ---------- ----------- ----------- Income (loss) before minority interest........ (3,973,948) (2,467,811) (162,599) 18,556 (6,585,802) Minority interest.......... -- -- -- 53,658 53,658 ----------- ----------- ---------- ----------- ----------- Net income (loss).......... $(3,973,948) $(2,467,811) $ (162,599) $ 72,214 $(6,532,144) =========== =========== ========== =========== ===========
F-40 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2002
UNCONSOLIDATED ------------------------------------------- PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------- ------------ ------------ Net cash provided by operating activities........................ $ 5,854,988 $5,384,759 $(1,244,714) $357,500 $10,352,533 Additions to property, plant and equipment......................... (77,790) (5,261,452) (165,280) (357,500) (5,862,022) Other investing activities.......... 11,645,229 3,247 -- -- 11,648,476 ------------ ---------- ----------- -------- ----------- Net cash used in investing activities........................ 11,567,439 (5,258,205) (165,280) (357,500) 5,786,454 Payments on capital leases.......... (91,462) -- -- -- (91,462) Payments on revolving credit agreements........................ (18,360,874) -- -- -- (18,360,874) Net cash used in financing activities........................ (18,452,336) -- -- -- (18,452,336) ------------ ---------- ----------- -------- ----------- Increase (decrease) in cash and equivalents....................... (1,029,909) 126,554 (1,409,994) -- (2,313,349) Cash and equivalents at beginning of period............................ 3,186,078 (64,937) 2,761,591 -- 5,882,732 ------------ ---------- ----------- -------- ----------- Cash and equivalents at end of period............................ $ 2,156,169 $ 61,617 $ 1,351,597 $ -- $ 3,569,383 ============ ========== =========== ======== ===========
F-41 BLOCK COMMUNICATIONS, INC., AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2001
UNCONSOLIDATED ------------------------------------------- PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED ------------ ------------ ------------- ------------ ------------ Net cash provided by operating activities...................... $(13,928,452) $14,584,564 $ 737,000 $18,556 $ 1,411,668 Additions to property, plant and equipment....................... (1,330,602) (15,758,760) -- (18,556) (17,107,918) Other investing activities........ (545,894) 32,264 -- -- (513,630) ------------ ----------- ---------- ------- ------------ Net cash used in investing activities...................... (1,876,496) (15,726,496) -- (18,556) (17,621,548) Payments on long-term debt........ (6,580,248) -- -- -- (6,580,248) Borrowings on revolving credit agreements...................... 22,214,799 -- -- -- 22,214,799 Net cash provided by financing activities...................... 15,634,551 -- -- -- 15,634,551 ------------ ----------- ---------- ------- ------------ Increase (decrease) in cash and equivalents..................... (170,397) (1,141,932) 737,000 -- (575,329) Cash and equivalents at beginning of period....................... 2,021,900 1,290,070 901,000 -- 4,212,970 ------------ ----------- ---------- ------- ------------ Cash and equivalents at end of period.......................... $ 1,851,503 $ 148,138 $1,638,000 $ -- $ 3,637,641 ============ =========== ========== ======= ============
F-42 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [BCI LOGO] BCI BLOCK COMMUNICATIONS, INC. OFFER TO EXCHANGE UP TO $175,000,000 OF ITS 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR UP TO $175,000,000 OF ITS OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 -------------------- PROSPECTUS , 2002 -------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS (a) The Company is an Ohio corporation. Section 1701.13(E) of the Ohio Revised Code provides that: (1) A corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, other than an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against expenses, including attorney's fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner he reasonably believed to be not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. (2) A corporation may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against expenses, including attorney's fees, actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any of the following: (a) Any claim, issue, or matter as to which such person is adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless, and only to the extent that, the court of common pleas or the court in which such action or suit was brought determines, upon application, that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court of common pleas or such other court shall deem proper; (b) Any action or suit in which the only liability asserted against a director is pursuant to section 1701.95 of the Revised Code. (3) To the extent that a director, trustee, officer, employee, member, manager, or agent has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in division (E)(1) or (2) of this section, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses, including attorney's fees, actually and reasonably incurred by him in connection with the action, suit, or proceeding. (4) Any indemnification under division (E)(1) or (2) of this section, unless ordered by a court, shall be made by the corporation only as authorized in the specific case, upon a determination that indemnification of the director, trustee, officer, employee, member, manager, or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in division (E)(1) or (2) of this section. Such determination shall be made as follows: (a) By a majority vote of a quorum consisting of directors of the indemnifying corporation who were not and are not parties to or threatened with the action, suit, or proceeding referred to in division (E)(1) or (2) of this section; II-1 (b) If the quorum described in division (E)(4)(a) of this section is not obtainable or if a majority vote of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney, who has been retained by or who has performed services for the corporation or any person to be indemnified within the past five years; (c) By the shareholders; (d) By the court of common pleas or the court in which the action, suit, or proceeding referred to in division (E)(1) or (2) of this section was brought. Any determination made by the disinterested directors under division (E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this section shall be promptly communicated to the person who threatened or brought the action or suit by or in the right of the corporation under division (E)(2) of this section, and, within ten days after receipt of such notification, such person shall have the right to petition the court of common pleas or the court in which such action or suit was brought to review the reasonableness of such determination. (5) (a) Unless at the time of a director's act or omission that is the subject of an action, suit, or proceeding referred to in division (E)(1) or (2) of this section, the articles or regulations of a corporate state, by specific reference to this division, that the provisions of this division do not apply to the corporation and unless the only liability asserted against a director in an action, suite, or proceeding referred to in division (E)(1) or (2) of this section is pursuant to section 1701.95 of the Revised Code, expenses, including attorney's fees, incurred by a director in defending the action, suit, or proceeding shall be paid by the corporation as they are incurred, in advance of the final disposition of the action, suit, or proceeding, upon receipt of an undertaking by or on behalf of the director in which he agrees to do both of the following: (i) Repay such amount if it is proved by clear and convincing evidence in a court of competent jurisdiction that his action or failure to act involved an act or omission undertaken with deliberate intent to cause injury to the corporation or undertaken with reckless disregard for the best interests of the corporation; (ii) Reasonably cooperate with the corporation concerning the action, suit, or proceeding. (b) Expenses, including attorney's fees, incurred by a director, trustee, officer, employee, member, manager, or agent in defending any action, suit, or proceeding referred to in division (E)(1) or (2) of this section, may be paid by the corporation as they are incurred, in advance of the final disposition of the action, suit, or proceeding, as authorized by the directors in the specific case, upon receipt of an undertaking by or on behalf of the director, trustee, officer, employee, member, manager, or agent to repay such amount, if it ultimately is determined that he is not entitled to be indemnified by the corporation. (6) The indemnification authorized by this section shall not be exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification under the articles, the regulations, any agreement, a vote of shareholders or disinterested directors, or otherwise, both as to action in their official capacities and as to action in another capacity while holding their offices or positions, and shall continue as to a person who has ceased to be a director, trustee, officer, employee, member, manager, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. (7) A corporation may purchase and maintain insurance or furnish similar protection, including, but not limited to, trust funds, letters of credit, or self-insurance, on behalf of or for any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. Insurance may be purchased from or maintained with a person in which the corporation has a financial interest. (8) The authority of a corporation to indemnify persons pursuant to division (E)(1) or (2) of this section does not limit the payment of expenses as they are incurred, indemnification, insurance, or other protection that may be provided pursuant to divisions (E)(5), (6), and (7) of this section. Divisions (E)(1) and (2) of this section do not create any obligation to repay or return payments made by the corporation pursuant to division (E)(5), (6), or (7). II-2 (9) As used in division (E) of this section, "corporation" includes all constituent entities in a consolidation or merger and the new or surviving corporation, so that any person who is or was a director, officer, employer, employee, trustee, member, manager, or agent of such a constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee, member, manager, or agent of another corporation, domestic or foreign, nonprofit or for profit, a limited liability company, or a partnership, joint venture, trust, or other enterprise, shall stand in the same position under this section with respect to the new or surviving corporation as he would if he had served the new or surviving corporation in the same capacity. (b) Article VII of the Company's Regulations provides that: The Corporation shall indemnify or agree to indemnify, to the fullest extent now or hereafter permitted by law, a director, officer or salaried employee, or a former director, officer, agent or salaried employee or any person who is serving or has served at the request of the Corporation as a director, officer or salaried employee of any other corporation, joint venture, or other enterprise, or as a trustee of any trust, against costs and expenses reasonably incurred by or imposed upon him, judgments, decrees, fines, penalties or amounts paid in settlement or in connection with the defense of any pending, concluded, or threatened action, suit or proceeding, criminal, civil, administrative, investigative, or otherwise, to which he is or may be made a party by reason of being or having been such director, officer, employee or trustee; provides that, a determination is made (a) that he was not, and has not been adjudicated to have been, negligent or guilty of misconduct in the performance of his duty to the Corporation or other entity of which he is a director, officer, employee or trustee, (b) that he acted in good faith in what he reasonably believed to be in or not opposed to the best interest of the Corporation, or other entity, (c) that, in any matter the subject of a criminal action, suit or proceeding, he had no reasonable cause to believe that his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Any such determination shall be made, and any action authorizing such indemnification shall be taken, by the directors of the Corporation acting at a meeting at which a quorum of directors who are and were not parties to or threatened with such action, suit or proceeding is present. Any director who is a party to or threatened with such action, suit, or proceeding shall not be qualified to vote respecting such determination or action, and if for this reason a quorum of directors cannot be obtained for such vote, such determination shall be made by any of the following procedures: (1) by a written opinion of independent counsel, (2) by resolution adopted by a majority of a committee of stockholders or directors who have not incurred such expenses, appointed by the Board of Directors, or (3) by the affirmative vote at a meeting held for such purpose of the holders of shares entitling them to exercise a majority of the voting power of the Corporation on such matters, or by a written consent of the holders of shares entitling them to exercise two-thirds (2/3) of the voting power on such matters (whether or not such shareholders are personally interested in the determination). Upon any such determination by the Board of Directors, or by any one of the other foregoing procedures, that the conditions set forth in clauses (a), (b) and (c), of this article have been fulfilled, such indemnity shall be binding upon the Corporation and shall be made without further action of the directors. Indemnification under this article shall not be deemed exclusive of any other rights to which such director, officer, employee, or trustee may be entitled under the Articles of Incorporation, the Regulations of the Corporation, any agreement, vote of shareholders, or as a matter of law. (c) The Company maintains director and officer liability insurance covering its directors and officers with respect to liability which they may incur in connection with their serving as such, which liability could include liability under the Securities Act of 1933. II-3 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) A list of exhibits filed with this registration statement on Form S-4 is set forth on the Index to Exhibits and Financial Statement Schedule and is incorporated in this Item 21 by reference. (b) The following report of independent auditors and financial statement schedule are filed with this registration statement and should be read in conjunction with the financial statements included elsewhere herein: Report of Independent Auditors on Financial Statement Schedule Schedule II -- Valuation and Qualifying Accounts All other schedules are not applicable and have therefore been omitted. ITEM 22. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event hat a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 (c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. BLOCK COMMUNICATIONS, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Managing Director (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Managing Director (Principal July 16, 2002 ------------------------------------------------ Executive Officer); Director Allan J. Block /s/ GARY J. BLAIR Vice President and Chief Financial July 16, 2002 ------------------------------------------------ Officer; Director Gary J. Blair /s/ JODI L. MIEHLS Treasurer July 16, 2002 ------------------------------------------------ (Principal Accounting Officer) Jodi L. Miehls /s/ JOHN R. BLOCK Director July 16, 2002 ------------------------------------------------ John R. Block Director July , 2002 ------------------------------------------------ William Block /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey
II-6
SIGNATURE TITLE DATE --------- ----- ---- /s/ FRITZ BYERS Director July 16, 2002 ------------------------------------------------ Fritz Byers /s/ KAREN D. JOHNESE Director July 16, 2002 ------------------------------------------------ Karen D. Johnese Director July , 2002 ------------------------------------------------ Donald G. Block /s/ MARY G. BLOCK Director July 16, 2002 ------------------------------------------------ Mary G. Block /s/ CYRUS P. BLOCK Director July 16, 2002 ------------------------------------------------ Cyrus P. Block /s/ DIANA E. BLOCK Director July 16, 2002 ------------------------------------------------ Diana E. Block /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr.
II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. ACCESS TOLEDO, LTD. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Vice President (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Vice President July 16, 2002 ------------------------------------------------ (Principal Executive Officer); Allan J. Block Director /s/ RICK MLCEK Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer Rick Mlcek and Principal Accounting Officer) /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. BUCKEYE TELESYSTEM, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Chairman (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Chairman (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ BRIAN REX Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Brian Rex Officer) /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ JOSEPH JENSEN Director July 16, 2002 ------------------------------------------------ Joseph Jensen /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. CARS HOLDING, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: President (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK President (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ JOHN R. BLOCK Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting John R. Block Officer); Director Director July , 2002 ------------------------------------------------ William Block /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr.
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. COMMUNITY COMMUNICATION SERVICES, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Vice President (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Vice-President (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ GLORIA SHANK President and General Manager July 16, 2002 ------------------------------------------------ (Principal Financial Officer and Gloria Shank Principal Accounting Officer); Director /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair /s/ JOHN R. BLOCK Director July 16, 2002 ------------------------------------------------ John R. Block
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. CORPORATE PROTECTION SERVICES, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Chairman (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Chairman (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ ROY CHASE Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Roy Chase Officer) /s/ KIM KLEWER Director July 16, 2002 ------------------------------------------------ Kim Klewer /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey /s/ JOSEPH JENSEN Director July 16, 2002 ------------------------------------------------ Joseph Jensen /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr.
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. ERIE COUNTY CABLEVISION, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Chairman (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Chairman (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ RICK MLCEK Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Rick Mlcek Officer) Director July , 2002 ------------------------------------------------ Patrick Deville /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair
II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. IDAHO INDEPENDENT TELEVISION, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Chairman (Principal Executive Officer) KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Chairman (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ JAMES MCKENNA Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting James McKenna Officer) /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair Director July , 2002 ------------------------------------------------ Ricky Joseph
II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. INDEPENDENCE TELEVISION COMPANY By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Chairman (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Chairman (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ RICK ROBERTS Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Rick Roberts Officer) /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair /s/ JOHN R. BLOCK Director July 16, 2002 ------------------------------------------------ John R. Block
II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. LIMA COMMUNICATIONS CORPORATION By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Chairman (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Chairman (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ DAVID E. PLAUGHER Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting David E. Plaugher Officer) /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair /s/ JOHN R. BLOCK Director July 16, 2002 ------------------------------------------------ John R. Block /s/ BRUCE OPPERMAN Director July 16, 2002 ------------------------------------------------ Bruce Opperman
II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. METRO FIBER & CABLE CONSTRUCTION COMPANY By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Vice President (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Vice President (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ BRIAN REX Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Brian Rex Officer) /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey /s/ JOSEPH JENSEN Director July 16, 2002 ------------------------------------------------ Joseph Jensen
II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. MONROE CABLEVISION, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Chairman (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Chairman (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ RICK MLCEK Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Rick Mlcek Officer) /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ GARY J. BLAIR Director July 16, 2002 ------------------------------------------------ Gary J. Blair /s/ FLORENCE BUCHANAN Director July 16, 2002 ------------------------------------------------ Florence Buchanan
II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. PG PUBLISHING COMPANY By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Vice President (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Vice President (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ ROBERT STAMM Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Robert Stamm Officer); Director Director July , 2002 ------------------------------------------------ William Block /s/ RAYMOND N. BURNETT Director July 16, 2002 ------------------------------------------------ Raymond N. Burnett Director July , 2002 ------------------------------------------------ John G. Craig /s/ JOHN R. BLOCK Director July 16, 2002 ------------------------------------------------ John R. Block
II-19
SIGNATURE TITLE DATE --------- ----- ---- /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. Director July , 2002 ------------------------------------------------ Maddy Ross /s/ DAVID M. BEIHOFF Director July 16, 2002 ------------------------------------------------ David M. Beihoff Director July , 2002 ------------------------------------------------ Michael Tomasieski Director July , 2002 ------------------------------------------------ Scott Brooks /s/ KAREN D. JOHNESE Director July 16, 2002 ------------------------------------------------ Karen D. Johnese Director July , 2002 ------------------------------------------------ Randy Waugaman /s/ DIANA E. BLOCK Director July 16, 2002 ------------------------------------------------ Diana E. Block /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey
II-20 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Vice President (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Vice President (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ BRADLEY MEFFERD Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Bradley Mefferd Officer) /s/ JOHN R. BLOCK Director July 16, 2002 ------------------------------------------------ John R. Block /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey
II-21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. WLFI-TV, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: President (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK President (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ GARY J. BLAIR Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Executive Gary J. Blair Officer); Director /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ JOHN R. BLOCK Director July 16, 2002 ------------------------------------------------ John R. Block
II-22 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toledo, State of Ohio, on the 16th day of July, 2002. BUCKEYE CABLEVISION, INC. By: /s/ ALLAN J. BLOCK ------------------------------------ Name: Allan J. Block Title: Chairman (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Allan J. Block, Gary J. Blair, Jodi L. Miehls, Fritz Byers and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements and the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ ALLAN J. BLOCK Chairman (Principal Executive July 16, 2002 ------------------------------------------------ Officer); Director Allan J. Block /s/ RICK MCLEK Treasurer (Principal Financial July 16, 2002 ------------------------------------------------ Officer and Principal Accounting Rick Mclek Officer) /s/ WILLIAM BLOCK, JR. Director July 16, 2002 ------------------------------------------------ William Block, Jr. /s/ DAVID G. HUEY Director July 16, 2002 ------------------------------------------------ David G. Huey /s/ JOHN R. BLOCK Director July 16, 2002 ------------------------------------------------ John R. Block
II-23 INDEX TO FINANCIAL STATEMENT SCHEDULE AND EXHIBITS FINANCIAL STATEMENT SCHEDULE
NUMBER DESCRIPTION - ------ ----------- Report of Independent Auditors on Financial Statement Schedule II Valuation and Qualifying Accounts
EXHIBITS
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 3.1 Articles of Incorporation of Block Communications, Inc. (the "Company"), as amended to date. 3.2 Code of Regulations of the Company. 3.3 Close Corporation Operating Agreement, dated December 12, 1988, by and among the Company (f/n/a Blade Communications, Inc.) and the holders of all of its issued and outstanding stock. 3.4 Agreement to Amend and Extend Close Corporation Operating Agreement, dated October 15, 1994, by and among the Company (f/n/a Blade Communications, Inc.) and the holders of all of its issued and outstanding stock. 4.1 Indenture, dated as of April 18, 2002, among the Company, the Guarantors and Wells Fargo Bank Minnesota, National Association, as trustee. 4.2 Purchase Agreement, dated April 11, 2002, among the Company, the Guarantors and the initial purchasers of the notes. 4.3 Registration Rights Agreement, dated April 18, among the Company, the Guarantors and the initial purchasers of the notes. 5.1 Opinion of Reed Smith, LLP. 5.2 Opinion of Fritz Byers, Esq. 8.1 Tax opinion of Reed Smith, LLP. 10.1 Credit Agreement, dated as of May 15, 2002, by and among the Company and Bank of America, N.A., as Administrative Agent. 10.2 Guaranty Agreement, dated as of May 15, 2002, by and among each of the Guarantors and Bank of America, N.A., as Administrative Agent. 10.3 Security Agreement, dated as of May 15, 2002, by and among the Company, each of the Guarantors and Bank of America, N.A., as Administrative Agent. 10.4 Intellectual Property Security Agreement, dated as of May 15, 2002, by and among the Company, each of the Guarantors and Bank of America, N.A., as Administrative Agent. 10.5 Assignment of Patents, Trademarks and Copyrights, undated, by and among the Company, each of the Guarantors and Bank of America, N.A., as Administrative Agent. 10.6 Securities Pledge Agreement, by and among the Company, each Guarantor that owns Subsidiary Securities, and Bank of America, N.A., as Administrative Agent. 10.7 Mortgage, dated May 15, 2002, between Block Communications, Inc. and Bank of America, N.A., as Agent. 10.8 Phantom Stock Plan, dated December 13, 1999, for Block Communications, Inc. (f/n/a Blade Communications, Inc.). 10.9 Incentive Compensation Plan, dated January 1, 1991, for Block Communications, Inc. (f/n/a Blade Communications, Inc.). 10.10 Amendment to and Restatement of Stock Redemption Agreement, dated December 12, 1991. 10.11 Shareholders' Agreement. 12.1 Statement re computation of ratios. 21.1 Subsidiaries of the Company. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Reed Smith LLP (included in Exhibits 5.1 and 8.1). 23.3 Consent of Fritz Byers, Esq. (included in Exhibit 5.2). 25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of Wells Fargo Bank Minnesota, National Association (Form T-1). 99.1 Letter of Transmittal with Respect to the Exchange Offer.
II-24
EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 99.2 Notice of Guaranteed Delivery with Respect to the Exchange Offer. 99.3 Letter to DTC Participants Regarding the Exchange Offer. 99.4 Letter to Beneficial Holders Regarding the Exchange Offer.
II-25 REPORT OF INDEPENDENT AUDITORS BOARD OF DIRECTORS BLOCK COMMUNICATIONS, INC. We have audited the consolidated financial statements of Block Communications, Inc. and subsidiaries (the "Company") as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, and have issued our report thereon dated February 22, 2002 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedule listed in Item 21(b) of this Registration Statement. This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP February 22, 2002 Toledo, Ohio BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 2001 (IN THOUSANDS)
BALANCE AT CHARGED TO COSTS BALANCE AT JANUARY 1, 2001 AND EXPENSES DEDUCTIONS(1) DECEMBER 31, 2001 --------------- ---------------- ------------- ----------------- Allowance for doubtful receivables and discounts.................... $4,674 5,066 4,879 $4,861 Tax valuation allowance............ -- 587 -- 587
BALANCE AT CHARGED TO COSTS BALANCE AT JANUARY 1, 2000 AND EXPENSES DEDUCTIONS(1) DECEMBER 31, 2000 --------------- ---------------- ------------- ----------------- Allowance for doubtful receivables and discounts.................... $3,695 2,287 1,308 $4,674
BALANCE AT CHARGED TO COSTS BALANCE AT JANUARY 1, 1999 AND EXPENSES DEDUCTIONS(1) DECEMBER 31, 1999 --------------- ---------------- ------------- ----------------- Allowance for doubtful receivables and discounts.................... $2,806 2,034 1,145 $3,695
- --------------- (1) Deductions represent accounts receivable written off as uncollectible or credits given. EX-3.1 3 j9521601exv3w1.txt EXHIBIT 3.1 Exhibit 3.1 CERTIFICATE OF RESTATED ARTICLES OF INCORPORATION OF BLOCK COMMUNICATIONS, INC. John D. Willey, President, and Bernard R. Baker, Secretary, of Block Communications, Inc., an Ohio corporation with its principal office located at Toledo, Lucas County, Ohio, do hereby certify that in a writing or writings signed under the provisions of Section 1701.54 of the Revised Code by all of the shareholders who would be entitled to a notice of a meeting of shareholders held for such purpose, the following resolution was adopted to amend the articles: RESOLVED, that the following Amended Articles of Incorporation be and the same are hereby adopted to supersede and take the place of the existing Articles of Incorporation and all amendments thereto: AMENDED ARTICLES OF INCORPORATION OF BLOCK COMMUNICATIONS, INC. FIRST: The name of the Corporation is BLOCK COMMUNICATIONS, INC. SECOND: The principal office of the Corporation is located in the City of Toledo, Lucas County, Ohio. THIRD: The purposes of the Corporation are: (a) To carry on the business of printers and publishers in all its branches; to engage generally in the business of printing, publishing, producing, developing, circulating, and otherwise dealing in and with newspapers, books, magazines, pamphlets and other publications of every nature and kind; to acquire by purchase, lease or otherwise, or to sell, lease or otherwise dispose of, any printing or publishing business of any nature of description; to engage in the transaction of business pertaining to gathering and distributing news and information of all kinds; and to carry on a general advertising, press agency and publicity business; whether for itself or as agent for others. (b) To establish, erect, manufacture, construct, develop, maintain, own, lease, operate, buy, sell or otherwise acquire broadcasting stations, equipment, studios and buildings of every kind and description, and in connection therewith, to transmit, retransmit, transcribe on records or otherwise broadcast, televise, create, produce, disseminate, distribute, receive instantaneously or otherwise by means of radio, electricity, magnetism, electromagnetic waves, variations or impulses, or by any means, with or without wires, sounds, images, programs, pictures or views, animate or inanimate objects of every class or description, and to own, lease, manufacture, develop, construct, erect, operate and maintain towers, poles, wires, cables, apparatus, conductors and fixtures necessary for the operation and maintaining of systems for the interception, sale, transmission and distribution of audio and video impulses. (c) To manufacture, develop, produce, buy, sell, exchange, export, import, lease and deal in and with, processes, patents, formulae, goods, wares and merchandise and other tangible and intangible personal property of every class and description. (d) To purchase or otherwise acquire, hold, manage, lease, operate, pledge, mortgage, hypothecate, lend money upon, sell, exchange, or otherwise dispose of, or otherwise deal in or with, personal property and real property, or either, of every kind, character or description whatsoever, or any interest therein, wheresoever situated. (e) To acquire, hold, guarantee, sell, assign, exchange and otherwise dispose of, or deal in and with, shares of stock and other securities of whatever -2- nature issued by other corporations, governments, firms, trusts or individuals. (f) To acquire all or any part of the good will, rights, property and business of any person, firm, association or corporation, whether or not the business is similar to that in which the Corporation is then engaged, and to pay for the same in cash or in shares or obligations of the Corporation, or otherwise, and to assume in connection therewith any or all of the obligations or liabilities of such business, and to conduct in the State of Ohio, or elsewhere, any such business acquired, provided such business is not prohibited by the laws of the State of Ohio. (g) To carry on any one or more of the activities aforesaid on its own behalf or for others, and to transact any and all business which is necessary, convenient or incidental to any of the foregoing purposes. Each purpose specified in any clause or paragraph of this Article is an independent purpose and shall not be limited by reference to or inference from the terms of any other clause or paragraph of these Amended Articles of Incorporation, and it is expressly provided that enumeration herein of specific purposes and powers shall not be held to limit or restrict in any manner the general powers conferred on this Corporation by the laws of the State of Ohio. FOURTH: The maximum number of shares of all classes which the Corporation (sometimes referred to in this Article Fourth as "the Company") is authorized to issue and have outstanding is Six Hundred Thirty-Three Thousand and Eighty (633,080) shares, of which Fifteen Thousand Six Hundred and Eighty (15,680) shares shall be 5% Non-Cumulative Class A Stock of the par value of One Hundred ($100.00) Dollars per share, hereinafter called "Class A Stock"; and Six Hundred and Seventeen Thousand Four Hundred (617,400) of said shares shall be Common Stock of the par value of ten ($.10) cents per share. The Common Stock shall be divided into two classes, as follows: Twenty-Nine Thousand Four Hundred (29,400) shares thereof shall be designated as Common Stock, hereinafter sometimes called "Voting Common Stock", which will have the exclusive voting rights and powers in all matters except where otherwise provided by law or by this Article Fourth; and the remaining Five Hundred Eighty-Eight Thousand (588,000) shares of the Common Stock shall be designated as Non-Voting Common Stock, hereinafter sometimes called "Non-Voting Common Stock", and shall have no voting powers whatsoever except as may be otherwise provided by law or by this Article Fourth. When and as declared by the Board of Directors of the Company, dividends on shares of any class of stock of the Company may be paid in shares of another class without the consent or vote of the holders of shares of the class of stock in which payment of such dividend is to be made. The Express Terms and Provisions, which include the designations and the powers, the preferences and rights, and the qualifications, limitations or restrictions, of the shares of each class of the Stock of the Company are as follows: 5% NON-CUMULATIVE CLASS A STOCK 1. DIVIDENDS. Subject to the provisions hereof in respect of shares of any class of stock of the Company ranking prior to the Class A Stock, the holders of the Class A Stock shall be entitled to receive, if, when and as declared by the Board of Directors, out of any funds legally available for the declaration of dividends, non-cumulative preferential cash dividends at the rate of Five ($5.00) Dollars per share per annum, and no more, payable quarterly on the first days of January, April, July and October in each year; and the shares of such class of prior stock shall not be entitled to participate therein. -3- 2. LIQUIDATION. Subject to the provisions hereof in respect of any class of stock of the Company ranking prior to the Class A Stock, the holders of the Class A Stock, upon any liquidation, dissolution or winding up of the affairs of the Company, shall be entitled to be paid One Hundred ($100.00) Dollars per share, and no more, before any distribution or payment shall be made to the holders of stock of any class ranking subordinate to the Class A Stock. After payment to the holders of the Class A Stock of all of the amounts to which they are entitled as aforesaid, the balance, of any, shall be paid to the holders of stock subordinate to the Class A Stock according to their respective rights. In case the remaining net assets of the Company are insufficient to pay to holders of all outstanding shares of Class A Stock, and to holders of any stock ranking on a parity with the Class A Stock, the full amount to which they are respectively entitled, the entire net assets of the Company remaining after providing for any stock which may rank prior to the Class A Stock, shall be distributed ratably to the holders of all outstanding shares of Class A Stock and the holders of any stock ranking on a parity with the Class A Stock in proportion to the full amounts to which they respectively are entitled. The consolidation or merger of the Company at any time, or from time to time, with any other company or companies, or a sale of all or substantially all of the assets of the Company, shall not be construed as a dissolution, liquidation or winding up of the Company within the meaning of this Subdivision 2. 3. VOTING. The holders of the Class A Stock shall have no voting rights except those specifically conferred upon them by statute, and such holders shall not be entitled to notice of meetings of stockholders, except such meetings as may be called to consider and act upon the proposals, subjects and questions as to which voting rights are specifically conferred upon them by statute. COMMON STOCK 1. DIVIDENDS. Subject to the provisions hereof in respect of shares of the classes of stock of the Company ranking prior to the Common Stock, such dividends or distributions as may be determined by the Board of Directors may, from time to time, be declared and paid out of the funds legally available therefor, or made upon, or in respect of, the Common Stock, and the shares of such classes of prior stock shall not be entitled to participate therein. The holders of the Non-Voting Common Stock and the Voting Common Stock shall participate equally to the same amount per share in all such dividends or distributions. 2. LIQUIDATION. Subject to the provisions hereof in respect of the classes of stock of the Company ranking prior to the Common Stock, the holders of the Common Stock upon any liquidation, dissolution or winding up of the affairs of the Company shall be entitled as a class, that is, both the holders of the Non-Voting Common Stock and of the Voting Common Stock, to receive pro rata the assets of the Company available for distribution after the above provisions for the rights of all such prior stock. The consolidation or merger of the Company at any time, or from time to time, with any other company or companies, or a sale of all, or substantially all, of the assets of the Company, shall not be construed as a dissolution, liquidation or winding up of the Company within the meaning of this Subdivision 2. 3. VOTING. Except as otherwise provided by these Amended Articles or required by the laws of the State of Ohio, the holders of the Voting Common Stock shall exclusively possess all the voting power of the Company for the election of directors and for all other purposes. The holders of the Non-Voting Common Stock shall have no voting power and no holder thereof shall vote thereon or be entitled to receive notice of any meeting of shareholders. FIFTH: The amount of stated capital of the Corporation at the time of filing this Amended Article Fifth is $1,663,000.00. -4- SIXTH: The Corporation, by action of its Board of Directors, may purchase any issued shares of the Corporation to the extent not prohibited by law. SEVENTH: No holder of shares of any class of stock shall be entitled as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of the Corporation of any class whatsoever, or of securities convertible into stock of the Corporation of any class whatsoever, or of such options, warrants or other rights to subscribe for or acquire shares of stock of the Corporation of any class whatsoever or of securities convertible into stock of the Corporation of any class whatsoever, whether now or hereafter authorized, or whether issued for cash or other consideration or by way of dividend. EIGHTH: These Amended Articles of Incorporation supersede and take the place of the existing Articles of Incorporation as now instituted in the Agreement of Statutory Merger between The Toledo Blade Company and Paul Block and Associates, Inc., entered into September 25, 1946, and filed in the Office of the Secretary of State of the State of Ohio on September 30 1946. IN WITNESS WHEREOF, JOHN D. WILLEY, President, and BERNARD B. BAKER, Secretary, of BLOCK COMMUNICATIONS, INC., acting for and on behalf of said Corporation, have hereunto subscribed their names and caused the seal of said Corporation to be hereunto affixed this 12th day of November, 1970. ---------------------------------------- John D. Willey, President ---------------------------------------- Bernard R. Baker, Secretary -5- EX-3.2 4 j9521601exv3w2.txt EXHIBIT 3.2 Exhibit 3.2 CODE OF REGULATIONS OF BLADE COMMUNICATIONS, INC. ARTICLE I MEETING OF SHAREHOLDERS 1. Annual Meeting. The Annual meeting of the shareholders of this Corporation shall be held on the second Tuesday in April of each year at 10:00 a.m., or if that day should be a legal holiday, then on the succeeding business day at the same hour unless another date in April or May is fixed by the vote of three directors in writing prior to the time notice is required to be given of such meeting. 2. Special Meetings. Special meetings of the shareholders may be called at any time by the President or Vice President or a majority of the Board of Directors acting with or without a meeting, or the holder or holders of one-half (1/2) of all the shares outstanding and entitled to vote thereat. 3. Place of Meetings. Meetings of shareholders shall be held at the offices of Blade Communications, Inc., in the City of Toledo, Ohio, or at such other place in the City of Toledo, Ohio, as shall be stated in the notice of such meeting, unless the Board of Directors, acting at a meeting or a majority of directors acting without a meeting, shall designate some other place within or without the State of Ohio and shall cause the notice thereof to so specify. 4. Notice of Meetings. Unless waived, a written notice of such special meeting, stating the day, hour and place, and purposes of such meeting shall be given by personal delivery or by mail to each shareholder of record entitled to vote or entitled to notice, not more than thirty (30) days nor less than seven (7) days before the date of such meeting. If mailed, it shall be directed to a shareholder at the address as the same appears on the records of the Corporation. 5. Waiver of Notice. My shareholder, either before or after any meeting, may waive any notice required to be given by law or under these regulations, and whenever all of the shareholders entitled to vote shall meet in person or by proxy and consent to hold a meeting, it shall be valid for all purposes without call or notice, and at such meeting any action may be taken. The attendance of any shareholder at a meeting, in person or by proxy, without protesting, prior to or at the commencement of the meeting, the lack of proper notice of such meeting, shall constitute a waiver of notice of such meeting by him. 6. Quorum Adjournment. At any meeting of shareholders, the holders of shares entitling them to exercise a majority of the voting power of the corporation, present in person or by proxy, shall constitute a quorum for such meeting, provided, however, that no action required by law, the Articles of Incorporation, or these Regulations to be authorized or taken by the holders of the designated proportion of the shares of the corporation, may be authorized or taken by a lesser proportion. At any meeting at which a quorum is a present or represented, all questions and business which shall come before the meeting shall be determined by the vote of the holders of a majority of such voting shares as are represented in person or by proxy. At any meeting, whether a quorum is present or not, the holders of a majority of the voting shares represented by shareholders present in person or by proxy may adjourn, from time to time, and from place to place, without notice, other than by announcement at the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted which might be transacted at the meeting as originally notified or held. 7. Proxies. Any shareholder of record entitled to vote or to give consent in writing may vote in person or exercise any other of his rights by proxy or proxies signed by such shareholder, which need not be sealed, witnessed or acknowledged. 8. Voting. At any meeting of shareholders, each shareholder of the Corporation shall, except as otherwise provided by law or by the Articles of Incorporation, or by these Regulations, be entitled to one (1) vote in person or by proxy, for each share of the Corporation registered in his name on the books of the Corporation. 9. Action Without Meeting. Any action which may be taken at any meeting of shareholders may be taken without a meeting if authorized in writing by all the holders of shares who would be entitled to notice of the meeting. ARTICLE II CERTIFICATES 1. Certificates. Certificates evidencing the ownership of shares of the Corporation shall be issued to those entitled to them by transfer or otherwise. Each certificate -2- for shares shall bear a distinguishing number, the signature of the Chairman of the Board of Directors, the President or one of the Vice Presidents, and of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, and if a seal is adopted, the seal of the Corporation (but failure to affix the seal shall not invalidate the certificate if properly signed) and such recitals as may be required by law. 2. Transfer. Such certificates for shares shall be transferable in person or by attorney, but, except as hereinafter provided in the case of lost, mutilated or destroyed certificates, no transfer of shares shall be entered on the records of the Corporation until the previous certificates, if any, issued for the same shall have been surrendered and cancelled. 3. Lost, Mutilated or Destroyed Certificates. If any certificates for shares are lost, mutilated or destroyed, the Board of Directors may authorize the issuance of a new certificate in place thereof, on such terms and conditions as it may deem advisable. The Board of Directors, in its discretion, may refuse to issue such new certificate until the Corporation has been indemnified to its satisfaction. ARTICLE III DIRECTORS 1. General Powers. Except where the law, the Articles of Incorporation, or these Regulations require action to be authorized or taken by the shareholders, all of the authority of the Corporation shall be exercised by its Board of Directors. 2. Number of Directors. Until changed in accordance with the provisions of this section, the number of directors of this Corporation, none of whom need be officers (except for the Co-Chairmen of the board) or shareholders, shall be nine (9). The number of directors may be fixed or changed by resolution at any annual meeting or at any special meeting of shareholders called for that purpose, adopted by the vote of the holders of shares, present in person or by proxy, entitling them to exercise a majority of the voting power on such proposal, but no reduction shall have the effect of removing any director prior to the expiration of his term of office. 3. Election of Directors. Directors shall be elected at the annual meeting of shareholders, but when the annual meeting is not held or directors are not elected thereat, they may be elected at a special meeting called and held for that purpose. At any meeting of shareholders called for that purpose, the entire Board of Directors or any individual director may -3- be removed from office, with or without assignment of cause, by the vote of a majority of the shares entitled to vote at an election of directors; provided however, an individual director shall not be removed in the event votes of a sufficient number of shares are cast against the resolution of his removal, which if cumulatively voted at an election of the entire Board would be sufficient to elect at least one director, or except as otherwise provided in these Regulations. 4. Term of Office. Directors shall hold office until the annual meeting next succeeding their election, or until their successors are elected and qualified. 5. Vacancies. Unless a vacancy on the board is filled by the shareholders within fifteen (15) days after the event occurs, the Board of Directors may, by a majority vote of the remaining directors, fill such vacancy. Shareholders entitled to elect directors shall have the right to fill any vacancy on the Board of Directors (whether the same has been temporarily filled by the remaining directors or, not) at any meeting of the shareholders called for that purpose, and any directors elected at such meeting of shareholders shall serve until the next annual election of directors or until their successors are elected and qualified. 6. Meetings of Board. A meeting of the Board of Directors shall be held immediately following the adjournment of each shareholders' meeting, at which directors are elected, and notice of such meeting need not be given. The Board of Directors may, by resolution, provide for other meetings of the Board. Special meetings of the Board may be held at any time upon call of the Chairmen of the Board, the President, or of the Vice President or a majority of the Board of Directors, authorized to exercise the authority of the President in his absence, death or disability. Notices of any special meeting of the Board of Directors shall be mailed to each director, addressed to him at his residence or usual place of business, or be delivered personally or sent by telegram or cablegram, at least five (5) days, excluding Sundays and legal holidays, before the day on which the meeting is to be held. Every such notice shall state the time and place of the meeting, but need not state the purpose thereof. Notice of any meeting of the Board need not be given to any director, however, if waived by him in writing, or by telegram or cablegram, whether before or after such meeting be held, or if he is present at such meeting, and any meeting of the Board shall be a legal meeting without any notice thereof having been given, if all the directors shall be present thereat. -4- All meetings of the Board shall be held at the principal office of the corporation, or at such other place, within or without the State of Ohio, as the Board of Directors may determine, from time to time, and as may be specified in the notice of the meeting. 7. Quorum. A majority of the board of Directors shall constitute a quorum for the transaction of business, provided that whenever less than a quorum is present at the time and place appointed for any meeting of the Board, a majority of those present may adjourn, the meeting, without notice other than by announcement at the meeting of the time and place to which it is adjourned, until a quorum shall be present. The act of a majority of the directors present at a meeting at which a quorum is present is the act of the Board unless the act of a greater number is required by these Regulations. 8. Committee. The Board of Directors may from time to time create or appoint an Executive Committee and nay other committee or committees of the board, to consist of non less than three (3) directors, and to the extend permitted by law, may delegate to any such committee any of the authority of the Board, however conferred, other than that of filing vacancies in the Board or in any committee of the Board. The directors may appoint one or more directors as alternate members of any such committee, who may take the place of any absent member or members at any meeting of such committee. Each such committee shall serve at the pleasure of the board, shall act only in the intervals between the meetings of the Board, and shall be subject to the control and direction of the Board. 9. By-Laws. For the government of its action, the Board of Directors may adopt by-laws consistent with the Articles of incorporation and these Regulations. 10. Action Without Meeting. Any action which could be taken by the board of Directors, or any committee, at a duly called meeting of the directors or such committee may be taken without such a meeting if, prior to or subsequent to such action, all members of the Board or of such committee, as the case may be, consent thereto in writing and such written consents are filed with the minutes of the proceedings of the Board or committee. Such consent shall have the same effect as the unanimous vote of the Board or committee for all purposes and may be stated as such in any certification required to be given in connection therewith. 11. Meetings by Telephone. One or more of the Directors may participate in any regular or special meeting of the Board of Directors, or of any committee of the Board of Directors, through any communications equipment if all persons participating in the meeting are -5- able to hear each other. Participation in a meeting pursuant to this section of these Regulations shall constitute presence at such meeting. ARTICLE IV OFFICERS 1. General Provisions. The officers of the Corporation shall consist of two Co-Chairmen of the Board, a President, one or more Vice-Presidents, a Secretary and a Treasurer, each of whom shall be elected or appointed by the Board of Directors. The Board of Directors may from time to time create such other offices and appoint such other officers, subordinate officers and assistant officers as it may determine. The Co-Chairmen of the Board shall be, but the other officers need not be, chosen from among the members of the Board of Directors. Any two or more offices may be held by the same person, except the offices of president and secretary, but no officers shall execute, acknowledge or verify any instrument in more than one capacity. 2. Term of Office. The officers of the Corporation shall hold office during the pleasure of the Board of Directors, and, unless sooner removed by the Board of Directors, until their successors be elected and qualified. The Board of Directors may remove any officer at any time, with or without cause, by a majority vote. A vacancy in any office, occurring for whatever reason, shall be filled by the Board of Directors. Compensation, including pension, disability and death benefits, of officers may be fixed by the Directors or by any committee or by an officer or officers to whom such authority shall be delegated by the Directors. ARTICLE V DUTIES OF OFFICERS 1. Co-Chairmen of the Board. The Co-Chairmen of the Board shall be the chief executive officers of the Corporation and they shall divide the duties of the office of the chief executive officer between them as they may jointly determine. In the event of the demise, disability, resignation or refusal to act of one of the two Co-Chairmen the authority and responsibilities of the chief executive officer shall devolve on the other Co-Chairman, unless and until the Board of Directors determines otherwise. In the event of the demise, resignation, disability or refusal to act of both of the Co-Chairmen the authority and responsibilities of the chief executive officer shall devolve on the President, unless and until the Board of Directors determines otherwise. In addition to the duties and responsibilities commonly associated with -6- the office of chief executive officer, one or the other of the Co-Chairmen of the board shall preside at all meetings of the Board of Directors and the shareholders. 2. President. The President shall be the chief operating officer and, as such, have general supervision of the affairs of the Corporation, he shall sign or countersign all certificates, contracts or other instruments of the Corporation as authorized by the Board of Directors, shall make reports to the Board of Directors and stockholders, and shall perform any and all other duties as are incident to his office or are properly required of him by the Board of Directors. In the absence, inability, or refusal to serve of the Co-Chairmen of the Board, he shall preside at all meetings of shareholders and the Board of Directors. 3. Vice President. The Vice President or Vice Presidents shall perform such duties as are conferred upon him or them by the Board of Directors, the Co-Chairmen of the Board, or the President. At the request of the Board of Directors, the Co-Chairmen of the Board, or the President, or in case of the absence or disability of the President, the Vice President, or if more than one, one of the Vice Presidents in order of their seniority, shall perform all the duties of the President and, when so acting, shall have all the powers of the President. 4. Secretary. The Secretary shall keep the minutes of all proceedings of the shareholders and directors of this corporation and make proper record of same, which shall be attested by him. He shall keep such books as may be required by the Board of Directors, shall act as Secretary of all shareholders meetings, shall have charge of the stock books of the Corporation, shall issue and sign all certificates of stock and shall perform such other duties as may be required of him by the shareholders or directors. 5. Treasurer. The Treasurer shall have custody of all moneys and securities of the Corporation and shall bond, in such sum and with such sureties as the directors may require, conditioned on the faithful performance of the duties of his office. He shall keep, or cause to be kept, regular books of account and shall submit them, together with his vouchers, receipts, records and other papers, to the directors for their examination and approval as often as they may require; and shall perform all such other duties as are incident to his office. 6. Assistant Officers. Assistant officers shall hold office during the pleasure of the Board of Directors and shall act as Assistants to, and under the direction of, their superior officers, and shall be vested with all the powers and be required to perform any of the duties of their superior officers in their absence, and they shall perform such other and further duties as may from time to time be required of them by the Board of Directors. -7- ARTICLE VI COMMON DIRECTORSHIPS OR INTEREST 1. Effect of Common Directorships and Directors' Personal Interests. No officer, director or shareholder of the Corporation shall be disqualified by his office, membership or stock ownership from dealing or contracting with the Corporation as a vendor, purchaser, employee, agent or in any other similar or dissimilar capacity; nor shall any transaction, contract or act of the Corporation be void or voidable or in any way affected or invalidated by reason of the fact that any such officer, director or shareholder or the Corporation, any firm of which he may be a member, or any other corporation or affiliate or subsidiary of which he may be an officer, director or shareholder, is in any way interested in such transaction, contract or act, provided the transaction is fair to the Corporation at the time the interest of such officer, director or shareholder is disclosed to or known by the Board of Directors of the Corporation, or of the shareholder as the case may be, or such members thereof as shall be present at any meeting at which action is taken upon any such transaction, contract or act and such transaction is authorized either by the affirmative vote of a majority of such disinterested directors, even though such disinterested directors be less than a quorum; or by the affirmative vote of the holder of shares entitling them to exercise a majority of the voting power of the Corporation not held by person interested in the contract or transaction. Neither shall such officer, director or shareholder be accountable or otherwise responsible to the Corporation for or in connection with any such transaction, contract or act, or for any gains or profits realized by him by reason of the fact that he, any firm of which he is a member, or any corporation or affiliate or subsidiary of which he is an officer, director, or shareholder, is interested in any such transaction, contract or act. Any such officer, director or shareholder, if he is a director, may be counted in determining the existence of a quorum at any meeting of the Board of Directors or of the shareholders of the Corporation which shall authorize or take action upon any such transaction, contract or act. ARTICLE VII INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES The Corporation shall indemnify or agree to indemnify, to the fullest extent now or hereafter permitted by law, a director, officer or salaried employee, or a former director, officer, agent or salaried employee or any person who is serving or has served at the request of the Corporation as a director, officer or salaried employee of any other corporation, joint venture, or other enterprise, or as a trustee of any trust, against costs and expenses reasonably incurred by -8- or imposed upon him, judgments, decrees, fines, penalties or amounts paid in settlement or in connection with the defense of any pending, concluded, or threatened action, suit or proceeding, criminal, civil, administrative, investigative, or otherwise, to which he is or may be made a party by reason of being or having been such director, officer, employee or trustees provides that, a determination is made (a) that he was not, and has not been adjudicated to have been, negligent or guilty of misconduct in the performance of his duty to the Corporation or other entity of which he is a director, officer, employee or trustee, (b) that he acted in good faith in what he reasonably believed to be in or not opposed to the best interests of the Corporation, or other entity, (c) that, in any matter the subject of a criminal action, suit or proceeding, he had no reasonable cause to believe that his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nodo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Any such determination shall be made, and any action authorizing such indemnification shall be taken, by the directors of the Corporation acting at a meeting at which a quorum of directors who are and were not parties to or threatened with such action, suit or proceeding is present. Any director who is a party to or threatened with such action, suit, or proceeding shall not be qualified to vote respecting such determination or action, and if for this reason a quorum of directors cannot be obtained for such vote, such determination shall be made by any of the following procedures: (1) by a written opinion of independent counsel, (2) by resolution adopted by a majority of a committee of stockholders or directors who have not incurred such expenses, appointed by the Board of Directors, or (3), by the affirmative vote at a meeting held for such purpose of the holders of shares entitling them to exercise a majority of the voting power of the Corporation on such matters, or by a written consent of the holders of shares entitling them to exercise two-thirds (2/3) of the voting power on such matters (whether or not such shareholders are personally interested in the determination). Upon any such determination by the Board of Directors, or by any one of the other foregoing procedures, that the conditions set forth in clauses (a), (b), and (c), of this article have been fulfilled, such indemnity shall. be binding upon the Corporation and shall be made without further action of the directors. Indemnification under this article shall not be deemed exclusive of any other rights to which such director, officer, employee, or trustee may be entitled under the Article of -9- Incorporation, the Regulations of the Corporation, any agreement, vote of shareholders, or as a matter of law. ARTICLE VIII FISCAL YEAR The fiscal year of the Corporation shall be the calendar year unless changed by appropriate action by the Board of Directors. ARTICLE IX PROXY Subject to the terms and provisions of ARTICLE FOURTH of said Amended Articles of Incorporation of the Corporation, at any meeting of shareholders, annual or special, any shareholder of record may be represented and vote by proxy or proxies, evidenced by an instrument in writing, but such written proxy must be first filed with the Secretary of the Corporation before the person authorized can vote thereunder. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the shareholder executing it shall have specified therein the length of time it shall continue in force. ARTICLE X SEAL The seal of the Corporation shall be circular, and shall contain the words "Blade Communications, Inc., Toledo, Ohio 1876", around its outer circle, and the words "Corporate Seal" inscribed within. ARTICLE XI AMENDMENTS The holders of the shares of the Voting Common Stock of the Corporation, at any annual or special meeting held for such purpose, may amend this Code of Regulations or may adopt new regulations by the affirmative vote of the holders of shares entitling them to exercise two-thirds of the voting power of the Corporation; and the regulations may be amended, or new -10- regulations may be adopted, without a meeting by the written consent of the holders of the voting shares entitling them to exercise the same two-thirds of such voting power. In addition, whenever the holders of shares of any particular class, that is, either the voting or non-voting common shares, are entitled to vote as a class on the adoption of an amendment to Article XIV of these regulations, such amendment in order to be adopted must receive the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of such class. ARTICLE XII NO MODIFICATION No provision of this Code of Regulations is intended to, and it shall not, limit or modify in any way any term or provision of ARTICLE FOURTH of the Amended Articles of Incorporation of this Corporation. ARTICLE XIII ORDER OF BUSINESS Unless changed by a majority vote, at all shareholders' meetings, the order of business shall be as follows: 1. Reading of minutes. 2. Reading of reports and statements. 3. Unfinished business. 4. Election of directors. 5. Hew or miscellaneous business. ARTICLE XIV RESTRICTIONS ON TRANSFER OF SHARES 1. Transfer of Stock. Transfer of stock shall be made only on the books of the Corporation and must be accompanied by the surrender of the certificate properly assigned -11- evidencing the stock as transferred. Certificates so surrendered shall be cancelled and attached to the stub corresponding thereto in the Stock Certificate Book. 2. Restrictions on Transfers of Shares. No present or future shareholder of the Corporation or his, her or its executors, administrators, personal representatives, assigns, transferees, or the purchaser of any shares of the common stock of the Corporation sold on execution or at any judicial sale shall encumber or dispose of the common stock of the Corporation which he, she, or it now owns or may hereafter acquire, except as follows: (a) Any shareholder may transfer any part or all of such stock by testate direction or intestate distribution at the time of his or her death to, or in trust for the benefit of, any person or persons, or by gift to, or in trust for the benefit of, himself, herself, his or her spouse, his or her parent, or any descendant of him or her. (b) Any corporate shareholder may transfer all or part of its stock to a resultant or acquiring corporation in the event of a merger or consolidation with or into such other corporation, or. in case substantially all of its assets shall be transferred to an acquiring corporation. (c) Any corporate shareholder may transfer all or part of its stock to its then existing bona fide shareholders as part of a plan of corporate reorganization; a spin-off, split-off or split-up; or a plan of partial or complete liquidation or other similar plans of corporate reorganization or liquidation. (d) Any shareholder ("Offering Shareholder") who desires to sell, pledge or otherwise encumber or dispose of all or any part of such stock in a manner other than described in paragraphs (a) to (c) above shall give written notice by certified mail, with return receipt requested, to the Secretary of the Corporation (who shall thereupon immediately notify all the directors of the Corporation writing) of his, her or its desire to sell and dispose of the same, which notice shall offer such stock for sale and state the price per share at which he, she or it offers such stock for sale (the "Offer"). (1) Within thirty (30) days after the receipt of the Offer, the Corporation may at its option, elect to purchase all (if the Offering Shareholder is an individual) or any part of the shares being -12- offered by giving notice by certified tail to such Offering Shareholder and that portion of the stock so offered to be sold shall be sold and transferred to the Corporation within ten (10) days from the date the Offer to purchase is accepted by the Corporation, as aforesaid, provided the purchase price is paid in full within the same period. (2) Any such stock which the Corporation does not elect to purchase, as aforesaid, shall then be offered by the Offering Shareholder to those other shareholders of the same class of stock of the Corporation as is being offered and who share the same common ancestor, i.e. either Paul Block, Jr. or William Block, including such ancestor (the "Related Shareholders"), upon the terms and at the price specified in the Offer. The Offer to the related Shareholders shall be in such proportion as the respective stock ownership of the same class of each such Related Shareholder shall bear to the aggregate stock of the same class of stock of the Corporation owned by all the Related Shareholders. Such Related Shareholders shall have the same thirty (30) day period after receipt of the Offer within which to elect to purchase and the same ten (10) day period within which to complete the purchase, and each such Related Shareholder may purchase all or such portion of his, her or its proportionate part of such offered stock as he, she or it may desire. (3) And such stock which the Related Shareholders do not elect to purchase, as aforesaid, shall then be offered by the Offering Shareholder to those other common shareholders of the Corporation who share the same common ancestor, including such ancestor, upon the terms and at the price specified in the Offer. The Offer to the Related Shareholders of the Corporation shall be in such proportion as the respective stock ownership of each such Related Shareholder shall bear to the aggregate common stock of the Corporation owned by all the Related Shareholders. Such Related Shareholders shall have the same thirty (30) day period after receipt of the offer within which to elect to purchase and the -13- same ten (10) day period within which to complete the purchase, and each such Related Shareholder may purchase all or such portion of his, her or its proportionate part of such offered stock as he, she or it may desire. (4) Any such stock which the Related Shareholders do not elect to purchase, as aforesaid, shall then be offered by the Offering Shareholder to those other Shareholders of the same class of stock of the Corporation as is being offered and who do not share the same common ancestor, including such ancestor (the "Other Related Shareholders") upon the terms and at the price specified in the Offer. The Offer to the Other Related Shareholders of the Corporation shall be in such proportion as the respective stock ownership of the same class of each such Other Related Shareholder shall bear to the aggregate stock of the same class of the Corporation owned by all the Other Related Shareholders. Such Other Related Shareholders shall have the same thirty (30) day period after receipt of the Offer within which to elect to purchase and the same ten (10) day period within which to complete the purchase, and each such Other Related Shareholder may purchase all or such portion of his, her or its proportionate part of such offered stock as he, she or it nay desire. (5) Any such stock which the Other Related Shareholders do not elect to purchase, as aforesaid, shall then be offered by the Offering Shareholder to those other common shareholders of the Corporation who do not share the same common ancestor, including such ancestor, upon the terms and at the price specified in the offer. The Offer to the Other Related Shareholders of the Corporation shall be in such proportion as the respective stock ownership of each such Other Related Shareholder shall bear to the aggregate common stock of the Corporation owned by all the Other Related Shareholders. Such Other Related Shareholders shall have the same thirty (30) day period after receipt of the Offer within which to elect to purchase and the same ten (10) day period within which to complete the purchase and each such Other -14- Related Shareholder may purchase all or such portion of his, her or its proportionate part of such offered stock as he, she or it may desire. (6) Any such stock which the Other Related Shareholders of the Corporation do not elect to purchase shall then be offered by the Offering Shareholder to those other common shareholders of the Corporation, irrespective of ancestry, upon the terms and at the price specified in the Offer. The Offer to the other common shareholders shall be in such proportion as the respective common stock ownership of each such other shareholder shall bear to the outstanding common stock of the Corporation, excluding therefrom the stock then owned by the Offering Shareholder and by the shareholders declining to purchase his, her or its full proportionate share of the stock then being offered for sale. Each other shareholder shall have fifteen (15) day period after receipt of the Offer within which to elect to purchase and the same ten (10) day period within which to complete the purchase and each such other shareholder may purchase all or such proportion of his, her or its proportionate part of such offered stock as he, she or it may desire. (7) Any shareholder, whether a Related Shareholder, Other Related Shareholder, or shareholder, may elect in his, her or its acceptance to purchase, in addition to the shares initially offered to him, her or it, the balance (or the balance up to a maximum number stated by the offeree) of any shares being offered to other offerees which are not accepted by such offerees. If more than one offeree elects to make an additional acceptance, their elective purchases thereunder shall be (up to any stated maximum) in proportion to the total number of other offerees making such election. (8) Any shares of such stock which is, not purchased by the Corporation or the shareholders as above provided may be sold to such person, firm, association or corporation as the Offering Shareholder may desire for a period ending on the one hundred twentieth (120th) day after the expiration of the aforesaid fifteen -15- (15) day period, at the same price, in the same quantity, and upon the same or more favorable (to the Offering Shareholder) terms and conditions as those upon which it was offered to the Corporation and such shareholders. Upon the expiration of such one hundred twentieth (120th) day period, if such Offering Shareholder does not sell all of such stock, then such shareholder shall not then again reoffer such stock until one hundred and ninety (190) days have elapsed after the expiration of the aforesaid one hundred twenty (120) day period. Such reoffering shall be on the same terms and conditions as set forth in this Section. (e) Before any shares of issued stock subsequently reacquired by the Corporation, or any additional shares of common stock or securities convertible into stock of the Corporation which subsequently may be authorized by the Corporation, are otherwise offered for sale or disposed of, they shall first be offered for sale at the issue price, or if to be disposed of otherwise than for cash, on the terms of such proposed disposition to the holders of the common stock then outstanding in proportion to their holdings. If one or more of such shareholders shall not accept such offer in writing within five (5) days from the date of his, her or its receipt thereof, the stock or other securities not so accepted shall be offered for sale at the issue price, or if to be disposed of otherwise than for cash, on the terms of such proposed disposition to the remaining holders of common stock in proportion to the number of shares thereof held. If one or more of such remaining shareholders shall not accept such offer in writing within five (5) days from the date of his, her or its receipt thereof, there shall be no further restriction as to the person or persons to whom the stock or other securities not so accepted may be sold; provided, that such stock or other securities shall not be sold below the issue price (underwriting or brokerage commission excepted). or, if to be disposed of otherwise than for cash, on terms less favorable than those on which such stock or other securities were offered to the holders of common stock in accordance with the terms of this paragraph; and provided, further, that any such stock or other securities no so sold within a period of one hundred twenty (120) days from the expiration of the five (5) day period last above referred to or within a period of one hundred twenty (120) days -16- from the date such stock or other securities may be permitted to be sold to the public under the rules and regulations of the appropriate state securities commissions and/or the Securities and Exchange Commission, shall not thereafter be sold or disposed of except in compliance with the provisions of this Section. (f) For purposes of this Article, if the Offering Shareholder is either the spouse, or transferee, or both, of a shareholder, then "sharing the same common ancestor" shall be determined by reference to such shareholder or his or her transferring or devising shareholder. (g) Any and all shares of common stock of the Corporation whether heretofore or hereafter issued, shall have stamped, printed, or legibly written thereon an appropriate legend-giving notice of the provisions of this Section as follows: "No shareholder may encumber or dispose of his common stock except (1) by certain transfers to family members, executors, administrators, or to corporate successors or assigns under certain circumstances, and (2) by sale if such shareholder first offers the shares to the Corporation or under certain circumstances to the other shareholders, on the same terms as such shareholder can sell to a bona fide prospective purchaser. The complete terms of this restriction are contained in Article XIV of the Code of Regulations of Blade Communications, Inc. duly adopted, and as the same may be amended from time to time, which are on file at the office of the Corporation. On receipt of a written request therefor, the Corporation will within five (5) days mail a copy thereof to any shareholder without charge." -17- EX-3.3 5 j9521601exv3w3.txt EXHIBIT 3.3 Exhibit 3.3 CLOSE CORPORATION OPERATING AGREEMENT THIS AGREEMENT, made and entered into as of this day of December, 1988, by and among BLADE COMMUNICATIONS, INC. (the "Corporation"), an Ohio corporation having its principal place of business in Toledo, Ohio or ("Blade") and the holders of all the Corporation's issued and outstanding stock (voting common, non-voting common and Class A Stock) (the "Shareholders"). RECITALS The following organizational structure is intended to assure the continuity of the principal of family equality in the governance of the corporation, it being the intention of the company founder, Paul Block, to provide equal ownership and equal influence in decision-making for his two sons, Paul Block, Jr. and William Block. This same principle of equality was intended in the agreements made by, among others, Paul Block, Jr. and William Block as to the voting stock they would pass on to their progeny. Once again, the equality of the two surviving families was to be assured. Neither family was to be dominant in the decision-making process. Unanimity of decision-making has been and must continue to be an important element in order to assure the success of the business enterprise. Non-family directors and operating executives should not be forced to take sides. Their effectiveness would be quickly immobilized if they feared that divisiveness or a possible reversal of a decision by conflicting family positions might inhibit a clear and positive course of action. An additional purpose of the Agreement is to provide for dispute settlement through arbitration. It is a less severe procedure than dissolution or any other legal deadlock remedies and is available to protect the rights of the parties. Arbitration does not reflect adversely upon the financial standing or good name of the Corporation nor does it take the property out of the hands of the owners of the persons actually administering the business. NOW, THEREFORE, in order to provide for a working organizational structure that will perpetuate the family equality concept and in consideration of the mutual promises and covenants herein contained and for other valuable considerations, the parties hereto agree that the Corporation and its Shareholders shall be subject to this Close Corporation Operating Agreement (the "Agreement"), which is to be governed by Ohio Revised Code Section 1701.591, as follows: 1. The ultimate decision-making authority for the Corporation is vested in an Executive Committee (hereunder called the "Executive Committee" or the "Committee") except for those powers specifically reserved to the Board of Directors (hereinafter called the "Board of Directors" or the "Board") by Section 4 of this Agreement. The Committee shall make a recommendation to the Board on each matter which requires the exercise of the powers reserved to the Board except that it shall not be required to, but may make a recommendation, with respect to matters which relate to operation of the Corporation's subsidiaries owning and operating TV stations or other subsidiaries which subsidiaries are subject to FCC Consent to Transfer of control rules and regulations as provided in Section 7 hereof. All Committee members, as directors, will vote in support of the Committee recommendation whether or not the recommendation of the Committee was reached by virtue of arbitration as provided in Section 7 hereof, or otherwise except with respect to the FCC matters as set forth in Section 7. The Executive Committee will initially include those members of the two families that either own or will vote the voting shares of corporate stock. IT will always be comprised of four (4) members. Two members (the "Paul Block members") will represent the Paul Block, Jr. family and two (2) members (the "William Block members") will represent the William Block family. Initially the William Block members will be William Block and William Block, Jr., and the Paul Block, Jr. members will be Allan Block and John Robinson Block. Voting rights of the -2- Committee members will be equal despite the number of voting shares they represent. Three (3) votes shall be sufficient to result in a binding Committee decision or recommendation. The Committee will select its own chairman and secretary annually. 2. The Executive Committee will function as the office of the chief executive and collectively exercise the powers and discharge the responsibilities of the chief executive officer. The Committee may delegate responsibility and authority to the appropriate line executives for the day-to-day operating decisions of each division and subsidiary of the Corporation. Since most routine, day-to-day decisions will normally be made by either the general manager of the subsidiary or division or by the group manager to whom he reports, those decisions will not be on the Committee's agenda unless the Committee elects otherwise in specific instances. The group manager is defined as the member of the Executive Committee responsible for several of the Corporation's subsidiaries, divisions or distinct areas of operations. Any decision to be made by a group manager that would normally be approved or reviewed by a chief executive officer shall be approved or reviewed by the Committee. The Executive Committee will establish the necessary communication lines and review procedures with the Corporation's operating executives in order to maintain control and to assure the growth and accomplishment of the goals and objectives of each division and subsidiary in the Corporation. Because the Executive Committee will function as the office of the chief executive, mattes that would normally be considered for action by a chief executive officer will be considered for action by the Committee. It is intended that most of these matters to be considered for action need not be handled in a formal meeting but rather through personal or telephone communication leading to a quick decision. Each executive and each group manager serving on the Committee shall contact the other Committee members with a recommendation or a proposal on matters to be considered for action. This will permit a quick consensus agreement and allow implementation to move ahead. The Committee member who has initiated the proposed action shall promptly issue a memo to the other Committee members confirming the -3- decision or decisions rendered by the Committee so that a written record of all decisions of the Committee will be maintained. The substance of all Committee decisions shall be provided to the line executive or executives of the division, subsidiary or other area of operation directly affected by the decision at the time the decision will be implemented as determined by the Committee. 3. All members of the Committee will use their best efforts to accomplish the objectives of this Agreement and will make reasonable and maximum good faith efforts to contact the other members of the Committee for consultation and to be available for consultation either in person or by conference telephone. If a member of the Committee will not be available for consultation for a period of more than one week, then he must give his written proxy to another member of the Committee so that the Committee business can proceed. If an emergency arises which requires an immediate Committee decision of a critical nature within twenty-four (24) hours and a Committee member cannot be reached for consultation, then the absent Committee member will be deemed t have given his proxy to the Committee member who represents the same family and is available for consultation for purposes of making that emergency decision. In all other instances, except where a Committee member must be replaced as provided in Section 6, a Committee member who is or may be unavailable for an informal or formal meeting must give a written proxy to another Committee member in order to have his vote counted on the matter or matters before the Committee. The Executive Committee will meet formally at least quarterly to review corporate progress, to make decisions on matters which are before the Committee on the day of the meeting and to insure that all members of the Committee meet together on a periodic basis. The powers of the Committee, in exercising its chief executive function, shall include, but not be limited to, (i) approval or disapproval of requests for capital expenditures not previously approved, (ii) making decisions on banking or financing connections, (iii) making acquisition or divestment decisions other than those requiring two-thirds vote of the voting -4- shareholders, (iv) reviewing corporate financial performance against goal, (v) making major executive appointments and removals other than corporate officers, (vi) approving charitable contributions in excess of $5,000, (vii) performing annual key executive performance and compensation reviews, (viii) authorizing the issuance of authorized shares, and (ix) making any other corporate (or corporate subsidiary) policy decisions except as to the matter set forth in Section 4. Nothing contained herein shall be construed to mean that actions of the Committee can only be taken at the quarterly or other scheduled meetings, it being the intention of the parties that the Committee may reach decisions and take action through informal meetings or consultation as provided in Section 2 above. 4. The number directors in nine until changed at any meeting of the voting Shareholders. Board action, which shall be by the affirmative vote of a majority of the number of directors constituting the entire Board (or by unanimous written consent), shall be required for the following matter: A) To create or incur any indebtedness except unsecured current liabilities incurred in the ordinary course of business; B) To create or incur any mortgage, pledge, lien or encumbrance on property or asset now owned or hereafter acquired by the Corporation; C) To make and execute any guaranties on behalf of the Corporation; D) To elect officers; E) To fill any vacancies in the full Board of Directors, if the Shareholders fail to do so, and then only by selection from the candidate or candidates selected by the Executive Committee; -5- F) To accept or reject the recommendation of the Executive Committee (or any special committee appointed by the Board) with respect to an outside offer to purchase the shares or assets of the Corporation; G) To accept or reject the recommendations of the members of the committee or the arbitrator described in Section 7 with respect to the operation of the Corporation's subsidiaries owing and operating TV stations or other subsidiaries which subsidiaries are subject to the Federal Communications Commission's (FCC) consent for Transfer of Control rules and regulations if, but only if, the Committee is deadlocked and unable to reach a decision with respect to such matter; H) To authorize dividend distributions; I) To authorize the purchase of shares of the Corporation by the Corporation; J) Any other matters referred to the Board by the Committee for Board action. 5. In addition to the quarterly meeting, any three members of the Committee may call a special formal meeting of the Committee. The call for the meeting will include an agenda indicating appropriate items to be discussed and real formal meeting called will be to discuss a new subject not previously considered y the Committee within the past year. Unless otherwise agreed to in writing by the Committee: (i) quarterly and special formal meetings will normally be held at the offices of the Corporation in Toledo, Ohio; (ii) the agenda for quarterly meetings will be prepared by the chairman and distributed at least one (1) week before the meeting; (iii) an ex-officio recording secretary may be used in formal Committee meetings to assure accurate minutes, to enable all four (4) Committee members to -6- participate in the meeting without minute-taking diversions and to enable all of the members to have a record for the decisions reached; and (iv) at least three (3) business days' notice is required to call a special formal meeting of the Committee. 6. In the event of the death, permanent incapacity of, or resignation by, any Committee member, the remaining Paul Block, Jr member or the remaining William Block member, as the case may be, of the Committee (hereinafter the "remaining Committee member") will within ten (10) business days thereof select another family member or a spouse of a family member, or if no family member or spouse of a family member of that side of the family is willing to serve on the Committee, another designated representative who will serve until his death, permanent incapacity or resignation, thus assuring equal representation of both families. The remaining Committee member shall consult with the Corporation's FCC counsel before making the selection of the new member with respect to whether the FCC must approve the new member for purposes of the FCC's Consent to Transfer of Control rules and regulations, and shall give the other Committee members written notice of the identity of the new Committee member within twenty-four (24) hours of the selection. If the Corporation's FCC counsel determines that an application for transfer of control must be filed with the FCC, the Corporation shall immediately file such an application unless the remaining Committee member agrees to an alternative method for filling the vacancy on the Committee which makes such an application unnecessary. If an application must be made, until the application has been approved, the remaining Committee member shall have two votes on matters relating to the operation of the Corporation's subsidiaries owing and operating TV stations or other subsidiaries which subsidiaries are subject to FCC Consent to Transfer of Control rules and regulations, but the new Committee member shall be entitled to exercise a vote on all matters relating to the operations of the Corporation and its other subsidiaries and divisions as provided herein. If approval of any Committee member is denied by the FCC or, if the FCC revokes its approval of any Committee member who has previously been approved, such Committee member shall be removed from the -7- Committee effective as of the date that all rights of appeal of such member have been unsuccessfully exhausted. Following the removal, a new member shall be selected by the remaining Committee member in accordance with the procedure for selection set forth above. If the Corporation's FCC counsel determines that an application for transfer of control to the FCC need not be made, the new member shall be entitled to immediately exercise a vote as a Committee member on all matters relating to the operations of the Corporation and all of its subsidiaries. No formal Committee meetings will be held for ten (10) business days after a vacancy occurs to enable the surviving member to till the vacancy and during that interim period, but only during that interim period, the surviving member will be deemed to have the proxy of the member who is deceased, permanently incapacitated or who has resigned if an informal Committee meeting becomes necessary to conduct business. 7. In the event of a voting deadlock, any two (2) Committee members may require a tie-breaking vote from an outside-the-family arbitrator mutually determined by the Committee. The arbitrator will be a U.S. citizen and will not be an employee and, preferably, should be familiar with the business of the Corporation and its goals. In addition, the arbitrator's impartiality shall be demonstrated by the fact that he has no close social or business contacts with either family group. The arbitrator shall not engage in ex parte contacts with any member of the Committee without the specific written consent of all members of the Committee. The arbitrator, and an alternate, shall be selected by unanimous vote of the members of the Committee and shall serve for a two (2) year period and will continue thereafter for annual periods if three (3) out of four (4) Committee members support them. Notice of failure to support the continuation of the terms of the arbitrators shall be given two (2) months prior to the termination of the arbitrators' term. The initial arbitrators shall be Chester Devenow and Rene C. McPherson. -8- Facts and position statements pertaining to the matter or matters to be arbitrated which shall incorporate the original positions taken by the respective Committee members at the time of the deadlock will be prepared by the Committee members with the assistance of such advisors as the Committee members may select and will be submitted to the arbitrator within one (1) week of the deadlock. The parties shall make available to the arbitrator any records or documents which are determined, in the arbitrator's discretion, to be necessary for the proper resolution of the dispute. If a decision must be made before the time specified herein for submission of facts and position statements, communication with the arbitrator may be by conference call or in-person conferences without presentation of written facts, position papers, records or documents. The arbitrator shall, within a maximum of one (1) week of the receipt of the position statements or completion of the conferences, break the deadlock by adopting one of the two original positions taken by the deadlocked factions of the Committee at the time of the deadlock in its entirety unless three (3) of the four (4) Committee members agree to an alternative compromise decision suggested by the arbitrator. This tie-breaking procedure will be employed only when all efforts for a consensus in decision-making by the Committee have failed. The arbitrator shall exercise his or her impartial judgment in resolving any deadlock, guided by what is determined to be in the best interests of the Corporation. The decision of the arbitrator shall become the decision of the Committee except when a decision is required with respect to matters which relate to the operation of the Corporation's subsidiaries owing and operating TV stations or other subsidiaries which subsidiaries are subject to FCC Consent to Transfer of Control rules and regulations. In that case the arbitrator may, if requested by the Committee, make suggestions or recommendations which will be considered by the Board of Directors of the Corporation in exercising its independent judgment. The Committee members who are members of the Board of Directors shall not be required to vote as a group on any such decision. In making suggestions or recommendations to the Board of Directors the arbitrator shall take into consideration the rules and regulations of any -9- state or federal regulatory body or agency. All members of the Committee and the Board of Directors will also be guided by and exercise their judgment in the same manner. If the arbitrator is called on to settle a deadlock with respect to recommending any or all officer candidates for election by the Board, then the arbitrator shall select one of the two candidate or candidates selected by the deadlocked factions of the Committee to fill each office or offices in controversy. Such officer or officers shall hold office for a minimum of one (1) year after the arbitrator has made his selection and such person or persons have been elected by the Board of Directors at a meeting to be held within one (1) week of the receipt of the arbitrator's selection or by unanimous consent in writing within the same period. If the arbitrator is called on to settle a deadlock with respect to selecting a successor to a vacancy on the full Board of Directors, then the arbitrator shall select one of the two successor candidates selected by the deadlocked factions of the Committee to fill such vacancy on the full board, and such successor shall serve for a minimum of one (1) year after the selection has been made. Any such vacancy shall be filled within thirty (3) days. If there is a deadlock of the voting Shareholders with respect to the re-election (at any annual or special meeting held to elect directors) of the full board of Directors as constituted on January 1, 1989, or as subsequently constituted on the date of a shareholders' meeting, then that Board will hold office until the next annual or special Shareholders' meeting at which there is no deadlock, with any vacancies on the full Board to be filled after the Committee, or the arbitrator, as the case may be, has reached a decision as provided in this Agreement. The arbitrator's power to break deadlocks as provided in this Agreement shall commence when the mobile radio, CARS and satellite earth station "receive only" licenses have been transferred from the Corporation's newspaper and cable system subsidiaries to the newly formed subsidiary of the Corporation, CARS Holding. Inc. The Corporation will make every effort to accomplish the transfer of said licenses to CARS Holding, Inc. as soon as possible. -10- After said licenses have been transferred to Cars Holding, Inc., any FCC licenses shall be held by CARS Holding, Inc., or another wholly owned subsidiary formed solely to hold such licenses or a wholly owned subsidiary whose only business shall be broadcasting or broadcasting related operations. The Shareholders and the Corporation agree to hold the arbitrator, or alternate arbitrator, harmless and indemnify them from all costs and expenses from any causes of action, proceedings or suits except those resulting from their willful misconduct. The arbitrator will be held to a standard of care and fairness customarily required of arbitrators and the arbitrator will have the judicial immunity ordinarily granted to arbitrators. Compensation for the arbitrator's services will be negotiated before the Committee selects the arbitrators. The alternate arbitrator will serve in case the primary arbitrator is unavailable in the week his or her services are needed. In the event of the resignation, long-term incapacity or demise of either of the selected persons, a replacement will be chosen at the next scheduled meeting by unanimous consent of the Committee. Any decision of the arbitrator on any deadlock referred to him for arbitration will be final unless rejected by all four (4) Committee members. 8. No Shareholder or director shall institute any action or proceeding to have the Corporation dissolved or institute any other action (such as a petition for appointment of a custodian or provisional director) in law or in equity because of any deadlock with respect to the election of a new Board of Directors or a deadlock on the then present Board of Directors nor shall a Shareholder or director institute any action or proceeding for breach of fiduciary duty or conflict of interest until two (2) years after the arbitrator has rendered his first decision under this Agreement, unless the Agreement has terminated prior to the expiration of said period. -11- 9. This Agreement will continue until October 15, 1994 unless all of the voting and four-fifths (4/5ths) of the non-voting common and Class A shares of the Corporation, voting as a class and all of the original members of the Committee, elect to terminate this Agreement prior thereto. The same proportion of each class of shares and all of the original members of the Committee may amend or extend this Agreement at any time provided any amendment or extension must be in writing. A breach or attempted breach of the covenants of this Agreement will result in irreparable damage, which damage is not measurable in money. Therefore, the parties agree that the provisions of this Agreement shall be enforceable by injunction, specific performance or other equitable relief, without reference to whether or not an adequate remedy at law may be available. Any proceedings will be conducted in the appropriate court in Lucas County, Ohio. 10. All shares of the Corporation will bear a legend similar to the following: "The rights of any holder of any share evidenced by this Certificate are subject to a Close Corporation Operating Agreement dated December 12, 1988 among each person who is a shareholder of the Corporation on such date. The Corporation will mail without charge to any holder of these shares a copy of such agreement within five (5) days of receipt by the Corporation of a written request therefor":. Each Shareholder agrees that if shares are transferred which are represented by a certificate which for any reason does not bear the above legend that such Shareholder will notify in writing the transferee of the existence of this Agreement and deliver a copy of the same at the time of transfer. Furthermore, the transferee of any shares or the purchaser of any newly issued shares will, as a condition to the transfer or issuance, execute this Agreement or the transfer or issuance shall be void. 11. In the event any of the provisions of this Agreement shall be deemed illegal or against public policy, the validity or legality of any of the other provisions or any part -12- thereof shall not be thereby affected. This Agreement supersedes any contrary or inconsistent provision in the Code of Regulations of the Corporation or any By-Laws adopted by the directors of the Corporation and for the life of this Agreement shall be construed as an amendment to said Regulations or By-Laws. 12. No Shareholder will attempt to transfer his shares to numerous shareholders for the sole purpose of becoming a public company for SEC purposes (i.e. more than five hundred(500) shareholders). This sentence will not in any manner preclude the Committee from determining to go public. Any share transfer, including the foregoing, is governed by the restrictions on transfer contained in the Code of Regulations of the Corporation. 13. Miscellaneous provisions. (a) This Agreement shall inure to the benefit of and be binding upon the respective heirs, personal representatives, successors and assigns of the parties hereto. (b) The parties hereto shall execute and deliver such other instruments and take such other steps as may be necessary to effectuate all the provisions of this Agreement. (c) This Agreement may be executed in counterparts, each of which together shall constitute one and the same instrument. (d) The section headings in this Agreement, if any, are inserted for convenience only. (e) This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio. -13- (f) The failure of any party to insist upon strict compliance by any other party with respect to any of the terms and conditions hereof shall not be deemed a waiver of any such term or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times, be deemed a waiver or relinquishment of such right or power at any other time or times.' (g) If any party desires to give notice for any reason to any other party, such notice shall be given by prepaid certified mail, return receipt requested, given to each member of the Committee at their residence address as on file with the Corporation with a copy sent in the same manner addressed to the Treasurer or Assistant Treasurer of the Corporation at 541 Superior Street, Toledo, Ohio 43660. Any notice given in this manner shall be deemed to be sufficient notice to all the Shareholders of the Corporation. Any Shareholder desiring to receive copies of any such notices may file a request for the same with the Treasurer of the Corporation (h) This Agreement is the exclusive statement of the agreement of the parties and supersedes all prior agreements and discussions among the parties. (i) Where appropriate, the number of all words in this Agreement shall be singular or plural or both and the gender of all pronouns shall be masculine, feminine, neuter, or any combination thereof. (j) This Agreement may be amended, but only by a written amendment as provided herein. -14- (k) The parties agree that any action to enforce this Agreement shall be brought and prosecuted in such state or federal court or courts located in Lucas County, Ohio that the appropriate party may select. The parties hereby consent to the jurisdiction and venue of said court or courts within Lucas County, Ohio and service of process by certified mail, return receipt requested, or by any other manner provided by law. 14. This Agreement will be binding when executed by all of the parties hereto, and will become operative on January 1, 1989. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BLADE COMMUNICATIONS, INC. By: ------------------------- Attest: --------------------- -15- SHAREHOLDERS
SHAREHOLDER: NUMBER AND TYPE OF SHARES - ----------------------------- 263,200 Non-Voting Common - Par $0.10 William Block 9,600 Voting Common - Par $0.10 - ----------------------------- 515 Class A - Par $100 - 5% Allan J. Block, a/k/a Non-Cumulative Allan Block 206 Non-Voting Common - Par $0.10 - ----------------------------- 570 Class A - Par $100 - 5% Cyrus P. Block Non-Cumulative - ----------------------------- 1,660 Class A - Par $100 - 5% Donald G. Block Non-Cumulative 4,100 Non-Voting Common - Par $0.10 - ----------------------------- 1,796 2/3 Class A - Par $100 - Mary G. Block 5% Non-Cumulative 9,214 Non-Voting Common - Par $0.10 - ----------------------------- 515 Class A - Par $100 - 5% John R. Block, a/k/a Non-Cumulative John Robinson Block 206 Non-Voting Common - Par $0.10 - ----------------------------- 1,300 Class A - Par $100 - William Block, Jr. 5% Non-Cumulative 4,090 Non-Voting Common - Par $0.10 - ----------------------------- 1,300 Class A - Par $100 - Karen B. Ayars 5% Non-Cumulative 4,100 Non-voting Common - Par $0.10
-16- - ----------------------------- 1,300 Class A - Par $100 - Barbara B. Burney 5% Non-Cumulative 4, 100 Non-Voting Common - Par $0.10 - ----------------------------- 10 Non-Voting Common - Par $0.10 Carol Z. Block - ----------------------------- 320 Class A - Par $100 - William Block, Jr., Custodian 5% Non-Cumulative For Diana E. Block - ----------------------------- 320 Class A - Par $100 - William Block, Jr., Custodian 5% Non-Cumulative for Nancy E. Block - ----------------------------- 320 Class A - Par $100 - William K. Block, Jr., 5% Non-Cumulative Custodian for Katherine Z. Block - ---------------------------- 380 Class A - Par $100 - Paul N. Ayars, Custodian 5% Non-Cumulative Emily E. Ayars - ----------------------------- 380 Class - Par $100 - Paul N. Ayars, Custodian 5% Non-Cumulative Brian M. Ayars - ----------------------------- 560 Class - Par $100 - 5% Barbara B. Burney, Custodian Non-Cumulative For Erin C. Smith - ----------------------------- 650 Non-Voting Common - Par $0.10 Donald G. Block, Trustee For Diana E. Block
-17-
- ----------------------------- 650 Non-Voting Common - Par $0.10 Donald G. Block, Trustee For Nancy E. Block - ----------------------------- 650 Non-Voting Common - Par $0.10 Donald G. Block, Trustee For Katherine Z. Block - ----------------------------- 650 Non-Voting Common - Par $0.10 Donald G. Block, Trustee For Erin C. Smith - ----------------------------- 650 Non-Voting Common - Par $0.10 Donald G. Block, Trustee For Emily E. Ayars - ----------------------------- 650 Non-Voting Common - Par $0.10 Donald G. Block, trustee For Brian M. Ayars - ----------------------------- 250 Non-Voting Common - Par $0.10 Donald G. Block, Trustee f For Benjamin W. Burney - ----------------------------- 250 Non-Voting Common - Par $0.10 William Block, Jr., Trustee For Laura Alice Block - ----------------------------- William Block and Cyrus Block, Trustees 2,400 Class A - Par $100 - 5% Non-Cumulative - ----------------------------- William Block, Trustee - ----------------------------- Cyrus Block, Trustee
-18-
- ----------------------------- 10,000 Non-Voting Common - Par $0.10 William Block, Jr., Trustee Of the Maxine Block Marital Trust No. 1 - ----------------------------- 5,100 Voting Common - Par $0.10 William Block, Jr., Trustee Of the Maxine Block Marital Trust No. 2 - ----------------------------- William Block, Allan J. Block, 14,700 Voting Common - Par $0.10 John R. Block, Trustees under Agreement dated November 1, 1977 - ----------------------------- William Block - ----------------------------- Allan J. Block - ----------------------------- John R. Block
Estate of Paul Block, Jr. by 2,043 1/3 Class A - Par $100.00 First National Bank of Toledo - 5% Non-Cumulative and William Block, 22,642 Non-Voting Common - Par $0.10 Co-Executors First National Bank of Toledo By: -------------------------- - ----------------------------- William Block -19- Tacona Company, Nominee for First National Bank of Toledo and William Block, Trustees under Trust Agreement dated September 18, 1974 and by the Trustees and Co-Trustees of the said Trust as follows: 171,753 Non-Voting Common - Par $0.10 Tacona Company By: -------------------------- A Partner First National Bank of Toledo, Trustee By: -------------------------- - ------------------------- William Block, Trustee - ------------------------ Allan Block, Co-Trustee - ------------------------------- John Robinson Block, Co-Trustee - -------------------------- Cyrus P. Block, Co-Trustee -20- EX-3.4 6 j9521601exv3w4.txt EXHIBIT 3.4 Exhibit 3.4 AGREEMENT TO AMEND AND EXTEND CLOSE CORPORATION OPERATING AGREEMENT THIS AGREEMENT, made and entered into as of this day of October, 1994, by and among BLADE COMMUNICATIONS, INC. ("the Corporation"), an Ohio corporation having its principal place of business in Toledo, Ohio, and the holders of all of the Corporation's issued and outstanding stock ("the Shareholders"). RECITALS WHEREAS, since January 1, 1989, the Corporation has operated under the terms of a Close Corporation Operating Agreement, dated as of December 12, 1988; and WHEREAS, by its terms the Close Corporation Operating Agreement will expire oil October 14, 1994, unless all of the voting and four-fifths of the non-voting common and Class A shares of the Corporation, voting as a class and all of the original members of the Committee elect to extend it; and WHEREAS, the Corporation, the original members of the Executive Committee created by the Close Corporation Operating Agreement, and the Shareholders deem it desirable to extend the Close Corporation Operating Agreement, with certain amendments. NOW, THEREFORE, in order to extend the operation of the Close Corporation Operating Agreement, to provide for certain amendments to improve the operations of the Corporation and the Executive Committee, and to promote the objectives of the Corporation, the Shareholders and the Close Corporation Operating Agreement, the parties hereto agree that the Close Corporation Operating Agreement, dated as of December 12, 1988, shall be amended and, as amended, extended as follows: 1. The Close Corporation Operating Agreement, as amended by this Agreement, shall continue until January 1, 2005, subject to the provisions of paragraph 9, as amended. 2. The final sentence of section 1 shall be amended to read as follows: "The Committee will select its own chairman and secretary annually, who will be from different sides of the family." 3. After the fifth sentence of section 2, the following sentence shall be added: "Since the Committee serves as the CEO of the Corporation, all of its members will have the right of access on a timely basis to the full range of information that would normally be available to an individual CEO." The sentence following this added sentence shall be amended to begin with the word "Therefore". 4. Subsection (ii) in section 5 shall be amended to read as follows: "the agenda for quarterly meetings will be prepared by the chairman or his delegate and distributed at least one (1) week before the meeting;". 5. After the first sentence of paragraph 6, the following sentence shall be added: "No spouse of a family member shall be eligible to serve on the Committee if a divorce or dissolution action involving that spouse has been filed and has proceeded to an initial judicial adjudication of any matter involving or related to the divorce or dissolution." 6. At the conclusion of paragraph 8, the following provision shall be added: "provided, however, that a Shareholder or director who is not a member of the Executive Committee may institute an action or proceeding for breach of fiduciary duty or conflict of interest if all of the following conditions have been met: (a) the Shareholder or director seeking to institute such action has presented to the Executive Committee a written statement identifying precisely the claimed breach of fiduciary duty or conflict of interest, and requesting that the Executive Committee correct the claimed breach or conflict; (b) the Executive Committee has failed, for a period of six months, to take action reasonably calculated to correct the claimed breach or conflict; and (c) the Shareholder or director is joined in the action or proceeding by at least one member of the Executive Committee. 7. The first two sentences of paragraph 9 shall be amended to read as follows: "This Agreement shall continue until January 1, 2005, unless all of the voting and four-fifths of-the non-voting common and Class A shares of the Corporation, voting as a class, and all of the members of the Committee, elect to terminate this Agreement prior thereto. The same proportion of each class of shares and all of the members of the Committee may amend or extend this Agreement at any time provided any amendment or extension must be in writing." 8. This Agreement shall be binding when executed by all of the parties hereto, and shall become operative on October 15, 1994. -2- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above. BLADE COMMUNICATIONS, INC. By: ------------------------------ Attest: -------------------------- SHAREHOLDERS -3- EX-4.1 7 j9521601exv4w1.txt EXHIBIT 4.1 Exhibit 4.1 - -------------------------------------------------------------------------------- BLOCK COMMUNICATIONS, INC. AND EACH OF THE GUARANTORS NAMED HEREIN SERIES A AND SERIES B 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 --------------------- INDENTURE DATED AS OF APRIL 18, 2002 --------------------- AND WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, AS TRUSTEE - -------------------------------------------------------------------------------- CROSS-REFERENCE TABLE* Trust Indenture Indenture Section Act Section 310(a)(1).......................................... 7.10 (a)(2).......................................... 7.10 (a)(3).......................................... N.A. (a)(4).......................................... N.A. (a)(5).......................................... 7.10 (b)............................................. 7.10 (c)............................................. N.A. 311(a)............................................. 7.11 (b)............................................. 7.11 (c)............................................. N.A. 312(a)............................................. 2.05 (b)............................................. 13.03 (c)............................................. 13.03 313(a)............................................. 7.06 (b)(2).......................................... 7.06; 7.07 (c)............................................. 7.06; 13.02 (d)............................................. 7.06 314(a)............................................. 4.03; 13.02; 13.05 (c)(1).......................................... 13.04 (c)(2).......................................... 13.04 (c)(3).......................................... N.A. (e)............................................. 13.05 (f)............................................. N.A. 315(a)............................................. 7.01 (b)............................................. 7.05, 13.02 (c)............................................. 7.01 (d)............................................. 7.01 (e)............................................. 6.11 316(a) (last sentence)............................. 2.09 (a)(1)(A)....................................... 6.05 (a)(1)(B)....................................... 6.04 (a)(2).......................................... N.A. (b)............................................. 6.07 (c)............................................. 2.12 317(a)(1).......................................... 6.08 (a)(2).......................................... 6.09 (b)............................................. 2.04 318(a)............................................. 13.01 (b)............................................. N.A. (c)............................................. 13.01 N.A. means not applicable. * This Cross Reference Table is not part of the Indenture. TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions.....................................................1 Section 1.02 Other Definitions..............................................18 Section 1.03 Incorporation by Reference of Trust Indenture Act..............19 Section 1.04 Rules of Construction..........................................19 ARTICLE 2. THE NOTES Section 2.01 Form and Dating................................................20 Section 2.02 Execution and Authentication...................................21 Section 2.03 Registrar and Paying Agent.....................................21 Section 2.04 Paying Agent to Hold Money in Trust............................22 Section 2.05 Holder Lists...................................................22 Section 2.06 Transfer and Exchange..........................................22 Section 2.07 Replacement Notes..............................................33 Section 2.08 Outstanding Notes..............................................34 Section 2.09 Treasury Notes.................................................34 Section 2.10 Temporary Notes................................................34 Section 2.11 Cancellation...................................................34 Section 2.12 Defaulted Interest.............................................35 ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee.............................................35 Section 3.02 Selection of Notes to Be Redeemed or Purchased.................35 Section 3.03 Notice of Redemption...........................................36 Section 3.04 Effect of Notice of Redemption.................................36 Section 3.05 Deposit of Redemption or Purchase Price........................36 Section 3.06 Notes Redeemed or Purchased in Part............................37 Section 3.07 Optional Redemption............................................37 Section 3.08 Mandatory Redemption...........................................38 Section 3.09 Offer to Purchase by Application of Excess Proceeds............38 ARTICLE 4. COVENANTS Section 4.01 Payment of Notes...............................................39 Section 4.02 Maintenance of Office or Agency................................40 Section 4.03 Reports........................................................40 Section 4.04 Compliance Certificate.........................................41 Section 4.05 Taxes..........................................................41 Section 4.06 Stay, Extension and Usury Laws.................................41 Section 4.07 Restricted Payments............................................42 Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries.........................................44 Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock................................................45 Section 4.10 Asset Sales....................................................47 Section 4.11 Transactions with Affiliates...................................49 Section 4.12 Liens..........................................................50 Section 4.13 Business Activities............................................50 Section 4.14 Corporate Existence............................................50 Section 4.15 Offer to Repurchase Upon Change of Control.....................51 Section 4.16 No Senior Subordinated Debt....................................52 Section 4.17 Payments for Consent...........................................52 Section 4.18 Additional Subsidiary Guarantees...............................52 Section 4.19 Designation of Restricted and Unrestricted Subsidiaries...................................................53 ARTICLE 5. SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets.......................53 Section 5.02 Successor Corporation Substituted..............................54 ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01 Events of Default..............................................54 Section 6.02 Acceleration...................................................55 Section 6.03 Other Remedies.................................................56 Section 6.04 Waiver of Past Defaults........................................57 Section 6.05 Control by Majority............................................57 Section 6.06 Limitation on Suits............................................57 Section 6.07 Rights of Holders of Notes to Receive Payment..................57 Section 6.08 Collection Suit by Trustee.....................................58 Section 6.09 Trustee May File Proofs of Claim...............................58 Section 6.10 Priorities.....................................................58 Section 6.11 Undertaking for Costs..........................................59 ARTICLE 7. TRUSTEE Section 7.01 Duties of Trustee..............................................59 Section 7.02 Rights of Trustee..............................................60 Section 7.03 Individual Rights of Trustee...................................60 Section 7.04 Trustee's Disclaimer...........................................60 Section 7.05 Notice of Defaults.............................................61 Section 7.06 Reports by Trustee to Holders of the Notes.....................61 Section 7.07 Compensation and Indemnity.....................................61 Section 7.08 Replacement of Trustee.........................................62 Section 7.09 Successor Trustee by Merger, etc...............................63 Section 7.10 Eligibility; Disqualification..................................63 Section 7.11 Preferential Collection of Claims Against Company..............63 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.....................................................63 Section 8.02 Legal Defeasance and Discharge.................................63 Section 8.03 Covenant Defeasance............................................64 Section 8.04 Conditions to Legal or Covenant Defeasance.....................64 Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. ................65 Section 8.06 Repayment to Company...........................................66 Section 8.07 Reinstatement..................................................66 ii ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes............................66 Section 9.02 With Consent of Holders of Notes...............................67 Section 9.03 Compliance with Trust Indenture Act............................68 Section 9.04 Revocation and Effect of Consents..............................68 Section 9.05 Notation on or Exchange of Notes...............................69 Section 9.06 Trustee to Sign Amendments, etc................................69 ARTICLE 10. SUBORDINATION Section 10.01 Agreement to Subordinate.......................................69 Section 10.02 Liquidation; Dissolution; Bankruptcy...........................69 Section 10.03 Default on Designated Senior Debt..............................70 Section 10.04 Acceleration of Notes..........................................70 Section 10.05 When Distribution Must Be Paid Over............................70 Section 10.06 Notice by Company..............................................71 Section 10.07 Subrogation....................................................71 Section 10.08 Relative Rights................................................71 Section 10.09 Subordination May Not Be Impaired by Company...................72 Section 10.10 Distribution or Notice to Representative.......................72 Section 10.11 Rights of Trustee and Paying Agent.............................72 Section 10.12 Authorization to Effect Subordination..........................72 Section 10.13 Amendments.....................................................72 Section 10.14 Reinstatement..................................................73 Section 10.15 No Waiver of Subordination Provisions..........................73 ARTICLE 11. NOTE GUARANTEES Section 11.01 Guarantee......................................................73 Section 11.02 Limitation on Guarantor Liability..............................74 Section 11.03 Execution and Delivery of Subsidiary Guarantee.................74 Section 11.04 Guarantors May Consolidate, etc., on Certain Terms.............75 Section 11.05 Releases Following Sale of Assets..............................75 Section 11.06 Subordination of Subsidiary Guarantee..........................76 Section 11.07 Release Following Designation as an Unrestricted Subsidiary........................................76 ARTICLE 12. SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge.....................................76 Section 12.02 Application of Trust Money.....................................77 ARTICLE 13. MISCELLANEOUS Section 13.01 Trust Indenture Act Controls...................................77 Section 13.02 Notices........................................................78 Section 13.03 Communication by Holders of Notes with Other Holders of Notes.........................................79 Section 13.04 Certificate and Opinion as to Conditions Precedent.............79 Section 13.05 Statements Required in Certificate or Opinion..................79 Section 13.06 Rules by Trustee and Agents....................................79 Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders.....................................80 Section 13.08 Governing Law..................................................80 iii Section 13.09 No Adverse Interpretation of Other Agreements..................80 Section 13.10 Successors.....................................................80 Section 13.11 Severability...................................................80 Section 13.12 Counterpart Originals..........................................80 Section 13.13 Table of Contents, Headings, etc...............................80 EXHIBITS Exhibit A1 FORM OF NOTE Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF NOTE GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE iv INDENTURE dated as of April 18, 2002 among Block Communications, Inc., an Ohio corporation (the "Company"), the Guarantors (as defined) and Wells Fargo Bank Minnesota, National Association, as trustee (the "Trustee"). The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the 9 1/4% Series A Senior Subordinated Notes due 2009 (the "Series A Notes") and the 9 1/4% Series B Senior Subordinated Notes due 2009 (the "Series B Notes" and, together with the Series A Notes, the "Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions. "144A Global Note" means a Global Note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Additional Interest" means all Additional Interest then owing pursuant to Section 5 of the Registration Rights Agreement. "Additional Notes" means Notes issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Notes issued on the date of this Indenture. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole shall be governed by Sections 4.15 and 5.01 and not by Section 4.10; and (2) the issuance of Equity Interests in any of the Company's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Sales: (1) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million; (2) a transfer of assets between or among the Company and its Restricted Subsidiaries, (3) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (4) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents; (6) the sale and leaseback of any assets within 90 days of the acquisition; (7) foreclosures on assets; (8) the disposition of equipment no longer used or useful in the business of the Company or a Restricted Subsidiary; (9) the licensing of intellectual property; and (10) a Restricted Payment or Permitted Investment that is permitted by the covenant described in Section 4.07. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning. "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; and (3) with respect to any other Person, the board or committee of such Person serving a 2 similar function. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than six months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $500.0 million; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and in each case maturing within six months after the date of acquisition; and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "Clearstream" means Clearstream Banking, S.A. "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially 3 all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a Principal; (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or (4) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Commission" means the Securities and Exchange Commission. "Company" means the issuer, and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus: (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income; plus (4) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus (5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business; minus (6) programming rights payments made during such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the 4 depreciation and amortization and other non-cash expenses of, a Subsidiary of the Company will be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended or otherwise paid to the Company by such Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "Consolidated Indebtedness" means, with respect to any Person as of any date of determination, the sum, without duplication, of (i) the total amount of Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total amount of Indebtedness of any other Person, to the extent that such Indebtedness has been Guaranteed by the referent Person or one or more of its Restricted Subsidiaries or is secured by a Lien on assets of the referent Person or any of its Restricted Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified Stock of such Person and all preferred stock of Restricted Subsidiaries of such Person, in each case, determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of the referent Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of the referent Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is guaranteed by the referent Person or one of its Restricted Subsidiaries or secured by a Lien on assets of the referent Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of such Person (other than Disqualified Stock) or to such Person or any of its Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of the referent Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded; and 5 (4) the cumulative effect of a change in accounting principles shall be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date of this Indenture; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Corporate Trust Office of the Trustee" will be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Agreement" means that certain Revolving Credit Agreement, dated as of December 29, 1998, by and among the Company, the Lenders referred to therein, Mellon Bank, N.A., as Administrative Agent, and The Huntington National Bank, as Documentation Agent, as amended, and that certain 364-Day Standby Term Loan Agreement, dated as of December 29, 1998, by and among the Company, the Lenders referred to therein, Mellon Bank, N.A., as Administrative Agent, and The Huntington National Bank, as Documentation Agent, as amended, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, amended and restated, modified, supplemented, renewed, refunded, replaced or refinanced from time to time. "Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, amended and restated, modified, supplemented, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Debt to Cash Flow Ratio" means, as of any date of determination, the ratio of (a) the Consolidated Indebtedness of the Company as of such date to (b) the Consolidated Cash Flow of the Company for the four most recent full fiscal quarters ending immediately prior to such date for which internal financial statements are available, determined on a pro forma basis after giving effect to all acquisitions or dispositions of assets made by the Company and its Restricted Subsidiaries from the beginning of such four-quarter period through and including such date of determination (including any related financing transactions) as if such acquisitions and dispositions had occurred at the beginning of such four-quarter period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (3) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. 6 "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Senior Debt" means: (1) any Indebtedness outstanding under the Credit Agreement; and (2) after payment in full of all Obligations under the Credit Agreement, any other Senior Debt permitted under this Indenture the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. Capital Stock subject to redemption by virtue of the Amendment to and Restatement of Stock Redemption Agreement, dated as of December 12, 1991, as in effect on the date of this Indenture (with such changes that from time to time do not materially adversely affect the Company and its Restricted Subsidiaries taken as a whole or increase the amounts payable thereunder), shall not be "Disqualified Stock" solely by virtue of such redemption. "Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the 9 -1/4% Senior Subordinated Notes due 2009, of the same series under this Indenture as the Notes, to be issued to Holders in exchange for Transfer Restricted Securities pursuant to the Registration Rights Agreement. "Exchange Offer" means the registration by the Company and the Guarantors under the Securities Act of the Exchange Notes pursuant to a Registration Statement pursuant to which Block and the Guarantors offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes 7 and Exchange Guarantees in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. "Exchange Offer Registration Statement" means the Registration Statement relating to the Exchange Offer, including the related Prospectus. "Existing Indebtedness" means the Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) in existence on the date of this Indenture, until such amounts are repaid. "GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A1 hereto issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(2), which is required to be placed on all Global Notes issued under this Indenture. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" means each of: (1) each Domestic Subsidiary of the Company, other than WAND (TV) Partnership; and (2) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture; and their respective successors and assigns. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (2) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "Holder" means a Person in whose name a Note is registered. "IAI Global Note" means a Global Note substantially in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and 8 registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and (2) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Purchasers" means Bank of America Securities LLC, Fleet Securities, Inc., Comerica Securities, Inc., NatCity Investments, Inc. and BMO Nesbitt Burns Corp. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no 9 longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Company's Investments in such Subsidiary that were not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain or loss, together with any related provision for taxes on such gain or loss, realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets that were the subject of such Asset Sale. "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the 10 payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a Person who is not a U.S. Person. "Notes" has the meaning assigned to it in the preamble to this Indenture. For purposes of this Indenture, the term "Notes" shall include any Additional Notes issued under the Indenture in accordance with Section 2.02 and 4.09 hereof, as part of the same series of Notes issued on the date of this Indenture. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 13.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Permitted Business" means any business engaged in by the Company or its Restricted Subsidiaries as of the date of this Indenture or any business reasonably related, ancillary or complimentary thereto. "Permitted Investments" means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company that is a Guarantor; (2) any Investment by the Company in WAND (TV) Partnership; provided, however that: (A) WAND (TV) Partnership is designated as a Restricted Subsidiary on the date of such Investment; (B) on the date of such Investment there does not exist any consensual encumbrance or restriction (other than those in or contemplated by the Partnership Agreement of WAND (TV) Partnership as in effect on the date of this Indenture with such changes that from time to time do not materially adversely affect the Company or its Restricted Subsidiaries (other than WAND (TV) Partnership) or increase the scope or substance of any such encumbrances or restrictions) on the ability of WAND (TV) Partnership to (i) pay dividends or make any other distributions on its Capital Stock to the Company or any other Restricted Subsidiary, or with respect to any other interest or 11 participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any other Restricted Subsidiary; (ii) make loans or advances to the Company or any other Restricted Subsidiary; or (iii) transfer any of its properties or assets to the Company or any other Restricted Subsidiary; and (C) senior management of the Company reasonably believes that such Investment is prudent to operate WAND (TV) Partnership's business in the ordinary course of its business; (3) any Investment in Cash Equivalents; (4) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: (A) such Person becomes a Restricted Subsidiary of the Company and a Guarantor; or (B) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Guarantor; (5) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (6) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (7) any Investments received in compromise of obligations of trade creditors or customers that were incurred in the ordinary course of the Company's or any of its Restricted Subsidiaries' business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; (8) Hedging Obligations; and (9) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (9) since the date of this Indenture not to exceed $5.0 million. "Permitted Junior Securities" means: (1) Equity Interests in the Company or any Guarantor; or (2) debt securities that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the Notes and the Subsidiary Guarantees are subordinated to Senior Debt under this Indenture. "Permitted Liens" means: (1) Liens securing Senior Debt that was permitted by the terms of this Indenture to be incurred; (2) Liens in favor of the Company or the Guarantors; 12 (3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Subsidiary; (4) Liens on property existing at the time of acquisition of the property by the Company or any Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (5) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (6) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by Section 4.09(b)(4) hereof covering only the assets acquired with such Indebtedness; (7) Liens existing on the date of this Indenture; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; (9) Liens securing Permitted Refinancing Indebtedness; provided, however that (a) such new Lien shall be limited to all or part of the same assets that secured the original Lien (plus improvements on such property) and (b) the Indebtedness secured by such Lien at such time is not increased (other than by an amount necessary to pay fees and expenses, including premiums, related to the refinancing, refunding, extension, renewal or replacement of such Indebtedness); (10) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects incurred or imposed, as applicable, in the ordinary course of business and consistent with industry practices; (11) any interest or title of a lessor under any Capital Lease Obligation; (12) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to letters of credit and products and proceeds thereof; (13) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty, including rights of offset and set-off; (14) Liens securing Hedging Obligations which Hedging Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (15) leases or subleases granted to others; (16) Liens under licensing agreements; (17) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (18) judgment Liens not giving rise to an Event of Default; 13 (19) Liens encumbering property of the Company or a Restricted Subsidiary consisting of carriers, warehousemen, mechanics, materialmen, repairmen and landlords and other Liens arising by operation of law and incurred in the ordinary course of business for sums which are not overdue or which are being contested in good faith by appropriate proceedings and (if so contested) for which appropriate reserves with respect thereto have been established and maintained on the books of the Company or a Restricted Subsidiary in accordance with GAAP; (20) Liens encumbering property of the Company or a Restricted Subsidiary incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance, or other forms of governmental insurance or benefits, or to secure performance of bids, tenders, statutory obligations, leases, and contracts (other than for Indebtedness) entered into in the ordinary course of business of the Company or a Restricted Subsidiary; and (21) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Principals" means the members of the Block family. "Private Placement Legend" means the legend set forth in Section 2.06(g)(1) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. 14 "Prospectus" means the prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. "Qualified Equity Offerings" means, any issuance of Capital Stock (other than Disqualified Stock) by the Company to any Person or Persons other than an Affiliate of the Company in a single transaction resulting in gross proceeds to the Company in excess of $50.0 million. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of April 18, 2002, among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any, one or more registration rights agreements among the Company, the Guarantors and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes. "Registration Statement" means any registration statement of the Company relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of the Registration Rights Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "Regulation S Permanent Global Note" means a permanent Global Note in the form of Exhibit A1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "Regulation S Temporary Global Note" means a temporary Global Note in the form of Exhibit A2 hereto deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Related Party" means: (1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member or legal guardian (in the case of an individual) of any Principal; or (2) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in the immediately preceding clause (1); or (3) the estate of any deceased or incompetent Principal. "Representative" means the Indenture Trustee or other trustee, agent or representative for any Senior Debt. 15 "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Period" means the 40-day distribution compliance period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means: (1) all Indebtedness of the Company or any Guarantor outstanding under Credit Facilities and all Hedging Obligations with respect thereto; (2) any other Indebtedness of the Company or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the notes or any Subsidiary Guarantee; and (3) all Obligations with respect to the items listed in the preceding clauses (1) and (2). Notwithstanding anything to the contrary in the preceding, Senior Debt will not include: (1) any liability for federal, state, local or other taxes owed or owing by the Company; (2) any intercompany Indebtedness of the Company or any of its Subsidiaries to the Company or any of its Affiliates; (3) any trade payables; or (4) the portion of any Indebtedness that is incurred in violation of this Indenture. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to 16 repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "Subsidiary Guarantee" means, the Guarantee by each Guarantor of the Company's payment obligations under this Indenture and the Notes, executed pursuant to the terms of this Indenture. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Transfer Restricted Securities" means the Transfer Restricted Securities as defined in the Registration Rights Agreement. "Trustee" means the party named as such in the preamble to this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Global Note" means a permanent global Note substantially in the form of Exhibit A1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (4) has not guaranteed or otherwise directly or indirectly provided credit support for any 17 Indebtedness of the Company or any of its Restricted Subsidiaries; and (5) has at least one director on its Board of Directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Company shall be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (1) such Indebtedness is permitted under the covenant described under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. Person as defined in Rule 902(o) under the Securities Act. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. Section 1.02 Other Definitions.
Defined in Term Section ---- ------- "Affiliate Transaction".................................. 4.11 "Asset Sale Offer"....................................... 3.09 "Authentication Order"................................... 2.02 "Change of Control Offer"................................ 4.15 "Change of Control Payment".............................. 4.15 "Change of Control Payment Date"......................... 4.15 "Covenant Defeasance".................................... 8.03 "DTC".................................................... 2.03 "Event of Default"....................................... 6.01 "Excess Proceeds"........................................ 4.10 "incur".................................................. 4.09
18
Defined in Term Section ---- ------- "Legal Defeasance"....................................... 8.02 "Offer Amount"........................................... 3.09 "Offer Period"........................................... 3.09 "Paying Agent"........................................... 2.03 "Permitted Debt"......................................... 4.09 "Purchase Date".......................................... 3.09 "Registrar".............................................. 2.03 "Restricted Payments".................................... 4.07
Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Subsidiary Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Subsidiary Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) "will" shall be interpreted to express a command; (6) provisions apply to successive events and transactions; and (7) references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the Commission from time to time. 19 ARTICLE 2. THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication will be substantially in the form of Exhibit A1 hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note will be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form will be substantially in the form of Exhibits A1 or A2 attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A1 attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S will be issued initially in the form of the Regulation S Temporary Global Note, which will be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream Bank, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period will be terminated upon the receipt by the Trustee of: (1) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream Bank certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(b) hereof); and (2) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note will be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee will cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent 20 Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (3) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Clearstream. Section 2.02 Execution and Authentication. Two Officers must sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid. A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee will, upon receipt of a written order of the Company signed by two Officers (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount set forth in such Authentication Order. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate amount of Notes authenticated for original issue pursuant to all Authentication Orders issued by the Company, except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Registrar and Paying Agent. The Company will maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar will keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. 21 Section 2.04 Paying Agent to Hold Money in Trust. The Company will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) will have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee will serve as Paying Agent for the Notes. Section 2.05 Holder Lists. The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). Section 2.06 Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if: (1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; or (2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. 22 (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1). (2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either: (A) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or (B) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in 23 the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Permanent Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or 24 (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; or 25 (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Restricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Restricted Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (2) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.06(c)(1)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (3) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private 26 Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (4) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the 27 Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the 28 Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (D) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (A) through (C) above, a 29 certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; or (E) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof. (2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a broker-dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate: 30 (1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered into the Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company; and (2) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee will cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company will execute and the Trustee will authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (1) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend. (2) Global Note Legend. Each Global Note will bear a legend in substantially the following form: 31 "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (3) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note will bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. 32 (i) General Provisions Relating to Transfers and Exchanges. (1) To permit registrations of transfers and exchanges, the Company will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 or at the Registrar's request. (2) No service charge will be made to a Holder of a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Holder will be required to pay of a sum sufficient to pay all transfer tax or similar governmental charges payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). The Registrar will not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (3) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes will be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (4) The Company will not be required: (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection; (B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (5) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (6) The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (7) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07 Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the 33 Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08 Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest. Section 2.09 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded. Section 2.10 Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Company will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes will be entitled to all of the benefits of this Indenture. Section 2.11 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes 34 will be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company will fix or cause to be fixed each such special record date and payment date, provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3. REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth: (1) the clause of this Indenture pursuant to which the redemption shall occur; (2) the redemption date; (3) the principal amount of Notes to be redeemed; and (4) the redemption price. Section 3.02 Selection of Notes to Be Redeemed or Purchased. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee will select Notes for redemption or purchase as follows: (1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate. In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase. The Trustee will promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed or purchased, 35 the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase. Section 3.03 Notice of Redemption. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 of this Indenture. The notice will identify the Notes to be redeemed and will state: (1) the redemption date; (2) the redemption price; (3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee will give the notice of redemption in the Company's name and at its expense; provided, however, that the Company has delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption or Purchase Price. One Business Day prior to the redemption or purchase price date, the Company will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and 36 accrued interest and Additional Interest, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Additional Interest, if any, on, all Notes to be redeemed or purchased. If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 Notes Redeemed or Purchased in Part. Upon surrender of a Note that is redeemed or purchased in part, the Company will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered. Section 3.07 Optional Redemption. (a) At any time prior to April 15, 2005, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 109.25% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of one or more Qualified Equity Offerings, provided that: (1) at least 65% of the aggregate principal amount of Notes issued under this Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (2) the redemption occurs within 45 days of the date of the closing of such Qualified Equity Offering. Except pursuant to this Section 3.07(a), the Notes may not be redeemed at the option of the Company prior to April 15, 2006. (b) After April 15, 2006, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, and Additional Interest, if any, on the Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:
Year Percentage ---- ---------- 2006.................................................. 104.625% 2007.................................................. 102.313% 2008 and thereafter................................... 100.000%
37 (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08 Mandatory Redemption. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09 Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company is required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it will follow the procedures specified below. The Asset Sale Offer shall be made to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales and assets. The Asset Sale Offer will remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than three Business Days after the termination of the Offer Period (the "Purchase Date"), the Company will apply all Excess Proceeds (the "Offer Amount") to the purchase of Notes and such other pari passu Indebtedness (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Notes and other Indebtedness tendered in response to the Asset Sale Offer. Payment for any Notes so purchased will be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, and Additional Interest, if any, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company will send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which will govern the terms of the Asset Sale Offer, will state: (1) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer will remain open; (2) the Offer Amount, the purchase price and the Purchase Date; (3) that any Note not tendered or accepted for payment will continue to accrue interest; (4) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer will cease to accrue interest after the Purchase Date; (5) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only; (6) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; 38 (7) that Holders will be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (8) that, if the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by Holders exceeds the Offer Amount, the Company will select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, will be purchased); and (9) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and will deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company will promptly issue a new Note, and the Trustee, upon written request from the Company will authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4. COVENANTS Section 4.01 Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest and Additional Interest, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Additional Interest, if any will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any 39 proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. Section 4.03 Reports. (a) Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes, within the time periods specified in the Commission's rules and regulations: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, whether or not required by the Commission, the Company will file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. The Company will at all times comply with TIA Section 314(a) to the extent applicable. If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. 40 (b) For so long as any Notes remain outstanding, the Company and the Guarantors will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04 Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) So long as any of the Notes are outstanding, the Company shall deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06 Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. 41 Section 4.07 Restricted Payments. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company); (2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees, except a payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; and (2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to the Debt to Cash Flow Ratio test set forth in the first paragraph of Section 4.09 hereof; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (1), (2), (3), (4), (5), (6), (7) and (9) of Section 4.07(b) hereof) shall not exceed, at the date of determination, the sum of: (A) an amount equal to the Company's Consolidated Cash Flow from the date of this Indenture to the end of the Company's most recently ended full fiscal quarter for which internal financial statements are available, taken as a single accounting period, less the product of 1.4 times the Company's Consolidated Interest Expense from the date of this Indenture to the end of the Company's most recently ended full fiscal quarter for which internal financial statements are available, taken as a single accounting period, plus (B) an amount equal to the net cash proceeds received by the Company from the sale of Equity Interests after the date of this Indenture (other than (i) sales of Disqualified Stock and (ii) Equity Interests sold to any of the Company's Restricted Subsidiaries) plus (C) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) 42 the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment plus (D) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after the date of this Indenture, the fair market value of such Subsidiary as of the date of such redesignation. (b) So long as no Default has occurred and is continuing or would be caused thereby, the provisions of Section 4.07(a) will not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of the dividend, if at the date of declaration the dividend payment would have complied with the provisions of this Indenture; (2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(B) of the preceding paragraph; (3) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (4) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; (5) the payment of dividends by the Company to holders of its common Equity Interests not to exceed $2.0 million in any twelve-month period; (6) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement, stock option agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $750,000 in any twelve-month period (with unused amounts in any twelve month period being available to be so utilized in succeeding twelve month periods); (7) Restricted Payments made solely with the net cash proceeds to the Company or any Restricted Subsidiary of any "keyman" life insurance proceeds (i) to repurchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement, stock option agreement or similar agreement or (ii) to repurchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company held by members of the Block family pursuant to the Amendment to and Restatement of Stock Redemption Agreement, dated as of December 12, 1991, as in effect on the date of this Indenture, with such changes that from time to time do not materially adversely affect the Company and its Restricted Subsidiaries taken as a whole or increase the amounts payable thereunder; (8) the repurchase, redemption or other acquisition or retirement for value of any Equity 43 Interests of the Company held by members of the Block family pursuant to the Amendment to and Restatement of Stock Redemption Agreement, dated as of December 12, 1991, as in effect on the date of this Indenture, with such changes that from time to time do not materially adversely affect the Company and its Restricted Subsidiaries taken as a whole or increase the amounts payable thereunder, other than repurchases, redemptions, acquisitions or retirements made for similar purposes pursuant to clause (7) above; and (9) other Restricted Payments in an amount not to exceed $2.5 million in the aggregate. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $10.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture. Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. (b) The restrictions in Section 4.08(a) will not apply to encumbrances or restrictions existing under or by reason of: (1) agreements governing Existing Indebtedness and Credit Facilities as in effect on the date of this Indenture and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture; (2) this Indenture, the Notes and the Subsidiary Guarantees; (3) applicable law; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the 44 Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; (5) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (6) purchase money obligations (including Capital Lease Obligations) for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (3) of Section 4.08(a); (7) contracts for the sale of assets, including any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition; (8) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (9) Liens securing Indebtedness otherwise permitted to be incurred under Section 4.12 that limit the right of the debtor to dispose of the assets subject to such Liens; (10) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, assets sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business; (11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly, or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Company's Debt to Cash Flow Ratio at the time of incurrence of such Indebtedness or the issuance of such Disqualified Stock, after giving pro forma effect to such incurrence or issuance as of such date and to the use of proceeds therefrom as if the same had occurred at the beginning of the most recently ended four full fiscal quarter period of the Company for which internal financial statements are available, would have been no greater than (a) 7.0 to 1, if such incurrence or issuance is on or prior to April 15, 2005 and (b) 6.5 to 1, if such incurrence or issuance is after April 15, 2005; (b) The provisions of Section 4.09(a) will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by the Company and any of its Restricted Subsidiaries of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1)(with letters of credit being deemed to have a principal 45 amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed $200.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of its Restricted Subsidiaries since the date of this Indenture to repay any Indebtedness under a Credit Facility and effect a corresponding commitment reduction thereunder pursuant to Section 4.10; (2) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (3) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees to be issued on the date of this Indenture and the Exchange Notes and the related Subsidiary Guarantees to be issued pursuant to the Registration Rights Agreement; (4) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (4), not to exceed $10.0 million at any time outstanding; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 4.09(a) hereof or clauses (2), (3), (4), (5) or (10) of this Section 4.09(b); (6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that: (A) if the Company or any Guarantor is the obligor on such Indebtedness and the obligee under such Indebtedness is neither the Company nor a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Guarantor; and (B) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company; shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; (8) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant; 46 (9) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; (10) Indebtedness incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence; (11) Indebtedness consisting of customary indemnification, adjustments of purchase price or similar obligations, in each case, incurred or assumed in connection with the acquisition of any business or assets; (12) Obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary in the ordinary course of business; and (13) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (13), not to exceed $10.0 million. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (13) above, or is entitled to be incurred pursuant to Section 4.09(a), the Company will be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09. Accrual of interest, accretion or amortization of original issue discount and the accretion of accreted value will not be deemed to be an incurrence of Indebtedness for purposes of this Section 4.09. Indebtedness under Credit Facilities outstanding on the date on which the Notes are first issued and authenticated under this Indenture will be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt. Section 4.10 Asset Sales. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of; (2) the fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee; and (3) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following shall be deemed to be cash: 47 (A) any liabilities, as shown on the Company's most recent consolidated balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; and (B) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted within 90 days by the Company or such Restricted Subsidiary into cash or Cash Equivalents, to the extent of the cash or Cash Equivalents received in that conversion. The 75% limitation referred to in clause (3) above will not apply to any Asset Sale in which the cash or Cash Equivalents portion of the consideration received therefrom, determined in accordance with the preceding provision, is equal to or greater than what the after-tax proceeds would have been had such Asset Sale complied with the aforementioned 75% limitation. Notwithstanding the foregoing, the Company or any Restricted Subsidiary will be permitted to consummate an Asset Sale without complying with the foregoing if: (1) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of; (2) the fair market value is determined by the Company's Board of Directors and is evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate to the Trustee; and (3) at least 75% (or 50% in the case of the sale of all of the Capital Stock owned by the Company of WAND (TV) Partnership) of the consideration for such Asset Sale constitutes a controlling interest in a Permitted Business, assets used or useful in a Permitted Business and/or cash; provided that any cash (other than any amount deemed cash under this Section 4.10(3)(A)) received by the Company or such Restricted Subsidiary in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Proceeds subject to the provisions of the next paragraph. Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply those Net Proceeds at its option: (1) to repay Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (2) to acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business; (3) to make capital expenditures; or (4) to acquire other non-current assets that are used or useful in a Permitted Business. Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture. 48 Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, within five days thereof the Company will make an Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets in accordance with Section 3.09 hereof to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of the Notes and such other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Section 3.09 or 4.10 of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under those provisions of this Indenture by virtue of such conflict. Section 4.11 Transactions with Affiliates. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless: (1) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (2) the Company delivers to the Trustee: (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.11 and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. (b) The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of Section 4.11(a): (1) any compensation paid to employees, including pursuant to any employment 49 agreement, entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business of the Company or such Restricted Subsidiary; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) loans, advances, payment of reasonable fees, indemnification of directors or similar arrangements to officers, directors, employees and consultants who are not otherwise Affiliates of the Company; (4) sales of Equity Interests (other than Disqualified Stock) of the Company to Affiliates of the Company; (5) Restricted Payments and Permitted Investments that are permitted by Section 4.07; and (6) transactions, including the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company held by members of the Block family, pursuant to the Amendment to and Restatement of Stock Redemption Agreement, dated as of December 12, 1991, as in effect on the date of this Indenture, with such changes that from time to time do not materially adversely affect the Company and its Restricted Subsidiaries taken as a whole or increase the amounts payable thereunder. Section 4.12 Liens. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness or trade payables on any asset now owned or hereafter acquired, except Permitted Liens, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. Section 4.13 Business Activities. The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. Section 4.14 Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect: (1) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and (2) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. 50 Section 4.15 Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company will make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Sections 3.09 or 4.15 of this Indenture, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under Section 3.09 or this Section 4.15 by virtue of such conflict. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; 51 (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of $1,000 or an integral multiple thereof. Prior to complying with any of the provisions of this Section 4.15, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.15. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Section 3.09 hereof and purchases all Notes validly tendered and not withdrawn under the Change of Control Offer. Section 4.16 No Senior Subordinated Debt. The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes. No Guarantor will incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor's Subsidiary Guarantee. For purposes of this covenant, the foregoing limitations shall not apply to distinctions between categories of Senior Debt of the Company that exist by reason of any Liens or Guarantees arising or created in respect of some but not all such Senior Debt. Section 4.17 Payments for Consent. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.18 Additional Subsidiary Guarantees. If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of this Indenture, other than a Subsidiary that has properly been designated as an Unrestricted Subsidiary in accordance with this Indenture for so long as they continue to constitute Unrestricted Subsidiaries, then that newly acquired or created Domestic Subsidiary will become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel satisfactory to the Trustee within 10 Business Days of the date on which it was acquired or created. 52 Section 4.19 Designation of Restricted and Unrestricted Subsidiaries The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 or under one or more clauses of the definition of Permitted Investments, as applicable, as determined by the Company. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default. ARTICLE 5. SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets. The Company shall not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: (1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to a supplemental indenture or other agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction no Default or Event of Default exists; and (4) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made shall, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt to Cash Flow Ratio test set forth in the first paragraph of Section 4.09. In addition, the Company shall not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of the Guarantors. In the event of any transaction (other than a lease) described in and complying with the conditions listed in the immediately preceding paragraph in which the Company is not the surviving Person and the surviving Person is to assume all the obligations of the Company under the Notes and this Indenture 53 pursuant to a supplemental indenture, such surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Company, and the Company would be discharged from its obligations under this Indenture and the Notes; provided that solely for the purpose of calculating amounts described in Section 4.07(b)(2) any such surviving Person shall only be deemed to have succeeded to and be substituted for the Company with respect to the period subsequent to the effective time of such transaction (and the Company (before giving effect to such transaction) shall be deemed to be the "Company" for such purposes for all prior periods). Section 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.01 Events of Default. Each of the following is an "Event of Default": (1) the Company defaults for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes whether or not prohibited by the subordination provisions of this Indenture; (2) the Company defaults in payment when due of the principal of, or premium, if any, on the Notes, whether or not prohibited by the subordination provisions of this Indenture; (3) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions of Section 4.15; (4) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice from the Trustee or Holders of at least 25% in principal amount of the Notes to comply with the provisions of 4.07, 4.09 or 4.10 hereof; (5) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice from the Trustee or Holders of at least 25% in principal amount of the Notes to comply with any of the other agreements in this Indenture; (6) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the 54 Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default: (A) is caused by a failure to pay principal of such Indebtedness at the final stated maturity thereof (a "Payment Default"); or (B) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $5.0 million or more; (7) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million not covered by insurance, which judgments are not paid, discharged or stayed for a period of 60 days; (8) the Company or any of its Restricted Subsidiaries pursuant to or within the meaning of Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is not paying its debts as they become due; or (9) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any of its Restricted Subsidiaries in an involuntary case; (b) appoints a custodian of the Company or any of its Restricted Subsidiaries or for all or substantially all of the property of the Company or any of its Restricted Subsidiaries; or (c) orders the liquidation of the Company or any of its Restricted Subsidiaries; and the order or decree remains unstayed and in effect for 60 consecutive days; or (10) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee. Section 6.02 Acceleration. In the case of an Event of Default specified in clauses (8) or (9) of Section 6.01 hereof, with respect to the Company, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at 55 least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (6) of Section 6.01, the declaration of acceleration of the notes shall be automatically annulled if the Holders of any Indebtedness described in clause (6) of Section 6.01 have rescinded the declaration of acceleration in respect of the Indebtedness within 30 days of the date of the declaration and if: (1) the annulment of the acceleration of notes would not conflict with any judgment or decree of a court of competent jurisdiction; and (2) all existing Events of Default, except nonpayment of principal or interest on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clauses (8) or (9) of Section 6.01 hereof occurs with respect to the Company or any of its Restricted Subsidiaries, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived. If an Event of Default occurs on or after April 15, 2006 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to April 15, 2006 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable, to the extent permitted by law, in an amount, for each of the years beginning on April 15 of the years set forth below, as set forth below (expressed as a percentage of the principal amount of the Notes on the date of payment that would otherwise be due but for the provisions of this sentence):
YEAR PERCENTAGE ---- ---------- 2002.................................................. 9.25000% 2003.................................................. 8.09375% 2004.................................................. 6.93750% 2005.................................................. 5.78125%
Section 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Additional Interest, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or 56 constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Additional Interest, if any, or interest on, the Notes (including in connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default if it determines that withholding notes is in their interest, except a Default or Event of Default relating to the payment of principal or interest or Additional Interest. Section 6.06 Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (1) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (3) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (5) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Additional Interest, if any, and interest on the Note, on or 57 after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Additional Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Additional Interest, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. 58 The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE Section 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. 59 (e) No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability. The Trustee will be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company will be sufficient if signed by an Officer of the Company. (f) The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer. The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in 60 the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee will mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium or Additional Interest, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 Reports by Trustee to Holders of the Notes. (a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA Section 313(b)(2). The Trustee will also transmit by mail all reports as required by TIA Section 313(c). (b) A copy of each report at the time of its mailing to the Holders of Notes will be mailed by the Trustee to the Company and filed by the Trustee with the Commission and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company will promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.07 Compensation and Indemnity. (a) The Company will pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation will not be limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. (b) The Company and the Guarantor will indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee will notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company will not relieve the Company or any of the Guarantors of their obligations hereunder. The Company or such Guarantor will defend the claim and the Trustee will cooperate in the defense. The Trustee may have separate counsel and the Company will pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent will not be unreasonably withheld. (c) The obligations of the Company and the Guarantors under this Section 7.07 will survive the satisfaction and discharge of this Indenture. 61 (d) To secure the Company's payment obligations in this Section 7.07, the Trustee will have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien will survive the satisfaction and discharge of this Indenture. (e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(7) or (8) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. (f) The Trustee will comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08 Replacement of Trustee. (a) A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a custodian or public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee. 62 Section 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee. Section 7.10 Eligibility; Disqualification. There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture will always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Subsidiary Guarantees) on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Subsidiary Guarantees), which will thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Subsidiary Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on such Notes when such payments are due from the trust referred to in Section 8.04 hereof; (2) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof; 63 (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith; and (4) the provisions of this Article 8 relating to Legal Defeasance. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03 Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19 hereof and clause (4) of the first paragraph of Section 5.01 hereof and the first sentence of the second paragraph of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Notes will thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Subsidiary Guarantees, the Company and the Guarantors may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Subsidiary Guarantees will be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(5) hereof will not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance. In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof: (1) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and Additional Interest, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (2) in the case of an election under Section 8.02 hereof, the Company has delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that: (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, 64 in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit); (5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (6) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; and (7) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, which Opinion of Counsel may be subject to customary assumptions and exclusions, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Additional Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee 65 (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Additional Interest, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium or Additional Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantor's obligations under this Indenture and the Notes and the Subsidiary Guarantees will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Additional Interest, if any, or interest on any Note following the reinstatement of its obligations, the Company will be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Subsidiary Guarantees or the Notes without the consent of any Holder of a Note: (1) to cure any ambiguity, defect or inconsistency; (2) to provide for uncertificated Notes in addition to or in place of certificated Notes; (3) to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's assets; 66 (4) to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under this Indenture of any such Holder; (5) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; (6) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of its date; or (7) to allow any Guarantor to execute a supplemental indenture and/or a Subsidiary Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee will not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including, without limitation, Section 3.09, 4.10 and 4.15 hereof), the Subsidiary Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including, without limitation, Additional Notes, if any) then outstanding voting as a single class (including, without limitation, consents obtained in connection with a purchase of or a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee will join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental Indenture. It is not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it is sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount 67 of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof; (3) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (4) waive a Default or Event of Default in the payment of principal of or premium or Additional Interest, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in money other than that stated in the Notes; (6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on the Notes; (7) waive a redemption payment with respect to any Note other than a payment required by Sections 3.09, 4.10 and 4.15 hereof; or (8) make any change in the preceding amendment and waiver provisions; In addition, any amendment to, or waiver of, the provisions of this Indenture relating to (i) subordination that adversely affects the rights of the Holders of the Notes or (ii) the release of any Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture, will require the consent of the Holders of at least 75% in aggregate principal amount of notes then outstanding. Section 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes will be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. 68 Section 9.05 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, etc. The Trustee will sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee will be entitled to receive and (subject to Section 7.01 hereof) will be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental Indenture is authorized or permitted by this Indenture. ARTICLE 10. SUBORDINATION Section 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full in cash or Cash Equivalents of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. Section 10.02 Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (1) holders of Senior Debt will be entitled to receive payment in full of all Obligations in cash or Cash Equivalents due in respect of such Senior Debt (including interest after the commencement of any bankruptcy proceeding at the rate specified in the applicable Senior Debt) before the Holders of Notes will be entitled to receive any payment with respect to the Notes (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof); and (2) until all Obligations with respect to Senior Debt (as provided in clause (1) above) are paid in full in cash or Cash Equivalents, any distribution to which Holders would be entitled but for this Article 10 will be made to holders of Senior Debt (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof), as their interests may appear. 69 Section 10.03 Default on Designated Senior Debt. (a) The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the Trustee or any Holder any Notes for cash or property (other than Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full in cash or Cash Equivalents if: (1) payment default on Designated Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Debt; or (2) any other default occurs and is continuing on any series of Designated Senior Debt that permits holders of that series of Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the holders of any Designated Senior Debt or their representative. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice will be effective for purposes of this Section unless and until (A) at least 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice and (B) all scheduled payments of principal, premium and Additional Interest, if any, and interest on the Notes that have come due have been paid in full in cash or Cash Equivalents. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee may be, or may be made, the basis for a subsequent Payment Blockage Notice. (b) The Company may and will resume payments on and distributions in respect of the Notes and may acquire them upon the earlier of: (1) in the case of a payment default, upon the date upon which such default is cured or waived, or (2) in the case of a nonpayment default, upon the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any Designated Senior Debt has been accelerated, if this Article 10 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. Section 10.04 Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company will promptly notify holders of Senior Debt of the acceleration. Section 10.05 When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes (other than Permitted Junior Securities and payments made from any defeasance trust created pursuant to Section 8.01 hereof) at a time when such payment is prohibited by Section 10.03 hereof, such payment will be held by the Trustee or such Holder, in trust for the benefit of, and will be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the agreement, indenture or other document (if any) pursuant to which Senior 70 Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in cash or Cash Equivalents in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only those obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt will be read into this Indenture against the Trustee. The Trustee will not be deemed to owe any fiduciary duty to the holders of Senior Debt, and will not be liable to any such holders if the Trustee pays over or distributes to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt are then entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.06 Notice by Company. The Company will promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 10, but failure to give such notice will not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. Section 10.07 Subrogation. After all Senior Debt is paid in full in cash or Cash Equivalents and until the Notes are paid in full, Holders of Notes will be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.08 Relative Rights. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture will: (1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of, premium and interest and Additional Interest, if any, on the Notes in accordance with their terms; (2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes; provided, however, that all Senior Debt then due and payable or thereafter declared to be due and payable shall first be paid in full, in cash or Cash Equivalents, before the Holders or the Trustee are entitled to receive any direct or indirect payment from the Company of Obligations with respect to the Notes. 71 If the Company fails because of this Article 10 to pay principal of, premium or interest or Additional Interest, if any, on a Note on the due date, the failure is still a Default or Event of Default. Section 10.09 Subordination May Not Be Impaired by Company. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes may be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 10.10 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to or by holders of Senior Debt, the distribution may be made and the notice given to or by their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes will be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Section 10.11 Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee will not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee has received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 will impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Paying Agent may do the same with like rights. Section 10.12 Authorization to Effect Subordination. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. Section 10.13 Amendments. The provisions of this Article 10 may not be amended or modified without the written consent of such holders of Senior Debt as are required under the agreement, indenture or other document (if any) governing such Senior Debt. In addition, any amendment to, or waiver of, the provisions of this Article 10 that adversely affects the rights of the Holders of the Notes will require the consent of the Holders of at least 75% in aggregate principal amount of Notes then outstanding. 72 Section 10.14 Reinstatement. To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. To the extent the obligation to repay any Senior Debt is declared to be fraudulent, invalid, or otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then the obligation so declared fraudulent, invalid or otherwise set aside (and all other amounts that would come due with respect thereto had such obligation not been so affected) shall be deemed to be reinstated and outstanding as Senior Debt for all purposes hereof as if such declaration, invalidity or setting aside had not occurred. Section 10.15 No Waiver of Subordination Provisions. Without in any way limiting the generality of Section 10.09, such holders of Senior Debt as are required or permitted under the agreement, indenture or other document (if any) governing such Senior Debt, may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article 10 or the obligations hereunder of the Holders to the holders of Senior Debt, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment, or renew or alter, Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding or secured; (b) sell, exchange or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c) release any Person liable in any manner for the collection of Senior Debt and (d) exercise or refrain from exercising any rights against the Company and any other Person. ARTICLE 11. NOTE GUARANTEES Section 11.01 Guarantee. (a) Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (1) the principal of, premium and Additional Interest, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. 73 Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. (b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect. (d) Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. The Guarantors will have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. Section 11.02 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. Section 11.03 Execution and Delivery of Subsidiary Guarantee. To evidence its Subsidiary Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form attached as Exhibit E hereto will be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture will be executed on behalf of such Guarantor by one of its Officers. 74 Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 11.01 will remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee will be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, will constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any Domestic Subsidiary after the date of this Indenture, if required by Section 4.18 hereof, the Company will cause such Domestic Subsidiary to comply with the provisions of Section 4.18 hereof and this Article 11, to the extent applicable. Section 11.04 Guarantors May Consolidate, etc., on Certain Terms. Except as otherwise provided in Section 11.05, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor, unless: (1) immediately after giving effect to such transaction, no Default or Event of Default exists; and (2) if the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger is a Restricted Subsidiary immediately following such transaction, such Person assumes all the obligations of that Guarantor under this Indenture, its Subsidiary Guarantee and the Registration Rights Agreement pursuant to a supplemental indenture satisfactory to the Trustee. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person will succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued will in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or will prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 11.05 Releases Following Sale of Assets. In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or 75 other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition, merger or consolidation was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee will execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. Any Guarantor not released from its obligations under its Subsidiary Guarantee will remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. Section 11.06 Subordination of Subsidiary Guarantee. The Obligations of each Guarantor under its Subsidiary Guarantee pursuant to this Article 11 will be junior and subordinated to the Senior Debt of such Guarantor on the same basis as the Notes are junior and subordinated to Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders will have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. Section 11.07 Release Following Designation as an Unrestricted Subsidiary. In the event the Company designates any Guarantor as an Unrestricted Subsidiary in accordance with Section 4.19, the Obligations of such Guarantor under its Subsidiary Guarantee pursuant to this Article 11 shall be released. ARTICLE 12. SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge. This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when: (1) either: (a) all Notes that have been authenticated (except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company) have been delivered to the Trustee for cancellation; or (b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not previously delivered to the Trustee for 76 cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption; (2) no Default or Event of Default has occurred and is continuing on the date of such deposit or will occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (3) the Company or any Guarantor has paid or caused to be paid all other sums payable by it under this Indenture; and (4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel, which Opinion of Counsel may be subject to customary assumptions and exclusions, to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section, the provisions of Section 12.02 and Section 8.06 will survive. In addition, nothing in this Section 12.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture. Section 12.02 Application of Trust Money. Subject to the provisions of Section 8.06, all money deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 12.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01; provided that if the Company has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. ARTICLE 13. MISCELLANEOUS Section 13.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties will control. 77 Section 13.02 Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company and/or any Guarantor: Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 Telecopier No.: (419) 241-4215 Attention: Gary Blair With a copy to: Fritz Byers, Esquire 824 Spritzer Building Toledo, OH [43660] Telecopier No.: (419) 241-4215 and Reed Smith LLP 435 Sixth Avenue Pittsburgh, Pennsylvania 15219 Telecopier No.: (412) 288-3063 Attention: Nelson Winter, Esquire If to the Trustee: Wells Fargo Bank Minnesota, National Association 213 Court St., Suite 902 Middletown, Connecticut 06457 Telecopier No.: (860) 704-6219 Attention: Frank McDonald The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication will also be so mailed 78 to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time. Section 13.03 Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 13.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 13.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) must comply with the provisions of TIA Section 314(e) and must include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 13.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. 79 Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Subsidiary Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. Section 13.08 Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 13.09 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 13.10 Successors. All agreements of the Company in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successors. All agreements of each Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 11.05. Section 13.11 Severability. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Section 13.12 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement. Section 13.13 Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 80 SIGNATURES Dated as of April 18, 2002 BLOCK COMMUNICATIONS, INC. By: ---------------------------------------- Name: Title: ACCESS TOLEDO, LTD. -------------------------------------------- Name: Title: BUCKEYE CABLEVISION, INC. -------------------------------------------- Name: Title: BUCKEYE TELESYSTEM, INC. -------------------------------------------- Name: Title: CARS HOLDING, INC. -------------------------------------------- Name: Title: COMMUNITY COMMUNICATION SERVICES, INC. -------------------------------------------- Name: Title: CORPORATE PROTECTION SERVICES, INC. -------------------------------------------- Name: Title: ERIE COUNTY CABLEVISION, INC. -------------------------------------------- Name: Title: IDAHO INDEPENDENT TELEVISION, INC. -------------------------------------------- Name: Title: INDEPENDENCE TELEVISION COMPANY -------------------------------------------- Name: Title: LIMA COMMUNICATION CORPORATION -------------------------------------------- Name: Title: METRO FIBER & CABLE CONSTRUCTION COMPANY -------------------------------------------- Name: Title: MONROE CABLEVISION, INC. -------------------------------------------- Name: Title: PG PUBLISHING COMPANY -------------------------------------------- Name: Title: TOLEDO AREA TELECOMMUNICATIONS SERVICES,INC. -------------------------------------------- Name: Title: WLFI-TV-INC. -------------------------------------------- Name: Title: WELLS FARGO BANK MINNESOTA, NATIONAL NATIONAL ASSOCIATION By: -------------------------------------- Name: Title: SCHEDULE I SCHEDULE OF GUARANTORS The following schedule lists each Guarantor under this Indenture as of the date of this Indenture: Access Toledo, Ltd., an Ohio limited liability corporation Buckeye Cablevision, Inc., an Ohio corporation Buckeye TeleSystem, Inc., an Ohio corporation CARS Holding, Inc., an Ohio corporation Community Communication Services, Inc., an Ohio corporation Corporate Protection Services, Inc., an Ohio corporation Erie County Cablevision, Inc., an Ohio corporation Idaho Independent Television, Inc., an Idaho corporation Independence Television Company, a Pennsylvania corporation Lima Communications Corporation, an Ohio corporation Metro Fiber & Cable Construction Company, an Ohio corporation Monroe Cablevision, Inc., a Michigan corporation PG Publishing Company, a Pennsylvania corporation Toledo Area Telecommunications Services, Inc., an Ohio corporation WLFI-TV, Inc., an Indiana corporation EXHIBIT A1 [Face of Note] CUSIP/CINS ____________ _____% [Series A] [Series B] Senior Subordinated Notes due 2009 No. ___ $____________ BLOCK COMMUNICATIONS, INC. promises to pay to CEDE & CO. or registered assigns, the principal sum of ___________________________________________________________ Dollars on _____________, 20___. Interest Payment Dates: ____________ and ____________ Record Dates: ____________ and ____________ Dated: _______________, 2002 BLOCK COMMUNICATIONS, INC. By: ______________________________________ Name: Title: By: ______________________________________ Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: ______________________________________ Authorized Signatory A1-1 [Back of Note] ___% [Series A] [Series B] Senior Subordinated Notes due 2009 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. (1) INTEREST. Block Communications, Inc., an Ohio corporation (the "Company"), promises to pay interest on the principal amount of this Note at ___% per annum from April _____, 2002 until maturity and shall pay the Additional Interest, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Additional Interest, if any, semi-annually in arrears on _____ and _____ of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be _____, 2002. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. (2) METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the ______ or ______ next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Additional Interest, if any, and interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Additional Interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Interest, if any, on, all Global Notes and all other Notes the Holders of which will have provided wire transfer instructions to the Company or the Paying Agent. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. (3) PAYING AGENT AND REGISTRAR. Initially, Wells Fargo Bank Minnesota, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. (4) INDENTURE. The Company issued the Notes under an Indenture dated as of April ___, 2002 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the A1-2 Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. (5) OPTIONAL REDEMPTION. (a) At any time prior to ____, 2005, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of % of the principal amount thereof, plus accrued and unpaid interest and Additional Interest to the redemption date, with the net cash proceeds of one or more Qualified Equity Offerings, provided that: (i) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (ii) the redemption occurs within 45 days of the date of the closing of such Qualified Equity Offering. Except pursuant to the preceding paragraph, the Notes may not be redeemed at the option of the Company prior to ______,2006. (b) After _______,2006, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, and Additional Interest, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on to _______ of the years indicated below:
Year Percentage ---- ---------- 2006.................................................... % 2007.................................................... % 2008 and thereafter..................................... 100.000%
(c) Any redemption pursuant to Section 3.07 of the Indenture shall be made in accordance with the provisions of Sections 3.01 through 3.06 of the Indenture. (6) MANDATORY REDEMPTION. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. (7) REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company will be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company will mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. A1-3 (b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceeds exceeds $10 million, the Company will commence an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes (including Additional Notes) and other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest thereon, if any, to the date fixed for the closing of such offer in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including Additional Notes, if any) and other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. (8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. (9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. (10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. (11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class, and any existing default or compliance with any provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any), voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any A1-4 additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Subsidiary Guarantee with respect to the Notes. (12) DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes whether or not prohibited by the subordination provisions of the Indenture; (ii) default in payment when due of the principal of, or premium, if any, on the Notes, whether or not prohibited by the subordination provisions of the Indenture; (iii) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions of Section 4.15; (iv) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice from the Trustee or Holders of at least 25% in principal amount of the Notes to comply with the provisions of 4.07, 4.09 or 4.10 hereof; (v) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice from the Trustee or Holders of at least 25% in principal amount of the Notes to comply with any of the other agreements in the Indenture; (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of this Indenture, if that default (A) is caused by a failure to pay principal of such Indebtedness at the final stated maturity thereof or (B) results in the acceleration of such Indebtedness prior to its express maturity; (vii) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million not covered by insurance, which judgments are not paid, discharged or stayed for a period of 60 days; (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (ix) certain events of bankruptcy or insolvency described in the Indenture with respect to the Company or any of its Restricted Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. (13) SUBORDINATION. Payment of principal, interest and premium and Additional Interest, if any, on the Notes is subordinated to the prior payment of Senior Debt on the terms provided in the Indenture. A1-5 (14) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. (15) NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any of the Guarantors, as such, will not have any liability for any obligations of the Company or such Guarantor under the Notes, the Subsidiary Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (16) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. (17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (18) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set forth in the A/B Exchange Registration Rights Agreement dated as of April ___, 2002, among the Company, the Guarantors and the other parties named on the signature pages thereof, or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Company, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement"). (19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 Attention: Trustee A1-6 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: ------------------------------- (Insert assignee's legal name) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint ------------------------------------------------------ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: ------------------ Your Signature: ----------------------------------- (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: ---------------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-1 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: --Section 4.10 --Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $--------------- Date: -------------------- Your Signature: ------------------------------ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: --------------------- Signature Guarantee*: --------------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A1-1 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE* The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Amount of Amount of Principal decrease in increase in Amount Signature of Principal Principal of this Global authorized Amount Amount Note following officer of of this Global of this Global such decrease Trustee or Date of Exchange Note Note (or increase) Custodian
* This schedule should be included only if the Note is issued in global form. A1-1 EXHIBIT A2 [Face of Regulation S Temporary Global Note] CUSIP/CINS __________ _____% [Series A] [Series B] Senior Subordinated Notes due 2009 No. ___ $__________ BLOCK COMMUNICATIONS, INC. promises to pay to CEDE & CO. or registered assigns, the principal sum of ___________________________________________________________ Dollars on _______________, 20___. Interest Payment Dates: ____________ and ____________ Record Dates: ____________ and ____________ Dated: _______________, 2002 BLOCK COMMUNICATIONS, INC. By: ________________________________________ Name: Title: By: ________________________________________ Name: Title: This is one of the Notes referred to in the within-mentioned Indenture: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: _______________________________ Authorized Signatory A2-1 [Back of Regulation S Temporary Global Note] ____% [Series A] [Series B] Senior Subordinated Notes due 2009 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF BLOCK COMMUNICATIONS, INC. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN A2-2 EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. (1) INTEREST. Block Communications, Inc., an Ohio corporation (the "Company"), promises to pay interest on the principal amount of this Note at % per annum from April , 2002 until maturity and shall pay the Additional Interest, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Additional Interest, if any, semi-annually in arrears on ______ and ______ of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be ______, 2002. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture. (2) METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on ______ or ______ next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, interest and Additional Interest, if any, at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Additional Interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Interest, if any, on, all Global Notes and all other Notes the Holders of which will have provided wire transfer instructions to the Company or the Paying Agent. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. (3) PAYING AGENT AND REGISTRAR. Initially, Wells Fargo Bank Minnesota, National Association, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. A2-3 (4) INDENTURE. The Company issued the Notes under an Indenture dated as of April , 2002 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. (5) OPTIONAL REDEMPTION. (a) At any time prior to ______, 2005, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of ______% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest to the redemption date, with the net cash proceeds of one or more Qualified Equity Offerings, provided that: (i) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and (ii) the redemption occurs within 45 days of the date of the closing of such Qualified Equity Offering. Except pursuant to the preceding paragraph, the Notes may not be redeemed at the option of the Company prior to ______, 2006. (b) After ______, 2006, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest, and Additional Interest, if any, thereon, to the applicable redemption date, if redeemed during the twelve-month period beginning on ______ of the years indicated below:
Year Percentage ____ __________ 2006.................................................... % 2007.................................................... % 2008 and thereafter..................................... 100.000%
(c) Any redemption pursuant to Section 3.07 of the Indenture shall be made in accordance with the provisions of Sections 3.01 through 3.06 of the Indenture. (6) MANDATORY REDEMPTION. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. (7) REPURCHASE AT OPTION OF HOLDER.. (a) If there is a Change of Control, the Company will be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, thereon, if any, to the date of purchase ( the "Change of Control Payment"). Within 10 days following any Change of Control, the Company will mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. A2-4 (b) If the Company or a Subsidiary consummates any Asset Sales, within five days of each date on which the aggregate amount of Excess Proceeds exceeds $10 million, the Company will commence an offer to all Holders of Notes and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the maximum principal amount of Notes (including Additional Notes) and other pari passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest thereon, if any, to the date fixed for the closing of such offer in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including Additional Notes, if any) and other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company may use such deficiency for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. (8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. (9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. (10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. (11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class, and any existing default or compliance with any provision of the Indenture, the Subsidiary Guarantees or the Notes may be A2-5 waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any), voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or any Guarantor's obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Subsidiary Guarantee with respect to the Notes. (12) DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes whether or not prohibited by the subordination provisions of the Indenture; (ii) default in payment when due of the principal of, or premium, if any, on the Notes, whether or not prohibited by the subordination provisions of the Indenture; (iii) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions of Section 4.15; (iv) failure by the Company or any of its Restricted Subsidiaries for 30 days after notice from the Trustee or Holders of at least 25% in principal amount of the Notes to comply with the provisions of 4.07, 4.09 or 4.10 hereof; (v) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice from the Trustee or Holders of at least 25% in principal amount of the Notes to comply with any of the other agreements in the Indenture; (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, if that default (A) is caused by a failure to pay principal of such Indebtedness at the final stated maturity thereof or (B) results in the acceleration of such Indebtedness prior to its express maturity; (vii) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million not covered by insurance, which judgments are not paid, discharged or stayed for a period of 60 days; (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; and (ix) certain events of bankruptcy or insolvency described in the Indenture with respect to the Company or any of its Restricted Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the A2-6 Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. (13) SUBORDINATION. Payment of principal, interest and premium and Additional Interest, if any, on the Notes is subordinated to the prior payment of Senior Debt on the terms provided in the Indenture. (14) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. (15) NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any of the Guarantors, as such, will not have any liability for any obligations of the Company or such Guarantor under the Notes, the Subsidiary Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (16) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. (17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (18) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set forth in the A/B Exchange Registration Rights Agreement dated as of April , 2002, among the Company, the Guarantors and the other parties named on the signature pages thereof, or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Company, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement"). (19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 Attention: Treasurer A2-7 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: __________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________ Your Signature:_____________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: --Section 4.10 --Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $--------------- Date: --------------- Your Signature: ------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ----------------- Signature Guarantee*: ------------------------------ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made:
Amount of Amount of Principal decrease in increase in Amount Signature of Principal Principal of this Global authorized Amount Amount Note following officer of of this Global of this Global such decrease Trustee or Date of Exchange Note Note (or increase) Custodian - ---------------- -------------- -------------- -------------- -----------
EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 [Registrar address block] Re: ____% Senior Subordinated Notes due 2009 Reference is hereby made to the Indenture, dated as of April , 2002 (the "Indenture"), among Block Communications, Inc., as issuer (the "Company"), the Guarantors named on the signature pages thereto and Wells Fargo Bank Minnesota, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchasers). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred B-1 beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) / / such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) / / such Transfer is being effected to the Company or a subsidiary thereof; or (c) / / such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) / / such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) / / CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. B-2 (b) / / CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) / / CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ----------------------------------------- [Insert Name of Transferor] By: -------------------------------------- Name: Title: Dated: ----------------------- B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) / / a beneficial interest in the: (i) / / 144A Global Note (CUSIP _________), or (ii) / / Regulation S Global Note (CUSIP _________), or (iii) / / IAI Global Note (CUSIP _________); or (b) / / a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) / / a beneficial interest in the: (i) / / 144A Global Note (CUSIP _________), or (ii) / / Regulation S Global Note (CUSIP _________), or (iii) / / IAI Global Note (CUSIP _________); or (iv) / / Unrestricted Global Note (CUSIP _________); or (b) / / a Restricted Definitive Note; or (c) / / an Unrestricted Definitive Note, in accordance with the terms of the Indenture. EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 [Registrar address block] Re: ____% Senior Subordinated Notes due 2009 (CUSIP _______________) Reference is hereby made to the Indenture, dated as of April , 2002 (the "Indenture"), among Block Communications, Inc., as issuer (the "Company"), the Guarantors named on the signature pages thereto and Wells Fargo Bank Minnesota, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the C-1 Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, / / IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ------------------------------------------ [Insert Name of Transferor] By: --------------------------------------- Name: Title: Dated: -------------------------- C-2 EXHIBIT C FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 [Registrar address block] Re: ____% Senior Subordinated Notes due 2009 Reference is hereby made to the Indenture, dated as of April __, 2002 (the "Indenture"), among Block Communications, Inc., as issuer (the "Company"), the guarantors named on the signature pages thereto and Wells Fargo Bank Minnesota, National Association, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) / / a beneficial interest in a Global Note, or (b) / / a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. C-1 EXHIBIT C 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ------------------------------------------ [Insert Name of Accredited Investor] By: --------------------------------------- Name: Title: Dated: ---------------------- C-1 EXHIBIT C FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of April , 2002 (the "Indenture") among Block Communications, Inc., (the "Company"), the Guarantors listed on Schedule I thereto and Wells Fargo Bank Minnesota, National Association, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium and Additional Interest, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. [NAME OF GUARANTOR(S)] By: -------------------------------------- Name: Title: C-1 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, 200__, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Block Communications, Inc. (or its permitted successor), an Ohio corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and Wells Fargo Bank Minnesota, National Association, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of April __, 2002 providing for the issuance of an aggregate principal amount of up to $__________ of __% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of, and premium and Additional Interest, if any, and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. F-1 (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. (c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. (i) Pursuant to Section 11.02 of the Indenture, after giving effect to any maximum amount and all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 11 of the Indenture, this new Subsidiary Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guarantor under this Subsidiary Guarantee will not constitute a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. F-2 (a) The Guaranteeing Subsidiary may not sell or otherwise dispose of all substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor unless: (i) immediately after giving effect to such transaction, no Default or Event of Default exists; and (ii) if the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger is a Restricted Subsidiary immediately following such transaction, such Person assumes all the obligations of that Guaranteeing Subsidiary under this Supplemental Indenture, its Subsidiary Guarantee and the Registration Rights Agreement pursuant to a supplemental indenture satisfactory to the Trustee. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable under the Indenture which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the F-3 Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 6. SUBORDINATION. The Obligations of each Guaranteeing Subsidiary under its Subsidiary Guarantee pursuant to this Supplemental Indenture will be junior and subordinated to the Senior Debt of such Guaranteeing Subsidiary on the same basis as the Notes are junior and subordinated to Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders will have the right to receive and/or retain payments by any of the Guaranteeing Subsidiaries only at such times as they may receive and/or retain payments in respect of the Notes pursuant to the Indenture, including Article 10 thereof. 7. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 9. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. F-4 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, 20___ [GUARANTEEING SUBSIDIARY] By: _______________________________ Name: Title: BLOCK COMMUNICATIONS, INC. By: _______________________________ Name: Title: [EXISTING GUARANTORS] By: _______________________________ Name: Title: WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By: _______________________________ Authorized Signatory F-5 EX-4.2 8 j9521601exv4w2.txt EXHIBIT 4.2 EXHIBIT 4.2 Block Communications, Inc. and Access Toledo, Ltd. Buckeye Cablevision, Inc. Buckeye Telesystem, Inc. CARS Holding, Inc. Community Communications Services, Inc. Corporate Protection Services, Inc. Erie County Cablevision, Inc. Idaho Independent Television, Inc. Independence Television Company Lima Communications Corporation Metro Fiber & Cable Construction Company Monroe Cablevision, Inc. PG Publishing Company Toledo Area Telecommunications Services, Inc. WLFI-TV, Inc. as Guarantors $175,000,000 9.25% Senior Subordinated Notes due 2009 Purchase Agreement dated April 11, 2002 Banc of America Securities LLC Fleet Securities, Inc. Comerica Securities, Inc. NatCity Investments, Inc. BMO Nesbitt Burns Corp. Table of Contents SECTION 1. Representations and Warranties................................ 2 SECTION 2. Purchase, Sale and Delivery of the Securities................. 15 SECTION 3. Additional Covenants.......................................... 16 SECTION 4. Payment of Expenses........................................... 19 SECTION 5. Conditions of the Obligations of the Initial Purchasers....... 19 SECTION 6. Reimbursement of Initial Purchasers' Expenses................. 22 SECTION 7. Offer, Sale and Resale Procedures............................. 22 SECTION 8. Indemnification............................................... 23 SECTION 9. Contribution.................................................. 26 SECTION 10. Termination of this Agreement................................. 27 SECTION 11. Representations and Indemnities to Survive Delivery........... 28 SECTION 12. Notices....................................................... 28 SECTION 13. Successors.................................................... 29 SECTION 14. Partial Unenforceability...................................... 29 SECTION 15. Governing Law Provisions...................................... 29 SECTION 16. Default of One or More of the Several Initial Purchasers...... 30 SECTION 17. General Provisions............................................ 30
Purchase Agreement April 11, 2002 BANC OF AMERICA SECURITIES LLC As Representative of the Initial Purchasers named in Schedule A hereto c/o BANC OF AMERICA SECURITIES LLC 9 West 57th Street New York, New York 10019 Ladies and Gentlemen: Introductory. Block Communications, Inc., an Ohio corporation (the "Company"), proposes to issue and sell to the several Initial Purchasers named in Schedule A (the "Initial Purchasers"), acting severally and not jointly, the respective amounts set forth in such Schedule A of a $175,000,000 aggregate principal amount of the Company's 9.25% Senior Subordinated Notes due 2009 (the "Notes"). Banc of America Securities LLC has agreed to act as the representative of the several Initial Purchasers in connection with the offering and sale of the Notes. The Notes will be issued pursuant to an indenture, dated as of April 18, 2002 (the "Indenture"), among the Company, the Guarantors (as defined below) and Wells Fargo Bank Minnesota, National Association, as trustee (the "Trustee"). Notes issued in book-entry form will be issued in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary"). The holders of the Notes will be entitled to the benefits of a registration rights agreement, to be dated as of April 18, 2002 (the "Registration Rights Agreement"), among the Company, the Guarantors and the Initial Purchasers, pursuant to which the Company will agree to file, within 90 days of the Closing Date, a registration statement with the Commission (as defined below) registering the Exchange Securities (as defined below) under the Securities Act (as defined below). The payment of principal of, premium and Additional Interest (as defined in the Indenture), if any, and interest on the Notes and the Exchange Notes (as defined below) will be fully and unconditionally guaranteed on a senior subordinated basis, jointly and severally, by (i) Access Toledo, Ltd., Buckeye Cablevision, Inc., Buckeye Telesystem, Inc., CARS Holding, Inc., Community Communications Services, Inc., Corporate Protection Services, Inc., Erie County Cablevision, Inc., Idaho Independent Television, Inc., Independence Television Company, Lima Communications Corporation, Metro Fiber & Cable Construction Company, Monroe Cablevision, Inc., PG Publishing Company, Toledo Area Telecommunications Services, Inc. and WLFI-TV, Inc. and (ii) any subsidiary of the Company formed or acquired after the Closing Date that executes an additional guarantee in accordance with the terms of the Indenture, and their respective successors and assigns (collectively, the "Guarantors"), pursuant to their guarantees (the "Guarantees"). The Notes and the Guarantees, a notation of which is attached thereto, are herein collectively referred to as the "Securities;" and the Exchange Notes and the Exchange Guarantees (as defined below) attached thereto are herein collectively referred to as the "Exchange Securities." The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and in the Offering Memorandum (as defined below) and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (the "Subsequent Purchasers") at any time after the date of this Agreement. The Securities are to be offered and sold to or through the Initial Purchasers without being registered with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933 (as amended, the "Securities Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder), in reliance upon exemptions therefrom. The terms of the Securities and the Indenture will require that investors that acquire Securities expressly agree that Securities may only be resold or otherwise transferred, after the date hereof, if such Securities are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemptions afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S") thereunder). The Company has prepared and delivered to each Initial Purchaser copies of a Preliminary Offering Memorandum, dated March 28, 2002 (the "Preliminary Offering Memorandum"), and has prepared and will deliver to each Initial Purchaser, copies of the Offering Memorandum, dated April 11, 2002, describing the terms of the Securities, each for use by such Initial Purchaser in connection with its solicitation of offers to purchase the Securities. As used herein, the "Offering Memorandum" shall mean, with respect to any date or time referred to in this Agreement, the Company's Offering Memorandum, dated April 11, 2002, including amendments or supplements thereto and any exhibits thereto, in the most recent form that has been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of offers to purchase Securities. Further, any reference to the Preliminary Offering Memorandum or the Offering Memorandum shall be deemed to refer to and include any Additional Issuer Information (as defined in Section 3) furnished by the Company prior to the completion of the distribution of the Securities. The Company hereby confirms its agreements with the Initial Purchasers as follows: SECTION 1. Representations and Warranties. The Company and each of the Guarantors, jointly and severally, hereby represent and warrant as of the date hereof to each Initial Purchaser as follows: (a) No Registration Required. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 2 hereof and with the procedures set forth in Section 7 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement and the Offering Memorandum to register the Securities under the Securities Act or, until such time as the Exchange Securities are issued pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder). (b) No Integration of Offerings or General Solicitation. The Company and the Guarantors have not, directly or indirectly, solicited any offer to buy or offered to sell, 2 and will not, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the Securities Act. None of the Company, the Guarantors, their respective affiliates (as such term is defined in Rule 501 under the Securities Act (each, an "Affiliate"), or any person acting on its or their respective behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502 under the Securities Act. With respect to those Securities sold in reliance upon Regulation S, none of the Company, the Guarantors, their Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of the Company, the Guarantors and their Affiliates and any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation or warranty) has complied and will comply with the offering restrictions set forth in Regulation S. (c) Eligibility for Resale under Rule 144A. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Date, of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated interdealer quotation system. (d) The Offering Memorandum. The Offering Memorandum does not, and at the Closing Date will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by any Initial Purchaser through Banc of America Securities LLC expressly for use in the Offering Memorandum, it being understood and agreed that such information consists only of the information described in Section 8(b) hereof. Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its date, contains all the information specified in, and meeting the requirements of, Rule 144A. Neither the Company nor any Guarantor has distributed or will distribute, prior to the later of the Closing Date and the completion of the Initial Purchasers' distribution of the Securities, any offering material in connection with the offering and sale of the Securities other than the Preliminary Offering Memorandum or the Offering Memorandum. (e) The Purchase Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company and each of the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except as rights to indemnification may be limited by applicable law. 3 (f) The Registration Rights Agreement. The Registration Rights Agreement has been duly authorized by the Company and the Guarantors and at the Closing Date, will be duly authorized, executed and delivered by, and will be a valid and binding agreement of, the Company and each of the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and except as rights to indemnification may be limited by applicable law. Pursuant to the Registration Rights Agreement, the Company will agree to file with the Commission, under the circumstances set forth therein, a registration statement under the Securities Act relating to another series of debt securities of the Company with terms substantially identical to the Notes and the Guarantees (the "Exchange Notes" and the "Exchange Guarantees") to be offered in exchange for the Notes and the Guarantees (the "Exchange Offer") and (ii) to the extent required by the Registration Rights Agreement, a shelf registration statement pursuant to Rule 415 of the Securities Act relating to the resale by certain holders of the Notes, and in each case, to use its best efforts to cause such registration statements to be declared effective. (g) Authorization of the Securities and the Exchange Securities. (i) The Notes to be purchased by the Initial Purchasers from the Company will be in the form contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding agreements of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles, and will be entitled to the benefits of the Indenture. (ii) The Exchange Notes have been duly and validly authorized for issuance by the Company, and when issued and authenticated in accordance with the terms of the Indenture, the Registration Rights Agreement and the Exchange Offer, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting enforcement of the rights and remedies of creditors or by general principles of equity and will be entitled to the benefits of the Indenture. (iii) The Guarantees of the Notes will be in the respective forms contemplated by the Indenture, have been duly authorized for issuance and sale pursuant to this Agreement and the Indenture and, at the Closing Date, will have been duly executed by each of the Guarantors and, when the Notes have been authenticated in the manner provided for in the Indenture and delivered against payment of the purchase price therefor, the Guarantees will constitute valid and binding agreements of the Guarantors, enforceable against the Guarantors in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture. (iv) The Exchange Guarantees have been duly authorized for issuance by the Guarantors and, when the Exchange Notes have been authenticated in the manner provided for in the Indenture and delivered in exchange for the Notes pursuant to the Exchange Offer, will constitute valid and binding agreements of the Guarantors, enforceable against the Guarantors in accordance with their terms, except as the 4 enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles and will be entitled to the benefits of the Indenture. (h) Authorization of the Indenture. The Indenture has been duly authorized by the Company and the Guarantors and, at the Closing Date, will have been duly executed and delivered by the Company and the Guarantors and will constitute a valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles. (i) Description of the Securities and the Indenture. The Notes, the Exchange Notes, the Guarantees, the Exchange Guarantees and the Indenture will conform in all material respects to the respective statements relating thereto contained in the Offering Memorandum. (j) No Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum, subsequent to the respective dates as of which information is given in the Offering Memorandum: (i) there has been no material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company, the Guarantors and their respective subsidiaries, (any such change is called a "Material Adverse Change"); (ii) none of the Company, the Guarantors or their respective subsidiaries has incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no (A) dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or any Guarantor, the Guarantors or any of their respective subsidiaries on any class of capital stock or (B) repurchase or redemption by the Company, the Guarantors or any of their respective subsidiaries of any class of capital stock. (k) Independent Accountants. Ernst & Young LLP, who have expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) included in the Offering Memorandum, are independent public or certified public accountants within the meaning of Regulation S-X under the Securities Act and the Exchange Act. (l) Preparation of the Financial Statements. The financial statements, together with the related schedules and notes, included in the Offering Memorandum present fairly the consolidated financial position of the Company and its consolidated subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States, applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The financial data set forth in the Offering Memorandum under the captions "Offering Memorandum Summary--Summary Consolidated Financial Data" and "Selected Consolidated Financial Data" fairly present the information set forth 5 therein on a basis consistent with that of the audited financial statements contained in the Offering Memorandum. (m) Incorporation and Good Standing of the Company, the Guarantors and their Subsidiaries. Each of the Company, the Guarantors and their respective subsidiaries has been duly incorporated or formed and is validly existing as a corporation, limited liability company or partnership in good standing under the laws of the jurisdiction of its incorporation or formation and has corporate, limited liability company or partnership power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and, in the case of the Company and the Guarantors, to enter into and perform their respective obligations under each of this Agreement, the Registration Rights Agreement, the Securities, the Exchange Securities and the Indenture. Each of the Company, the Guarantors and their respective subsidiaries is duly qualified as a foreign corporation, limited liability company or partnership to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. Except as set forth in the Offering Memorandum, all of the issued and outstanding capital stock, membership interests or partnership interests of the Company's and the Guarantors' subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company and the Guarantors, directly or through their subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim other than those securing the Company's obligations under the Senior Credit Facilities, Revolving Credit Facility and Senior Notes (each as defined below). The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Schedule C hereto. (n) Capitalization and Other Capital Stock Matters. At December 31, 2001, on a consolidated basis, after giving pro forma effect to the issuance and sale of the Securities pursuant hereto, the Company would have an authorized and outstanding capitalization as set forth in the Offering Memorandum under the caption "Capitalization" (other than for subsequent issuances of capital stock, if any, pursuant to employee benefit plans described in the Offering Memorandum or upon exercise of outstanding options described in the Offering Memorandum). (o) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. Neither the Company, any of the Guarantors nor any of their respective subsidiaries is in violation of its charter or by-laws or is in default (or, with the giving of notice or lapse of time, would be in default) ("Default") under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which the Company, any of the Guarantors or any of their respective subsidiaries is a party or by which it or any of them may be bound (including, without limitation, the Company's (i) senior credit facilities, including a term loan in the amount of $75.0 million, which matures on December 31, 2006, and a revolving credit loan, with outstanding borrowings of $92.5 million as of December 31, 2001 and which matures on December 31, 2006 (the "Senior Credit Facilities"); (ii) revolving credit facility, with no outstanding borrowings as of December 31, 2001 and which matures on June 30, 2002 (the "Revolving Credit Facility"); and (iii) five series of senior notes, with an aggregate principal amount outstanding as of December 31, 2001 of $67.5 million and which have 6 maturities ranging from August 1, 2003 to December 12, 2006 (such notes, the "Senior Notes")) or to which any of the property or assets of the Company, the Guarantors or any of their respective subsidiaries is subject (each, an "Existing Instrument"), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. The Company's and each of the Guarantors' execution, delivery and performance of this Agreement, the Registration Rights Agreement and the Indenture, and the issuance and delivery of the Securities (including the Guarantees endorsed thereon) or the Exchange Securities (including the Exchange Guarantees endorsed thereon), and consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum (i) will not result in any violation of the provisions of the charter or by-laws of the Company, (ii) will not conflict with or constitute a breach of, or Default or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, any of the Guarantors or any of their respective subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument, except for such conflicts, breaches, Defaults, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company, any of the Guarantors or any of their respective subsidiaries. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company's or any of the Guarantors' execution, delivery and performance of this Agreement, the Registration Rights Agreement, or the Indenture, or the issuance and delivery of the Securities (including the Guarantees endorsed thereon) or the Exchange Securities (including the Exchange Guarantees endorsed thereon), or consummation of the transactions contemplated hereby and thereby and by the Offering Memorandum, except (1) such as have been obtained or made by the Company or by any of the Guarantors and are in full force and effect, (2) such as may be required by applicable state securities or blue sky laws and (3) such as may be required by federal and state securities laws with respect to the Company's and any of the Guarantors' obligations under the Registration Rights Agreement. As used herein, a "Debt Repayment Triggering Event" means any event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company, any of the Guarantors or any of their respective subsidiaries. (p) No Material Actions or Proceedings. Except as otherwise disclosed in the Offering Memorandum, there are no legal or governmental actions, suits or proceedings pending or, to the best of the Company's or any of the Guarantors' knowledge, threatened against or affecting the Company, any of the Guarantors or any of their respective subsidiaries, which has as the subject thereof any property owned or leased by the Company, any of the Guarantors or any of their respective subsidiaries, where in any such case there is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company, any of the Guarantors or any of their respective subsidiaries and any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or adversely affect the consummation of the transactions contemplated by this Agreement. Except as otherwise disclosed in the Offering Memorandum, no material labor dispute with the employees of the Company, any of the Guarantors or any of their respective subsidiaries exists or, to the best of the Company's or any of the Guarantors' knowledge, is threatened or imminent. 7 (q) Intellectual Property Rights. The Company, the Guarantors and their respective subsidiaries own or possess sufficient trademarks, trade names, patent rights, copyrights, licenses, approvals, trade secrets and other similar rights (collectively, "Intellectual Property Rights") reasonably necessary to conduct their respective businesses as now conducted; and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. Neither the Company, any of the Guarantors nor any of their respective subsidiaries has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, would result in a Material Adverse Change. (r) All Necessary Permits, etc. The Company, the Guarantors and their respective subsidiaries possess such valid and current certificates, authorizations, franchises or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses, and except as otherwise disclosed in the Offering Memorandum, neither the Company, any of the Guarantors nor any of their respective subsidiaries has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could result in a Material Adverse Change. (s) FCC Licenses. (i) The Company and each of the Guarantors hold such validly issued Federal Communications Commission (the "FCC") licenses and authorizations as are necessary to operate their respective television stations, which are listed on Schedule B (each a "Station" and collectively, the "Stations"), as they are currently operated (collectively, the "FCC Licenses"), and each such FCC License is in full force and effect. The FCC Licenses of the Company and each Guarantor are listed on Schedule B, and each of such FCC Licenses has the expiration date indicated on Schedule B. (ii) Neither the Company nor any Guarantor has knowledge of any condition imposed by the FCC as part of any FCC License, which condition is neither set forth on the face thereof as issued by the FCC nor contained in the rules and regulations of the FCC applicable generally to stations of the type, nature, class or location of the Station in question. Except as otherwise disclosed in the Offering Memorandum, each Station has been and is being operated in all material respects in accordance with the terms and conditions of the FCC Licenses applicable to it and the rules and regulations of the FCC and the Communications Act of 1934, as amended (the "Communications Act"). (iii) Except as otherwise disclosed in the Offering Memorandum, no proceedings are pending or to the Company's knowledge, are threatened which may result in the revocation, modification, non-renewal or suspension of any of the FCC Licenses, the denial of any pending applications, the issuance of any cease and desist order or the imposition of any fines, forfeitures or other administrative actions by the FCC with respect to any Station or its operation, other than any matters which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Change and proceedings affecting the television broadcasting industry in general. (iv) All reports, applications and other documents required to be filed by the Company or any such Guarantor with the FCC with respect to the Stations have been timely filed, and all such reports, applications and documents are true, correct and complete in all 8 respects, except where the failure to make such timely filing or any inaccuracy therein could not reasonably be expected to result in a Material Adverse Change, and except as otherwise disclosed in the Offering Memorandum, neither the Company nor any of the Guarantors has knowledge of any matters that could reasonably be expected to result in the suspension or revocation of or the refusal to renew any of the FCC Licenses or the imposition on the Company or any Guarantor of any material fines or forfeitures by the FCC, or which could reasonably be expected to result in the revocation, rescission, reversal or modification of any Station's authorization to operate as currently authorized under the Communications Act and the policies, rules and regulations of the FCC. (t) No Citations. There are no unsatisfied or otherwise outstanding citations issued by the FCC with respect to any Station or its operations. (u) Condition of Stations. All of the material properties, equipment and systems of the Company and the Guarantors and the Stations owned and/or operated by them are, and all material properties, equipment and systems to be added in connection with any contemplated Station expansion or construction will be, in condition which is sufficient for the operation thereof in accordance with past practice of the Station in question and except as otherwise disclosed in the Offering Memorandum, are and will be in compliance with all applicable standards, rules or requirements imposed by (a) any governmental agency or authority including without limitation the FCC and (b) any FCC License, in each case except where such noncompliance would not reasonably be expected to result in a Material Adverse Change. (v) No Material Actions or Proceedings by FCC. Other than as set forth in the Offering Memorandum (including those matters referred to therein relating to general rulemakings and similar matters relating generally to the cable television industry) and except with respect to general rulemakings and similar matters relating generally to the cable television industry, (i) there are no actions, suits, proceedings, inquiries or investigations by the FCC pending or threatened in writing against or affecting the Company, any of its subsidiaries or any System, which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate result in a Material Adverse Change; and (ii) to the Company's knowledge, there is no reasonable basis for any such action, suit, proceeding or investigation, which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate result in a Material Adverse Change. (w) FCC Authorizations. Except with respect to matters that would not, individually or in the aggregate, result in a Material Adverse Change, (i) the Company and its subsidiaries have made all material filings, recordings and registrations with, and possess all validations or exemptions, approvals, orders, authorizations, consents, licenses, certificates and permits from, the FCC and other federal, state and local regulatory or governmental bodies and authorities or any subdivision thereof, including, without limitation, cable television franchises and cable antenna relay service, broadcast auxiliary, earth station, business radio, microwave or special safety radio service licenses issued by the FCC (collectively, the "FCC Authorizations") necessary or appropriate to own, operate and construct the cable communication systems that are now owned or managed by them (the "Systems") or otherwise for the operation of their businesses and are not in violation of any thereof; (ii) all such FCC Authorizations are in full force and effect, and no event has occurred that permits, or after notice or lapse of time could permit, the revocation, termination or modification of any FCC Authorization which is 9 necessary or appropriate to own, operate and construct the Systems or otherwise for the operation of any such business; (iii) neither the Company nor any of its subsidiaries is in breach or violation of, or in default under, any duty or obligation required by any of the terms, conditions or provisions of the Communications Act, or any FCC rule, regulation or policy applicable to the operation of any portion of any of the Systems; (iv) neither the Company nor any of its subsidiaries, is in violation of any duty or obligation required by state or local laws, or local rules or regulations applicable to the operation of any portion of any of the Systems; (v) there is not pending or, to the knowledge of the Company or any of its subsidiaries, threatened, any action by the FCC or state or local regulatory authority to modify, revoke, cancel, suspend or refuse to renew any FCC Authorization; (vi) other than as described in the Offering Memorandum, there is not now issued or outstanding or, to the knowledge of the Company or any of its subsidiaries, threatened, any notice of any hearing, material violation or material complaint against the Company or any of its subsidiaries, with respect to the operation of any portion of the Systems and none of the Company or its subsidiaries has any knowledge that any person intends to contest renewal of any material FCC Authorization. (x) Programming Agreements. (i) Except as otherwise disclosed in the Offering Memorandum, (A) the Company and its subsidiaries have entered into, or have rights under, all required programming agreements (including, without limitation, all agreements under which the Company and its subsidiaries are accorded retransmission rights relating to programming that the Systems provide to their customers) that are material to the conduct of their business as described in the Offering Memorandum; and (B) all such material agreements are in full force and effect and none of the Company, any of its subsidiaries or any of their affiliates has received any written notice of revocation or material modifications of such material agreements; and (ii) (A) with respect to each television station that has notified the Company or its subsidiary that such station's respective consent is required to carry such station on the Systems, either the Company or the subsidiary has obtained such consent or has ceased carrying such station; (B) all such agreements grant the Company or one of its subsidiaries retransmission consent; and (C) all such agreements are in full force and effect, and no event has occurred that permits, or after notice or lapse of time could permit, the revocation, termination or material modification of any such agreement, except where the failure of such agreements to be in full force and effect or such revocation would not, in either case, individually or in the aggregate, result in a Material Adverse Change. (y) Operation of the Systems. Except for matters that would not, individually or in the aggregate, result in a Material Adverse Change, (i) all registration statements and all other documents (including but not limited to annual reports) required by the FCC in connection with the operation of the Systems have been filed with the FCC; (ii) all frequencies within the restricted aeronautical and navigational bands (i.e., 108-136 MHz and 225-400 MHz) which are currently being used in connection with the operation of the Systems have been authorized for such use by the FCC; (iii) each of the Systems subject to Equal Employment Opportunity Commission ("EEO") compliance certification by the FCC has been certified by the FCC for annual EEO compliance during the time such Systems have been owned by the Company or its subsidiaries; and (iv) all towers associated with the Systems are in compliance with the rules and regulations of the United States Federal Aviation Administration. (z) Copyright Compliance. Except for matters that would not, individually or in the aggregate, result in a Material Adverse Change, (i) all statements of accounts and any 10 other filings that are required under Section 111 of the United States Copyright Act of 1976, as amended, in connection with the retransmission of any broadcast television and radio signals on the Systems have been timely filed with the United States Copyright Office and indicated royalty payments have been made for each System for each accounting period during which such Systems have been owned or managed by the Company or its subsidiaries; (ii) none of the Company, any of its subsidiaries or any System has received any inquiry or request from the United States Copyright Office or from any other party challenging or questioning any such statements of account or royalty payments; and (iii) no claim of copyright infringement has been made or threatened in writing against the Company, any of its subsidiaries or any System. (aa) Compliance with Communications Act or FCC. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby or by the Offering Memorandum under "Use of Proceeds," nor compliance with the terms, conditions and provisions hereof and thereof by the Company or its subsidiaries, will conflict with the Communications Act or the rules, regulations or policies of the FCC thereunder, or will cause any suspension, revocation, impairment, forfeiture, nonrenewal or termination of any material license, permit, franchise, certificate, consent, authorization, designation, declaration, filing, registration or qualification. (bb) Title to Properties. The Company, the Guarantors and their respective subsidiaries have good and marketable title to all the properties and assets reflected as owned in the financial statements contained in the Offering Memorandum, in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except such as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company, the Guarantors or their respective subsidiaries and except for liens permitted by the Indenture. The real property, improvements, equipment and personal property held under lease by the Company, the Guarantors or any of their subsidiaries are held under valid and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company, the Guarantors or their respective subsidiaries. (cc) Tax Law Compliance. Except to the extent that any such failures would not, individually or in the aggregate, result in a Material Adverse Change, the Company, the Guarantors and each of their respective subsidiaries have filed all necessary federal, state and foreign income and franchise tax returns and have paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them except as may be being contested in good faith and by appropriate proceedings. The Company has made adequate charges, accruals and reserves in the applicable financial statements contained in the Offering Memorandum in respect of all federal, state and foreign income and franchise taxes for all periods as to which the tax liability of the Company or any of its consolidated subsidiaries has not been finally determined. (dd) Company Not an "Investment Company". The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the "Investment Company Act"). The Company is not, and after receipt of payment for the Securities will not be, an "investment company" within the meaning of Investment 11 Company Act and will conduct its business in a manner so that it will not become subject to the Investment Company Act. (ee) Insurance. The Company, the Guarantors and each of their respective subsidiaries are insured by recognized, financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company, the Guarantors and their respective subsidiaries against theft, damage, destruction, acts of vandalism and earthquakes. Except as set forth in the Offering Memorandum, each of the Company and its subsidiaries has no knowledge that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. (ff) No Price Stabilization or Manipulation. Neither the Company, the Guarantors nor their respective subsidiaries have taken nor will take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (gg) Accounting System. The Company and each of the Guarantors maintain a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (hh) Compliance with Environmental Laws. Except as would not, individually or in the aggregate, result in a Material Adverse Change (i) neither the Company, the Guarantors nor their respective subsidiaries are in violation of any federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, "Materials of Environmental Concern"), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the operation of the respective businesses of the Company, the Guarantors or their respective subsidiaries under applicable Environmental Laws, or noncompliance with the terms and conditions thereof, nor has the Company, the Guarantors or their respective subsidiaries received any written communication from a governmental authority that alleges that the Company, any of the Guarantors or any of their respective subsidiaries is in violation of any Environmental Law; (ii) there is no claim, action or cause of action filed with a court 12 or governmental authority, no investigation with respect to which the Company or the Guarantors have received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys' fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company, any of the Guarantors or their respective subsidiaries, now or in the past (collectively, "Environmental Claims"), pending or, to the best of the Company's or any of the Guarantors' knowledge, threatened against the Company, any of the Guarantors or any of their respective subsidiaries or any person or entity whose liability for any Environmental Claim the Company, any of the Guarantors or their respective subsidiaries has retained or assumed either contractually or by operation of law; and (iii) to the best of the Company's or any of the Guarantors' knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company, any of the Guarantors or any of their respective subsidiaries or against any person or entity whose liability for any Environmental Claim the Company, any of the Guarantors or their respective subsidiaries has retained or assumed either contractually or by operation of law. (ii) ERISA Compliance. The Company, the Guarantors and their respective subsidiaries and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by the Company, the Guarantors, their respective subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in all material respects with ERISA. "ERISA Affiliate" means, with respect to the Company, the Guarantors or their respective subsidiaries, any member of any group of organizations described in Sections 414 (b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which the Company, the Guarantors, or any of their respective subsidiaries is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company, the Guarantors, their respective subsidiaries or any of their ERISA Affiliates. Neither the Company, the Guarantors, any of their respective subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under Title IV of ERISA, other than for the payment of premiums under Section 4007 of ERISA, with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained by the Company, the Guarantors, their respective subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401 of the Code has received a favorable determination of such qualification from the Internal Revenue Service, or currently has an application for such determination on file, and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. (jj) No Default in Senior Indebtedness. No event of default exists under any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument constituting senior indebtedness of the Company or any of the Guarantors. 13 (kk) Regulation S compliance. The Company, the Guarantors and their respective affiliates and all persons acting on their behalf (other than the Initial Purchasers, as to whom the Company and the Guarantors make no representation) have complied with and will comply with the offering restrictions requirements of Regulation S in connection with the offering of the Securities outside the United States and, in connection therewith, the Offering Memorandum will contain the disclosure required by Rule 902. (ll) Compliance with Regulation S Restriction Period. The Securities sold in reliance on Regulation S will be represented upon issuance by a temporary global security that may not be exchanged for definitive securities until the expiration of the 40-day restricted period referred to in Rule 903 of the Securities Act and only upon certification of beneficial ownership of such Securities by non-U.S. persons or U.S. persons who purchased such Securities in transactions that were exempt from the registration requirements of the Securities Act. SECTION 2. Purchase, Sale and Delivery of the Securities. (a) The Securities. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Company agrees to issue and sell to the several Initial Purchasers, severally and not jointly, all of the Securities and the Initial Purchasers agree, severally and not jointly, to purchase from the Company the aggregate principal amount of Securities set forth opposite their names on Schedule A, at a purchase price of 97.00% of the principal amount thereof payable on the Closing Date. (b) The Closing Date. Delivery of certificates for the Securities in definitive form to be purchased by the Initial Purchasers and payment therefor shall be made at the offices of Latham & Watkins, 885 Third Avenue, New York, New York 10022 (or such other place as may be agreed to by the Company and the Initial Purchasers) at 9:00 a.m. New York City time, on April 18, 2002, or such other time and date as the Initial Purchasers shall designate by notice to the Company (the time and date of such closing are called the "Closing Date"). (c) Delivery of the Securities. The Company shall deliver, or cause to be delivered, to Banc of America Securities LLC for the accounts of the several Initial Purchasers certificates for the Securities at the Closing Date against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The certificates for the Securities shall be in such denominations and registered in the name of Cede & Co., as nominee of the Depositary, and shall be made available for inspection on the business day preceding the Closing Date at a location in New York City, as the Initial Purchasers may designate. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Initial Purchasers. (d) Delivery of Offering Memorandum to the Initial Purchasers. Not later than 12:00 p.m. on the second business day following the date of this Agreement, the Company shall deliver or cause to be delivered copies of the Offering Memorandum in such quantities and at such places as the Initial Purchasers shall reasonably request. (e) Initial Purchasers as Qualified Institutional Buyers. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Company that 14 it is a "qualified institutional buyer" within the meaning of Rule 144A (a "Qualified Institutional Buyer"). (f) Resale of Securities. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Company that such Initial Purchaser will make offers of the Securities purchased hereunder on the terms set forth in the Offering Memorandum solely (i) to persons whom such Initial Purchaser reasonably believes to be a Qualified Institutional Buyer and (ii) to persons permitted to purchase securities in offshore transactions in reliance upon Regulation S under the Securities Act (such persons specified in clauses (i) and (ii) are the Subsequent Purchasers referred to herein). SECTION 3. Additional Covenants. The Company and each of the Guarantors, jointly and severally, further covenant and agree with each Initial Purchaser as follows: (a) Initial Purchasers' Review of Proposed Amendments and Supplements. Prior to amending or supplementing the Offering Memorandum, the Company shall furnish to the Initial Purchasers for review a copy of each such proposed amendment or supplement, and the Company shall not use any such proposed amendment or supplement to which the Initial Purchasers reasonably object. (b) Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters. If, prior to the completion of the placement of the Securities by the Initial Purchasers with the Subsequent Purchasers but not later than the date of the consummation of the Exchange Offer, any event shall occur or condition exist as a result of which the Offering Memorandum shall include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if in the opinion of the Initial Purchasers or counsel for the Initial Purchasers, it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Company and each of the Guarantors agree to promptly prepare (subject to Section 3 hereof) and furnish, at their own expense to the Initial Purchasers, amendments or supplements to the Offering Memorandum so that the statements in the Offering Memorandum as so amended or supplemented will not include such statement or omission or so that the Offering Memorandum, as amended or supplemented, will comply with law. Following the consummation of the Exchange Offer or the effectiveness of an applicable shelf registration statement and for so long as the Securities are outstanding, if, in the reasonable judgment of the Initial Purchasers, the Initial Purchasers or any of their affiliates (as such term is defined in the rules and regulations under the Securities Act) are required to deliver a prospectus in connection with sales of, or market-making activities with respect to, such securities, because they are or may be deemed an "Affiliate" of the Company, as such term is used under Rule 144 under the Securities Act, to periodically amend the applicable registration statement so that the information contained therein complies with the requirements of Section 10 of the Securities Act, to amend the applicable registration statement or supplement the related prospectus or the documents incorporated therein when necessary to reflect any material changes in the information provided therein so that the registration statement and the prospectus will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and to provide the Initial Purchasers with copies of each amendment or 15 supplement filed and such other documents as the Initial Purchasers may reasonably request. The Company and each of the Guarantors hereby expressly acknowledge that the indemnification and contribution provisions of Sections 8 and 9 hereof are specifically applicable and relate to each offering memorandum, registration statement, prospectus, amendment or supplement referred to in this Section 3. (c) Copies of the Offering Memorandum. The Company agrees to furnish the Initial Purchasers, without charge, as many copies of the Offering Memorandum and any amendments and supplements thereto as they shall have reasonably requested. (d) Blue Sky Compliance. The Company and each of the Guarantors shall cooperate with the Initial Purchasers and counsel for the Initial Purchasers to qualify or register the Securities for sale under (or obtain exemptions from the application of) the Blue Sky or state securities laws of those jurisdictions designated by the Initial Purchasers, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Securities. Each of the Company and the Guarantors shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company and each of the Guarantors will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company and each of the Guarantors shall use their best efforts to obtain the withdrawal thereof at the earliest possible moment. (e) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Securities sold by it in the manner described under the caption "Use of Proceeds" in the Offering Memorandum. (f) The Depositary. The Company and each of the Guarantors will cooperate with the Initial Purchasers and use their best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of the Depositary. (g) Additional Issuer Information. At any time when the Company is not subject to Section 13 or 15 of the Exchange Act, for the benefit of holders and beneficial owners from time to time of Securities, the Company shall furnish, at its expense, upon request, to holders and beneficial owners of Securities and prospective purchasers of Securities information ("Additional Issuer Information") satisfying the requirements of subsection (d)(4) of Rule 144A. (h) Agreement Not To Offer or Sell Additional Securities. During the period of 180 days following the date of the Offering Memorandum, the Company and each of the Guarantors will not, without the prior written consent of Banc of America Securities LLC, directly or indirectly, issue, sell, offer to sell, grant any option for the sale of, any securities similar to the Notes, or any securities convertible into or exchangeable for the Notes or any such similar securities, except for the Notes sold to the Initial Purchasers pursuant to this Purchase Agreement. 16 (i) Future Reports to the Initial Purchasers. For so long as any Securities or Exchange Securities remain outstanding, the Company and the Guarantors will furnish to Banc of America Securities LLC (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company and the Guarantors as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public or certified public accountants; and (ii) as soon as available, copies of any report or communication of the Company or the Guarantors mailed generally to holders of its debt (including the holders of the Securities). (j) No Integration. The Company and each of the Guarantors agree that they will not and will cause their respective Affiliates not to make any offer or sale of securities of the Company of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of (i) the sale of the Securities by the Company to the Initial Purchasers, (ii) the resale of the Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the Securities Act provided by Section 4 thereof or by Rule 144A or by Regulation S thereunder or otherwise. (k) Legended Securities. Each certificate for a Note will bear the legend contained in "Notice to Investors" in the Offering Memorandum for the time period and upon the other terms stated in the Offering Memorandum. (l) PORTAL. The Company and each of the Guarantors will use their best efforts to cause such Notes to be eligible for the National Association of Securities Dealers, Inc. PORTAL market (the "PORTAL market"). Banc of America Securities LLC, on behalf of the several Initial Purchasers, may, in its sole discretion, waive in writing the performance by the Company and each of the Guarantors of any one or more of the foregoing covenants or extend the time for their performance. SECTION 4. Payment of Expenses. The Company agrees to pay (i) all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation all expenses incident to the issuance and delivery of the Securities (including all printing and engraving costs), (ii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Securities to the Initial Purchasers, (iii) all fees and expenses of the Company's and the Guarantors' counsel, independent public or certified public accountants and other advisors, (iv) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Preliminary Offering Memorandum and the Offering Memorandum (including financial statements and exhibits), and all amendments and supplements thereto, this Agreement, the Registration Rights Agreement, the Indenture, and the Notes and the Guarantees, (v) all filing fees, attorneys' fees and expenses incurred by the Company or the Initial Purchasers in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities for offer and sale under the Blue Sky laws and, if requested by the Initial Purchasers, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Initial Purchasers of such qualifications, registrations and exemptions, (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture, the 17 Securities and the Exchange Securities, (vii) any fees payable in connection with the rating of the Securities or the Exchange Securities with the ratings agencies and the listing of the Securities with the PORTAL market and (viii) all fees and expenses (including reasonable fees and expenses of counsel) of the Company and the Guarantors in connection with approval of the Securities by DTC for "book-entry" transfer, and the performance by the Company and the Guarantors of their respective other obligations under this Agreement. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Initial Purchasers shall pay their own expenses, including the fees and disbursements of their counsel. SECTION 5. Conditions of the Obligations of the Initial Purchasers. The obligations of the several Initial Purchasers to purchase and pay for the Securities as provided herein on the Closing Date shall be subject to the accuracy of the representations and warranties on the part of the Company and the Guarantors set forth in Section 1 hereof as of the date hereof and as of the Closing Date as though then made and to the timely performance by the Company and each of the Guarantors of their respective covenants and other obligations hereunder, and to each of the following additional conditions: (a) Accountants' Comfort Letter. On the date hereof, the Initial Purchasers shall have received from Ernst & Young LLP, independent public or certified public accountants for the Company, a letter dated the date hereof addressed to the Initial Purchasers, in form and substance satisfactory to the Initial Purchasers, containing statements and information of the type ordinarily included in accountant's "comfort letters" to Initial Purchasers, delivered according to Statement of Auditing Standards Nos. 72 and 76 (or any successor bulletins), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement and the Offering Memorandum. (b) No Material Adverse Change or Ratings Agency Change. For the period from and after the date of this Agreement and prior to the Closing Date: (i) in the judgment of the Initial Purchasers there shall not have occurred any Material Adverse Change or any development that could reasonably be expected to result in a Material Adverse Change; and (ii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company or any of its subsidiaries by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436 under the Securities Act. (c) Opinion of Counsel for the Company. On the Closing Date the Initial Purchasers shall have received the favorable opinion of Reed Smith LLP, counsel for the Company, dated as of such Closing Date, the form of which is attached as Exhibit A. (d) Opinion of General Counsel for the Company. On the Closing Date the Initial Purchasers shall have received an opinion of Fritz Byers, Esquire, general counsel for the Company dated as of such Closing Date, the form of which is attached as Exhibit B. (e) Opinion of Counsel for the Initial Purchasers. On the Closing Date the Initial Purchasers shall have received the favorable opinion of Latham & Watkins, counsel for 18 the Initial Purchasers, dated as of such Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers. (f) Officers' Certificate. On the Closing Date the Initial Purchasers shall have received a written certificate executed by the Chairman of the Board, Chief Executive Officer or President of the Company and each of the Guarantors and the Chief Financial Officer or Chief Accounting Officer of the Company and each of the Guarantors, dated as of the Closing Date, to the effect set forth in subsection b (ii) of this Section 5, and further to the effect that: (i) for the period from and after the date of this Agreement and prior to the Closing Date there has not occurred any Material Adverse Change; (ii) the representations and warranties of the Company and each of the Guarantors set forth in Section 1 of this Agreement are true and correct with the same force and effect as though expressly made on and as of the Closing Date; and (iii) the Company and each of the Guarantors has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date. (g) Bring-down Comfort Letter. On the Closing Date the Initial Purchasers shall have received from Ernst & Young LLP, independent public or certified public accountants for the Company, a letter dated such date, in form and substance satisfactory to the Initial Purchasers, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date. (h) PORTAL Listing. At the Closing Date the Notes shall have been designated for trading on the PORTAL market. (i) Registration Rights Agreement. The Company and each of the Guarantors shall have entered into the Registration Rights Agreement and the Initial Purchasers shall have received executed counterparts thereof. (j) Indenture. The Company and each of the Guarantors shall have entered into the Indenture and the Initial Purchasers shall have received executed counterparts thereof. (k) Notice of Redemption. On the Closing Date, the Senior Notes shall have been fully repaid and retired and all obligations thereunder shall have been satisfied in full and evidence reasonably satisfactory to the Initial Purchasers of the same shall have been delivered to the Initial Purchasers. (l) Interest Swap Agreements. On or before the Closing Date, the Company shall have effectively terminated its interest swap agreements relating to its senior credit facilities or it shall have entered into interest hedging arrangements reasonably satisfactory to Banc of America Securities LLC. 19 (m) Additional Documents. On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained. If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Initial Purchasers by notice to the Company at any time on or prior to the Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. SECTION 6. Reimbursement of Initial Purchasers' Expenses. If this Agreement is terminated by the Initial Purchasers pursuant to Section 5, or if the sale to the Initial Purchasers of the Securities on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company or the Guarantors to perform any agreement herein or to comply with any provision hereof, the Company and the Guarantors agree, jointly and severally, to reimburse the Initial Purchasers (or such Initial Purchasers as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Initial Purchasers in connection with the proposed purchase and the offering and sale of the Securities, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges. SECTION 7. Offer, Sale and Resale Procedures. Each of the Initial Purchasers, on the one hand, and the Company and each of the Guarantors, on the other hand, hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities: (a) Offers and sales of the Securities will be made only by the Initial Purchasers or Affiliates thereof qualified to do so in the jurisdictions in which such offers or sales are made. Each such offer or sale shall only be made to persons whom the offeror or seller reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) or non-U.S. persons outside the United States to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the Securities Act, upon the terms and conditions set forth in Annex I hereto, which Annex I is hereby expressly made a part hereof. (b) The Securities will be offered by approaching prospective Subsequent Purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502 under the Securities Act) will be used in the United States in connection with the offering of the Securities. (c) Upon original issuance by the Company, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Securities (and all securities issued in exchange therefor or in substitution thereof, other than the Exchange Securities) shall bear the following legend: "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED 20 HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY: (i) (a) TO A PERSON WHO IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),(3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (ii) TO THE ISSUER, OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." Following the sale of the Securities by the Initial Purchasers to Subsequent Purchasers pursuant to the terms hereof, the Initial Purchasers shall not be liable or responsible to the Company for any losses, damages or liabilities suffered or incurred by the Company, including any losses, damages or liabilities under the Securities Act, arising from or relating to any resale or transfer of any Security. 21 SECTION 8. Indemnification. (a) Indemnification of the Initial Purchasers. The Company and each of the Guarantors, jointly and severally, agree to indemnify and hold harmless each Initial Purchaser, its directors, officers and employees, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act and the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Initial Purchaser or such controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (ii) upon any failure of the Company or any of the Guarantors to perform its obligations hereunder or under law; or (iii) any act or failure to act or any alleged act or failure to act by any Initial Purchaser in connection with, or relating in any manner to, the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon any matter covered by clause (i) above, provided that the Company and each of the Guarantors shall not be liable under this clause (iii) to the extent that a court of competent jurisdiction shall have determined by a final judgment that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by any Initial Purchaser through its gross negligence or willful misconduct; and to reimburse each Initial Purchaser and each such controlling person for reasonable expenses (including the fees and disbursements of counsel chosen by Banc of America Securities LLC) as such expenses are reasonably incurred by such Initial Purchaser or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company or any of the Guarantors by the Initial Purchasers expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto) it being understood and agreed that such information consists only of the information described as such in subsection (b) below. The indemnity agreement set forth in this Section 8 shall be in addition to any liabilities that the Company or any of the Guarantors may otherwise have. (b) Indemnification of the Company, the Guarantors, their Directors and Officers. Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, each of the Guarantors and each of their respective directors, officers and employees and each person, if any, who controls the Company or any of the Guarantors within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, any of the Guarantors or any such director, or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with 22 the written consent of such Initial Purchaser), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), in reliance upon and in conformity with written information furnished to the Company or any of the Guarantors by the Initial Purchasers expressly for use therein; and to reimburse the Company, any of the Guarantors or any such director or controlling person for any legal and other expenses reasonably incurred by the Company, any of the Guarantors or any such director or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company and each of the Guarantors hereby acknowledge that the only information that the Initial Purchasers have furnished to the Company and each of the Guarantors expressly for use in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto) are the statements set forth (i) in the fifth paragraph on page (ii), (ii) in the fourth sentence under the caption "Risk Factors - If an active trading market does not develop for those notes, you may not be able to resell them," and (iii) under the first and third sentence of the third paragraph, the second sentence of the fourth paragraph and the fifth paragraph under the caption "Plan of Distribution;" and the Initial Purchasers confirm that such statements are correct. The indemnity agreement set forth in this Section 8 shall be in addition to any liabilities that each Initial Purchaser may otherwise have. (c) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select one separate counsel (together with local counsel) to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party's election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not 23 be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party (Banc of America Securities LLC in the case of Section 8 and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8 hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. SECTION 9. Contribution. If the indemnification provided for in Section 8 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and each of the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and each of the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and each of the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same 24 respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and each of the Guarantors, and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Securities. The relative fault of the Company and each of the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company and each of the Guarantors, on the one hand, or the Initial Purchasers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8 with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8 for purposes of indemnification. The Company, each of the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the discount received by such Initial Purchaser in connection with the Securities distributed by it. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each director, officer and employee of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of the Company and any of the Guarantors, and each person, if any, who controls the Company and each of the Guarantors with the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company. SECTION 10. Termination of this Agreement. Prior to the Closing Date, this Agreement may be terminated by the Initial Purchasers by notice given to the Company if at any time (i) trading in securities generally on either the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the NASD; (ii) a general banking moratorium shall have been declared by any of federal, New York, Ohio or California authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States' or international political, financial or economic conditions, as in the judgment of the Initial Purchasers is material and adverse and makes it impracticable to market the Securities 25 in the manner and on the terms described in the Offering Memorandum or to enforce contracts for the sale of securities; (iv) in the judgment of the Initial Purchasers there shall have occurred any Material Adverse Change; or (v) the Company, the Guarantors or their respective subsidiaries shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the judgment of the Initial Purchasers may interfere materially with the conduct of the business and operations of the Company and the Guarantors or their respective subsidiaries regardless of whether or not such loss shall have been insured. Any termination pursuant to this Section 10 shall be without liability on the part of the Company and the Guarantors to any Initial Purchaser, except that the Company and the Guarantors shall be obligated to reimburse the expenses of the Initial Purchasers pursuant to Sections 4 and 6 hereof, of any Initial Purchaser to the Company, or of any party hereto to any other party except that the provisions of Section 8 and Section 9 shall at all times be effective and shall survive such termination. SECTION 11. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company, of each of the Guarantors, of their respective officers and of the several Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or the Company or any of the Guarantors or their respective partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and, in the case of Section 8 or 9 only, any termination of this Agreement. SECTION 12. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows: If to the Initial Purchasers: Banc of America Securities LLC 9 West 57th Street, 31st Floor New York, New York 10019 Facsimile: (212) 583-8324 Attention: Dan Kelly with a copy to: Latham & Watkins 885 Third Avenue New York, New York 10022 Facsimile: (212) 751-4864 Attention: Gregory A. Ezring, Esq. 26 If to the Company or the Guarantors: Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 Facsimile: (419) 724-6167 Attention: Gary Blair with copies to: Fritz Byers, Esq. 824 Spritzer Building Toledo, OH [43660] Facsimile: (419) 241-4215 Reed Smith LLP 435 Sixth Avenue Pittsburgh, PA 15219 Facsimile: (412) 288-3063 Attention: Nelson Winter, Esq. Any party hereto may change the address for receipt of communications by giving written notice to the others. SECTION 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Initial Purchasers pursuant to Section 16 hereof, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Securities as such from any of the Initial Purchasers merely by reason of such purchase. SECTION 14. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. SECTION 15. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. (a) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Related Proceedings") may be instituted in the federal courts of the United States of America located in the City and County of New York or the courts of the State of New York in 27 each case located in the City and County of New York (collectively, the "Specified Courts"), and each party irrevocably submits to the non-exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party's address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum. SECTION 16. Default of One or More of the Several Initial Purchasers. If any one or more of the several Initial Purchasers shall fail or refuse to purchase Securities that it or they have agreed to purchase hereunder on the Closing Date, and the aggregate number of Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Securities to be purchased on such date, the other Initial Purchasers shall be obligated, severally, in the proportions that the number of Securities set forth opposite their respective names on Schedule A bears to the aggregate number of Securities set forth opposite the names of all such non-defaulting Initial Purchasers, or in such other proportions as may be specified by the Initial Purchasers with the consent of the non-defaulting Initial Purchasers, to purchase the Securities which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase on such date. If any one or more of the Initial Purchasers shall fail or refuse to purchase Securities and the aggregate number of Securities with respect to which such default occurs exceeds 10% of the aggregate number of Securities to be purchased on the Closing Date, and arrangements satisfactory to the Initial Purchasers and the Company for the purchase of such Securities are not made within 48 hours after such default, this Agreement shall terminate without liability of any party to any other party except that the provisions of Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. In any such case either the Initial Purchasers or the Company shall have the right to postpone the Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Offering Memorandum or any other documents or arrangements may be effected. As used in this Agreement, the term "Initial Purchaser" shall be deemed to include any person substituted for a defaulting Initial Purchaser under this Section 16. Any action taken under this Section 16 shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Initial Purchaser under this Agreement. SECTION 17. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit[; provided, however, the Company may waive any condition on behalf of itself and the Guarantors, on the one hand, and Banc of America Securities LLC may waive any condition on behalf of itself and the several Initial Purchasers, on the other hand]. The Table of Contents and the section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement. 28 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms. 29 Very truly yours, BLOCK COMMUNICATIONS, INC. By: ------------------------------------ Name: Title: ACCESS TOLEDO, LTD. By: ------------------------------------ Name: Title: BUCKEYE CABLEVISION, INC. By: ------------------------------------ Name: Title: BUCKEYE TELESYSTEM, INC. By: ------------------------------------ Name: Title: CARS HOLDING, INC. By: ------------------------------------ Name: Title: 30 COMMUNITY COMMUNICATIONS SERVICES, INC. By: ------------------------------------ Name: Title: CORPORATE PROTECTION SERVICES, INC. By: ------------------------------------ Name: Title: ERIE COUNTY CABLEVISION, INC. By: ------------------------------------ Name: Title: IDAHO INDEPENDENT TELEVISION, INC. By: ------------------------------------ Name: Title: INDEPENDENCE TELEVISION COMPANY By: ------------------------------------ Name: Title: 31 LIMA COMMUNICATIONS CORPORATION By: ------------------------------------ Name: Title: METRO FIBER & CABLE CONSTRUCTION COMPANY By: ------------------------------------ Name: Title: MONROE CABLEVISION, INC. By: ------------------------------------ Name: Title: PG PUBLISHING COMPANY By: ------------------------------------ Name: Title: TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC. By: ------------------------------------ Name: Title: 32 WLFI-TV, INC. By: ------------------------------------ Name: Title: 33 The foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written. BANC OF AMERICA SECURITIES LLC FLEET SECURITIES, INC. COMERICA SECURITIES, INC. NATCITY INVESTMENTS, INC. BMO NESBITT BURNS CORP. By: Banc of America Securities LLC, as representative of the Initial Purchasers named on Schedule A hereto By: ----------------------------- Name: Title: 34 SCHEDULE A
Aggregate Principal Amount of Securities to Initial Purchasers be Purchased Banc of America Securities LLC ....................... $ 127,750,000 Fleet Securities, Inc................................. 15, 750,000 Comerica Securities, Inc.............................. 10,500,000 NatCity Investments, Inc.............................. 10,500,000 BMO Nesbitt Burns Corp................................ 10,500,000 Total........................................... $ 175,000,000
Schedule B
Television Channel FCC License Station Number Market Expiration Date - ---------- ------ ------ ---------------- WDRB 41 Louisville, KY August 1, 2005 WFTE 58 Louisville, KY August 1, 2005 WAND 17 Champaign-Springfield and Decatur, IL December 1, 2005 KTRV 12 Boise, ID February 1, 2005 WLIO 35 Lima, OH October 1, 2005
Schedule C Access Toledo, Ltd. Buckeye Cablevision, Inc. Buckeye Telesystem, Inc. CARS Holding, Inc. Community Communications Services, Inc. Corporate Protection Services, Inc. Erie County Cablevision, Inc. Idaho Independent Television, Inc. Independence Television Company Lima Communications Corporation Metro Fiber & Cable Construction Company Monroe Cablevision, Inc. PG Publishing Company Toledo Area Telecommunications Services, Inc. WAND (TV) Partnership WLFI-TV, Inc. ANNEX I Resale Pursuant to Regulation S or Rule 144A. Each Initial Purchaser understands that: Such Initial Purchaser agrees that it has not offered or sold and will not offer or sell the Securities in the United States or to, or for the benefit or account of, a U.S. person (other than a distributor), in each case, as defined in Rule 902 under the Securities Act (i) as part of its distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering of the Securities pursuant hereto and the Closing Date, other than in accordance with Regulation S of the Securities Act or another exemption from the registration requirements of the Securities Act. Such Initial Purchaser agrees that, during such 40-day restricted period, it will not cause any advertisement with respect to the Securities (including any "tombstone" advertisement) to be published in any newspaper or periodical or posted in any public place and will not use any offering materials or documents in connection with offers and sales of the Securities, except such advertisements, offering materials or documents as permitted by and include the statements required by Regulation S. Such Initial Purchaser agrees that, at or prior to confirmation of a sale of Securities by it to any distributor, dealer or person receiving a selling concession, fee or other remuneration during the 40-day restricted period referred to in Rule 903 under the Securities Act, it will send to such distributor, dealer or person receiving a selling concession, fee or other remuneration a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of your distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the Offering and the Closing Date, except in either case in accordance with Regulation S under the Securities Act (or Rule 144A or to Institutional Accredited Investors in transactions that are exempt from the registration requirements of the Securities Act), and in connection with any subsequent sale by you of the Notes covered hereby in reliance on Regulation S during the period referred to above to any distributor, dealer or person receiving a selling concession, fee or other remuneration, you must deliver a notice to substantially the foregoing effect. Terms used above have the meanings assigned to them in Regulation S." Such Initial Purchaser agrees that the Securities offered and sold in reliance on Regulation S will be represented upon issuance by a global security that may not be exchanged for definitive securities until the expiration of the 40-day restricted period referred to in Rule 903 of the Securities Act and only upon certification of beneficial ownership of such Securities by non-U.S. persons or U.S. persons who purchased such Securities in transactions that were exempt from the registration requirements of the Securities Act. EX-4.3 9 j9521601exv4w3.txt EXHIBIT 4.3 EXHIBIT 4.3 REGISTRATION RIGHTS AGREEMENT BY AND AMONG BLOCK COMMUNICATIONS, INC. AND ACCESS TOLEDO, LTD. BUCKEYE CABLEVISION, INC., BUCKEYE TELESYSTEM, INC. CARS HOLDING INC. COMMUNITY COMMUNICATION SERVICES, INC. CORPORATE PROTECTION SERVICES, INC. ERIE COUNTY CABLEVISION, INC. IDAHO INDEPENDENT TELEVISION, INC. INDEPENDENCE TELEVISION COMPANY LIMA COMMUNICATIONS CORPORATION METRO FIBER & CABLE CONSTRUCTION COMPANY MONROE CABLEVISION, INC. PG PUBLISHING COMPANY TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC. WLFI-TV, INC. AS GUARANTORS AND BANC OF AMERICA SECURITIES LLC FLEET SECURITIES, INC. COMERICA SECURITIES, INC. NATCITY INVESTMENTS, INC. BMO NESBITT BURNS CORP. DATED AS OF APRIL 18, 2002 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of April 18, 2002, by and among Block Communications, Inc., an Ohio corporation (the "Company"), the Guarantors listed on Schedule I attached hereto (the "Guarantors") and Banc of America Securities LLC, Comerica Securities, Inc. Fleet Securities, Inc., NatCity Investments, Inc. and BMO Nesbitt Burns Corp. (each an "Initial Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed to purchase the Company's 9 1/4% Senior Subordinated Notes due 2009 (the "Initial Notes") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated as of April 11, 2002 (the "Purchase Agreement"), by and among the Company, the Guarantors and the Initial Purchasers (i) for your benefit and for the benefit of each other Initial Purchaser and (ii) for the benefit of the holders from time to time of the Notes (including you and each other Initial Purchaser). In order to induce the Initial Purchasers to purchase the Initial Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 5(i) of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Additional Interest: As defined in Section 5 hereof. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Closing Date: The date of this Agreement. Commission: The Securities and Exchange Commission. Consummate: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes that were tendered by Holders thereof pursuant to the Exchange Offer. Effectiveness Target Date: As defined in Section 5 hereof. Exchange Act: The Securities Exchange Act of 1934, as amended. Exchange Notes: The 9 -1/4% Senior Subordinated Notes due 2009, of the same series under the Indenture as the Initial Notes, to be issued to Holders in exchange for Transfer Restricted Securities pursuant to this Agreement. Exchange Offer: The registration by the Company under the Securities Act of the Exchange Notes pursuant to a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Initial Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act and outside the United States to non-U.S. persons pursuant to Regulation S. Holders: As defined in Section 2(b) hereof. Indemnified Holder: As defined in Section 8(a) hereof. Indenture: The Indenture, dated as of April 18, 2002, among the Company, the Guarantors and Wells Fargo Minnesota, National Association, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. Initial Purchaser: As defined in the preamble hereto. Initial Notes: The 9 1/4% Senior Subordinated Notes due 2009, of the same series under the Indenture as the Exchange Notes, for so long as such securities constitute Transfer Restricted Securities. Initial Placement: The issuance and sale by the Company of the Initial Notes to the Initial Purchasers pursuant to the Purchase Agreement. Interest Payment Date: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. Notes: The Initial Notes and the Exchange Notes. Person: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Record Holder: With respect to any Damages Payment Date relating to the Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Company relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments 2 and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Securities Act: The Securities Act of 1933, as amended. Shelf Filing Deadline: As defined in Section 4 hereof. Shelf Registration Statement: As defined in Section 4 hereof. Trust Indenture Act: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa 77bbbb) as in effect on the date of the Indenture. Transfer Restricted Securities: Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with a Shelf Registration Statement and (c) the date on which such Note is distributed to the public pursuant to Rule 144 under the Securities Act or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) Transfer Restricted Securities. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 90 days after the Closing Date, a Registration Statement under the Securities Act relating to the Exchange Notes and the Exchange Offer, (ii) use their best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 270 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings in connection with the registration and qualification of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Exchange Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, 3 however, that in no event shall such period be less than 30 days after the date notice of the Exchange Offer is mailed to the Holders. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Notes shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 300 days after the Closing Date. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus forming a part of the Exchange Offer Registration Statement that any Broker-Dealer who holds Initial Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Initial Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company and the Guarantors shall use their best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period ending on the earlier of (i) 180 days from the date on which the Exchange Offer Registration Statement is declared effective and (ii) the date on which a Broker-Dealer is no longer required to deliver a prospectus in connection with market-making or other trading activities. The Company shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 180-day (or shorter as provided in the foregoing sentence) period in order to facilitate such resales. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Company is not required to file an Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) with respect to any Holder of Transfer Restricted Securities, such Holder notifies the Company prior to the 20th day following the Consummation of the Exchange Offer that (A) such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired directly from the Company or one of its affiliates, then, upon such Holder's request, the Company and the Guarantors shall: (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement") and use their best efforts to cause such filing 4 on or prior to 90 days after the earlier to occur of: (1) the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement and (2) the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above (such earlier date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have given notice required by Section 4(a) hereof and provided the information required pursuant to Section 4(b) hereof; and (y) use their best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 270 days after the Shelf Filing Deadline. The Company and the Guarantors shall use their best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the Closing Date (or shorter period that will terminate when all the Notes covered by such Shelf Registration Statement have been sold pursuant to such Shelf Registration Statement). (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in the Shelf Registration Statement, if any, pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. The Company shall not be required to file more than one Shelf Registration Statement pursuant to Section 4(a)(ii) hereof. SECTION 5. ADDITIONAL INTEREST If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective during the periods specified in this Agreement (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company and the Guarantors hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected by such Registration Default additional interest in an amount equal to $.05 per week per $1,000 in principal amount of Transfer Restricted Securities held by such Holder ("Additional Interest") for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of any Registration Default. The amount of the Additional Interest will increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Additional Interest of $.50 per week per $1,000 in principal amount of Transfer Restricted Securities. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the Additional Interest payable with respect to the Transfer Restricted Securities will cease and the interest rate borne by the relevant Transfer Restricted Securities will be reduced to the original interest rate borne by such Transfer Restricted Securities; provided, however, that, if after any such cessation of the accrual of Additional Interest, a different Registration Default 5 occurs, Additional Interest shall begin to accrue again at the initial rate of $.05 per week per $1,000 in principal amount of Transfer Restricted Securities. All obligations of the Company and the Guarantors set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Note shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Company and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company and the Guarantors hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such Initial Notes. The Company and the Guarantors each hereby agrees to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Company and the Guarantors each hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a favorable resolution by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (which may include any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such Holder in exchange for Initial Notes acquired by such Holder directly from the Company. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, if any, the Company and the Guarantors shall comply with all the provisions of Section 6(c) below and shall use their best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will within the period required by Section 4(a) prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for 6 the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof as notified to the Company pursuant to Section 4(b) hereof. (c) General Provisions. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes by Broker-Dealers), the Company shall: (i) use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Securities Act or any regulation thereunder, financial statements of the Guarantors for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Company shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event (it being understood that only the existence of the fact or event must be disclosed and that the nature of the fact or event may be kept confidential for such period as required for bona fide business reasons) that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company and the Guarantors shall use their best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish without charge to each of the Initial Purchasers, in the case of the Exchange Offer Registration Statement, and each selling Holder named in such Registration Statement and each of the underwriter(s), if any, in the case of any Shelf Registration Statement, before filing with the 7 Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus, which documents will be subject to the review of the Initial Purchasers or such Holders and underwriter(s) in connection with such sale, if any, for a period of at least five business days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus to which an Initial Purchaser or a Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, as applicable, shall reasonably object in writing within five business days after the receipt thereof (such objection to be deemed timely made upon confirmation of telecopy transmission within such period). The objection of an Initial Purchaser or a Holder or underwriter, if any, shall be deemed to be reasonable if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the Initial Purchasers, in the case of the Exchange Offer Registration Statement, each selling Holder named in such Registration Statement, and to the underwriter(s), if any, in the case of any Shelf Registration Statement, make the Company's representatives available and representatives of the Guarantors for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as the Initial Purchasers or such selling Holders or underwriter(s), if any, as applicable, reasonably may request; (vi) make available at reasonable times for inspection by the Initial Purchasers, in the case of the Exchange Offer Registration Statement, any managing underwriter participating in any disposition pursuant to such Registration Statement, in the case of any Shelf Registration Statement, and any attorney or accountant retained by such Initial Purchasers or any of the underwriter(s), as applicable, all financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and cause the Company's and the Guarantors' officers, directors and employees to supply all information reasonably requested by the Initial Purchasers, the underwriters and their attorneys, as applicable, in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; (viii) if the Notes are not rated with appropriate rating agencies, cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Notes covered thereby or the underwriter(s), if any; (ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including financial statements and schedules, all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company and the Guarantors hereby consent 8 to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into, and cause the Guarantors to enter into, such customary agreements (including an underwriting agreement), and make, and cause the Guarantors to make, such customary representations and warranties, and take all such other customary actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonably requested by the Initial Purchasers, in the case of the Exchange Offer Registration Statement, or by any Holder of Transfer Restricted Securities or their underwriter in connection with any sale or resale pursuant to the Shelf Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company and the Guarantors shall: (A) furnish to each Initial Purchaser, each selling Holder and each underwriter, if any, in such substance and scope as they may request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of each of the Company and the Guarantors, confirming, as of the date thereof and for the period from the effective date of the applicable Registration Statement, matters similar to those set forth in paragraphs (i), (ii) and (iii) of Section 5(f) of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company and the Guarantors, covering the matters set forth in paragraph (c) of Section 5 of the Purchase Agreement and such other matters as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, the Initial Purchasers' representatives and the Initial Purchasers' counsel in connection with the preparation of such Registration Statement and the related Prospectus at which the contents of the Registration Statement and Prospectus and related matters were discussed although such counsel has not independently verified the accuracy, completeness or fairness of such statements; such counsel advises that, on the basis of the foregoing, such counsel does not believe that the applicable Registration Statement, at the time such Registration Statement became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; 9 (3) opinions, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of general counsel for the Company, covering the matters set forth in paragraph (d) of Section 5 of the Purchase Agreement and such other matters as such parties may reasonably request; and (4) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings, and affirming matters of the type set forth in the comfort letters delivered pursuant to Section 5(a) of the Purchase Agreement, without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantors pursuant to this clause (xi), if any. If at any time the representations and warranties of the Company and the Guarantors contemplated in clause (A)(1) above cease to be true and correct, the Company or the Guarantors shall so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with, and cause the Guarantors to cooperate with, the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such United States jurisdictions as the selling Holders or underwriter(s) may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor the Guarantors shall be required to register or qualify as a foreign corporation where it is not then so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not then so subject; (xiii) shall issue, upon the request of any Holder of Initial Notes covered by the Shelf Registration Statement, Exchange Notes, having an aggregate principal amount equal to the aggregate principal amount of Initial Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Exchange Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Initial Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with, and cause the Guarantors to cooperate with, the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other United States governmental agencies or 10 authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xvi) if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD; (xix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) cause the Indenture to be qualified under the Trust Indenture Act not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate, and cause the Guarantors to cooperate with, with the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and to execute, and cause the Guarantors to execute, and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; (xxi) cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed if requested by the Holders of a majority in aggregate principal amount of Initial Notes or the managing underwriter(s), if any; and (xxii) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13(a) and Section 15(d) of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company (x) of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof or (y) that the Board of Directors of the Company (the "Board of Directors") has resolved that the Company and its subsidiaries have a bona fide business purpose for doing so, then the Company and the Guarantors may delay the filing or the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement (if not then filed or effective, as applicable) and shall not be required to maintain the effectiveness thereof or amend or supplement the Exchange Offer Registration Statement or the Shelf Registration, in all cases, for a period (a "Delay Period") expiring upon the earlier to occur of (A) in the case of the immediately 11 preceding clause (x), such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus or (B) in the case of the immediately preceding clause (y), the date which is the earlier of (1) the date on which such business purpose ceases to interfere with the Company's or its subsidiaries' obligations to file or maintain the effectiveness of any such Registration Statement pursuant to this Agreement or (2) 90 days after the Company and Guarantors notify the Holders of such good faith determination. There shall not be more than 90 days of Delay Periods during any 12-month period. Upon receipt of such notice, each Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement and, if so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice; however, no such extension shall be taken into account in determining whether Additional Interest is due pursuant to Section 5 hereof or the amount of such Additional Interest, it being agreed that the Company's option to suspend use of a Registration Statement pursuant to this paragraph shall be treated as a Registration Default for purposes of Section 5. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's or the Guarantors' performance of or compliance with this Agreement will be borne by the Company or the Guarantors, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company, the Guarantors and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements thereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and the Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with the Exchange Offer Registration Statement and the Shelf Registration Statement, the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. 12 SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors, jointly and severally, agree to indemnify and hold harmless (i) each Holder and (ii) each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the persons referred to in this clause (ii) being hereinafter referred to as a "controlling person") and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing, settling, compromising, paying or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder), joint or several, directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by any of the Holders expressly for use therein. This indemnity agreement shall be in addition to any liability which the Company may otherwise have. In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Company or the Guarantors, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Company and the Guarantors in writing (provided, that the failure to give such notice shall not relieve the Company or the Guarantors of their respective obligations pursuant to this Agreement except to the extent that the Company is materially prejudiced from the failure to give such notice). Such Indemnified Holder shall have the right to employ its own counsel in any such action and the reasonable fees and expenses of such counsel shall be paid, as incurred, by the Company and the Guarantors (regardless of whether it is ultimately determined that an Indemnified Holder is not entitled to indemnification hereunder). The Company and the Guarantors shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for such Indemnified Holders, which firm shall be designated by the Holders. In case any such action is brought against any Indemnified Holder and such Indemnified Holder seeks or intends to seek indemnity from the Company or the Guarantors, each of the Company and the Guarantors will be entitled to participate in, to the extent that it shall elect, by written notice delivered to the Indemnified Holder promptly after receiving the aforesaid notice from such Indemnified Holder, to assume the defense thereof with counsel reasonably satisfactory to such Indemnified Holder; provided, however, if the defendants in any such action include both the Indemnified Holder and the Company and the Guarantors and the Indemnified Holder shall have reasonably concluded that a conflict may arise between the positions of the Company and the Guarantors and the Indemnified Holder in conducting the defense of any such action or that there may be legal defenses available to it and/or other Indemnified Holders which are different from or additional to those available to the Company and the Guarantors, the Indemnified Holder(s) shall have the right to select one separate counsel (together with local counsel) to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Holder(s). Upon receipt of notice from the Company or the Guarantors to such Indemnified Holder of such Company or Guarantors' election so to assume the defense of such action and approval by the counsel of Indemnified Holder, the Company and the Guarantors will not be liable to such Indemnified Holder under this Section 8 for any legal or other expenses subsequently incurred by such Indemnified Holder in connection with the defense thereof unless (i) the Indemnified Holder shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, 13 however, that the Company and the Guarantors shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the Company and the Guarantors, representing the Indemnified Holders who are parties to such action) or (ii) the Company and the Guarantors shall not have employed counsel satisfactory to the Indemnified Holder to represent the Indemnified Holder within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the Company and the Guarantors. The Company shall be liable for any settlement of any such action or proceeding effected with the Company's prior written consent, which consent shall not be withheld unreasonably, and the Company agrees to indemnify and hold harmless any Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of the Company. The Company shall not, without the prior written consent of each Indemnified Holder, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Holder from all liability arising out of such action, claim, litigation or proceeding. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company and the Guarantors and their respective directors, officers of the Company who sign a Registration Statement, and any person controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company, and the respective officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Company and the Guarantors to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement. In case any action or proceeding shall be brought against the Company or its directors or officers or any such controlling person in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Company and the Company or its directors or officers or such controlling person shall have the rights and duties given to each Holder by the preceding paragraph. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Securities giving rise to such indemnification obligation. (c) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities, judgments, actions or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Holders, on the other hand, from the Initial Placement (which in the case of the Issuer shall be deemed to be equal to the total net proceeds from the Initial Placement), the amount of Additional Interest which did not become payable as a result of the filing of the Registration Statement resulting in such losses, claims, damages, liabilities, judgments actions or expenses, and such Registration Statement, or if such allocation is not permitted by applicable law, the relative fault of the Company and the Guarantors on the one hand, and of the Indemnified Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors on the one hand and of the Indemnified Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors or by the Indemnified Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. 14 The Company, the Guarantors and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 8, none of the Holders (and its related Indemnified Holders) shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total proceeds received by such Holder with respect to the Initial Notes exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Initial Notes held by each of the Holders hereunder and not joint. SECTION 9. RULE 144A The Company and the Guarantors each hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATION No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) Remedies. The Company and the Guarantors each hereby agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not, and will cause the Guarantors not to, on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor the Guarantors has entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict 15 with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Adjustments Affecting the Notes. The Company will not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate the Exchange Offer. (d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer, or registered pursuant to the Shelf Registration Statement, if any, and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer, or registered pursuant to the Shelf Registration Statement, if any, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered; provided that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser with respect to which such amendment, qualification, supplement, waiver, consent or departure is to be effective. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Company: Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 Facsimile: (419) 724-6167 Attention: Gary Blair With copies to: Fritz Byers, Esq. 824 Spritzer Building Toledo, OH [43660] Facsimile: (419) 241-4215 Reed Smith LLP 435 Sixth Avenue Pittsburgh, PA 15219 Telecopier No.: (412) 288-3063 Attention: Nelson Winter, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. 16 Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Entire Agreement. This Agreement together with the Purchase Agreement, the Indenture and the Securities (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 17 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. BLOCK COMMUNICATIONS, INC. By: ----------------------------------- Name: Title: ACCESS TOLEDO, LTD. By: ----------------------------------- Name: Title: BUCKEYE CABLEVISION, INC. By: ----------------------------------- Name: Title: BUCKEYE TELESYSTEM, INC. By: ----------------------------------- Name: Title: CARS HOLDING, INC. By: ----------------------------------- Name: Title: 18 COMMUNITY COMMUNICATIONS SERVICES, INC. By: ----------------------------------- Name: Title: CORPORATE PROTECTION SERVICES, INC. By: ----------------------------------- Name: Title: ERIE COUNTY CABLEVISION, INC. By: ----------------------------------- Name: Title: IDAHO INDEPENDENT TELEVISION, INC. By: ----------------------------------- Name: Title: INDEPENDENCE TELEVISION COMPANY By: ----------------------------------- Name: Title: 19 LIMA COMMUNICATIONS CORPORATION By: ----------------------------------- Name: Title: METRO FIBER & CABLE CONSTRUCTION COMPANY By: ----------------------------------- Name: Title: MONROE CABLEVISION, INC. By: ----------------------------------- Name: Title: PG PUBLISHING COMPANY By: ----------------------------------- Name: Title: TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC. By: ----------------------------------- Name: Title: 20 WLFI-TV, INC. By: ----------------------------------- Name: Title: 21 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. BANC OF AMERICA SECURITIES LLC FLEET SECURITIES, INC. COMERICA SECURITIES, INC. NATCITY INVESTMENTS, INC. BMO NESBITT BURNS CORP. BY: BANC OF AMERICA SECURITIES LLC By: -------------------------------------- Name: Title: 22 SCHEDULE I Access Toledo, Ltd. Buckeye Cablevision, Inc. Buckeye TeleSystem, Inc. CARS Holding, Inc. Community Communication Services, Inc. Corporate Protection Services, Inc. Erie County Cablevision, Inc. Idaho Independent Television, Inc. Independence Television Company Lima Communications Corporation Metro Fiber & Cable Construction Company Monroe Cablevision, Inc PG Publishing Company Toledo Area Telecommunications Services, Inc. WLFI-TV, Inc. 23 EX-5.1 10 j9521601exv5w1.txt EXHIBIT 5.1 EXHIBIT 5.1 Reed Smith July 16, 2002 Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 Re: Exchange Offer of $175,000,000 of 9-1/4% Senior Subordinated Notes due 2009 for up to $175,000,000 of 9-1/4% Senior Subordinated Notes due 2009 Ladies and Gentlemen: We have acted as counsel for Block Communications, Inc., an Ohio corporation (the "Company") and those certain subsidiaries of the Company listed on Schedule 1 hereto (each a "Guarantor" and referred to at times collectively herein as the "Guarantors") in connection with the proposed offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $175,000,000 of the Company's 9-1/4% Senior Subordinated Notes due 2009 (the "Old Notes") for up to $175,000,000 of its 9-1/4% Senior Subordinated Notes due 2009 (the "Exchange Notes") pursuant to a Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). Such Registration Statement, as amended or supplemented, is hereinafter referred to as the "Registration Statement." The Exchange Notes are to be issued pursuant to the Indenture (the "Indenture"), dated as of April 18, 2002, among the Company, the Guarantors and Wells Fargo Bank Minnesota, National Association, as trustee, in exchange for and in replacement of the Company's outstanding Old Notes, of which $175,000,000 in aggregate principal amount is outstanding. As used herein, "Exchange Guarantees" refers to the guarantees made by the Guarantors in the Indenture with respect to payments on the Exchange Notes, together with the Notations of Guarantee to be appended to the Exchange Notes; and "Registration Rights Agreement" refers to the registration rights agreement, dated April 18, 2002, among the Company, the Guarantors and the initial purchasers of the Old Notes. For purposes of this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public 435 Sixth Avenue Delaware Pittsburgh, PA 15219-1886 New Jersey 412.288.3131 New York Fax 412.288.3063 Pennsylvania United Kingdom Virginia Washington, DC r e e d s m i t h . c o m "Reed Smith" refers to Reed Smith LLP and related entities. Reed Smith Block Communications, Inc. July 16, 2002 Page 2 officials and other instruments as we have deemed necessary for the purposes of this opinion, including the following documents: (i) executed counterparts of the Indenture; and (ii) executed counterparts of the Registration Rights Agreement. The documents referred to in paragraphs (i) and (ii) above, together with the Exchange Notes and the Exchange Guarantees, are referred to herein as the "Transaction Documents." In making such examination and in rendering the opinions set forth below, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostat copies and the authenticity of the originals of such latter documents. We have assumed that each of the parties to the Transaction Documents (other than the Company and Guarantors) has the power and authority and has taken the action necessary to authorize the execution and delivery of, and the performance of its obligations under, the Transaction Documents to which it is a party, that such Transaction Documents have been validly executed and delivered by each such party and are binding thereon, and that no consent, approval, authorization, declaration or filing by or with any governmental commission, board or agency, which has not been obtained or made, is required for the valid execution or delivery by such party of, or the performance of its obligations under, the Transaction Documents. In rendering the opinion expressed below, we have also relied with your permission and without independent investigation upon the opinion of Fritz Byers, Esquire, General Counsel of the Company, dated the date hereof and addressed to you, as to the matters (other than matters involving Pennsylvania law) set forth in his opinion. As to matters of fact, we have relied with your permission upon the representations and warranties made in the Transaction Documents and upon certificates of public officials and of officers of the parties to the Transaction Documents, and we have assumed that such representations and warranties and certificates are accurate, complete and valid as of the date when made and as of the date hereof. Based on the foregoing, and subject to the exceptions, qualifications, limitations, assumptions and reliances stated herein, it is our opinion that: 1. Each of PG Publishing Company and Independence Television Company is presently subsisting as a corporation under the laws of the Commonwealth of Pennsylvania. Reed Smith Block Communications, Inc. July 16, 2002 Page 3 2. The Indenture has been duly executed and delivered by the Company and each Guarantor and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of the Company and each Guarantor, enforceable against the Company and the Guarantors in accordance with its terms. 3. The Exchange Notes, when issued and authenticated in accordance with the terms of the Indenture, the Registration Rights Agreement and the Exchange Offer, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms and will be entitled to the benefits of the Indenture. 4. The Exchange Guarantees, when the applicable Notations thereof have been executed and delivered by the Guarantors and when the Exchange Notes have been issued and authenticated in the manner provided for in the Indenture and delivered in exchange for the Exchange Notes pursuant to the Exchange Offer, will constitute valid and binding obligations of each Guarantor, enforceable against such Guarantor in accordance with their respective terms. The opinions expressed herein are subject in all respects to the following further qualifications, limitations and exclusions: a. The opinions set forth above with respect to the enforceability of the Transaction Documents are further subject to the effects of laws relating to fraudulent conveyances, transfers and obligations, including, without limitation, Bankruptcy Code Section 548, the Uniform Fraudulent Transfer Act and other laws in pari materia. The foregoing opinions with respect to enforceability are further qualified by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditor's rights generally and by general principles of equity, public policy considerations, judicial discretion and general requirements of good faith and fair dealing and commercial reasonableness (regardless of whether such enforceability is considered in a proceeding in equity or at law). b. Our opinions are issued as of the date hereof and are limited to the laws now in effect as to which our opinions relate and facts and circumstances in existence on the date hereof, and we assume no undertaking to advise you of any changes in the opinions expressed herein as a result of any change in any laws, facts or circumstances which may come to our attention after the date hereof. The opinions expressed herein are limited to matters governed by the laws of the Commonwealth of Pennsylvania and the State of New York, in each case as presently enacted and construed. Reed Smith Block Communications, Inc. July 16, 2002 Page 4 We hereby consent to the filing of this opinion in Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the heading "Legal Matters" in the Registration Statement. In giving this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. This opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated herein. We assume no obligation to revise or supplement this opinion should the present laws of the Commonwealth of Pennsylvania or the State of New York be changed by legislative action, judicial decision or otherwise. This letter is furnished to you in connection with the filing of the Registration Statement, and is not to be used, circulated, quoted or otherwise relied upon for any other purposes. Yours truly, /s/ Reed Smith LLP REED SMITH LLP Schedule 1 Access Toledo, Ltd. Buckeye Cablevision, Inc. Buckeye Telesystem, Inc. CARS Holding, Inc. Community Communications Services, Inc. Corporate Protection Services, Inc. Erie County Cablevision, Inc. Idaho Independent Television, Inc. Independence Television Company Lima Communications Corporation Metro Fiber & Cable Construction Company Monroe Cablevision, Inc. PG Publishing Company Toledo Area Telecommunications Services, Inc. WLFI-TV, Inc. EX-5.2 11 j9521601exv5w2.txt EXHIBIT 5.2 EXHIBIT 5.2 FRITZ BYERS, ESQUIRE 824 Spitzer Building Toledo, Ohio 43604 419-241-8013 July 16, 2002 Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 Re: Exchange Offer of $175,000,000 of 9-1/4% Senior Subordinated Notes Due 2009 for up to $175,000,000 of 9-1/4% Senior Subordinated Notes due 2009 Ladies and Gentlemen: I am General Counsel of Block Communications, Inc., an Ohio corporation (the "Company") and those certain subsidiaries of the Company listed on Schedule 1 hereto (each a "Guarantor" and referred to at times collectively herein as the "Guarantors") and have acted as such in connection with the proposed offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $175,000,000 of the Company's 9-1/4% Senior Subordinated Notes due 2009 (the "Old Notes") for up to $175,000,000 of its 9-1/4% Senior Subordinated Notes due 2009 (the "Exchange Notes") pursuant to a Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). Such Registration Statement, as amended or supplemented, is hereinafter referred to as the "Registration Statement." The Exchange Notes are to be issued pursuant to the Indenture (the "Indenture"), dated as of April 18, 2002, among the Company, the Guarantors and Wells Fargo Bank Minnesota, National Association, as trustee, in exchange for and in replacement of the Company's outstanding Old Notes, of which $175,000,000 in aggregate principal amount is outstanding. As used herein, "Exchange Guarantees" refers to the guarantees made by the Guarantors in the Indenture with respect to payments on the Exchange Notes, together with the Notations of Guarantee to be appended to the Exchange Notes; and "Registration Rights Agreement" refers to the registration rights agreement, dated April 18, 2002, among the Company, the Guarantors and the initial purchasers of the Old Notes. For purposes of this opinion, I have examined originals, or copies certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments as I have deemed necessary for the purposes of this opinion, including the following documents: (i) executed counterparts of the the Indenture; and (ii) executed counterparts of the Registration Rights Agreement. Block Communications, Inc. July 16, 2002 Page 2 The documents referred to in paragraphs (i) and (ii) above, together with the Exchange Notes and the Exchange Guarantees, are referred to herein as the "Transaction Documents." In making such examination and in rendering the opinions set forth below, I have assumed the genuineness of all signatures (other than of officers of the Company and the Guarantors), the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified or photostat copies and the authenticity of the originals of such latter documents. I have assumed that each of the parties to the Transaction Documents (other than the Company and Guarantors) has the power and authority and has taken the action necessary to authorize the execution and delivery of, and the performance of its obligations under, the Transaction Documents to which it is a party, that such Transaction Documents have been validly executed and delivered by each such party and are binding thereon, that no consent, approval, authorization, declaration or filing by or with any governmental commission, board or agency, which has not been obtained or made, is required for the valid execution or delivery by such party of, or the performance of its obligations under, the Transaction Documents. As to matters of fact, I have relied with your permission upon the representations and warranties made in the Transaction Documents and in certificates of public officials and of officers of the parties to the Transaction Documents, and I have assumed that such representations and warranties and certificates are accurate, complete and valid as of the date when made and as of the date hereof. Based on the foregoing, and subject to the exceptions, qualifications, limitations, assumptions and reliances stated herein, it is my opinion that: 1. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Ohio. 2. Each Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation. 3. The Transaction Documents have been duly authorized by all necessary corporate action on the part of the Company and each Guarantor (all action by shareholders, if any being required therefor, having been taken), and the Indenture and the Registration Rights Agreement have been duly executed and delivered by the Company and each of the Guarantors. The opinions expressed herein are subject in all respect to the following further qualifications, limitations and exclusions: Block Communications, Inc. July 16, 2002 Page 3 a. My opinions are issued as of the date hereof and are limited to the laws now in effect as to which my opinions relate and facts and circumstances in existence on the date hereof, and I assume no undertaking to advise you of any changes in the opinions expressed herein as a result of any change in any laws, facts or circumstances which may come to my attention after the date hereof. b. The opinions expressed herein are limited to matters governed by the laws of the State of Ohio, as presently enacted and construed, and the general corporate law as presently in effect of the States of Idaho, Indiana, Michigan and Pennsylvania, except that, with your permission, I have assumed that the general corporate laws of the states of Idaho, Indiana, Michigan and Pennsylvania do not materially differ from the general corporate law of Ohio. I hereby consent to the filing of this opinion in Exhibit 5.2 to the Registration Statement. I also consent to the reference to my name under the heading "Legal Matters" in the Registration Statement. In giving this consent, I do not thereby admit that I am in the category of persons whose consent is required under Section 7 of the Securities Act of the rules and regulations of the Commission. This opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated herein. This letter is furnished to you in connection with the filing of the Registration Statement, and is not to be used, circulated, quoted or otherwise relied upon for any other purposes. Very truly yours, /s/ Fritz Byers Fritz Byers Schedule 1 Access Toledo, Ltd. Buckeye Cablevision, Inc. Buckeye Telesystem, Inc. CARS Holding, Inc. Community Communications Services, Inc. Corporate Protection Services, Inc. Erie County Cablevision, Inc. Idaho Independent Television, Inc. Independence Television Company Lima Communications Corporation Metro Fiber & Cable Construction Company Monroe Cablevision, Inc. PG Publishing Company Toledo Area Telecommunications Services, Inc. WLFI-TV, Inc. EX-8.1 12 j9521601exv8w1.txt EXHIBIT 8.1 EXHIBIT 8.1 Reed Smith July 16, 2002 Block Communications, Inc. 541 N. Superior Street P.O. Box 921 Toledo, OH 43697-0921 Re: Exchange Offer for $175,000,000 aggregate principal amount 9 -1/4% Senior Subordinated Notes due 2009 for up to $175,000,000 aggregate principal amount 9 -1/4% Senior Subordinated Notes due 2009 Dear Ladies and Gentlemen: We have acted as counsel to Block Communications, Inc. (the "Company" or the "Registrant") in connection with the proposed offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $175,000,000 of 9 -1/4% Senior Subordinated Notes due 2009 (the "Old Notes") for up to an aggregate principal amount of $175,000,000 of 9 -1/4% Senior Subordinated Notes due 2009 (the "Exchange Notes"), pursuant to a Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). Such Registration Statement, as amended or supplemented, is hereinafter referred to as the "Registration Statement." You have requested our opinion as to certain United States federal income tax consequences of the Exchange Offer. In preparing our opinion, we have reviewed and relied upon the Registration Statement and such other documents as we deemed necessary. On the basis of the foregoing, it is our opinion that the exchange of the Old Notes for the Exchange Notes pursuant to the Exchange Offer will not be treated as an "exchange" for United States federal income tax purposes, because the Exchange Notes will not be considered to differ materially in kind or extent from the Old Notes. Rather, the Exchange Notes received by a holder will be treated as a continuation of the Old Notes in the hands of the holder. Accordingly, there will be no federal income tax consequences to holders solely as a result of the exchange of the Old Notes for Exchange Notes under the Exchange Offer. 435 Sixth Avenue Delaware Pittsburgh, PA 15219-1886 New Jersey 412.288.3131 New York Fax 412.288.3063 Pennsylvania United Kingdom Virginia Washington, DC
r e e d s m i t h . c o m "Reed Smith" refers to Reed Smith LLP and related entities. Block Communications, Inc. Reed Smith July 16, 2002 Page 2 The opinion set forth above is based upon the applicable provisions of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated or proposed thereunder, current positions of the Internal Revenue Service (the "IRS") contained in published revenue rulings, revenue procedures, and announcements, existing judicial decisions and other applicable authorities. No tax ruling has been sought from the IRS with respect to any of the matters discussed herein. Unlike a ruling from the IRS, an opinion of counsel is not binding on the IRS. Hence, no assurance can be given that the opinion stated in this letter will not be successfully challenged by the IRS or that a court would reach the same conclusion. We express no opinion concerning any tax consequences of the Exchange Offer except as expressly set forth above. Moreover, we assume no obligation to revise or supplement this opinion should the authorities referred to above be amended by legislative, Judicial or administrative action. We consent to the filing of this opinion as an exhibit to the Registration Statement, to the reference to this firm and the inclusion of our opinion in the section entitled "Certain U.S. Federal Income Tax Considerations" in the Registration Statement. Very truly yours, /s/ REED SMITH LLP REED SMITH LLP EX-10.1 13 j9521601exv10w1.txt EXHIBIT 10.1 Exhibit 10.1 CREDIT AGREEMENT Dated as of May 15, 2002 among BLOCK COMMUNICATIONS, INC., as the Borrower, BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer BANC OF AMERICA SECURITIES LLC and NATIONAL CITY BANK, as Joint Lead Arrangers NATIONAL CITY BANK as Syndication Agent and Swing Line Lender and FLEET NATIONAL BANK, BANK OF MONTREAL and COMERICA BANK as Co-Documentation Agents and The Lenders Party Hereto BANC OF AMERICA SECURITIES LLC as Sole Book Manager TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01 Defined Terms.................................................................... 1 1.02 Other Interpretive Provisions.................................................... 29 1.03 Accounting Terms................................................................. 30 1.04 Rounding......................................................................... 30 1.05 References to Agreements and Laws................................................ 30 ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS 2.01 Term Loan........................................................................ 30 2.02 Revolving Loans.................................................................. 31 2.03 Borrowings, Conversions and Continuations........................................ 32 2.04 Letters of Credit................................................................ 33 2.05 Swing Line Loans................................................................. 41 2.06 Prepayments...................................................................... 44 2.07 Reduction or Termination of Revolving Credit Commitments and Term Loan A Commitments.......................................................... 47 2.08 Scheduled Reductions of Revolving Credit Commitments............................. 47 2.09 Repayment of Loans............................................................... 48 2.10 Interest......................................................................... 50 2.11 Fees............................................................................. 51 2.12 Computation of Interest and Fees................................................. 52 2.13 Evidence of Debt................................................................. 52 2.14 Payments Generally............................................................... 52 2.15 Sharing of Payments.............................................................. 55 2.16 Discretionary Increase in Aggregate Revolving Credit Commitment and/or Term Loan C Facility............................................................. 55 ARTICLE II A SECURITY 2A.01 Security......................................................................... 60 2A.02 Further Assurances............................................................... 61 2A.03 Information Regarding Collateral................................................. 61 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes............................................................................ 62 3.02 Illegality....................................................................... 63 3.03 Inability to Determine Rates..................................................... 64 3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans............................................................ 64 3.05 Funding Losses................................................................... 64
TABLE OF CONTENTS 3.06 Matters Applicable to all Requests for Compensation.............................. 65 3.07 Survival......................................................................... 65 ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS 4.01 Conditions of Initial Credit Extension........................................... 65 4.02 Conditions to all Credit Extensions and Conversions and Continuations............ 69 ARTICLE V REPRESENTATIONS AND WARRANTIES 5.01 Existence, Qualification and Power; Compliance with Laws......................... 69 5.02 Authorization; No Contravention.................................................. 70 5.03 Governmental and Third-Party Authorization....................................... 70 5.04 Binding Effect................................................................... 70 5.05 Financial Statements; No Material Adverse Effect................................. 70 5.06 Litigation....................................................................... 71 5.07 No Default....................................................................... 71 5.08 Ownership of Property; Liens..................................................... 71 5.09 Environmental Compliance......................................................... 71 5.10 Insurance........................................................................ 71 5.11 Taxes............................................................................ 72 5.12 ERISA Compliance................................................................. 72 5.13 Subsidiaries..................................................................... 72 5.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act... 72 5.15 Disclosure....................................................................... 73 5.16 Intellectual Property; Licenses, Etc............................................. 73 5.17 Solvency......................................................................... 73 ARTICLE VI AFFIRMATIVE COVENANTS 6.01 Financial Statements............................................................. 73 6.02 Certificates; Other Information.................................................. 74 6.03 Notices.......................................................................... 75 6.04 Payment of Obligations........................................................... 76 6.05 Preservation of Existence, Etc................................................... 76 6.06 Maintenance of Properties........................................................ 76 6.07 Maintenance of Insurance......................................................... 76 6.08 Compliance with Laws and Contractual Obligations................................. 77 6.09 Books and Records................................................................ 77 6.10 Inspection Rights................................................................ 77
TABLE OF CONTENTS 6.11 Compliance with ERISA............................................................ 77 6.12 Use of Proceeds.................................................................. 77 6.13 Maintain Principal Line of Business.............................................. 78 6.14 New Subsidiaries and Pledgors.................................................... 78 6.15 Further Assurances............................................................... 79 6.16 Interest Rate Protection......................................................... 79 ARTICLE VII NEGATIVE COVENANTS 7.01 Liens............................................................................ 80 7.02 Investments...................................................................... 81 7.03 Indebtedness..................................................................... 81 7.04 Fundamental Changes.............................................................. 83 7.05 Dispositions..................................................................... 83 7.06 Restricted Payments.............................................................. 83 7.07 ERISA............................................................................ 84 7.08 Change in Nature of Business..................................................... 84 7.09 Transactions with Affiliates..................................................... 84 7.10 Burdensome Agreements............................................................ 84 7.11 Use of Proceeds.................................................................. 85 7.12 Financial Covenants.............................................................. 85 7.13 Acquisitions..................................................................... 86 7.14 Capital Expenditures............................................................. 87 7.15 Prepayment of Subordinated Indebtedness.......................................... 88 7.16 Negative Pledge Clauses.......................................................... 88 7.17 Payments under Stock Redemption Agreement........................................ 88 7.18 Foreign Subsidiaries............................................................. 89 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES 8.01 Events of Default................................................................ 89 8.02 Remedies Upon Event of Default................................................... 91 ARTICLE IX ADMINISTRATIVE AGENT 9.01 Appointment and Authorization of Administrative Agent............................ 92 9.02 Delegation of Duties............................................................. 92 9.03 Liability of Administrative Agent................................................ 92 9.04 Reliance by Administrative Agent................................................. 93 9.05 Notice of Default................................................................ 93 9.06 Credit Decision; Disclosure of Information by Administrative Agent............... 94 9.07 Indemnification of Administrative Agent.......................................... 94
TABLE OF CONTENTS 9.08 Administrative Agent in its Individual Capacity.................................. 95 9.09 Successor Administrative Agent................................................... 95 9.10 Other Agents; Lead Managers...................................................... 96 ARTICLE X MISCELLANEOUS 10.01 Amendments, Etc.................................................................. 96 10.02 Notices and Other Communications; Facsimile Copies............................... 98 10.03 No Waiver; Cumulative Remedies................................................... 99 10.04 Attorney Costs, Expenses and Taxes............................................... 99 10.05 Indemnification by the Borrower; Limitation of Liability......................... 100 10.06 Payments Set Aside............................................................... 101 10.07 Successors and Assigns........................................................... 102 10.08 Confidentiality.................................................................. 105 10.09 Set-off.......................................................................... 106 10.10 Interest Rate Limitation......................................................... 106 10.11 Counterparts..................................................................... 106 10.12 Integration...................................................................... 106 10.13 Survival of Representations and Warranties....................................... 107 10.14 Severability..................................................................... 107 10.15 Tax Forms........................................................................ 107 10.16 Governing Law.................................................................... 108 10.17 Waiver of Right to Trial by Jury................................................. 108 10.18 Entire Agreement................................................................. 109
SCHEDULES 1.01(a) Commitments and Pro Rata Shares 1.01(b) Required Properties 2A.03 Collateral Information 5.06 Litigation 5.09 Environmental Matters 5.13 Subsidiaries and Other Equity Investments 5.16 Intellectual Property Matters 6.07 Life Insurance 7.01 Existing Liens 7.02 Existing Investments 7.03 Existing Indebtedness 10.02 Lending Offices, Addresses for Notices
EXHIBITS FORM OF: A-1 Loan Notice A-2 Term Loan Interest Rate Selection Notice B Swing Line Loan Notice C-1 Term Loan A Note C-2 Term Loan B Note C-3 Revolving Loan Note C-4 Swing Line Note D Compliance Certificate E Assignment and Assumption F Form of Guaranty
CREDIT AGREEMENT This CREDIT AGREEMENT ("Agreement") is entered into as of May 15, 2002, among BLOCK COMMUNICATIONS, INC., an Ohio corporation (the "Borrower"), each lender from time to time party hereto (collectively, the "Lenders" and individually, a "Lender"), and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer. The Borrower has requested that the Lenders provide senior term loan facilities and a senior revolving credit facility to refund, replace and refinance that certain Revolving Credit Agreement among the Borrower, Mellon Bank, N.A., as administrative agent and certain lenders party thereto, dated as of December 29, 1998, as amended (the "Existing Credit Facilities"), and the Lenders are willing to refund, replace and refinance the Existing Credit Facilities and to provide credit for working capital and other corporate purposes as set forth herein, all on the terms and conditions set forth herein. The Borrower, the Administrative Agent and the Lenders intend that this Agreement shall be, and qualify therein for all purposes as, the "Credit Agreement" defined and described in the Subordinated Indenture (as defined below). In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings set forth below: "Acquisition" means the acquisition of (i) a controlling equity or other ownership interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the holder thereof), whether by purchase of such equity or other ownership interest or upon exercise of an option or warrant for, or conversion of securities into, such equity or other ownership interest, or (ii) assets of another Person which constitute all or substantially all of the assets of such Person or of a line or lines of business conducted by such Person. "Administrative Agent" means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent. "Administrative Agent's Office" means the Administrative Agent's address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders. "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. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. A Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, power to vote 10% or more of the securities having ordinary voting power for the election of directors or managing general partners. "Agent/Arranger Fee Letter" has the meaning specified in Section 2.10(b). "Agent-Related Persons" means the Administrative Agent (including any successor administrative agent), together with its Affiliates (including, in the case of Bank of America in its capacity as the Administrative Agent, BAS), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Aggregate Commitments" means, as at the date of determination thereof, the sum of (a) the Aggregate Revolving Credit Commitments at such date, plus (b) (i) prior to the Term Loan A Advance Expiration Date, the Aggregate Term Loan A Commitments and (ii) thereafter, the Outstanding Amount with respect to the Term Loan A at such date, plus (c) the Outstanding Amount with respect to the Term Loan B at such date, plus (d) the Outstanding Amount with respect to the Term Loan C, if any, at such date (or, in the event such measurement is made prior to the funding of the Term Loan C pursuant to Section 2.16 but after the election of the Borrower pursuant to Section 2.16 to issue the Term Loan C Facility and the receipt of necessary commitments of the Discretionary Facility Lenders, the aggregate principal amount of such commitments). "Aggregate Revolving Credit Commitments Increase" means that increase of the Aggregate Revolving Credit Commitments described in Section 2.16. "Aggregate Revolving Credit Commitments" means, as at the date of determination thereof, the sum of all Revolving Credit Commitments of all Lenders at such date. "Aggregate Term Loan A Commitments" means, as at the date of determination thereof, the sum of all Term Loan A Commitments of all Lenders at such date, which sum shall not exceed (i) from the Closing Date to June 30, 2003, $40,000,000 and (ii) thereafter until the Term Loan A Advance Expiration Date, $40,000,000 minus the positive difference (if any) obtained by subtracting the Outstanding Amount of Loans under the Term Loan A Facility as at June 30, 2003 from $20,000,000, as such amount may be further reduced from time to time in accordance with the terms hereof. "Agreement" means this Credit Agreement. "Allocated Discretionary Commitment" shall have the meaning set forth in Section 2.16(c) hereof. "Applicable Margin" means, from time to time, the following percentages per annum, based upon the Total Leverage Ratio as set forth below: 2
REVOLVING LOANS, TERM LOAN A AND SWING LINE LOANS TERM LOAN B ---------------- ----------- EURODOLLAR RATE PRICING TOTAL LEVERAGE LOANS AND LETTER OF EURODOLLAR RATE LEVEL RATIO CREDIT FEES BASE RATE LOANS LOANS BASE RATE LOANS ----- ----- ----------- --------------- ----- --------------- 1 Greater than 4.00 3.00% 2.00% 3.25% 2.25% to 1.00 Less than or equal to 4.00 to 2 1.00 but greater 2.50% 1.50% 3.25% 2.25% than 3.50 to 1.00 Less than or equal to 3.50 to 3 1.00 but greater 2.00% 1.00% 3.25% 2.25% than 3.00 to 1.00 Less than or 4 equal to 3.00 to 1.00 1.75% 0.75% 3.25% 2.25%
The Applicable Margin shall be established with reference to the Total Leverage Ratio at the end of each fiscal quarter of the Borrower (each, a "Determination Date"). Any change in the Applicable Margin following each Determination Date shall be determined based upon the computation of the Total Leverage Ratio set forth in each Compliance Certificate furnished to the Administrative Agent pursuant to Section 6.02(b), subject to review for correctness of such computation by the Administrative Agent, and shall be effective commencing on the fifth Business Day following the date such certificate is received until the fifth Business Day following the date on which a new certificate is delivered or is required to be delivered, whichever shall first occur. From the Closing Date to the fifth Business Day following the date the certificate referred to in the preceding sentence for the fiscal period ended as at the first Determination Date is delivered or is required to be delivered (whichever shall first occur), the Applicable Margin shall be Pricing Level 1. Notwithstanding the provisions of the two preceding sentences, if the Borrower shall fail to deliver any such certificate within the time period required by Section 6.02(b), then the Applicable Margin shall be Pricing Level 1 from the date such certificate was due until the fifth Business Day following the date the appropriate certificate is so delivered. The Applicable Margin is subject to the adjustment as provided in Section 2.16. "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. "Arrangers" means BAS and National City Bank, each in its respective capacity as joint lead arranger. "Assignment and Assumption" means an Assignment and Assumption substantially in the form of Exhibit E. 3 "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel. "Attributable Indebtedness" means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital Lease. "Audited Financial Statements" means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2001, and the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto. "Bank of America" means Bank of America, N.A. "BAS" means Banc of America Securities LLC. "Base Rate" means for any day a fluctuating rate per annum equal to the Applicable Margin plus the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." Such prime rate is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced prime rate. Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan (including a Segment) bearing interest or to bear interest at the Base Rate or, with respect to Swing Line Loans, the Swing Line Base Rate. "Base Rate Segment" means a Segment bearing interest or to bear interest at the Base Rate. "Block Family Ownership Group" means William Block, Jr., Allan J. Block, John R. Block and William Block, and their respective immediate family members, heirs and descendants. "Borrower" has the meaning set forth in the introductory paragraph hereto. "Borrowing" means any of (i) a Term Loan A Borrowing, (ii) the borrowing under the Term Loan B Facility, (iii) any borrowing under the Term Loan C Facility, (iv) a Revolving Borrowing or (v) a Swing Line Borrowing, as the context may require. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state 4 where the Administrative Agent's Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in deposits in Dollars are conducted by and between banks in the London interbank market. "Capital Expenditures" means, with respect to the Borrower and its Subsidiaries, for any period the sum of (without duplication) (i) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower or any Subsidiary during such period for items that would be classified as "property, plant or equipment" or comparable items on the consolidated balance sheet of the Borrower and its Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized, excluding, however, the amount of any Capital Expenditures paid for with proceeds of casualty insurance as evidenced in writing and submitted to the Administrative Agent together with any Compliance Certificate delivered pursuant to Section 6.02(b), and (ii) with respect to any Capital Lease entered into by the Borrower or its Subsidiaries during such period, the present value of the lease payments due under such Capital Lease over the term of such Capital Lease applying a discount rate equal to the interest rate provided in such lease (or in the absence of a stated interest rate, that rate used in the preparation of the financial statements described in Section 6.01), all the foregoing in accordance with GAAP applied on a Consistent Basis. "Capital Leases" means all leases which have been or should be capitalized in accordance with GAAP as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof. "Carry Forward Amount" shall have the meaning set forth in Section 7.14(a) hereof. "Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations plus all fees accrued or to be incurred in connection therewith, cash, deposit accounts and all balances therein, in an amount not less than the sum of such L/C Obligations and fees and all proceeds of the foregoing pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders) and to take all such other action as shall be necessary for the Administrative Agent to have "control" thereof within the meaning of the Uniform Commercial Code applicable thereto. Derivatives of such term shall have corresponding meaning. The Borrower hereby grants the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a Lien on all such cash, deposit accounts and deposit account balances. Cash collateral shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America or other institutions satisfactory to it. "Cash Collateral" shall have a correlative meaning. "Change of Control" means, with respect to any Person, an event or series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) but excluding (x) any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan or (y) the Block Family Ownership Group, becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed 5 to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option right"), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 35% or more of the equity securities of such Person entitled to vote for members of the board of directors or equivalent governing body of such Person on a fully diluted basis (i.e., taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Person cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors). "Closing Date" means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01 (or, in the case of Section 4.01(b), waived by the Person entitled to receive the applicable payment). "Code" means the Internal Revenue Code of 1986 and all regulations issued pursuant thereto. "Collateral" means, collectively, all real and personal property of the Borrower, any Subsidiary or any other Person in which the Administrative Agent or any Lender is granted a Lien under any Security Instrument as security for all or any portion of the Obligations or any other obligation arising under any Loan Document. "Commitment Fee Percentage" means (a) at all times prior to the occurrence of the Commitment Fee Termination Date (as set forth in subsection (b) of such definition) with respect to the Term Loan A Facility, (i) for each day that the Outstanding Amount of Revolving Loans, L/C Obligations, and the Term Loan A are less than or equal to 50% of the sum of the Aggregate Revolving Credit Commitments and the Aggregate Term Loan A Commitments, 0.75%, and (ii) for each day that the Outstanding Amount of Revolving Loans, L/C Obligations, and the Term Loan A are greater than 50% of sum of the Aggregate Revolving Credit Commitments and the Aggregate Term Loan A Commitments, 0.50%; and 6 (b) at all times after the occurrence of the Commitment Fee Termination Date (as set forth in subsection (b) of such definition) with respect to the Term Loan A Facility, (i) for each day that the Outstanding Amount of Revolving Loans and L/C Obligations are less than or equal to 50% of the Aggregate Revolving Credit Commitments, 0.75%, and (ii) for each day that the Outstanding Amount of Revolving Loans and L/C Obligations are greater than 50% of the Aggregate Revolving Credit Commitments, 0.50%. "Commitment Fee Termination Date" means (a) in the case of the commitment fee with respect to the Revolving Credit Facility set forth in Section 2.11(a)(i), the Revolving Credit Maturity Date, and (b) in the case of the commitment fee with respect to the Term Loan A Facility set forth in Section 2.11(a)(ii), the earlier to occur of the Term Loan A Advance Expiration Date or the date upon which the Term Loan A Commitments have been terminated. "Compliance Certificate" means a certificate substantially in the form of Exhibit D. "Consistent Basis" in reference to the application of GAAP means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of the Borrower referred to as of the Closing Date in Section 5.05(a). "Consolidated Current Assets" means cash and all other assets of the Borrower and its Subsidiaries which would be classified as a current asset, all determined on a consolidated basis in accordance with GAAP. "Consolidated Current Liabilities" means all liabilities of the Borrower and its Subsidiaries which by their terms are payable within one year (but excluding all Consolidated Funded Indebtedness payable on demand or maturing not more than one year from the date of computation and the current portion of Indebtedness having a maturity date in excess of one year), all determined on a consolidated basis in accordance with GAAP. "Consolidated EBITDA" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to: (a) Consolidated Net Income, minus (b) the sum of the following: (i) extraordinary net gains to the extent included in Consolidated Net Income, (ii) gains from the Dispositions of assets (other than sales of inventory in the ordinary course of business) whether or not extraordinary to the extent included in Consolidated Net Income, (iii) all Consolidated Film Contract Payments to the extent not deducted in arriving at Consolidated Net Income, and (iv) all proceeds of any Life Insurance Policies received by the Borrower and its Subsidiaries to the extent included in Consolidated Net Income, plus 7 (c) the sum of the following: (i) extraordinary net non-cash losses to the extent deducted in arriving at Consolidated Net Income, (ii) losses from the Dispositions of assets (other than sales of inventory in the ordinary course of business) whether or not extraordinary to the extent deducted in arriving at Consolidated Net Income, (iii) Consolidated Interest Charges, (iv) the amount of taxes, based on or measured by income, used or included in determining Consolidated Net Income, and (v) the amount of depreciation and amortization expense deducted in determining Consolidated Net Income (including Consolidated Film Contract Amortization), all subject to Transaction Adjustments. "Consolidated Film Contract Amortization" means for any period, all amortization by the Borrower and its Subsidiaries, on a consolidated basis, of Film Contracts which is deducted in the calculation of Consolidated Net Income for such period. "Consolidated Film Contract Payments" means, for any period, all cash payments on Film Contracts made by Borrower and its Subsidiaries, on a consolidated basis, during such period that are capitalized on the balance sheet of the Borrower and its Subsidiaries. "Consolidated Fixed Charges" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the sum of, without duplication, (i) Consolidated Interest Charges, (ii) current maturities of Consolidated Funded Indebtedness, (iii) income taxes paid in cash during such period, (iv) Capital Expenditures during such period, and (v) Restricted Payments less the amount of stock redemptions funded with the proceeds of any of the Life Insurance Policies, all determined on a consolidated basis in accordance with GAAP, subject to Transaction Adjustments. "Consolidated Funded Indebtedness" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, including without limitation all direct or Contingent Obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments, (b) all purchase money Indebtedness, (c) Attributable Indebtedness in respect of Capital Leases and Synthetic Lease Obligations, (d) all obligations to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), and (e) without duplication, all Contingent Obligations with respect to Indebtedness of the types specified in subsections (a) and (d) above of Persons other than the Borrower or any Subsidiary. For all purposes hereof, the Consolidated Funded Indebtedness of the Borrower or any Subsidiary shall include the foregoing Indebtedness in (a) through (e) above of any partnership or joint venture (other than a joint venture that is itself a corporation or a limited liability company) in which the Borrower or any Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary. "Consolidated Interest Charges" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, debt discount, premium payments, commissions, fees (including commitment fees), charges and related expenses of the Borrower and its Subsidiaries in connection with Indebtedness (including capitalized interest) or 8 in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, (b) the portion of rent expense of the Borrower and its Subsidiaries with respect to such period under Capital Leases that is treated as interest in accordance with GAAP and (c) the amount of payments in respect of Synthetic Lease Obligations that are in the nature of interest, subject to Transaction Adjustments. "Consolidated Net Income" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the net income of the Borrower and its Subsidiaries for that period computed in accordance with GAAP, subject to Transaction Adjustments. "Consolidated Senior Indebtedness" means, as of any date on which the amount thereof is to be determined, the aggregate principal amount of all Consolidated Funded Indebtedness as of such date minus, to the extent otherwise included in Consolidated Funded Indebtedness, the aggregate principal amount of all Subordinated Indebtedness as of such date. "Consolidated Working Capital" means, as of any date on which the amount thereof is to be determined, the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Contingent Obligation" means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guarantying or having the economic effect of guarantying any Indebtedness or other obligation payable or performable by another Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring or holding harmless in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guarantying Person in good faith. "Continuation" and "Continue" mean, with respect to any Eurodollar Rate Loan, the continuation of such Eurodollar Rate Loan as a Eurodollar Rate Loan on the last day of the Interest Period for such Loan. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. 9 "Conversion" and "Convert" mean the conversion of a Loan from one Type to another Type. "Corresponding Applicable Margin Increase Amount" shall have the meaning set forth in Section 2.16(a)(ii) hereof. "Cost of Acquisition" means, with respect to any Acquisition, as at the date of entering into any agreement therefor, the sum of the following (without duplication): (i) the value of the capital stock, warrants or options to acquire capital stock of the Borrower or any Subsidiary to be transferred in connection therewith, (ii) the amount of any cash and fair market value of other property (excluding property described in clause (i) and the unpaid principal amount of any debt instrument) given as consideration, (iii) the amount (determined by using the face amount or the amount payable at maturity, whichever is greater) of any Indebtedness incurred, assumed or acquired by the Borrower or any Subsidiary in connection with such Acquisition, (iv) all additional purchase price amounts in the form of earnouts and other contingent obligations that should be recorded on the financial statements of the Borrower and its Subsidiaries in accordance with GAAP, (v) all amounts paid in respect of covenants not to compete, and consulting agreements that should be recorded on financial statements of the Borrower and its Subsidiaries in accordance with GAAP, (vi) the aggregate fair market value of all other consideration given by the Borrower or any Subsidiary in connection with such Acquisition, and (vii) out-of-pocket transaction costs for the services and expenses of attorneys, accountants and other consultants incurred in effecting such transaction, and other similar transaction costs so incurred and capitalized in accordance with GAAP. "Credit Extension" means each of a Borrowing or an L/C Credit Extension. "Debtor Relief Laws" means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally. "Default" means any event or circumstance that, with the giving of any notice, the passage of time, or both, would be an Event of Default. "Default Rate" means an interest rate equal to the Base Rate plus 2% per annum; provided, however, that with respect to Eurodollar Rate Loans, until the end of the Interest Period during which the Default Rate is first applicable, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Loan plus 2% per annum, and thereafter, the Base Rate plus 2% per annum, in each case to the fullest extent permitted by applicable Laws. "Discretionary Commitment" means the commitment of any Discretionary Facility Lender to increase the Aggregate Revolving Credit Commitments or to establish the Term Loan C Facility, each pursuant to Section 2.16. "Discretionary Commitment Effective Date" shall have the meaning set forth in Section 2.16(c) hereof. 10 "Discretionary Commitment Notice" shall have the meaning set forth in Section 2.16(c) hereof. "Discretionary Commitment Request" shall have the meaning set forth in Section 2.16(b) hereof. "Discretionary Facility" means the increase in the Aggregate Revolving Credit Commitments pursuant to Section 2.16 or the Term Loan C Facility, or both as the context may require. "Discretionary Facility Lenders" shall have the meaning set forth in Section 2.16(e) hereof. "Disposition" or "Dispose" means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any Subsidiary Securities or any notes or accounts receivable or any rights and claims associated therewith. "Dollar" and "$" means lawful money of the United States of America. "Domestic Subsidiary" means any direct or indirect Subsidiary of the Borrower organized under the laws of the United States of America, any state or territory thereof or the District of Columbia. "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent, and (ii) unless a Default or Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrower or any of the Borrower's Affiliates or Subsidiaries. "Environmental Laws" means all Laws relating to environmental matters applicable to any property. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any of its Subsidiaries 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 Securities" means, with respect to any Person at any time, equity securities issued by such Person, including without limitation any security not constituting Indebtedness exchangeable, exercisable or convertible for or into equity securities of such Person both at the time of issuance of such equity security and at the time of each such exchange, exercise or conversion which results in the receipt of Net Proceeds therefrom by such Person. 11 "ERISA" means the Employee Retirement Income Security Act of 1974 and all regulations issued pursuant thereto. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate. "Eurodollar Rate" means for any Interest Period with respect to any Eurodollar Rate Loan, a rate per annum determined by the Administrative Agent pursuant to the following formula: Interbank Offered Rate ------------------------------------ Eurodollar Rate = 1.00 - Eurodollar Reserve Percentage Where "Interbank Offered Rate" means, for such Interest Period: (i) the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (ii) if the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or 12 (iii) if the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, Continued or Converted by Bank of America in its capacity as a Lender and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch or London Affiliate to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. "Eurodollar Rate Loan" means a Loan (including a Segment) bearing interest or to bear interest at the Eurodollar Rate. "Eurodollar Rate Segment" means a Segment bearing interest or to bear interest at the Eurodollar Rate. "Eurodollar Reserve Percentage" means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. The determination of the Eurodollar Reserve Percentage by the Administrative Agent shall be conclusive in the absence of manifest error. "Event of Default" means any of the events or circumstances specified in Article VIII. "Excess Cash Flow" means, with respect to the Borrower and its Subsidiaries for any fiscal year, the difference of (i) Consolidated EBITDA for such period (including therein any net gain or loss, as applicable, of an extraordinary nature otherwise excluded from the calculation thereof in the definition thereof) minus (ii) the sum of (A) the change in Consolidated Working Capital as at the end of such fiscal year; provided the positive change in Consolidated Working Capital shall not exceed $1,000,000 for any fiscal year; plus (B) Capital Expenditures (paid in cash and not prohibited hereunder) for such period plus (C) Consolidated Fixed Charges for such period (reduced by the amount of Capital Expenditures included in Consolidated Fixed Charges and reduced by the current maturities of Consolidated Funded Indebtedness provided in part (ii) of the definition thereof) plus (D) the aggregate amount of any optional prepayments made by the Borrower pursuant to Section 2.06(a) or (b) hereof during such period, the aggregate amount of prepayments made in connection with required reductions of the Aggregate Revolving Credit Commitment during such period, and the aggregate amount of required repayments of principal of the Term Loans pursuant to Section 2.09 or, with respect to Term Loan C, the Supplemental Credit Documents, during such period, but not including any mandatory prepayment of the Term Loans pursuant to Section 2.06(d) during such period. 13 "Existing Credit Facilities" means shall have the meaning set forth in the recitals hereof. "Federal Funds Rate" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by the Administrative Agent. "Film Contracts" shall mean all contracts for television, film, programs, music and related audio rights and syndicated series exhibition rights acquired under license agreements. "Fixed Charge Coverage Ratio" means with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated Fixed Charges for such period. "Foreign Lender" has the meaning specified in Section 10.15(a). "Four-Quarter Period" means a period of four full consecutive fiscal quarters of the Borrower and its Subsidiaries, taken together as one accounting period. "FRB" means the Board of Governors of the Federal Reserve System of the United States of America. "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. "GAAP" means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Granting Lender" has the meaning set forth in Section 10.01(g). 14 "Guarantors" means, collectively or individually as the context may indicate, each of the Subsidiaries of the Borrower at the Closing Date, other than WAND, and each other Person who becomes a party to the Guaranty (including by execution of a Guaranty Joinder Agreement). "Guaranty" means that certain Guaranty Agreement dated as of the date hereof among the Guarantors and the Administrative Agent substantially in the form of Exhibit F, as supplemented from time to time by the execution and delivery of Guaranty Joinder Agreements pursuant to Section 6.14, as from time to time the same may be otherwise supplemented or amended, modified, amended and restated or replaced. "Guaranty Joinder Agreement" means each Guaranty Joinder Agreement, substantially in the form thereof attached to the Guaranty, executed and delivered by a Guarantor to the Administrative Agent pursuant to Section 6.14, as amended, modified, supplemented or amended and restated. "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, the generation, handling, storage, transportation, disposal, treatment, release, discharge or emission of which is subject to any Environmental Law. "Honor Date" has the meaning set forth in Section 2.04(c). "Indebtedness" means, as to any Person at a particular time, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all direct or Contingent Obligations of such Person arising under letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, surety bonds and similar instruments; (c) net obligations under any Swap Contract in an amount equal to the Swap Termination Value thereof; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business); (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (f) Capital Leases and Synthetic Lease Obligations; and 15 (g) all Contingent Obligations of such Person in respect of any of the foregoing. For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any Capital Lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. "Indemnified Liabilities" has the meaning set forth in Section 10.05. "Indemnitees" has the meaning set forth in Section 10.05. "Intellectual Property" means trademarks and service marks (whether registered or unregistered) and trade names; patents (including any continuations, continuations in part, renewals and applications for any of the foregoing); copyrights (including any registrations and applications therefor and whether registered or unregistered); computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, databases and compilations, including any and all data and collections of data, whether machine readable or otherwise; works of authorship; mask works; technology; trade secrets, know-how, proprietary processes, formulae, algorithms, models, user interfaces, inventions, discoveries, concepts, ideas, techniques, methods, source codes, object codes, methodologies and, with respect to all of the foregoing, related confidential data or information and any licenses of the foregoing; but excluding any limited copyright license or permission from authors, publishers or other parties to use material in the Borrower's or a Subsidiary's products that have no future payment obligations. "Interbank Offered Rate" has the meaning therefor set forth in the definition of Eurodollar Rate. "Interest Coverage Ratio" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Charges for such period. "Interest Payment Date" means, (a) as to any Eurodollar Rate Loan, the last day of the relevant Interest Period, any date that such Loan is prepaid or Converted, in whole or in part, and the Revolving Credit Maturity Date, the Term Loan A Maturity Date, the Term Loan B Maturity Date or the Term Loan C Maturity Date, as applicable; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, interest shall also be paid on the Business Day which falls three months after the beginning of such Interest Period; and (b) as to any Base Rate Loan or Swing Line Loan, the last Business Day of each March, June, September and December and the Revolving Credit Maturity Date, the Term Loan A Maturity Date, the Term Loan B Maturity Date or the Term Loan C Maturity Date, as applicable; provided, further, that interest accruing at the Default Rate shall be payable from time to time upon demand of the Administrative Agent. 16 "Interest Period" means, for each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or on the date any Loan is Continued as or Converted into a Eurodollar Rate Loan, and ending, in each case, on the date which is one, two, three or six months thereafter, as selected by the Borrower in its Loan Notice or Term Loan Interest Rate Selection Notice, provided that: (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period shall extend beyond the Stated Maturity Date. "Investment" means, as to any Person, any acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, guaranty of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment, but including subsequent amounts of Investments in the same Person at the time such amount is actually invested, whether pursuant to earnouts, working capital adjustments or other contractual obligations, or otherwise. "IP Security Agreement" means the Intellectual Property Security Agreement dated as of the date hereof by the Borrower and one or more of the Guarantors to the Administrative Agent, as supplemented from time to time by the execution and delivery of IP Security Joinder Agreements pursuant to Section 6.14, as the same may be otherwise supplemented or amended, modified, amended and restated or replaced. "IP Security Joinder Agreement" means each Intellectual Property Security Joinder Agreement, substantially in the form thereof attached to the IP Security Agreement, executed and delivered by a Guarantor or any other Person to the Administrative Agent pursuant to Section 6.14, as amended, modified, supplemented, amended and restated or replaced. "IRS" means the United States Internal Revenue Service and any successor governmental agency performing a similar function. "Joinder Agreements" means, collectively, Guaranty Joinder Agreements, the Pledge Joinder Agreements, the IP Security Joinder Agreements and the Security Joinder Agreements. 17 "Laws" means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. "L/C Advance" means, with respect to each Lender, such Lender's funding in Dollars of its participation in any L/C Borrowing in accordance with its Pro Rata Revolving Share as set forth in Section 2.04(c). "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing. "L/C Credit Extension" means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof. "L/C Issuer" means Bank of America in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder. "L/C Obligations" means, as at any date of determination, the aggregate undrawn face amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. "Lender" has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the L/C Issuer and each Swing Line Lender. "Lending Office" means, as to any Lender, the office or offices of such Lender described as such on Schedule 10.02, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent. "Letter of Credit" means any letter of credit issued hereunder. A Letter of Credit may be a commercial letter of credit or a standby letter of credit. "Letter of Credit Application" means an application and agreement for the issuance or amendment of a letter of credit in the form from time to time in use by the L/C Issuer. "Letter of Credit Expiration Date" means the day that is seven days prior to the day set forth in part (a) of the definition of Revolving Credit Maturity Date (or, if such day is not a Business Day, the next preceding Business Day). "Letter of Credit Sublimit" means an amount equal to the lesser of the Aggregate Revolving Credit Commitments and $20,000,000. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Revolving Credit Commitments. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or 18 other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable Laws of any jurisdiction) of or in property securing any obligation to, or a claim by a Person other than the owner of such property, whether statutory, by contract or otherwise, including the interest of a purchaser of accounts receivable. "Life Insurance Policies" means, collectively or individually as the context may indicate, the life insurance policies owned by the Borrower, and with respect to which the Borrower is the beneficiary, for the purpose of funding stock redemptions required under the Stock Redemption Agreement, all as set forth on Schedule 6.07, and any replacements thereof and any additional policies purchased on the lives of shareholders of the Borrower for the same purpose from time to time. "Loan" means an extension of credit by a Lender to the Borrower under Article II in the form of a Revolving Loan, a Term Loan A, a Term Loan B, a Term Loan C or a Swing Line Loan, including any Segment. "Loan Documents" means this Agreement, each Note, the Guaranty (including the Guaranty Joinder Agreements), each Security Instrument, the Agent/Arranger Fee Letter, each Loan Notice, each Term Loan Interest Rate Selection Notice, each Letter of Credit Application and each Compliance Certificate, and all other instruments and documents heretofore or hereafter executed or delivered to or in favor of any Lender or the Administrative Agent in connection with the Loans made and transactions contemplated by this Agreement. "Loan Notice" means a notice of (a) a Revolving Borrowing; (b) a Term Loan A Borrowing; (c) a Conversion of Revolving Loans, or (d) a Continuation of Revolving Loans as the same Type, pursuant to Section 2.03(a), which, if in writing, shall be substantially in the form of Exhibit A-1. "Loan Parties" means, collectively, the Borrower, each Guarantor and each other Person providing Collateral pursuant to any Security Instrument. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, assets, properties, condition (financial or otherwise), or liabilities of the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to pay or perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party. "Maximum Discretionary Commitment" means an aggregate principal amount (subject to reduction or cancellation as herein provided) equal to $100,000,000. "Mortgage" means, collectively, all mortgages, deeds of trust, deeds to secure debt and/or similar documents or instruments granting a Lien to the Administrative Agent (or a trustee for the benefit of the Administrative Agent) for the benefit of the Lenders in any Required Property, as such documents may be amended, modified, supplemented, amended and restated or replaced from time to time. 19 "Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding three calendar years, has made or been obligated to make contributions. "National City Base Rate" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the greater of (i) the rate of interest established by National City Bank in Cleveland, Ohio, from time to time, as its base rate, whether or not publicly announced, which interest rate may or may not be the lowest rate charged by it for commercial loans or other extensions of credit; and (ii) the Federal Funds Rate in effect from time to time plus 1/2 of 1% per annum. "National City Line of Credit" means the Borrower's line of credit from National City Bank of Pennsylvania in the maximum amount of $5,000,000. "Net Proceeds" (a) from any public or private offering of any Equity Security means cash payments received by the Borrower or any Subsidiary therefrom as and when received, net of all legal, accounting, banking and underwriting fees and expenses, commissions, discounts and other issuance expenses incurred in connection therewith and all taxes required to be paid or accrued as a consequence of such issuance; and (b) from any Disposition by the Borrower or any of its Subsidiaries means cash payments received by the Borrower or any Subsidiary therefrom, including (A) any cash payments received pursuant to any note or other debt security received in connection with any Disposition and (B) any tax refunds in connection with any Disposition, whether received in cash or applied to tax liabilities, in each case as and when received or applied, net of (i) all legal fees and expenses and other fees and expenses paid to third parties and incurred in connection therewith, (ii) all taxes required to be paid or accrued as a consequence of such disposition, and (iii) all amounts applied to repayment of Indebtedness (other than the Obligations) secured by a Lien on the asset or property disposed. "New Lender" shall have the meaning set forth in Section 2.16(b) hereof. "Notes" means, collectively, the Revolving Loan Notes, the Term Loan A Notes, the Term Loan B Notes, the Term Loan C Notes (if any) and the Swing Line Note. "Obligations" means all advances to, and debts, liabilities, obligations, covenants and duties of the Borrower arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, or arising under any Related Swap Contract, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. "Organization Documents" means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws; (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation and any agreement, instrument, filing or 20 notice with respect thereto filed in connection with its formation with the secretary of state or other department in the state of its formation and all certificates and articles issued thereto by such secretary of state or other department, in each case as amended from time to time. "Organizational Action" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, any corporate, organizational or partnership action (including any required shareholder, member or partner action), or other similar official action, as applicable, taken by such entity. "Other Taxes" has the meaning therefor set forth in Section 3.01(b). "Outstanding Amount" means (i) with respect to the Term Loan A on any date, the aggregate outstanding principal amount thereof after giving effect to any Term Loan A Borrowings and any prepayments or repayments of the Term Loan A (or any Segment) occurring on such date, (ii) with respect to the Term Loan B on any date, the aggregate outstanding principal amount thereof after giving effect to the Borrowing of the Term Loan B on the Closing Date and any prepayments or repayments of the Term Loan B (or any Segment) occurring on such date, (iii) with respect to the Term Loan C on any date, the aggregate outstanding principal amount thereof after giving effect to any Borrowing of the Term Loan C and any prepayments or repayments of the Term Loan C (or any Segment) occurring on such date, (iv) with respect to Revolving Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Revolving Loans, subject to Section 2.05(f), as the case may be, occurring on such date; (v) with respect to Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Swing Line Loans, subject to Section 2.05(f), as the case may be, occurring on such date; and (vi) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes to the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date. "Participant" has the meaning specified in Section 10.07(d). "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. 21 "Plan" means any "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate. "Pledge Agreement" means that certain Securities Pledge Agreement dated as of the date hereof among the Borrower, certain Guarantors and the Administrative Agent, as supplemented from time to time by the execution and delivery of Pledge Joinder Agreements pursuant to Sections 6.14, as the same may be otherwise supplemented (including by Pledge Agreement Supplement), amended, modified, amended and restated or replaced. "Pledge Agreement Supplement" means the Pledge Agreement Supplement in the form affixed as an exhibit to the Pledge Agreement. "Pledged Interests" means all of the Subsidiary Securities of each Subsidiary. "Pledge Joinder Agreement" means each Pledge Joinder Agreement, substantially in the form thereof attached to the Pledge Agreement, executed and delivered by a Guarantor to the Administrative Agent pursuant to Section 6.14, as amended, modified, supplemented, amended and restated or replaced. "Private Notes" means, collectively or individually as the context may indicate, those certain promissory notes in an aggregate principal amount outstanding as of December 31, 2001 of approximately $68,000,000 issued by the Borrower in favor of (a) Massachusetts Mutual Life Insurance Company, (b) CM Life Insurance Company, (c) Farmington Casualty Company, (d) Teachers Insurance and Annuity Association of America, (e) The Travelers Indemnity Company, and (f) The Travelers Insurance Company. "Pro Rata Revolving Share" means, with respect to each Revolving Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Revolving Credit Commitment of such Revolving Lender at such time and the denominator of which is the amount of the Aggregate Revolving Credit Commitments at such time; provided that if the Aggregate Revolving Credit Commitments have been terminated at such time, then the Pro Rata Revolving Share of each Revolving Lender shall be the Pro Rata Revolving Share of such Revolving Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to Section 10.07. The initial Pro Rata Revolving Share of each Revolving Lender is set forth opposite the name of such Revolving Lender on Schedule 1.01(a) or in the Assignment and Assumption pursuant to which such Revolving Lender becomes a party hereto, as applicable. "Pro Rata Term A Share" means, with respect to each Term Loan A Lender (i) from the Closing Date to the earlier to occur of the Term Loan A Advance Expiration Date or the date upon which the Term Loan A Commitments have been terminated, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Term Loan A Commitment of such Term Loan A Lender at such time and the denominator of which is the amount of the Aggregate Term Loan A Commitments at such time, and (ii) thereafter, the percentage (carried out to the ninth decimal place) of the principal amount of the Term Loan A funded by such Term Loan A Lender. The initial Pro Rata Term A Share of each Term Loan A Lender is set forth opposite the name of such Term Loan A Lender on Schedule 22 1.01(a) or in the Assignment and Assumption pursuant to which such Term Loan A Lender becomes a party hereto, as applicable. "Pro Rata Term B Share" means, with respect to each Term Loan B Lender, the percentage (carried out to the ninth decimal place) of the principal amount of the Term Loan B funded by such Term Loan B Lender. The initial Pro Rata Term B Share of each Term Loan B Lender is set forth opposite the name of such Term Loan B Lender on Schedule 1.01(a) or in the Assignment and Assumption pursuant to which such Term Loan B Lender becomes a party hereto, as applicable. "Pro Rata Term C Share" means, with respect to each Discretionary Facility Lender, the percentage (carried out to the ninth decimal place) of the principal amount of the Term Loan C funded by such Discretionary Facility Lender. "Register" has the meaning set forth in Section 10.07(c). "Related Swap Contract" means all Swap Contracts that are entered into or maintained with a Lender or Affiliate of a Lender in connection with Indebtedness of the Borrower arising under the Loan Documents or the Subordinated Indenture and which are not prohibited by the express terms of the Loan Documents. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30-day notice period has been waived. "Required Lenders" means, as of any date of determination, Lenders whose Voting Percentages aggregate more than 50% of the Voting Percentages of all Lenders. "Required Property" means, collectively, the real property, improvements, fixtures and other items of real property related thereto at the locations set forth on Schedule 1.01(b) and such other locations as are from time to time determined by the Administrative Agent in its reasonable discretion to be material, and the products and proceeds thereof, fee title to which is held by the Borrower or any Subsidiary. "Required Revolving Lenders" means, as of any date of determination, Revolving Lenders whose Voting Percentages (determined solely with respect to Revolving Credit Commitments and Outstanding Amounts (including risk participations in Letters of Credit and Swing Line Loans) under the Revolving Credit Facility) aggregate more than 50% of the Voting Percentages (similarly determined) of all Revolving Lenders. "Required Term Loan A Lenders" means, as of any date of determination, Term Loan A Lenders whose Voting Percentages (determined solely with respect to Term Loan A Commitments and Outstanding Amounts of the Term Loan A) aggregate more than 50% of the Voting Percentages (similarly determined) of all Term Loan A Lenders. "Required Term Loan B Lenders" means, as of any date of determination, Term Loan B Lenders whose Voting Percentages (determined solely with respect to Outstanding Amounts of the Term Loan B) aggregate more than 50% of the Voting Percentages (similarly determined) of all Term Loan B Lenders. 23 "Required Term Loan C Lenders" means, as of any date of determination, Term Loan C Lenders whose Voting Percentages (determined solely with respect to Outstanding Amounts of the Term Loan C) aggregate more than 50% of the Voting Percentages (similarly determined) of all Term Loan C Lenders. "Responsible Officer" means the president, chairman, managing director, vice president, chief financial officer, treasurer or assistant treasurer of a Loan Party, each of which is an officer-level title of the applicable Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate and/or other action of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. "Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other equity interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other equity interest or of any option, warrant or other right to acquire any such capital stock or other equity interest. "Revolving Borrowing" means a borrowing consisting of simultaneous Revolving Loans of the same Type and, as to Eurodollar Rate Loans, having the same Interest Period made by each of the Revolving Lenders pursuant to Section 2.02. "Revolving Credit Commitment" means, as to each Revolving Lender, its obligation to (a) make Revolving Loans to the Borrower pursuant to Section 2.02, (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Revolving Lender's name on Schedule 1.01(a), as such amount may be reduced, increased or adjusted from time to time in accordance with this Agreement. "Revolving Credit Facility" means the facility described in Section 2.02 providing for Revolving Loans to the Borrower by the Revolving Lenders in the maximum aggregate principal amount at any time outstanding of $85,000,000, as reduced from time to time pursuant to the terms of this Agreement. "Revolving Credit Maturity Date" means (a) the earlier of (i) May 15, 2009 or (ii) the date that is six months prior to the maturity date of the Subordinated Notes, or (b) such earlier date upon which the Aggregate Revolving Credit Commitments may be terminated in accordance with the terms hereof. "Revolving Lender" means each Lender that has a Commitment or, following termination of Commitments, has a Loan outstanding or participation in an outstanding Letter of Credit or Swing Line Loan, under the Revolving Credit Facility. "Revolving Loan" means a Base Rate Loan or a Eurodollar Rate Loan made to the Borrower by a Revolving Lender in accordance with its Pro Rata Revolving Share pursuant to Section 2.02, except as otherwise provided herein. 24 "Revolving Loan Note" means a promissory note made by the Borrower in favor of a Lender evidencing Revolving Loans made by such Revolving Lender, substantially in the form of Exhibit C-3. "Same Day Funds" means immediately available funds. "Secured Parties" means, collectively, with respect to each of the Security Instruments, the Administrative Agent, the Lenders and such other Persons for whose benefit the Lien thereunder is conferred, as therein provided. "Security Agreement" means the Security Agreement dated as of the date hereof by the Borrower and one or more of the Guarantors to the Administrative Agent for the benefit of the Secured Parties, as supplemented from time to time by the execution and delivery of Security Joinder Agreements pursuant to Section 6.14, as the same may be otherwise supplemented, amended, modified, amended and restated or replaced. "Security Instruments" means, collectively or individually as the context may indicate, the Pledge Agreement (including the Pledge Joinder Agreements and the Pledge Agreement Supplements), the Security Agreement (including the Security Joinder Agreements), the IP Security Agreement (including the IP Security Joinder Agreements), Mortgages and all other agreements (including control agreements), instruments and other documents, whether now existing or hereafter in effect, pursuant to which the Borrower or any Subsidiary or other Person shall grant or convey to the Administrative Agent or the Lenders a Lien in, or any other Person shall acknowledge any such Lien in, property as security for all or any portion of the Obligations or any other obligation under any Loan Document, as any of them may be amended, modified, supplemented, amended and restated or replaced from time to time. "Security Joinder Agreement" means each Security Joinder Agreement, substantially in the form thereof attached to the Security Agreement, executed and delivered by a Guarantor or any other Person to the Administrative Agent pursuant to Section 6.14, as amended, modified, supplemented, amended and restated or replaced. "Segment" means a portion of any Term Loan (or all thereof) with respect to which a particular interest rate is (or is proposed to be) applicable. "Senior Leverage Ratio" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Senior Indebtedness as of such date to (b) Consolidated EBITDA for the Four-Quarter Period ending on or most recently ended prior to such date. "Solvent" means, when used with respect to any Person, that at the time of determination: (a) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including Contingent Obligations; and (b) it is then able and expects to be able to pay its debts as they mature; and 25 (c) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "SPC" has the meaning set forth in Section 10.01(g). "Stock Redemption Agreement" has the meaning set forth in Section 7.17(a). "Subordinated Indebtedness" means all obligations of the Borrower and its Subsidiaries with respect to the Subordinated Notes as set forth therein and in the Subordinated Indenture Documents. "Subordinated Indenture" means that certain Indenture dated as of April 18, 2002 by and among the Borrower, certain Subsidiaries of the Borrower and Wells Fargo Bank Minnesota, National Association, as Trustee, as amended from time to time in accordance with its terms and the terms of this Agreement. "Subordinated Notes" has the meaning given the term "Notes" in the Subordinated Indenture. "Subsidiary" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Borrower. "Subsidiary Securities" means the shares of capital stock or the other equity interests issued by or equity participations in any Subsidiary, whether or not constituting a "security" under Article 8 of the Uniform Commercial Code as in effect in any jurisdiction, but such term shall not include the partnership interests of the Borrower or any Subsidiary in WAND. "Supplemental Credit Documents" shall have the meaning set forth in Section 2.16(e). "Swap Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, 26 a "Master Agreement"), including any such obligations or liabilities under any Master Agreement. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Lender). "Swing Line" means the revolving credit facility made available by the Swing Line Lenders pursuant to Section 2.05. "Swing Line Base Rate" means (a) with respect to Swing Line Loans for which National City Bank is the Swing Line Lender, the National City Base Rate, and (b) with respect to Swing Line Loans for which any other Person is the Swing Line Lender, the Base Rate. "Swing Line Borrowing" means a borrowing of a Swing Line Loan pursuant to Section 2.05. "Swing Line Lender" means each of Bank of America and National City Bank in its capacity as a provider of Swing Line Loans, or any successor swing line lender hereunder. "Swing Line Loan" has the meaning specified in Section 2.05(a). "Swing Line Loan Notice" means a notice of a Swing Line Borrowing pursuant to Section 2.05(b), which, if in writing, shall be substantially in the form of Exhibit B. "Swing Line Note" means each promissory note made by the Borrower in favor of a Swing Line Lender evidencing Swing Line Loans made by such Lender, substantially in the form of Exhibit C-4. "Swing Line Sublimit" means an amount equal to the lesser of the Aggregate Revolving Credit Commitments and $5,000,000. The Swing Line Sublimit is part of, and not in addition to, the Aggregate Revolving Credit Commitments. "Synthetic Lease Obligation" means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment). "Taxes" has the meaning therefor set forth in Section 3.01(a). "Telesystem" means Buckeye Telesystem, Inc., an Ohio corporation. 27 "Term Loan A" means, individually or in the aggregate as the context may indicate, the loans made pursuant to the Term Loan A Facility in accordance with Section 2.01(a). "Term Loan A Advance Expiration Date" means December 31, 2003. "Term Loan A Amortization Amount" means the Outstanding Amount of the Term Loan A measured as of the close of business on the Term Loan A Advance Expiration Date. "Term Loan A Borrowing" means a borrowing consisting of simultaneous Term Loans A of the same Type and, as to Eurodollar Rate Loans, having the same Interest Period made by each of the Term Loan A Lenders pursuant to Section 2.01(a). "Term Loan A Commitment" means, as to each Term Loan A Lender, its obligation to fund Borrowings under Term Loan A pursuant to Section 2.01(a) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Term Loan A Lender's name on Schedule 1.01(a), as such amount may be reduced or adjusted from time to time in accordance with this Agreement, and shall include at all times the aggregate amount of all Loans under the Term Loan A made by such Term Loan A Lender. "Term Loan A Facility" means the facility described in Section 2.01(a) providing for a Term Loan to the Borrower by the Term Loan A Lenders in the principal amount of up to $40,000,000, as the same may be reduced from time to time in accordance with the terms hereof. "Term Loan A Lender" means each Lender that has a Term Loan A Commitment or a Term Loan A outstanding under the Term Loan A Facility. "Term Loan A Maturity Date" means (a) the earlier of (i) May 15, 2009 or (ii) the date that is six months prior to the maturity date of the Subordinated Notes, or (b) such earlier date upon which the Outstanding Amounts under the Term Loan A Facility, including all accrued and unpaid interest, are paid in full in accordance with the terms hereof. "Term Loan A Note" means a promissory note made by the Borrower in favor of a Lender evidencing the portion of the Term Loan A made by such Term Loan A Lender, substantially in the form of Exhibit C-1. "Term Loan B" means the loans made pursuant to the Term Loan B Facility in accordance with Section 2.01(b). "Term Loan B Facility" means the facility described in Section 2.01(b) providing for a Term Loan to the Borrower by the Term Loan B Lenders in the original principal amount of $75,000,000. "Term Loan B Lender" means each Lender that has a Term Loan B outstanding under the Term Loan B Facility. "Term Loan B Maturity Date" means (a) the earlier of (i) November 15, 2009 or (ii) the date that is five months prior to the maturity date of the Subordinated Notes, or (b) such earlier date upon which the Outstanding Amounts under the Term Loan B Facility, including all accrued and unpaid interest, are paid in full in accordance with the terms hereof. 28 "Term Loan B Note" means a promissory note made by the Borrower in favor of a Term Loan B Lender evidencing the portion of the Term Loan B made by such Term Loan B Lender, substantially in the form of Exhibit C-2. "Term Loan C" means the loans made pursuant to the Term Loan C Facility in accordance with Section 2.16. "Term Loan C Facility" means the facility, if issued in accordance with Section 2.16, providing for a Term Loan to the Borrower by the Discretionary Facility Lenders in the original principal amount to be determined in accordance with the terms hereof, but in no event greater than the difference of $100,000,000 less the Aggregate Revolving Credit Commitments Increase. "Term Loan C Lender" means each Discretionary Facility Lender that has a Term Loan C outstanding under the Term Loan C Facility. "Term Loan C Maturity Date" means the date to be determined by the Borrower, the Administrative Agent and the Discretionary Facility Lenders in accordance with the terms hereof and set forth in the Supplemental Credit Documents, but shall not be earlier than the Term Loan A Maturity Date or the Term Loan B Maturity Date. "Term Loan C Note" means a promissory note made by the Borrower in favor of a Discretionary Facility Lender evidencing the portion of the Term Loan C made by such Discretionary Facility Lender in the form set forth in the Supplemental Credit Documents. "Term Loan Facilities" means the Term Loan A Facility, the Term Loan B Facility and, if issued in accordance with Section 2.16, the Term Loan C Facility. "Term Loan Interest Rate Selection Notice" means the written notice delivered by a Responsible Officer of the Borrower in connection with the election of a subsequent Interest Period for any Eurodollar Rate Segment or the Conversion of any Eurodollar Rate Segment into a Base Rate Segment or the Conversion of any Base Rate Segment into a Eurodollar Rate Segment, which, if in writing, shall be substantially in the form of Exhibit A-2. "Term Loan Notes" means the Term Loan A Notes, the Term Loan B Notes and, if the Term Loan C is issued in accordance with Section 2.16, the Term Loan C Notes. "Term Loans" means the Term Loan A, Term Loan B and, if issued, Term Loan C. "Threshold Amount" means $5,000,000. "Total Leverage Ratio" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the Four-Quarter Period ending on or most recently ended prior to such date. "Transaction Adjustments" means those adjustments to certain financial terms and computations contained herein in connection with the making of Acquisitions and Dispositions, as from time to time agreed to by the Administrative Agent and the Borrower. 29 "Type" means with respect to a Revolving Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan. "Unreimbursed Amount" has the meaning set forth in Section 2.04(c)(i) "Voting Percentage" means, as to any Lender, the percentage (carried out to the ninth decimal place) which (i) the sum of (A) such Lender's Pro Rata Revolving Share (expressed in Dollars), plus (B) such Lender's Pro Rata Term A Share (expressed in Dollars), plus (C) such Lender's Pro Rata Term B Share (expressed in Dollars), plus (D) such Lender's Pro Rata Term C Share (expressed in Dollars) then comprises of (ii) the sum of (A) the Aggregate Revolving Credit Commitments (or if at the date of such calculation the Aggregate Revolving Credit Commitments shall have been terminated, the Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations); plus (B) the Aggregate Term Loan A Commitments (or if at the date of such calculation the Aggregate Term Loan A Commitments shall have been terminated, the Outstanding Amount of Term Loan A); plus (C) the Outstanding Amount of Term Loan B, plus (D) the Outstanding Amount of Term Loan C; provided, however, that if any Lender has failed to fund any portion of any Revolving Loan, any Term Loan, any participation in L/C Obligations or any participation in Swing Line Loans required to be funded by it hereunder, such Lender's Voting Percentage shall be deemed to be zero, and the respective Voting Shares and Voting Percentages of the other Lenders shall be recomputed for purposes of this definition and the definition of "Required Lenders" without regard to such Lender's Revolving Credit Commitment or Term Loan A Commitment or the Outstanding Amount of its Revolving Loans, Term Loans, L/C Advances and funded participations in Swing Line Loans, as the case may be. "Voting Securities" means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "WAND" means WAND (TV) Partnership, an Illinois general partnership and a Subsidiary of the Borrower. "WLFI" means WLFI-TV, Inc., an Indiana corporation and a Subsidiary of the Borrower. "Weighted Average Life to Maturity " means, relative to the Outstanding Amount of any Loan at any date, the number of years (rounded to the nearest one-twelfth) obtained by dividing (a) the then Outstanding Amount of such Loan into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity, or other required scheduled payments of principal, including payment of final maturity, in respect thereof, by (ii) the number of years (rounded to the nearest one-twelfth) that will elapse between such date and the making of such payment. "Work Stoppage" means any strike or other work stoppage by employees of the Pittsburgh Post-Gazette arising in connection with or out of the negotiations that are ongoing as of the Closing Date between the Pittsburgh Post-Gazette, Teamsters Local 211 and certain other unions. 30 1.02 OTHER INTERPRETIVE PROVISIONS. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) (i) The words "herein" and "hereunder" and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof. (ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears. (iii) The term "including" is by way of example and not limitation. (iv) The term "documents" includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form. (c) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including;" the words "to" and "until" each mean "to but excluding;" and the word "through" means "to and including." (d) Each reference to "basis points" or "bps" shall be interpreted in accordance with the convention that 100 bps = 1.0%. (e) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. 1.03 ACCOUNTING TERMS. (a) All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. (b) If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as 31 reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. 1.04 ROUNDING. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). 1.05 REFERENCES TO AGREEMENTS AND LAWS. Unless otherwise expressly provided herein, (a) references to agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law. ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS 2.01 TERM LOAN. (a) Term Loan A. Subject to the terms and conditions set forth herein, each Term Loan A Lender severally agrees to make Loans under the Term Loan A Facility from time to time on any Business Day during the period from the Closing Date to the Term Loan A Advance Expiration Date; provided, however, that after giving effect to any Term Loan A Borrowing, (i) the aggregate Outstanding Amount of all Loans under the Term Loan A Facility shall not exceed the Aggregate Term Loan A Commitments and (ii) the aggregate Outstanding Amount of the Loans of any Term Loan A Lender under the Term Loan A Facility shall not exceed such Term Loan A Lender's Term Loan A Commitment. The principal amount of each Segment of the Term Loan A outstanding hereunder from time to time shall bear interest and the Term Loan A shall be repayable as herein provided. No amount of the Term Loan A repaid or prepaid by the Borrower may be reborrowed hereunder, and no Term Loan A Borrowing shall be allowed after the Term Loan A Advance Expiration Date. (b) Term Loan B. (i) Subject to the terms and conditions of this Agreement, each Term Loan B Lender severally agrees to make an advance of its Pro Rata Term B Share of the Term Loan B to the Borrower on the Closing Date. The principal amount of each Segment of the Term Loan B outstanding hereunder from time to time shall bear interest and the Term Loan B shall be repayable as herein provided. No amount of the Term Loan B repaid or prepaid by the Borrower may be reborrowed hereunder, and no subsequent Borrowing under the Term Loan B Facility shall be allowed after the initial such advance of the Term Loan B on the Closing Date. 32 (ii) Not later than 1:00 P.M. New York time, on the Closing Date, each Term Loan B Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of its Pro Rata Term B Share of the Term Loan B available by wire transfer to the Administrative Agent. Such wire transfer shall be directed to the Administrative Agent at the Administrative Agent's Office and shall be in the form of Same Day Funds in Dollars. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, including without limitation the satisfaction of all applicable conditions in Sections 4.01 and 4.02, be made available to the Borrower by delivery of the proceeds thereof as shall be directed by the Responsible Officer of the Borrower and reasonably acceptable to the Administrative Agent. The initial Borrowing of the Term Loan B shall be a single Base Rate Segment, subject to Conversion after the Closing Date in accordance with a Term Loan Interest Rate Selection Notice delivered on the Closing Date pursuant to Section 4.01(a) (or, if no Term Loan Interest Rate Selection Notice is so delivered on the Closing Date, thereafter in accordance with Section 2.03). 2.02 REVOLVING LOANS. Subject to the terms and conditions set forth herein, each Revolving Lender severally agrees to make, Convert and Continue Revolving Loans to the Borrower from time to time on any Business Day during the period from the Closing Date to the Revolving Credit Maturity Date; provided, however, that after giving effect to any Revolving Borrowing, (i) the aggregate Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations shall not exceed the Aggregate Revolving Credit Commitments, and (ii) the aggregate Outstanding Amount of the Revolving Loans of any Revolving Lender, plus such Revolving Lender's Pro Rata Revolving Share of the aggregate Outstanding Amount of all L/C Obligations, plus such Revolving Lender's Pro Rata Revolving Share of the aggregate Outstanding Amount of all Swing Line Loans, shall not exceed such Revolving Lender's Revolving Credit Commitment. Within the limits of each Revolving Lender's Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.02, prepay under Section 2.06, and reborrow under this Section 2.02. Revolving Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein. 2.03 BORROWINGS, CONVERSIONS AND CONTINUATIONS (a) Each Revolving Borrowing, each Term Loan A Borrowing, each Conversion of Revolving Loans or Segments of any Term Loan, and each Continuation of Revolving Loans or Segments of any Term Loan shall be made upon the Borrower's irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 11:00 a.m., New York time, (i) three Business Days prior to the requested date of any Borrowing of, Conversion to or Continuation of Eurodollar Rate Loans, and (ii) on the requested date of any Borrowing of, or Conversion to, Base Rate Loans. Each such telephonic notice must be confirmed promptly by delivery to the Administrative Agent of a written Loan Notice (as to Revolving Borrowings or Term Loan A Borrowings) or Term Loan Interest Rate Selection Notice, appropriately completed and signed by a Responsible Officer (unless such Loan Notice is being delivered by a Swing Line Lender pursuant to Section 2.05(c) or by the Administrative Agent on behalf of the L/C Issuer pursuant to Section 2.04(c)(i)); provided that the lack of such prompt confirmation shall not affect the conclusiveness or binding effect of such telephonic notice. Each Borrowing of, Conversion to or Continuation 33 of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof, except that Term Loan A Borrowings shall be in a principal amount of $10,000,000 or a whole multiple of $5,000,000 thereof. Except as provided in Sections 2.04(c) and 2.05(c), each Borrowing of or Conversion to Base Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof, except that Term Loan A Borrowings shall be in a principal amount of $10,000,000 or a whole multiple of $5,000,000 thereof. Each Loan Notice (whether telephonic or written) shall be substantially in the form of Exhibit A-1 attached hereto, and each Term Loan Interest Rate Selection Notice (whether telephonic or written) shall be substantially in the form of Exhibit A-2 attached hereto. If the Borrower fails to specify a Type of Revolving Loan or Term Loan A in a Loan Notice or if the Borrower fails to give a timely notice requesting a Conversion or Continuation, then the applicable Revolving Loans or Term Loan A shall, subject to the last sentence of this Section 2.03(a), be made or Continued as, or Converted to, Base Rate Loans. Any such automatic Conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect. If no timely notice of a Conversion or Continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic Conversion to Base Rate Loans. If the Borrower requests a Borrowing of, Conversion to, or Continuation of Eurodollar Rate Loans in any such Loan Notice or Term Loan Interest Rate Selection Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month. (b) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each applicable Lender of its Pro Rata Revolving Share of the applicable Revolving Loans or Pro Rate Term A Share of the applicable Term Loan A, as the case may be. Each applicable Lender shall make the amount of its Revolving Loan or Term Loan A available to the Administrative Agent in Same Day Funds in Dollars at the Administrative Agent's Office not later than 1:00 p.m., New York time, on the Business Day specified in the applicable Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower. (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be Continued or Converted only on the last day of the Interest Period for such Eurodollar Rate Loan. During the existence of a Default or Event of Default, no Loans (including Segments) may be requested as, Converted into or Continued as Eurodollar Rate Loans without the consent of the Required Revolving Lenders, the Required Term Loan A Lenders, the Required Term Loan B Lenders or the Required Term Loan C Lenders, as applicable. (d) The Administrative Agent shall promptly notify the Borrower and the applicable Lenders of the interest rate applicable to any Eurodollar Rate Loan upon determination of such interest rate. The determination of the Eurodollar Rate by the Administrative Agent shall be conclusive in the absence of manifest error. 34 (e) After giving effect to all Revolving Borrowings, all Conversions of Revolving Loans from one Type to the other, and all Continuations of Revolving Loans as the same Type, there shall not be more than seven Interest Periods in effect with respect to Revolving Loans. (f) After giving effect to all Term Loan A Borrowings, all Conversions of Segments of the Term Loan A from one Type to the other, and all Continuations of Segments of the Term Loan A as the same Type, there shall not be more than three Interest Periods in effect with respect to Segments of the Term Loan A. (g) After giving effect to the Borrowing under the Term Loan B Facility, all Conversions of Segments of the Term Loan B from one Type to the other, and all Continuations of Segments of the Term Loan B as the same Type, there shall not be more than three Interest Periods in effect with respect to Segments of the Term Loan B. (h) After giving effect to the Borrowing under the Term Loan C Facility, all Conversions of Segments of the Term Loan C from one Type to the other, and all Continuations of Segments of the Term Loan C as the same Type, there shall not be more Interest Periods in effect with respect to Segments of the Term Loan C than shall be determined in accordance with Section 2.16 and set forth in the Supplemental Credit Documents. 2.04 LETTERS OF CREDIT. (a) The Letter of Credit Commitment. (i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the other Revolving Lenders set forth in this Section 2.04, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower, and to renew Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drafts under the Letters of Credit; and (B) the Revolving Lenders severally agree to risk participate in Letters of Credit issued for the account of the Borrower; provided that the L/C Issuer shall not be obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no Revolving Lender shall be obligated to risk participate in, any Letter of Credit if as of the date of such L/C Credit Extension, (x) the aggregate Outstanding Amount of all Revolving Loans, Swing Line Loans and L/C Obligations would exceed the Aggregate Revolving Credit Commitments, (y) the aggregate Outstanding Amount of the Revolving Loans of any Revolving Lender, plus such Revolving Lender's Pro Rata Revolving Share of the Outstanding Amount of all L/C Obligations, plus such Revolving Lender's Pro Rata Revolving Share of the Outstanding Amount of all Swing Line Loans, would exceed such Revolving Lender's Revolving Credit Commitment, or (z) the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower's ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. 35 (ii) The L/C Issuer shall be under no obligation to issue any Letter of Credit if: (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it; (B) subject to Section 2.04(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last renewal, unless the Required Revolving Lenders have approved such expiry date; (C) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Revolving Lenders have approved such expiry date; (D) the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer; or (E) such Letter of Credit is in a face amount less than $100,000, in the case of a commercial Letter of Credit, or $500,000, in the case of a standby Letter of Credit. (iii) The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. (b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Renewal Letters of Credit. (i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer. Such L/C Application must be received by the L/C Issuer and the Administrative Agent not later than 12:00 noon, New York time, at least two Business Days (or such later date and time as the L/C Issuer may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C 36 Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require. (ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by the L/C Issuer of confirmation from the Administrative Agent that the requested issuance or amendment is permitted under Section 2.04(a)(i) in terms of any additional L/C Obligations created thereby, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer's usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Revolving Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Revolving Lender's Pro Rata Revolving Share times the amount of such Letter of Credit. (iii) If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic renewal provisions (each, an "Auto-Renewal Letter of Credit"); provided that any such Auto-Renewal Letter of Credit must permit the L/C Issuer to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the "Nonrenewal Notice Date") in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such renewal. Once an Auto-Renewal Letter of Credit has been issued, the Revolving Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the renewal of such Letter of Credit at any time to an expiry date not later than the date twelve months after the date of renewal or the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such renewal if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof, or (B) it has received notice (which may be by telephone or in writing) on or before the day that is two Business Days before the Nonrenewal Notice Date (1) from the Administrative Agent that the Required Revolving Lenders have elected not to permit such renewal or (2) from the Administrative Agent, any Revolving Lender or the Borrower that one or more of the 37 applicable conditions specified in Section 4.02 is not then satisfied. In no event shall the expiry date of any Auto-Renewal Letter of Credit after any renewal as described herein occur after the Letter of Credit Expiration Date, unless all the Revolving Lenders have approved such expiry date. (iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment. (c) Drawings and Reimbursements; Funding of Participations. (i) Upon any drawing under any Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof. Not later than 11:00 a.m., New York time, on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an "Honor Date"), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing in Dollars in Same Day Funds. If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Revolving Lender of the Honor Date, the amount of the unreimbursed drawing (the "Unreimbursed Amount"), such Revolving Lender's Pro Rata Revolving Share thereof and, in accordance with the following sentence, whether a Swing Line Borrowing or a Revolving Borrowing will be made to repay the Unreimbursed Amount or whether, pursuant to Section 2.04(c)(iii), an L/C Borrowing in the amount of the Unreimbursed Amount shall be deemed incurred by the Borrower and that each Revolving Lender shall participate in such L/C Borrowing in accordance with its Pro Rata Revolving Share. In such event, the Borrower shall be deemed to have requested a Swing Line Borrowing from either or both of the Swing Line Lenders as designated by the Administrative Agent, without regard to the minimum and multiples specified in Section 2.05 or Section 2.03, or, if the Unreimbursed Amount is greater than the amount available for Swing Line Borrowings under the Swing Line Sublimit, a Revolving Borrowing, without regard to the minimum and multiples specified Section 2.03, to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, but subject, in each case, to the amount of the unutilized portion of the Aggregate Revolving Credit Commitments, and the conditions set forth in Section 4.02 (other than the delivery of a Loan Notice). Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.04(c)(i) shall constitute a notice under Section 2.05(b) or a Loan Notice, respectively, and may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice. (ii) The applicable Swing Line Lender, if a Swing Line Borrowing can be made as determined by the Administrative Agent pursuant to Section 2.05(c)(i), shall make funds available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent's Office in an amount equal to the Unreimbursed Amount, not later than 2:00 p.m., New York time, on the Business Day specified in such notice by the Administrative Agent. In the event the Administrative Agent determines that a Swing Line Borrowing is not so available and its notice pursuant to Section 2.05(c)(i) indicates that in the alternative a Revolving Borrowing or an L/C Borrowing is to be made, each 38 Revolving Lender (including the Lender acting as L/C Issuer) shall upon receipt of any notice from any such Administrative Agent pursuant to Section 2.04(c)(i) make funds in Dollars available to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent's Office in the amount equal to its Pro Rata Revolving Share of the Unreimbursed Amount not later than 2:00 p.m., New York time, on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.04(c)(iii), each Revolving Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received from either the Swing Line Lenders or the Revolving Lenders, as applicable, to the L/C Issuer. (iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Borrowing because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Revolving Lender's payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(ii) shall be deemed payment in respect of its risk participation in such L/C Borrowing and shall constitute an L/C Advance from such Revolving Lender in satisfaction of its risk participation obligation in such L/C Borrowing under this Section 2.04. (iv) Until each Revolving Lender funds its Revolving Loan or L/C Advance pursuant to Section 2.04(c)(ii) to reimburse the L/C Issuer for any Unreimbursed Amount drawn under any Letter of Credit or to fund its participation therein, as the case may be, interest in respect of such Revolving Lender's ratable share of such amount shall be solely for the account of the L/C Issuer. (v) Each Revolving Lender's obligation to make Revolving Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.04(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Revolving Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Lender's obligation to make Revolving Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02 (other than the delivery of a Loan Notice). Any such reimbursement with the proceeds of Revolving Loans or L/C Advances shall not relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein. (vi) If any Revolving Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Revolving Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(ii), the L/C Issuer shall be entitled to recover from such 39 Revolving Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the applicable Federal Funds Rate for three (3) Business Days and thereafter at a rate per annum equal to the Default Rate. A certificate of the L/C Issuer submitted to any Revolving Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error. (d) Repayment of Participations. (i) At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Revolving Lender such Revolving Lender's L/C Advance in respect of such payment in accordance with Section 2.04(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), or any payment of interest thereon, the Administrative Agent will distribute to such Revolving Lender the ratable share of such payment in the same funds as those received by the Administrative Agent. (ii) If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.04(c)(i) in respect of any drawing on any Letter of Credit is required to be returned (including pursuant to any settlement entered into by the Administrative Agent or the L/C Issuer in its discretion), each Revolving Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Pro Rata Revolving Share of such amount on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Revolving Lender, at a rate per annum equal to the applicable Federal Funds Rate from time to time in effect, and such payment by each Revolving Lender shall be deemed to be its L/C Advance in such amount pursuant to Section 2.04(c)(iii). (e) Obligations Absolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit, and to repay each L/C Borrowing, shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following: (i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; (ii) the existence of any claim, counterclaim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or 40 any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit; (iv) any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit, or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower. The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower's instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid. (f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. Neither the L/C Issuer, any Agent-Related Person nor any of the respective correspondents, participants or assignees of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders or the Required Revolving Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. Neither the L/C Issuer, any Agent-Related Person, nor any of the respective correspondents, participants or assignees of the L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.04(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, special, punitive or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer's willful misconduct or gross negligence or the L/C Issuer's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be 41 in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. (g) Cash Collateral. Upon the request of the Administrative Agent, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date or the Revolving Credit Maturity Date, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, the Borrower shall immediately Cash Collateralize the Outstanding Amount of all L/C Obligations plus the Letter of Credit fees payable with respect to such Letter of Credit (calculated at the Applicable Margin then in effect for the period from the date of such cash collateralization until the expiry date of such Letter of Credit). (h) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the "ICC") at the time of issuance shall apply to each commercial Letter of Credit. (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Revolving Lender in accordance with its Pro Rata Revolving Share a Letter of Credit fee (for each day such Letter of Credit remains in effect) for each Letter of Credit equal to the Applicable Margin for Letter of Credit fees multiplied by the daily maximum amount available to be drawn under such Letter of Credit; provided that at all times while a Default Rate is in effect under Section 2.10(b), such Applicable Margin shall be increased by 2.0% per annum. Such fee for each Letter of Credit shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, and on the Letter of Credit Expiration Date. If there is any change in the Applicable Margin during any quarter, the actual daily amount of each Letter of Credit shall be computed and multiplied by the Applicable Margin separately for each period during such quarter that such Applicable Margin was in effect. (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee equal in an amount equal to 1/8 of 1% per annum on the daily maximum amount available to be drawn under each Letter of Credit, due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, and on the Letter of Credit Expiration Date. In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect. Such fees and charges are due and payable on demand and are nonrefundable. 42 (k) Conflict with Letter of Credit Application. In the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control. 2.05 SWING LINE LOANS. (a) The Swing Line. Subject to the terms and conditions set forth herein, each Swing Line Lender agrees to make loans (each such loan, a "Swing Line Loan") in Dollars, to the Borrower from time to time on any Business Day during the period from the Closing Date to the Revolving Credit Maturity Date in an aggregate amount (for all Swing Line Loans of all Swing Lenders collectively) not to exceed the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the aggregate Outstanding Amount of Revolving Loans and Pro Rata Revolving Share of L/C Obligations of each Swing Line Lender in its capacity as a Revolving Lender, may exceed the amount of such Lender's Revolving Credit Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the aggregate Outstanding Amount of all Revolving Loans, Swing Loans and L/C Obligations shall not exceed the Aggregate Revolving Credit Commitments, and (ii) the aggregate Outstanding Amount of the Revolving Loans of any Revolving Lender other than the Swing Line Lenders, plus such Revolving Lender's Pro Rata Revolving Share of the Outstanding Amount of all L/C Obligations, plus such Revolving Lender's Pro Rata Revolving Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Revolving Lender's Revolving Credit Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.05; prepay under Section 2.06, and reborrow under this Section 2.05. Each Swing Line Loan shall bear interest at the applicable Swing Line Base Rate. Immediately upon the making of a Swing Line Loan, each Revolving Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from each Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Revolving Lender's Pro Rata Revolving Share times the amount of the Swing Line Loan. (b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrower's irrevocable notice to the applicable Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the applicable Swing Line Lender and the Administrative Agent not later than 12:00 noon, New York time on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000 and integral multiples of $25,000 in excess thereof, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the applicable Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer. Promptly after receipt by the applicable Swing Line Lender of any telephonic Swing Line Loan Notice, such Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, such Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the applicable Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Lender) prior to 1:00 p.m., New York time, on the date of the proposed Swing Line Borrowing (A) directing such Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.02, or (B) that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, then, subject to the terms and conditions 43 hereof, the applicable Swing Line Lender will, not later than 2:00 p.m., New York time, on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower at its office by crediting the account of the Borrower on the books of such Swing Line Lender in Same Day Funds. (c) Refinancing of Swing Line Loans. (i) Each Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes each Swing Line Lender to so request on its behalf), and the Borrower at any time may request, that a Revolving Loan be made in an amount equal to the amount of Swing Line Loans then outstanding. Such request shall be made in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Revolving Loans, but subject to the unutilized portion of the Aggregate Revolving Credit Commitments, and the conditions set forth in Section 4.02. Each Revolving Lender shall make an amount equal to its Pro Rata Revolving Share of the amount specified in such Loan Notice available to the Administrative Agent in Same Day Funds for the account of the applicable Swing Line Lender at the Administrative Agent's Office not later than 2:00 p.m., New York time, on the Business Day specified in such Loan Notice, whereupon, subject to Section 2.05 (c)(ii), each Revolving Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received from the Revolving Lenders to the applicable Swing Line Lender. (ii) If for any reason any Revolving Borrowing cannot be requested in accordance with Section 2.05(c)(i) or any Swing Line Loan cannot be refinanced by such a Revolving Borrowing, the Loan Notice submitted by the applicable Swing Line Lender shall be deemed to be a request by such Swing Line Lender that each of the Revolving Lenders fund its risk participation in the amount of the relevant Swing Line Loan and each Revolving Lender's payment to the Administrative Agent for the account of the applicable Swing Line Lender pursuant to Section 2.05(c)(i) shall be deemed payment in respect of such risk participation in the amount of such Swing Line Loan. (iii) If any Revolving Lender fails to make available to the Administrative Agent for the account of the applicable Swing Line Lender any amount required to be paid by such Revolving Lender pursuant to the foregoing provisions of this Section 2.05(c) by the time specified in Section 2.05(c)(i), the applicable Swing Line Lender shall be entitled to recover from such Revolving Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Swing Line Lender at a rate per annum equal to the applicable Federal Funds Rate for three (3) Business Days and thereafter at a rate per annum equal to the Default Rate. A certificate of the applicable Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error. (iv) Each Revolving Lender's obligation to make Revolving Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 44 2.05(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any set-off, counterclaim, recoupment, defense or other right which such Revolving Lender may have against either Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default or Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Lender's obligation to make Revolving Loans pursuant to this Section 2.05(c) is subject to the conditions set forth in Section 4.02. Any such purchase of risk participations by each Revolving Lender from the applicable Swing Line Lender shall not relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein. (d) Repayment of Participations. (i) At any time after any Revolving Lender has purchased and funded a risk participation in a Swing Line Loan, if the applicable Swing Line Lender receives any payment on account of such Swing Line Loan, such Swing Line Lender will distribute in Dollars to such Revolving Lender its ratable share of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Lender's risk participation was outstanding and funded). (ii) If any payment received by a Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by such Swing Line Lender, each Revolving Lender shall pay to such Swing Line Lender in Dollars its Pro Rata Revolving Share of such amount on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned (including pursuant to any settlement entered into by such Swing Line Lender in its discretion), at a rate per annum equal to the applicable Federal Funds Rate. The Administrative Agent will make such demand only upon the request of the applicable Swing Line Lender. (e) Interest for Account of Swing Line Lender. Each Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Revolving Lender funds its Revolving Loan or risk participation pursuant to this Section 2.05, interest in respect of such Lender's Pro Rata Revolving Share shall be solely for the account of the applicable Swing Line Lender. (f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the applicable Swing Line Lender; provided that for purposes of computing the amount available for Revolving Borrowings, each Swing Line Loan will be deemed outstanding until the Administrative Agent receives notice from the applicable Swing Line Lender of repayment thereof. 2.06 PREPAYMENTS. (a) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time on any Business Day, voluntarily prepay Revolving Loans in whole or in part from time to time on any Business Day without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 12:00 noon, New York time, (A) three 45 Business Days prior to any date of prepayment of Eurodollar Rate Loans, and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Revolving Loans to be prepaid. The Administrative Agent will promptly notify each Revolving Lender of its receipt of each such notice, and of such Revolving Lender's ratable share of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Revolving Loans of the Revolving Lenders in accordance with their ratable shares. (b) In addition to the required payments of principal of the Term Loan A, Term Loan B and Term Loan C set forth in Section 2.09(c) and (d) and specified in the Supplemental Credit Documents, respectively, and any mandatory prepayments of principal of the Term Loan A, Term Loan B and Term Loan C effected under subsection (d) below or specified in the Supplemental Credit Documents, the Borrower may, upon notice to the Administrative Agent, voluntarily prepay any Term Loan in whole or in part from time to time on any Business Day, without penalty or premium; provided that (i) such notice must be received by the Administrative Agent not later than 12:00 noon, New York time, (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans, and (B) one Business Day prior to the date of prepayment of Base Rate Loans, (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof (or in the entire remaining principal balance of the Term Loan A or Term Loan B or Term Loan C, as applicable); and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof (or in the entire remaining principal balance of the Term Loan A or Term Loan B or Term Loan C, as applicable). Each such notice shall specify the date and amount of such prepayment and the Type(s) of Segment to be prepaid. The Responsible Officer of the Borrower shall provide the Administrative Agent written confirmation of each such telephonic notice but failure to provide such confirmation shall not affect the validity of such telephonic notice. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of such Lender's ratable share of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05. All prepayments under this Section 2.06(b) of principal shall first be applied to installments of principal of the Term Loan A in scheduled order of their maturities and then, upon payment in full of all Outstanding Amounts under the Term Loan A, to installments of principal of the Term Loan B in scheduled order of their maturities. Notwithstanding the foregoing provisions of this Section 2.06(b), in the event of the issuance of Term Loan C in accordance with the provisions of Section 2.16, the order and amounts of the application of prepayments to the Term Loans as herein provided shall be adjusted, without further action or consent of the Lenders (notwithstanding anything to the contrary contained in Section 10.01), to accommodate optional prepayments of Term Loan C as shall be specified in the Supplemental Credit Documents. Each such prepayment shall be 46 applied to the Segments of the Lenders in accordance with their respective Pro Rata Term A Shares or Pro Rata Term B Shares or Pro Rata Term C Shares, as applicable. (c) If for any reason the Outstanding Amount of all Revolving Loans and L/C Obligations at any time exceeds the Aggregate Revolving Credit Commitments then in effect, the Borrower shall immediately prepay Revolving Loans and/or Cash Collateralize the L/C Obligations, as it shall select, in an aggregate amount equal to such excess. (d) In addition to the required payments of principal of the Term Loans set forth in Section 2.09(c) and (d) and any optional payments of principal of the Term Loans and the Revolving Loans effected under subsections (a) and (b) above, the Borrower shall make the following required prepayments of the Term Loans and the Revolving Loans, each such payment to be made to the Administrative Agent for the benefit of the Lenders within the time period specified below: (i) In the event that the Total Leverage Ratio is greater than or equal to 4.00 to 1.00 as of the end of any fiscal year of the Borrower and its Subsidiaries, beginning with the fiscal year ending December 31, 2002, the Borrower shall make a prepayment in an amount equal to fifty percent (50%) of the amount of Excess Cash Flow for such fiscal year, each such prepayment to be made on the date the audited, annual financial statements of the Borrower and its Subsidiaries for such fiscal year are required to be delivered (or if earlier, the date such financial statements are delivered) pursuant to Section 6.01(a), which payment shall be accompanied by a certificate of a Responsible Officer of the Borrower (which may be incorporated within the certificate regarding compliance with certain covenants otherwise required to be delivered under Section 6.02(b)) setting forth in reasonable detail the calculations utilized in computing Excess Cash Flow for such fiscal year and the amount of such prepayment. (ii) The Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment with respect to each private or public offering of Equity Securities of the Borrower or any Subsidiary (other than Equity Securities issued to the Borrower or a Guarantor) in an amount equal to one hundred percent (100%) of the Net Proceeds of each issuance of Equity Securities of the Borrower or any Subsidiary, each such prepayment to be made within ten (10) Business Days of receipt of such proceeds and upon not less than five (5) Business Days' prior written notice to the Administrative Agent, which notice shall include a certificate of a Responsible Officer of the Borrower setting forth in reasonable detail the calculations utilized in computing the Net Proceeds of such issuance and the amount of such prepayment. (iii) The Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment in an amount equal to one hundred percent (100%) of the Net Proceeds from each Disposition other than Dispositions permitted under Section 7.05(a), (b), (c), (d), (e) and (f), each such prepayment to be made within ten (10) Business Days of receipt of the Net Proceeds thereof and upon not less than five (5) Business Days' prior written notice to the Administrative Agent, which notice shall include a certificate of a Responsible Officer of the Borrower setting forth in reasonable detail the calculations utilized in computing the Net Proceeds of such issuance and the amount of such prepayment; provided, that despite the application of this Section 2.06(d)(iii) to any 47 Disposition that is not otherwise permitted under this Agreement, nothing in this Section 2.06(d)(iii) shall be deemed to permit any Disposition not expressly permitted under this Agreement or to constitute a waiver or cure of any Default or Event of Default that arises as a result of a Disposition that is not permitted under this Agreement. (iv) In the event that the Net Proceeds received from insurance carried with respect to the Collateral pursuant to this Credit Agreement and the Security Agreement and the other Loan Documents are not completely and fully utilized for the repair or replacement of Collateral as provided in the Security Agreement or any other applicable Loan Document, the Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment in an amount equal to one hundred percent (100%) of the Net Proceeds received with respect to such insurance that is not so utilized; each such prepayment to be made within the time period set forth in the applicable Loan Document and upon written notice to the Administrative Agent, which notice shall include a certificate of a Responsible Officer of the Borrower setting forth in reasonable detail the calculations utilized in computing the Net Proceeds of such insurance and the amount of such prepayment; provided that each fiscal year the Borrower and its Subsidiaries may retain up to an aggregate of $1,000,000 of Net Proceeds of insurance that would otherwise be required to be paid to the Lenders pursuant to this Section 2.06(d)(iv). Prepayments made under this Section 2.06(d) shall be applied pro rata to repay Outstanding Amounts of the Term Loan A, the Term Loan B and the Outstanding Amount under the Revolving Credit Facility, with (A) a permanent reduction in the Aggregate Revolving Credit Commitment in the amount of such prepayment with respect to the Revolving Credit Facility required under this Section 2.06(d), notwithstanding the Outstanding Amount under the Revolving Credit Facility, and corresponding permanent reductions in each Revolving Lender's Revolving Credit Commitment (such reductions in the Aggregate Revolving Credit Commitments to be credited against scheduled reductions of the Aggregate Revolving Credit Commitments specified in Section 2.08 in inverse order of occurrence) and (B) in the event such prepayment occurs prior to the Term Loan A Advance Expiration Date, a permanent reduction in the Aggregate Term Loan A Commitments in the amount of such prepayment of the Term Loan A required under this Section 2.06(d), and corresponding reductions in each Term Loan A Lender's Term Loan A. Each prepayment of Term Loan A and Term Loan B required under this Section 2.06(d) shall be applied to installments in inverse order of maturity. Notwithstanding the foregoing provisions of this Section 2.06, in the event of the issuance of Term Loan C in accordance with the provisions of Section 2.16, the order and amounts of the application of prepayments to the Term Loans as herein provided shall be adjusted, without further action or consent of the Lenders (notwithstanding anything to the contrary contained in Section 10.01), to accommodate mandatory prepayments of Term Loan C as shall be specified in the Supplemental Credit Documents. 2.07 REDUCTION OR TERMINATION OF REVOLVING CREDIT COMMITMENTS AND TERM LOAN A COMMITMENTS. (a) The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Revolving Credit Commitments, or permanently reduce the Aggregate Revolving Credit Commitments to an amount not less than the then aggregate Outstanding Amount of all Revolving Loans and L/C Obligations and Swing Line Loans; provided that (i) any such notice 48 shall be received by the Administrative Agent not later than 11:00 a.m., New York time, five Business Days prior to the date of termination or reduction, and (ii) any such partial reduction shall be in an aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof. The Administrative Agent shall promptly notify the Revolving Lenders of any such notice of reduction or termination of the Aggregate Revolving Credit Commitments. Once reduced in accordance with this Section 2.07(a), the Aggregate Revolving Credit Commitments may not be increased. Any reduction of the Aggregate Revolving Credit Commitments shall be applied to the Revolving Credit Commitment of each Revolving Lender according to its Pro Rata Revolving Share and shall be credited against scheduled reductions of the Aggregate Revolving Credit Commitments specified in Section 2.08 in inverse order of occurrence. All commitment fees accrued until the effective date of any termination of the Aggregate Revolving Credit Commitments shall be paid on the effective date of such termination. (b) The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Term Loan A Commitments, or permanently reduce any unused portion of the Aggregate Term Loan A Commitments; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m., New York time, five Business Days prior to the date of termination or reduction, and (ii) any such partial reduction shall be in an aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof. The Administrative Agent shall promptly notify the Term Loan A Lenders of any such notice of reduction or termination of the Aggregate Term Loan A Commitments. Once reduced in accordance with this Section 2.07(b), the Aggregate Term Loan A Commitments may not be increased. Any reduction of the Aggregate Term Loan A Commitments shall be applied to the Term Loan A Commitment of each Term Loan A Lender according to its Pro Rata Term A Share. All commitment fees accrued until the effective date of any termination of the Aggregate Term Loan A Commitments shall be paid on the effective date of such termination. 2.08 SCHEDULED REDUCTIONS OF REVOLVING CREDIT COMMITMENTS. In addition to reductions set forth in Section 2.06, the Aggregate Revolving Credit Commitments shall be permanently reduced on the dates and in the percentages of the Aggregate Revolving Credit Commitments (the Dollar amount resulting from the application of such percentages to be determined based upon the Aggregate Revolving Credit Commitments prior to giving effect to any optional or mandatory reductions effected under Sections 2.06 or 2.07 or any prior reduction under this Section 2.08) set forth below:
DATE PERCENTAGE ---- ---------- June 30, 2002 0.000% September 30, 2002 0.000% December 31, 2002 0.000% March 30, 2003 0.000% June 30, 2003 0.000% September 30, 2003 0.000% December 31, 2003 0.000% March 30, 2004 0.000% June 30, 2004 0.000% September 30, 2004 1.250% December 31, 2004 1.250%
49 March 30, 2005 1.250% June 30, 2005 1.250% September 30, 2005 3.750% December 31, 2005 3.750% March 30, 2006 3.750% June 30, 2006 3.750% September 30, 2006 6.250% December 31, 2006 6.250% March 30, 2007 6.250% June 30, 2007 6.250% September 30, 2007 6.875% December 31, 2007 6.875% March 30, 2008 6.875% June 30, 2008 6.875% September 30, 2008 6.875% December 31, 2008 6.875% March 30, 2009 6.875% Revolving Credit Maturity Date Remaining Aggregate Revolving Credit Commitments
Any such reduction of the Aggregate Revolving Credit Commitments shall be applied to each Revolving Lender's Revolving Credit Commitment according to its Pro Rata Revolving Share of such reduction. If at the time of any such reduction the aggregate Outstanding Amounts of the Revolving Loans, Swing Line Loans and L/C Obligations exceeds the Aggregate Revolving Credit Commitments, the Borrower shall make a prepayment in an amount equal to such excess. 2.09 REPAYMENT OF LOANS. (a) The Borrower shall repay to the Revolving Lenders on the Revolving Credit Maturity Date the aggregate principal amount of Revolving Loans outstanding on such date. (b) The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) demand (by telephonic or written notice) by the Administrative Agent and (ii) the Revolving Credit Maturity Date. (c) The Borrower shall repay the principal amount of the Term Loan A in twenty-eight (28) consecutive quarterly installments on the dates and in the percentages of the Term Loan A Amortization Amount set forth below, subject to adjustments for prepayments made pursuant to Section 2.06: 50
PERCENTAGE OF THE TERM LOAN A DATE AMORTIZATION AMOUNT ---- ------------------- June 30, 2002 0.000% September 30, 2002 0.000% December 31, 2002 0.000% March 30, 2003 0.000% June 30, 2003 0.000% September 30, 2003 0.000% December 31, 2003 0.000% March 30, 2004 0.000% June 30, 2004 0.000% September 30, 2004 1.250% December 31, 2004 1.250% March 30, 2005 1.250% June 30, 2005 1.250% September 30, 2005 3.750% December 31, 2005 3.750% March 30, 2006 3.750% June 30, 2006 3.750% September 30, 2006 6.250% December 31, 2006 6.250% March 30, 2007 6.250% June 30, 2007 6.250% September 30, 2007 6.875% December 31, 2007 6.875% March 30, 2008 6.875% June 30, 2008 6.875% September 30, 2008 6.875% December 31, 2008 6.875% March 30, 2009 6.875% Term Loan A Maturity Date All remaining Outstanding Amounts under the Term Loan A
The Dollar amount of each installment of the Term Loan A as required herein resulting from the application of such percentages shall be determined by the Outstanding Amount of the Term Loan A on such date, prior to giving effect to any optional or mandatory reduction effected under Sections 2.06 or 2.07 or any prior reduction under this Section 2.09. (d) The Borrower shall repay the principal amount of the Term Loan B in twenty-eight (28) consecutive quarterly installments on the dates and in the amounts set forth below, subject to adjustments for prepayments made pursuant to Section 2.06:
DATE AMOUNT ---- ------ September 30, 2002 $187,500 December 31, 2002 $187,500 March 30, 2003 $187,500 June 30, 2003 $187,500 September 30, 2003 $187,500 December 31, 2003 $187,500 March 30, 2004 $187,500
51 June 30, 2004 $187,500 September 30, 2004 $187,500 December 31, 2004 $187,500 March 30, 2005 $187,500 June 30, 2005 $187,500 September 30, 2005 $187,500 December 31, 2005 $187,500 March 30, 2006 $187,500 June 30, 2006 $187,500 September 30, 2006 $187,500 December 31, 2006 $187,500 March 30, 2007 $187,500 June 30, 2007 $187,500 September 30, 2007 $187,500 December 31, 2007 $187,500 March 30, 2008 $187,500 June 30, 2008 $187,500 September 30, 2008 $187,500 December 31, 2008 $187,500 March 30, 2009 $187,500 June 30, 2009 $187,500 September 30, 2009 $187,500 Term Loan B Maturity Date The Outstanding Amount of the Term Loan B
(e) The Borrower shall repay the principal amount of the Term Loan C as provided in the Supplemental Credit Documents by the Borrower and the Administrative Agent. 2.10 INTEREST. (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the applicable Swing Line Base Rate. (b) If any amount payable by the Borrower under any Loan Document is not paid when due, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Law. Furthermore, while any Event of Default exists or after acceleration, the Borrower shall pay interest on the principal amount of all outstanding Obligations at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Law. Accrued and unpaid interest on past due amounts (including interest on past due interest to the fullest extent permitted by applicable Law) shall be due and payable upon demand. 52 (c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law. 2.11 FEES. In addition to certain fees described in subsections (i) and (j) of Section 2.04: (a) Commitment Fees. The Borrower shall pay to the Administrative Agent (i) at all times prior to the Commitment Fee Termination Date with respect to the Revolving Credit Facility, for the account of each Revolving Lender in accordance with its Pro Rata Revolving Share, a commitment fee equal to the Commitment Fee Percentage then in effect times the excess of the actual daily amount of the Aggregate Revolving Credit Commitments over the Outstanding Amount of Revolving Loans and L/C Obligations, and (ii) at all times prior to the Commitment Fee Termination Date with respect to the Term Loan A Facility, for the account of each Term Loan A Lender in accordance with its Pro Rata Term A Share, a commitment fee equal to the Commitment Fee Percentage then in effect times the excess of the actual daily amount of the Aggregate Term Loan A Commitments over the Outstanding Amount of the Term Loan A. The respective commitment fees above shall accrue at all times from the Closing Date until the Commitment Fee Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Commitment Fee Termination Date. The commitment fee shall accrue at all times, including at any time during which one or more of the conditions in Article IV is not met. (b) Arrangement and Agent Fees. (i) The Borrower shall pay an arrangement fee to each Arranger for such Arranger's own account, and shall pay an agency fee to the Administrative Agent for the Administrative Agent's own account, in the amounts and at the times specified in the letter agreement, dated April 22, 2002 (the "Agent/Arranger Fee Letter"), among the Borrower, the Arrangers, the Administrative Agent and the Syndication Agent. Such fees shall be fully earned when paid and shall be nonrefundable for any reason whatsoever. (c) Lenders' Upfront Fee. On the Closing Date, the Borrower shall pay to the Administrative Agent, for the account of the Lenders in accordance with their respective share (computed as if the Borrowing of the entire Term Loan A and the Term Loan B pursuant to Section 2.01 had occurred), an upfront fee in a mutually agreeable amount. Such upfront fees are for the credit facilities committed by the Lenders under this Agreement and are fully earned on the date paid. The upfront fee paid to each Lender is solely for its own account and is nonrefundable for any reason whatsoever. Any upfront fee payable with respect to the Term Loan C shall be set forth in the Supplemental Credit Documents. 2.12 COMPUTATION OF INTEREST AND FEES. Interest on Base Rate Loans determined by reference to the Bank of America prime rate or the National City prime rate shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed. Computation of all other types of interest and all fees shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to the payee thereof than a method based on a year of 365 or 366 days. Interest shall accrue on each 53 Loan for the day on which the Loan is made, and, subject to Section 2.14(a), shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day. 2.13 EVIDENCE OF DEBT. (a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, such Lender's Loans shall be evidenced by a Revolving Loan Note, a Term Loan A Note, a Term Loan B Note, a Term Loan C Note and/or a Swing Line Note, as applicable, in addition to such accounts or records. Each Lender may attach schedules to its Note(s) and endorse thereon the date, Type (if applicable), amount and maturity of the applicable Loans and payments with respect thereto. (b) In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent, in the absence of manifest error, shall control. 2.14 PAYMENTS GENERALLY. (a) All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent's Office in Dollars and in Same Day Funds not later than 2:00 p.m., New York time, on the date specified herein. The Administrative Agent will promptly distribute to each such Lender its ratable share of such payment in like funds as received by wire transfer to such Lender's Lending Office. All payments received by the Administrative Agent after 2:00 p.m., New York time, shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall in each case continue to accrue. (b) Subject to the definition of "Interest Period," if any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. 54 (c) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, L/C Borrowings, interest and fees then due hereunder, such funds shall be applied (i) first, toward the reasonable expenses incurred in connection with retaking, holding, preserving, processing, maintaining or preparing for sale, lease or other disposition of, any Collateral, including reasonable attorney's fees and legal expenses pertaining thereto, (ii) second toward costs and expenses (including Attorney Costs and amounts payable under Article III) incurred by the Administrative Agent and each Lender, (iii) third, toward repayment of interest, fees, indemnification amounts and other obligations and liabilities (other than repayment of principal, L/C Borrowings or amounts payable under Related Swap Contracts) then due hereunder or under any other Loan Documents, ratably among the parties entitled thereto in accordance with the amounts of interest, fees, indemnification amounts and such other obligations and liabilities then due to such parties, and (iv) fourth, toward repayment of principal and L/C Borrowings then due hereunder (the "Principal Obligations") ratably among the parties entitled thereto in accordance with the amounts of principal (including by reason of the purchase of risk participations in Swing Line Loans) and L/C Borrowings then due to such parties; provided, however, that if the Loans outstanding hereunder shall have been declared or otherwise become immediately due and payable pursuant to Section 8.02, then amounts available for distribution under this clause (iv) arising from payments under the Guaranty or the realization on Collateral pursuant to the Security Instruments shall be distributed ratably to (x) the repayment of the Principal Obligations (to be applied ratably among the parties entitled thereto in accordance with the amounts of principal (including by reason of the purchase of risk participations in Swing Line Loans) and L/C Borrowings then due to such parties) and (y) the payment of Swap Termination Values owing to any Lender or any Affiliate of any Lender arising under Related Swap Contracts that shall have been terminated and as to which the Administrative Agent shall have received notice of such termination and the Swap Termination Value thereof from the applicable Lender or Affiliate of a Lender. (d) Unless the Borrower or any Lender has notified the Administrative Agent prior to the date any payment is required to be made by it to the Administrative Agent hereunder, that the Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Administrative Agent in Same Day Funds, then: (i) if the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in Same Day Funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in Same Day Funds, at the applicable Federal Funds Rate from time to time in effect; and (ii) if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in Same Day Funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the Borrower to the date such amount is recovered by the 55 Administrative Agent (the "Compensation Period") at a rate per annum equal to the applicable Federal Funds Rate from time to time in effect. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Revolving Loan included in the applicable Borrowing. If such Lender does not pay such amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Revolving Credit Commitment or its obligation to fund its Pro Rata Term A Share of the Term Loan A, its Pro Rata Term B Share of the Term Loan B or its Pro Rata Term C Share of the Term Loan C or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder. A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (d) shall be conclusive, absent manifest error. (e) If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent, except to the extent such funds do not constitute the funding of a risk participation under Article II, shall return such funds (in like funds as received from such Lender) to such Lender, without interest. (f) The obligations of the Lenders hereunder to make Revolving Loans, to fund their respective shares of the Term Loans and to fund participations in Letters of Credit and Swing Line Loans are several and not joint. The failure of any Lender to make any Revolving Loan, to fund its share of the Term Loans or to fund any participations in Letters of Credit and Swing Line Loans on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Revolving Loan, to fund its share of any Term Loan or to purchase its participations in Letters of Credit and Swing Line Loans. (g) Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 2.15 SHARING OF PAYMENTS. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Revolving Loans or portion of the Term Loans made by it or the risk participations in L/C Obligations or in Swing Line Loans held by it (but not including any amounts applied by a Swing Line Lender to outstanding Swing Line Loans prior to the funding of risk participations therein), any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other applicable Lenders such risk participations in the applicable Revolving Loans and/or portion of the applicable Term Loans made by them 56 and/or such subparticipations in the risk participations in L/C Obligations or Swing Line Loans held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Revolving Loans, Term Loans or such risk participations, as the case may be, pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender (including pursuant to any settlement entered into by the Administrative Agent or any Lender in its discretion), such purchase shall to that extent be rescinded and each other applicable Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon. The Borrower agrees that any Lender so purchasing a risk participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off), but subject to Section 10.09 with respect to such risk participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such risk participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of risk participations purchased under this Section and will in each case notify the applicable Lenders following any such purchases or repayments. Each Lender that purchases a risk participation pursuant to this Section shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased. 2.16 DISCRETIONARY INCREASE IN AGGREGATE REVOLVING CREDIT COMMITMENT AND/OR TERM LOAN C FACILITY (a) Aggregate Revolving Credit Commitments Increase and Term Loan C Facility. So long as (I) no Default or Event of Default under the Loan Documents then exists or would arise as a result of any Discretionary Commitment or Borrowing under a Discretionary Facility, (II) the Borrower is in pro forma compliance with the terms of Section 7.12 both before and after giving effect to any Discretionary Commitment and (III) the representations and warranties of the Borrower and each other Loan Party contained in Article V and in all other Loan Documents are true and correct (except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date), then subject to the terms and conditions of this Section 2.16, on and after the Closing Date but prior to May 15, 2004, the Borrower may request, from time to time, but not more than twice with respect to any Aggregate Revolving Credit Commitments Increase and only one time with respect to the Term Loan C Facility, that Lenders and New Lenders make one or more Discretionary Commitments in an aggregate principal amount (for all requests of all Discretionary Commitments) not to exceed the then available Maximum Discretionary Commitment under one or both of the following: (i) an Aggregate Revolving Credit Commitments Increase pursuant to which the Aggregate Revolving Credit Commitments may be increased by one or more Lenders (either existing Lenders or, pursuant to Section 2.16(d), New Lenders) committing to such Aggregate Revolving Credit Commitments Increase, so long as (A) one or more 57 Lenders (either existing Lenders or, pursuant to Section 2.16(d), New Lenders) commit to the entire amount of each such Aggregate Revolving Credit Commitments Increase in accordance with the procedures set forth in Sections 2.16(b), (c), (d) and (e) hereof; (B) on the date the Discretionary Commitments for each such Aggregate Revolving Credit Commitments Increase are effective, the sum of all Aggregate Revolving Credit Commitments Increases and the Outstanding Amount of the Term Loan C Facility does not exceed the Maximum Discretionary Commitment; (C) the Borrower shall not have requested a voluntary reduction of the Aggregate Revolving Credit Commitments in accordance with Section 2.07; and (D) the Aggregate Revolving Credit Commitments Increase must be in a minimum principal amount of $25,000,000 or an increment of $10,000,000 in excess thereof; and (ii) a Term Loan C Facility pursuant to which a Term Loan C may be made by one or more Lenders (either existing Lenders or, pursuant to Section 2.16(d), New Lenders) committing to the entire amount of such Term Loan C Facility, so long as (A) one or more Lenders (either existing Lenders or, pursuant to Sections 2.16(d), New Lenders) commit to such Term Loan C Facility in accordance with the procedures set forth in Sections 2.16(b), (c), (d) and (e); (B) on the date the Discretionary Commitments for such Term Loan C Facility are effective and on the date of the Borrowing of the Term Loan C thereunder, the sum of all Aggregate Revolving Credit Commitments Increase and the Outstanding Amount of the Term Loan C Facility does not exceed the Maximum Discretionary Commitment; (C) such Term Loan C shall terminate on a date not earlier than the later of the Term Loan A Maturity Date and the Term Loan B Maturity Date as specified in the applicable Supplemental Credit Documents; (D) the Borrowings of the Term Loan C shall be Eurodollar Rate Borrowings or Base Rate Borrowings with an Applicable Margin to be specified in the Supplemental Credit Documents for such Term Loan C; provided that the Applicable Margin shall not be more than 0.50% greater than the Applicable Margin applicable to (x) the Term Loan A Facility if the Term Loan C Facility is structured substantially similar to the Term Loan A Facility, as determined by the Arrangers, or (y) the Term Loan B Facility if the Term Loan C Facility is structured substantially similar to the Term Loan B Facility, as determined by the Arrangers; provided further, that, following the request of the Borrower for a Discretionary Commitment, in the event the Applicable Margin required successfully to arrange the Term Loan C Facility is more than 0.50% greater than the Applicable Margin as applicable under (x) or (y) above, then (I) the Applicable Margin with respect to the Term Loan A Facility, if (x) above applies, and also for the Revolving Credit Facility if for the Term Loan A Facility, or the Applicable Margin with respect to the Term Loan B Facility if (y) above applies, shall be increased (the amount of such increase being the "Corresponding Applicable Margin Increase Amount") at the sole discretion of the Administrative Agent in order to maintain, after giving effect to such increase, such 0.50% 58 margin between the Applicable Margin for the Term Loan C Facility and the Applicable Margin for the Term Loan A Facility (and also for the Revolving Credit Facility if for the Term Loan A Facility) or Term Loan B Facility, as applicable under (x) and (y) above, (II) in the event the Applicable Margin for the Term Loan A Facility and the Revolving Credit Facility is increased pursuant to (I) above, the Applicable Margin for the Term Loan B Facility shall also be increased by the Corresponding Applicable Margin Increase Amount, and (III) in the event the Applicable Margin for the Term Loan B Facility is increased pursuant to (I) above, the Applicable Margin for the Term Loan A Facility and the Revolving Credit Facility shall also be increased by the Corresponding Applicable Margin Increase Amount; and (E) the Borrowing under the Term Loan C shall be amortized in accordance with an amortization schedule specified in the applicable Supplemental Credit Documents; provided that the scheduled amortization of any Outstanding Amount under the Term Loan C must provide for a Weighted Average Life to Maturity for the Term Loan C that is equal to or longer than the Weighted Average Life to Maturity for both the Term Loan A and the Term Loan B (determined as of the date such Borrowing of the Term Loan C is made). No Lender shall be obligated to commit, or to agree to commit, to any request for Discretionary Commitments, which commitment shall only be made and evidenced in accordance with the procedures set forth in Section 2.16(c). (b) Discretionary Commitment Requests. Subject to the terms and conditions of this Section 2.16, on and after the Closing Date but prior to May 15, 2004, the Borrower may request from time to time that Lenders and, if determined by the Borrower, one or more other financial institutions that would qualify as Eligible Assignees (as used in this Section 2.16, upon its commitment to a Discretionary Facility in accordance with the terms hereof, a "New Lender") make one or more Discretionary Commitments in an aggregate principal amount not to exceed the then available Maximum Discretionary Commitment. The request by the Borrower for a Discretionary Commitment pursuant to Section 2.16 shall be made by the Borrower giving written notice thereof to the Administrative Agent (a "Discretionary Commitment Request"), (i) specifying the Discretionary Facility (either a Term Loan C Facility or an Aggregate Revolving Credit Commitments Increase) under which such Discretionary Commitment is requested; (ii) specifying the amount of the requested aggregate Discretionary Commitments (which amount shall be no less than $25,000,000 or a greater integral multiple of $10,000,000 or such lesser amount as may be available under the Maximum Discretionary Commitment); (iii) designating the date on which the proposed aggregate Discretionary Commitments are to be effective and the date by which each Discretionary Commitment Notice is due from any Lender or New Lender; and (iv) identifying the existing Lenders and New Lenders to whom a Discretionary Commitment Request is to be sent by the Administrative Agent. Upon receipt of any such Discretionary Commitment Request and such other information as the Administrative Agent shall reasonably request in connection therewith, the Administrative Agent shall promptly notify and deliver to the Lenders and prospective New Lenders such Discretionary Commitment Request and all such other information and shall request commitments from Lenders and prospective New Lenders with respect thereto, which request shall be made within 10 Business 59 Days after receipt of all such information by the Administrative Agent. No Lender shall be obligated to make any Discretionary Commitment requested thereof pursuant to any Discretionary Commitment Request. (c) Commitments. Within thirty (30) calendar days after receipt of a Discretionary Commitment Request (or such lesser period of time as set forth in such Discretionary Commitment Request, but in no event less than 15 calendar days), each Lender and each prospective New Lender making a Discretionary Commitment in response to the Discretionary Commitment Request shall notify the Administrative Agent and the Borrower of the maximum amount of its proposed Discretionary Commitment (such notice being a "Discretionary Commitment Notice"), which shall not be less than $1,000,000 and shall, if greater, be in $1,000,000 increments in excess thereof. Thereafter, after consultation with the Borrower, the Administrative Agent shall advise each Lender and New Lender submitting a Discretionary Commitment Notice of such Lender's allocated Discretionary Commitment, which in the aggregate shall not be greater than the maximum amount thereof set forth in such Lender's Discretionary Commitment Notice, and the date upon which such Discretionary Commitment shall be effective (the "Discretionary Commitment Effective Date"); provided, however, that the Discretionary Commitment Effective Date shall (i) be on or prior to May 15, 2004, (ii) not be earlier than the date thereof set forth in the Discretionary Commitment Request, and (iii) not be less than 15 calendar days after all the amendments referred to in Section 2.16(e) below and all Supplemental Credit Documents shall have been delivered to the Administrative Agent for its review. (d) Amendments; New Lenders. Each addition of a New Lender and each Discretionary Commitment of an existing Lender, shall be effected by the Supplemental Credit Documents pursuant to Section 2.16(e) below and an amendment that is executed without regard to Section 10.01 by the Borrower, the Administrative Agent, and such New Lender or existing Lender to revise Schedule 1.01(a) to reflect the addition and Discretionary Commitment of each New Lender and the Discretionary Commitment of each existing Lender, and to make corresponding revisions to the terms hereof as may be necessary for the administration of the Term Loan C Facility, if applicable, subject in each case to Section 10.01 in the event any such amendment directly affects any other Lender. Each New Lender providing a Discretionary Commitment shall be a "Lender" for all purposes hereunder with respect to the Discretionary Facility, entitled to the rights and benefits, and subject to the duties, of a Lender under the Loan Documents. (e) Supplemental Credit Documents. Each Discretionary Facility (i) will be subject to the terms and conditions of this Agreement and (ii) will be secured and guaranteed by the Security Instruments and the Guaranty. The Discretionary Commitment of each Lender will be subject, among other things, to (A) such Lender obtaining agreement with the Borrower as to all applicable fees payable in respect of its Discretionary Commitment (which, with respect to any Aggregate Revolving Credit Commitments Increase, shall be the same as the fees set forth herein with respect to the Revolving Credit Facility other than the fees referred to in Section 2.11(b) or (c)), (B) execution and delivery of all necessary amendments referred to in Section 2.16(d), (C) if requested by any Discretionary Facility Lender, the results of a Lien search and title update with respect to the property of the Borrower and the Guarantors that is Collateral with results satisfactory to such Discretionary Facility Lender, and (D) the execution and delivery by the 60 Loan Parties and each Lender party to the respective Discretionary Facility, as appropriate, and the Administrative Agent of all documents reasonably requested by such Lenders to evidence and effect the applicable Discretionary Facility, including, without limitation, a supplement to this Agreement memorializing, among other things, the amount of the Discretionary Commitment, the Lenders with respect to the Discretionary Facility (the "Discretionary Facility Lenders"), the respective Discretionary Commitment of each such Discretionary Facility Lenders, all fees payable in connection therewith, the Discretionary Commitment Effective Date for such Discretionary Facility, and such representations and warranties of such Discretionary Facility Lender that is a New Lender as required of an Eligible Assignee in the Assignment and Assumption, and solely with respect to the Term Loan C, the scheduled principal amortization, any optional or mandatory repayments, the applicable interest rates, number of interest periods (which shall not exceed three), the Term Loan C Maturity Date and any additional fee payable to the Administrative Agent with respect to the administration of a Discretionary Facility (collectively, the "Supplemental Credit Documents"), which Supplemental Credit Documents shall be acceptable to the Administrative Agent. As a condition precedent to any Discretionary Facility, the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Discretionary Commitment Effective Date (in sufficient copies for each Discretionary Facility Lender) signed by a Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such Discretionary Facility, and (ii) certifying that, before and after giving effect to such Discretionary Facility, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct on and as of the Discretionary Commitment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.16, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01, and (B) no Default or Event of Default exists. If the Discretionary Facility is an increase in the Aggregate Revolving Credit Commitment, the Borrower shall prepay any Revolving Loans outstanding on the Discretionary Commitment Effective Date (and pay any additional amounts required pursuant to Section 3.05) to the extent necessary to keep the outstanding Revolving Loans ratable with any revised Pro Rata Revolving Shares arising from any nonratable increase in the Revolving Credit Commitments under this Section. (f) Discretionary Commitments and Borrowings. With respect to each Discretionary Commitment and subject to the terms and conditions of the Loan Documents and the applicable Supplemental Credit Documents for such Discretionary Facility, each Lender having a Discretionary Commitment for the applicable Discretionary Facility, severally, but not jointly, agrees to make Revolving Loans or a Term Loan C, as applicable, to the Borrower in an aggregate principal amount at any time outstanding not in excess of its Discretionary Commitment. Revolving Loans shall be made subject to the terms and conditions set forth in this Article II for all Revolving Loans. The Term Loan C shall be advanced by the applicable Discretionary Facility Lenders to the Borrower pursuant to subsection (g) below and the Supplemental Credit Documents. (g) Term Loan C. 61 (i) Subject to the terms and conditions of this Agreement, each Discretionary Facility Lender severally agrees to make an advance of its Discretionary Commitment of the Term Loan C to the Borrower on the Discretionary Commitment Effective Date. The principal amount of each Segment of the Term Loan C outstanding hereunder from time to time shall bear interest and the Term Loan C shall be repayable as provided herein and in the Supplemental Credit Documents. No amount of the Term Loan C repaid or prepaid by the Borrower may be reborrowed hereunder, and no subsequent Borrowing under the Term Loan C Facility shall be allowed after the initial such advance of the Term Loan C on the Discretionary Commitment Effective Date. (ii) Not later than 1:00 P.M. New York time, on the Discretionary Commitment Effective Date, each Discretionary Facility Lender shall, pursuant to the terms and subject to the conditions of this Agreement, as amended in accordance with Section 2.16(d) and the Supplemental Credit Documents, make the amount of its Discretionary Commitment of the Term Loan C available by wire transfer to the Administrative Agent. Such wire transfer shall be directed to the Administrative Agent at the Administrative Agent's Office and shall be in the form of Same Day Funds in Dollars. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, including without limitation the satisfaction of all applicable conditions in Section 4.02, be made available to the Borrower by delivery of the proceeds thereof as shall be directed by the Responsible Officer of the Borrower and reasonably acceptable to the Administrative Agent. The initial Borrowing of the Term Loan C shall be a single Base Rate Segment, subject to Conversion after the Discretionary Commitment Effective Date in accordance with a Term Loan Interest Rate Selection Notice delivered on the Discretionary Commitment Effective Date (or, if no Term Loan Interest Rate Selection Notice is so delivered on the Discretionary Commitment Effective Date, thereafter in accordance with Section 2.03). ARTICLE II A SECURITY 2A.01 SECURITY. As security for the full and timely payment and performance of all Obligations, the Borrower shall, and shall cause all other Loan Parties to, on or before the Closing Date, do or cause to be done all things necessary in the opinion of the Administrative Agent and its counsel to grant to the Administrative Agent for the benefit of the Secured Parties a duly perfected first priority security interest in all Collateral (including all Required Property) subject to no prior Lien or other encumbrance or restriction on transfer, except as expressly permitted hereunder. Without limiting the foregoing, on the Closing Date the Borrower shall deliver, and shall cause each Guarantor to deliver to the Administrative Agent, in form and substance reasonably acceptable to the Administrative Agent, (a) a Mortgage with respect to each parcel of Required Property, (b) the Pledge Agreement which shall pledge to the Administrative Agent for the benefit of the Secured Parties the Pledged Interests of each Subsidiary, and, if such Pledged Interests are in the form of certificated securities, such certificated securities, together with undated stock powers or other appropriate transfer documents endorsed in blank pertaining thereto, (c) the Security Agreement and the IP Security 62 Agreement, (d) Uniform Commercial Code financing statements in form, substance and number as requested by the Administrative Agent, reflecting the Lien in favor of the Secured Parties on the Pledged Interests and all other Collateral, and (e) documents in form, substance and number as requested by the Administrative Agent for filing with the Federal Patent and Trademark Office, the Federal Copyright Office, or such other places as requested by the Administrative Agent, reflecting the Lien in favor of the Secured Parties in the Intellectual Property. In addition, and without limiting the foregoing, the Borrower shall take and cause the Guarantors to take such further action, and deliver or cause to be delivered such further documents, as required by the Security Instruments or otherwise as the Administrative Agent may request to effect the transactions contemplated by this Article IIA and each of the Security Instruments. The Borrower shall also, and shall cause each Subsidiary to also, pledge to the Administrative Agent for the benefit of the Secured Parties (and as appropriate to reaffirm its prior pledge of) all of the Pledged Interests of any Subsidiary acquired or created after the Closing Date, or otherwise acquired by any Subsidiary and not theretofore pledged to the Administrative Agent for the benefit of the Secured Parties, and to deliver to the Administrative Agent all of the documents and instruments in connection therewith as are required pursuant to the terms of Section 6.14 and of the Security Instruments. 2A.02 FURTHER ASSURANCES. At the request of the Administrative Agent from time to time, the Borrower will or will cause all other Loan Parties, as the case may be, to execute, by their respective Responsible Officers, alone or with the Administrative Agent, any certificate, instrument, financing statement, control agreement, statement or document, or to procure any such certificate, instrument, statement or document, or to take such other action (and pay all connected costs) which the Administrative Agent reasonably deems necessary from time to time to create, continue or preserve the Liens in Collateral (and the perfection and priority thereof) of the Administrative Agent contemplated hereby and by the other Loan Documents and specifically including all Collateral acquired by the Borrower or other Loan Party after the Closing Date and all Collateral moved to or from time to time located at locations owned by third parties, including without limitation all leased locations, bailees, warehousemen and third party processors. In addition to the foregoing, at the request of the Administrative Agent from time to time, the Borrower will or will cause any other applicable Loan Party, as the case may be, to execute, by their respective Responsible Officers, alone or with the Administrative Agent, a Mortgage with respect to any Required Property on which a Mortgage has not previously been granted, along with a title update with respect to such Required Property with results satisfactory to the Administrative Agent in its reasonable discretion. The Administrative Agent is hereby irrevocably authorized to execute and file or cause to be filed, with or if permitted by applicable law without the signature of the Borrower or any Loan Party appearing thereon, all Uniform Commercial Code financing statements reflecting the Borrower or any other Loan Party as "debtor" and the Administrative Agent as "secured party", and continuations thereof and amendments thereto, as the Administrative Agent reasonably deems necessary or advisable to give effect to the transactions contemplated hereby and by the other Loan Documents. 2A.03 INFORMATION REGARDING COLLATERAL. The Borrower represents, warrants and covenants that: (a) the exact legal name, jurisdiction of formation and chief executive office of the Borrower and each other Person providing Collateral pursuant to a Security Instrument (each, a 63 "Grantor") at the Closing Date, along with each location in which goods constituting Collateral (other than locations at which the amount of such goods is de minimis and which, when aggregated with all other such locations, the aggregate amount of such goods is immaterial) are currently located, whether owned, leased or third-party locations (together with the name of each owner of the property located at such address if not the applicable Grantor, and a summary description of the relationship between the applicable Grantor and such Person), are specified on Schedule 2A.03; (b) other than as provided in (a) above, with respect to each Grantor Schedule 2A.03 contains a true and complete list of (i) each exact legal name, jurisdiction of formation, and each location of the chief executive office of such Grantor at any time since April 1, 1997, (ii) each location owned or leased by a Grantor in which goods constituting Collateral are or have been located since April 1, 2001 (together with the name of each owner of the property located at such address if not the applicable Grantor), and (iii) each trade name, trademark or other trade style used by such Grantor since April 1, 2001 and the purposes for which it was used; and (c) with respect to each Person (other than a Grantor) that has effected any merger or consolidation with a Grantor or contributed or transferred to a Grantor any property constituting Collateral at any time since April 1, 1997 (excluding Persons making sales in the ordinary course of their businesses to a Grantor of property constituting inventory in the hands of such seller), Schedule 2A.03 contains a true and complete list of the exact legal name, jurisdiction of formation and each address of each such Person at the time such merger, consolidation, contribution or transfer occurred. The Borrower further covenants that it shall not change, and shall not permit any other Grantor to change, its name, jurisdiction of formation (whether by reincorporation, merger or otherwise), the location of its chief executive office, or use or permit any other Grantor to use, any additional trade name, trademark or other trade style, except upon giving not less than thirty (30) days' prior written notice to the Administrative Agent and taking or causing to be taken all such action at Borrower's or such other Grantor's expense as may be reasonably requested by the Administrative Agent to perfect or maintain the perfection of the Lien of the Administrative Agent in Collateral. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 TAXES. (a) Any and all payments by the Borrower to or for the account of the Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of the Administrative Agent and each Lender, taxes imposed on or measured by its net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which the Administrative Agent or such Lender, as the case may be, is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and 64 liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, the Borrower shall furnish to the Administrative Agent (which shall forward the same to such Lender) the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as "Other Taxes"). (c) If the Borrower shall be required to deduct or pay any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, the Borrower shall also pay to the Administrative Agent (for the account of such Lender) or to such Lender, at the time interest is paid, such additional amount that such Lender specifies is necessary to preserve the after-tax yield (after factoring in all taxes, including taxes imposed on or measured by net income) such Lender would have received if such Taxes or Other Taxes had not been imposed. (d) The Borrower agrees to indemnify the Administrative Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by the Administrative Agent and such Lender, (ii) amounts payable under Section 3.01(c) and (iii) any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Payment under this subsection (d) shall be made within 30 days after the date the Lender or the Administrative Agent makes a demand therefor. 3.02 ILLEGALITY. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans as it would otherwise be obligated hereunder to make, maintain or fund, or materially restricts the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the applicable Eurodollar interbank market, or to determine or charge interest rates based upon the Eurodollar Rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation existing hereunder of such Lender to make or Continue Eurodollar Rate Loans or to Convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), at the option of the Borrower, prepay or, if applicable, Convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of 65 the Interest Period thereof, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or Conversion, the Borrower shall also pay accrued interest on the amount so prepaid or Converted. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender. 3.03 INABILITY TO DETERMINE RATES. If the Administrative Agent or the Required Lenders determine in connection with any request for a Eurodollar Rate Loan or a Conversion to or Continuation thereof that (a) deposits in Dollars are not being offered to banks in the London eurodollar interbank market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Base Rate for such Eurodollar Rate Loan, or (c) the Eurodollar Base Rate for such Eurodollar Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding such Eurodollar Rate Loan, the Administrative Agent (following notice from the Required Lenders if they make such determination) will promptly notify the Borrower and all Lenders. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing, Conversion or Continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein. 3.04 INCREASED COST AND REDUCED RETURN; CAPITAL ADEQUACY; RESERVES ON EURODOLLAR RATE LOANS. (a) If any Lender determines that as a result of the introduction of or any change in or in the interpretation of any Law, or such Lender's compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Loans or (as the case may be) issuing or participating in Letters of Credit, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this subsection (a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or has its Lending Office, and (iii) reserve requirements utilized, as to Eurodollar Rate Loans, in the determination of the Eurodollar Rate), then from time to time upon demand of such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, or compliance by such Lender (or its Lending Office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender's desired return on capital), then from time to time upon demand of such Lender 66 (with a copy of such demand to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction. 3.05 FUNDING LOSSES. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: (a) any Continuation, Conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, Continue or Convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Interbank Offered Rate used in determining the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the applicable Eurodollar interbank market for Dollars for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded. Without limiting the foregoing, if within 180 days following the Closing Date, either of the Arrangers or Bank of America shall incur any loss, cost or expense in connection with the syndication of the credit facilities hereunder, including any item described above in this Section 3.05 and any assignment fee under Section 10.01 arising from any assignment of any Loan or commitment hereunder, the Borrower shall reimburse such Person immediately on demand therefor (made by such Person or by the Administrative Agent on behalf of such Person). 3.06 MATTERS APPLICABLE TO ALL REQUESTS FOR COMPENSATION. A certificate of the Administrative Agent, either Arranger or any Lender claiming compensation under this Article III and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, the Administrative Agent or such Lender may use any reasonable averaging and attribution methods. 3.07 SURVIVAL. All of the Borrower's obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all Obligations. 67 ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS 4.01 CONDITIONS OF INITIAL CREDIT EXTENSION. The obligation of each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent: (a) Unless either (x) waived by all the Lenders (or by the Administrative Agent with respect to immaterial matters or items specified in clause (v) below with respect to which the Borrower has given assurances satisfactory to the Administrative Agent that such items shall be delivered promptly following the Closing Date), or (y) deferred to a reasonable later date after the Closing Date at the reasonable discretion of the Administrative Agent pursuant to a post-closing agreement entered into between the Borrower and the Administrative Agent as of the Closing Date, a copy of which will be delivered to each of the Lenders, the Administrative Agent's receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and its legal counsel: (i) executed counterparts of this Agreement, the Guaranty, a Mortgage with respect to each of the Required Properties and each of the other Security Instruments, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower; (ii) Revolving Loan Notes and Term Loan Notes executed by the Borrower in favor of each Lender requesting such a Note; (iii) Swing Line Notes executed by the Borrower in favor of each Swing Line Lender (if it requests such a Note) in the principal amount of the Swing Line Sublimit; (iv) such certificates of resolutions or other Organizational Action, incumbency certificates (including specimen signatures) and/or other certificates of Responsible Officers of the signing Loan Party as the Administrative Agent may require to evidence the identities of and the authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; (v) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, validly existing, in good standing and qualified to engage in business in each jurisdiction in which it is required to be qualified to engage in business to the extent the failure to be so qualified would reasonably be expected to have a Material Adverse Effect, including certified copies of each Loan Parties' Organization Documents, certificates of good standing and/or qualification to engage in business; 68 (vi) a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, (B) that there is no event, circumstance, action, suit, investigation or proceeding pending or threatened in any court or before any arbitrator or Governmental Authority since the date of the Audited Financial Statements which has or would be reasonably expected to have a Material Adverse Effect, (C) that prior to the Closing Date, not less than $125,000,000 in gross proceeds have been delivered to the Borrower as a result of the issuance of the Subordinated Notes, and (D) as to the matters described in Section 4.01(d); (vii) an opinion or opinions of counsel to each Loan Party in form and substance satisfactory to the Administrative Agent; (viii)(A) the consolidated financial statements of the Borrower and its Subsidiaries for the fiscal years ended 1999, 2000 and 2001, including balance sheets, income and cash flow statements, all audited and opined on by independent certified public accountants of recognized national standing and prepared in conformity with GAAP, and such other financial information as the Administrative Agent may request, and (B) the consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of the fiscal quarter ending March 31, 2002, and the related consolidated and consolidating statements of income or operations, shareholders' equity and cash flows for such fiscal quarter, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal, recurring year end audit adjustments and the absence of footnotes; (ix) evidence that each of (A) the Existing Credit Facilities and (B) the National City Line of Credit, (C) the Private Notes, and (D) the Swap Contract pursuant to which Mellon Bank, N.A. is a counterparty with the Borrower has been or concurrently with the Closing Date is being terminated, all indebtedness and obligations of the Borrower and its Subsidiaries incurred thereunder, and under the other documents executed and delivered in connection therewith, have been, or with the initial Credit Extension hereunder and the proceeds of the Subordinated Notes on the Closing Date will be, repaid and the Borrower and its Subsidiaries released from all liability thereunder except such customary indemnification provisions which by their express terms survive such repayment and termination, and all Liens securing obligations under any of them (including any mortgage or deed of trust and notations of liens on vehicles) have been or concurrently with the Closing Date are being released; (x) a Compliance Certificate signed by a Responsible Officer of the Borrower dated as of the Closing Date demonstrating compliance with the financial covenants in Sections 7.12(a), (b) and (c) as of March 31, 2002, pro forma for the issuance of the Subordinated Notes and the Obligations hereunder as of the Closing Date; (xi) evidence of all insurance required by the Loan Documents; (xii) an initial Loan Notice, if any; 69 (xiii) an initial Term Loan Interest Rate Selection Notice, if any; (xiv) certified copies of the executed Subordinated Indenture and each of the Subordinated Notes, which shall not have been amended, altered or otherwise changed or supplemented from the forms thereof most recently delivered to the Administrative Agent; (xv) a certificate of the chief financial officer of the Borrower, or such other Person as is permitted under the terms of the Subordinated Note Documents and the Subordinated Notes, certifying that the Obligations qualify as "Senior Debt" and "Designated Senior Debt" (each as defined in the Subordinated Indenture) together with certified copies of resolutions of the board of directors of the Borrower as the Organizational Action establishing such designation and qualification of the Obligations; (xvi) delivery of Uniform Commercial Code financing statements suitable in form and substance for filing in all places required by applicable law to perfect the Liens of the Administrative Agent under the Security Instruments as a first priority Lien as to items of Collateral in which a security interest may be perfected by the filing of financing statements, and such other documents and/or evidence of other actions as may be necessary under applicable law to perfect the Liens of the Administrative Agent under the Security Instruments as a first priority Lien in and to such other Collateral as the Administrative Agent may require, including without limitation the delivery by the Borrower of all certificates evidencing Pledged Interests, accompanied in each case by duly executed stock powers (or other appropriate transfer documents) in blank affixed thereto; (xvii) Uniform Commercial Code search results showing only those Liens as are acceptable to the Lenders; (xviii) waivers with respect to the Collateral and such other matters as the Administrative Agent may require, in form and substance satisfactory to the Administrative Agent, executed by (A) the owner of each location leased by the Borrower or any Loan Party, and (B) the owner or operator, as applicable, of each location at which Collateral is located (including without limitation each independent warehouse) but which is neither owned nor leased by any Loan Party; and (xix) such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lenders or the Required Lenders reasonably may require. (b) Any fees required to be paid on or before the Closing Date shall have been paid. (c) Unless waived by the Administrative Agent, the Borrower shall have paid all Attorney Costs of the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent). 70 (d) In the good faith judgment of the Administrative Agent and the Lenders: (i) there shall not have occurred or become known to the Administrative Agent or the Lenders any event, condition, situation or status since the date of the information contained in the financial and business projections, budgets, pro forma data and forecasts concerning the Borrower and its Subsidiaries delivered to the Administrative Agent prior to the Closing Date that has had or would reasonably be expected to result in a Material Adverse Effect; (ii) there shall not exist any pending or, to the knowledge of the Borrower or any Guarantor or to the Administrative Agent, threatened litigation, action, suit, investigation or other arbitral, administrative or judicial proceeding, if adversely determined, which would reasonably be likely to result in a Material Adverse Effect; (iii) the Borrower shall have received all approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be required to consummate the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any Governmental Authority or arbitral authority or (B) any agreement, document or instrument to which the Borrower or any Subsidiary is a party or by which any of them or their properties is bound; (iv) the corporate capital and ownership structure (including all Organization Documents), shareholders agreements and management of the Borrower and its Subsidiaries shall be satisfactory to the Administrative Agent; and (v) no Work Stoppage shall have occurred and be continuing. 4.02 CONDITIONS TO ALL CREDIT EXTENSIONS AND CONVERSIONS AND CONTINUATIONS. The obligation of each Lender to honor any Loan Notice or Term Loan Interest Rate Selection Notice (other than a Loan Notice or Term Loan Interest Rate Selection Notice requesting only a Conversion of Eurodollar Rate Loans to Base Rate Loans) is subject to the following conditions precedent: (a) The representations and warranties of any Loan Party contained in Article V or in any other Loan Document shall be true and correct on and as of the date of such Credit Extension, Conversion or Continuation, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01. (b) No Default or Event of Default shall exist, or would result from such proposed Credit Extension, Conversion or Continuation. (c) No Work Stoppage shall then exist. 71 (d) The Administrative Agent and, if applicable, the L/C Issuer or the applicable Swing Line Lender shall have received a Loan Notice, Letter of Credit Application or a Term Loan Interest Rate Selection Notice, as applicable, in accordance with the requirements hereof. Each Loan Notice, Letter of Credit Application and Term Loan Interest Rate Selection Notice submitted by the Borrower under this Section 4.02 shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension, Conversion or Continuation. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Administrative Agent and the Lenders that: 5.01 EXISTENCE, QUALIFICATION AND POWER; COMPLIANCE WITH LAWS. The Borrower and each Subsidiary (a) is a corporation, limited partnership, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute and deliver, and perform its obligations under, the Loan Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license except to the extent failure so to qualify would not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance in all material respects with all Laws. 5.02 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other Organizational Action, and do not and will not (a) contravene the terms of any of the Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation or imposition of any Lien under, any Contractual Obligation to which the Person is a party or any order, injunction, writ or decree of any Governmental Authority or arbitral award to which such Person or its property is subject, except any Liens in favor of the Administrative Agent and the Lenders created by the Loan Documents; or (c) violate any Law. 5.03 GOVERNMENTAL AND THIRD-PARTY AUTHORIZATION. No further approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, which, has not been obtained or effected or with respect to which failure so to obtain or effect, would not reasonably be expected to have a Material Adverse Effect. 5.04 BINDING EFFECT. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document when so delivered 72 will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization and other similar Laws relating to or affecting creditors' rights generally and by the application of general equitable principles (whether considered in proceedings at law or in equity). 5.05 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT. (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness. (b) The unaudited interim consolidated balance sheet of the Borrower and its Subsidiaries, and the related unaudited consolidated statements of income or operations, shareholders' equity and cash flows for the applicable fiscal quarter then ended delivered to the Administrative Agent and the Lenders pursuant to Section 4.01(a)(viii)(B) and Section 6.01(b) (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments, and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date of such financial statements, including liabilities for taxes, material commitments and Indebtedness. (c) Since the date of the Audited Financial Statements, there has been no event or circumstance that has had or would reasonably be expected to have a Material Adverse Effect. 5.06 LITIGATION. Except as specifically disclosed in Schedule 5.06, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) would reasonably be expected to have a Material Adverse Effect. 5.07 NO DEFAULT. Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that would reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document. 73 5.08 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The property (real, personal or mixed) of the Borrower and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01. 5.09 ENVIRONMENTAL COMPLIANCE. Except as listed on Schedule 5.09, or to the extent that any deviation from any representation in this Section 5.09 would not reasonably be expected to have a Material Adverse Effect, (a) the Borrower and each Subsidiary is in compliance with all applicable Environmental Laws and has been issued and currently maintains all required federal, state and local environmental permits, licenses, certificates and approvals, and (b) neither the Borrower nor any Subsidiary has been notified of any pending or threatened action, suit, proceeding or investigation, and neither the Borrower nor any Subsidiary is aware of any facts, which (i) calls into question compliance by the Borrower or any Subsidiary with any Environmental Laws, (ii) seeks, or is likely to form the basis of a meritorious proceeding, to suspend, revoke or terminate any license, permit or approval necessary for the operation of the Borrower's or any Subsidiary's business or facilities or for the generation, handling, storage, treatment or disposal of any Hazardous Materials, or (iii) seeks to cause, or is likely to form the basis of a meritorious proceeding to cause, any property of the Borrower or any Subsidiary or other Credit Party to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Law. 5.10 INSURANCE. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts (after giving effect to any self-insurance compatible with the following standards), with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or its Subsidiaries operate. In addition to, and without being limited by, the foregoing, the Borrower and its Subsidiaries are currently maintaining the insurance required by each of the Security Instruments, and all such insurance is currently fully paid and in force. 5.11 TAXES. The Borrower and its Subsidiaries have filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Borrower or any Subsidiary that, if made, would reasonably be expected to have a Material Adverse Effect. 5.12 ERISA COMPLIANCE. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto, or will be filed within the remedial amendment period provided for in Section 401(b) of the Code, and, 74 to the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. The Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that would reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or would reasonably be expected to result in a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iv) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA. 5.13 SUBSIDIARIES. The Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13 and those created or acquired after the Closing Date in compliance with Section 6.14, and has no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13 and those acquired after the Closing Date in compliance with Section 7.02. 5.14 MARGIN REGULATIONS; INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. (a) The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. (b) None of the Borrower, any Person controlling the Borrower, or any Subsidiary (i) is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 5.15 DISCLOSURE. No statement, information, report, representation, or warranty made by any Loan Party in any Loan Document or furnished to the Administrative Agent or any Lender by or on behalf of any Loan Party in connection with any Loan Document contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the 75 Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. 5.16 INTELLECTUAL PROPERTY; LICENSES, ETC. The Borrower and its Subsidiaries own, or possess the right to use, all Intellectual Property that is reasonably necessary for the operation of their respective businesses, without material conflict with the rights of any other Person. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any Subsidiary infringes in any material respect upon any rights held by any other Person. Except as specifically disclosed in Schedule 5.16, no claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Borrower, proposed, which, in either case, would reasonably be expected to have a Material Adverse Effect. 5.17 SOLVENCY. After giving effect to the initial Credit Extension hereunder on the Closing Date and the payment in full of all amounts owing under, and the cancellation of, the Existing Credit Facilities, the Private Notes and the National City Line of Credit, the Borrower and each of the Guarantors are Solvent, both individually and collectively. ARTICLE VI AFFIRMATIVE COVENANTS So long as any Lender shall have any Revolving Credit Commitment or any Term Loan A Commitment hereunder, any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.11) cause each Subsidiary to: 6.01 FINANCIAL STATEMENTS. Deliver to the Administrative Agent and each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, shareholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any qualifications or exceptions as to the scope of the audit or the "going concern" or like status of the Borrower or to any other qualifications and exceptions that the Required Lenders reasonably determine are unacceptable; and (b) as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, an unaudited consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related unaudited consolidated and consolidating statements of income or 76 operations, shareholders' equity and cash flows for such fiscal quarter and for the portion of the Borrower's fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal, recurring year end audit adjustments and the absence of footnotes; 6.02 CERTIFICATES; OTHER INFORMATION. Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders: (a) concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent certified public accountants certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default under the financial covenants set forth herein or, if any such Default or Event of Default shall exist, stating the nature and status of such event; (b) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower; (c) promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by independent accountants in connection with the accounts or books of the Borrower or any Subsidiary, or any audit of any of them; (d) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the noteholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto; (e) not later than 30 days after the end of each fiscal year of the Borrower, a proposed budget (and supporting assumptions) for the Borrower and its Subsidiaries for the next succeeding fiscal year; and (f) promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary as the Administrative Agent, at the request of any Lender, may from time to time reasonably request. Each document required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) shall be deemed to have been delivered on the date on which the Borrower posts such document on the Borrower's website on the Internet at the website address listed on Schedule 10.02 hereof, or when such document is posted on the Securities and Exchange Commission's website at www.sec.gov (the "SEC Website") or on an Internet website established by the Administrative Agent with Intralinks, Inc. or other similarly available electronic media (each of 77 the foregoing an "Informational Website"); provided that (i) the Borrower shall deliver paper copies of all such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Administrative Agent and each Lender shall be notified by electronic mail of the applicable Informational Website and of the posting of each such document. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above in this paragraph, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents. 6.03 NOTICES. Promptly notify the Administrative Agent and each Lender: (a) of the occurrence of any Default or Event of Default; (b) of (i) any matter that has resulted in a Material Adverse Effect, (ii) any breach or non-performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary that would reasonably be expected to result in a Material Adverse Effect; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority that would reasonably be expected to result in a Material Adverse Effect; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws that would reasonably be expected to result in a Material Adverse Effect; (c) of any litigation, investigation or proceeding affecting the Borrower or any Subsidiary in which the amount involved (excluding amounts covered by applicable insurance as to which no reservation of rights is in effect) exceeds the Threshold Amount, or in which injunctive relief or similar relief is sought, which relief, if granted, would reasonably be expected to have a Material Adverse Effect; (d) of the occurrence of any ERISA Event; (e) of any change in accounting policies or financial reporting practices by the Borrower or any Subsidiary; and (f) of any event of default under the Subordinated Indenture immediately upon its occurrence and, in any event, not later than the time at which the Borrower provides notice of such event of default to the trustee or holder of any notes under the Subordinated Indenture. Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement or other Loan Document that have been breached. 6.04 PAYMENT OF OBLIGATIONS. Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and 78 governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness and subject to any provision of this Agreement. 6.05 PRESERVATION OF EXISTENCE, ETC. Except in a transaction permitted by Section 7.04 or 7.05, preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization; take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, and preserve or renew all of its registered Intellectual Property, the non-preservation of which would reasonably be expected to have a Material Adverse Effect. 6.06 MAINTENANCE OF PROPERTIES. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. 6.07 MAINTENANCE OF INSURANCE. (a) In the event compliance with the insurance requirements set forth in the Security Instruments does not satisfy the following requirements, and not in limitation of such insurance requirements in the Security Instruments, maintain with financially sound and reputable insurance companies not Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance compatible with the following standards) as are customarily carried under similar circumstances by such other Persons and providing for not less than 30 days prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance. (b) (i) Maintain with financially sound and reputable insurers insurance on the lives of the shareholders set forth on Schedule 6.07 in the amounts set forth on Schedule 6.07 with terms that require payment of the proceeds of such insurance not later than the date of the first payment of any contractual obligation of the Borrower under terms of the Stock Redemption Agreement for redemption of capital stock of the Borrower from the estate of any applicable shareholder whose life was insured under such policy (the "Stock Redemption Payment Date"), (ii) furnish to the Administrative Agent from time to time upon request copies of the policies under which such insurance is issued, certificates of insurance and such other information relating to such insurance as the Administrative Agent may request, (iii) maintain at all times the Borrower as the sole owner and beneficiary of such policies, and (iv) ensure that once death benefits become available under any such policy that Borrower proceeds as owner and beneficiary to collect such death benefits as soon as practicable. 6.08 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. Comply in all material respects with the requirements of all Laws (including Environmental Laws) and Contractual Obligations applicable to it or to its business or property, except in such instances in which (i) 79 such requirement of Law or Contractual Obligation is being contested in good faith by appropriate proceedings diligently conducted or a bona fide dispute exists with respect thereto; or (ii) the failure to comply therewith would not reasonably be expected to have a Material Adverse Effect. 6.09 BOOKS AND RECORDS. (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be. 6.10 INSPECTION RIGHTS. Permit representatives (including third-party agents) of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower. 6.11 COMPLIANCE WITH ERISA. Do, and cause each of its ERISA Affiliates to do, each of the following: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 6.12 USE OF PROCEEDS. Use the proceeds of the Credit Extensions (i) for working capital, Capital Expenditures, Restricted Payments and other general corporate purposes of the Borrower and its Subsidiaries not in contravention of any Law or of any Loan Document, (ii) Acquisitions permitted hereunder, and (iii) to refinance certain outstanding existing indebtedness, including all indebtedness outstanding under the Existing Credit Facilities and the National City Line of Credit. 6.13 MAINTAIN PRINCIPAL LINE OF BUSINESS. Maintain on a consolidated basis the principal line or lines of business of the Borrower and its Subsidiaries as they exist on the Closing Date. 6.14 NEW SUBSIDIARIES AND PLEDGORS. (a) Subject to Section 7.18, as soon as practicable but in any event within 10 Business Days following the acquisition or creation of any Subsidiary, cause to be delivered to the Administrative Agent each of the following: (i) a Guaranty Joinder Agreement duly executed by such Subsidiary; (ii) a Security Joinder Agreement duly executed by such Subsidiary (with all schedules thereto appropriately completed); 80 (iii) if such Subsidiary owns any real property that the Administrative Agent determines, in its reasonable discretion, is material, a Mortgage with respect to such real property; (iv) if any of the Subsidiary Securities issued by such Subsidiary are owned by a Subsidiary who has not then executed and delivered to the Administrative Agent the Pledge Agreement or a Pledge Joinder Agreement granting a Lien to the Administrative Agent, for the benefit of the Secured Parties, in such Pledged Interests, a Pledge Joinder Agreement (with all schedules thereto appropriately completed) duly executed by the Subsidiary that directly owns such Pledged Interests; (v) if any of the Subsidiary Securities issued by such Subsidiary are owned by the Borrower or a Subsidiary who has previously executed a Pledge Agreement or a Pledge Joinder Agreement, a Pledge Agreement Supplement by each Borrower and Subsidiary that owns any of such Pledged Interests with respect to such Pledged Interests in the form required by the Pledge Agreement; (vi) if the Pledged Interests issued or owned by such Subsidiary constitute securities under Article 8 of the Uniform Commercial Code (A) the certificates representing 100% of such Pledged Interest and (B) duly executed, undated stock powers or other appropriate powers of assignment in blank affixed thereto; (vii) if such Subsidiary itself owns any Subsidiary, a Pledge Joinder Agreement (with all schedules thereto appropriately completed) duly executed by such Subsidiary; (viii) if such Subsidiary owns any Intellectual Property, an IP Security Joinder Agreement duly executed by such Subsidiary (with all schedules thereto appropriately completed); (ix) with respect to any Person that has executed a Pledge Joinder Agreement, a Pledge Agreement Supplement, a Security Joinder Agreement or an IP Security Joinder Agreement hereunder, Uniform Commercial Code financing statements naming such Person as "Debtor" and naming the Administrative Agent for the benefit of the Secured Parties as "Secured Party," in form, substance and number sufficient in the reasonable opinion of the Administrative Agent and its special counsel to be filed in all Uniform Commercial Code filing offices and in all jurisdictions in which filing is necessary to perfect in favor of the Administrative Agent for the benefit of the Secured Parties the Lien on the Collateral conferred under such Security Instrument to the extent such Lien may be perfected by Uniform Commercial Code filing; (x) an opinion of counsel to each Subsidiary executing any Joinder Agreement or Pledge Supplement, and the Borrower if it executes a Pledge Supplement, provided for in this Section 6.14 dated as of the date of delivery of such applicable Joinder Agreements (and other Loan Documents) provided for in this Section 6.14 and addressed to the Administrative Agent and the Lenders, in form and substance reasonably acceptable to the Administrative Agent, each of which opinions may be in form and substance, including assumptions and qualifications contained therein, substantially similar to those opinions of counsel delivered pursuant to Section 4.01(a)). 81 (xi) current copies of the Organization Documents of each such Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, partners, or appropriate committees thereof (and, if required by such Organization Documents or applicable law, of the shareholders, members or partners) of such Subsidiary authorizing the actions and the execution and delivery of documents described in this Section 6.14, all certified by the applicable Governmental Authority or appropriate officer as the Administrative Agent may elect. (b) As soon as practicable but in any event within 10 Business Days following the acquisition of any Pledged Interests by any Subsidiary who has not theretofore executed the Pledge Agreement or a Pledge Joinder Agreement and who is not required to deliver a Pledge Joinder Agreement pursuant to the preceding provisions of this Section 6.14, cause to be delivered to the Administrative Agent a Pledge Joinder Agreement (with all schedules thereto appropriately completed) duly executed by the Subsidiary, and the documents, stock certificates, stock powers, financing statements, opinions, Organization Documents and Organizational Action relating thereto and to the pledge contained therein and described in clauses (vi), (ix), (x) and (xi) of Section 6.14(a). 6.15 FURTHER ASSURANCES. At the Borrower's cost and expense, upon request of the Administrative Agent, duly execute and deliver or cause to be duly executed and delivered, to the Administrative Agent such further instruments, documents, certificates, financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Administrative Agent to carry out more effectively the provisions and purposes of this Agreement, the Guaranty, the Security Instruments and the other Loan Documents. 6.16 INTEREST RATE PROTECTION. The Borrower shall maintain at all times Swap Contracts incurred to limit risks of interest rate fluctuations to which the Borrower and its Subsidiaries are otherwise subject in an aggregate notional amount necessary to assure that at no time is less than fifty percent (50%) of the Consolidated Funded Indebtedness of the Borrower and its Subsidiaries subject to fixed rates of interest. ARTICLE VII NEGATIVE COVENANTS So long as any Lender shall have any Revolving Credit Commitment or any Term Loan A Commitment hereunder, any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly: 7.01 LIENS. Create, incur, assume or suffer to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following: (a) Liens created or arising pursuant to the Security Instruments or any other Loan Document; 82 (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that the property covered thereby is not increased and any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(b); (c) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP and all foreclosure or like enforcement actions against the property covered thereby are effectively stayed; (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlords' (but only so long as any waiver required by any Loan Document or otherwise requested by the Administrative Agent is delivered in connection with such leased location) or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP and all foreclosure or like enforcement actions against the property covered thereby are effectively stayed; (e) pledges or deposits in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA; (f) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) easements, rights-of-way, irregularities of title, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; (h) Liens securing judgments for the payment of money in an aggregate amount not in excess of the Threshold Amount (except to the extent covered by independent third-party insurance as to which the insurer has acknowledged in writing its obligation to cover), unless any such judgment remains undischarged for a period of more than 30 consecutive days during which execution is not effectively stayed; (i) Liens securing Indebtedness of any Subsidiary that is not a Guarantor to the Borrower or any Subsidiary; (j) Liens securing Indebtedness permitted under Section 7.03(e); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (ii) the Indebtedness secured thereby (x) is not less than 75% of the cost of property acquired on the date of acquisition and (y) does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition; (k) Liens securing Indebtedness permitted under Section 7.03(g); provided that such Liens may only encumber the cash value of the specific Life Insurance Policies with respect to 83 which such Indebtedness is incurred, and may encumber no more of such cash value than the amount of such Indebtedness; (l) non-material Liens arising under leases or subleases by the Borrower or a Subsidiary to other Persons or acquisitions of property subject to leases (to the extent otherwise permitted herein) in the ordinary course of business; and (m) other Liens securing Indebtedness otherwise permitted hereunder the principal amount of which, in the aggregate, does not exceed $1,000,000 at any time; provided that notwithstanding any of the foregoing, the Borrower will not and will not permit any Subsidiary to create, incur, assume or suffer to exist any Lien on any interest in WAND other than Liens created or arising pursuant to the Security Instruments or any other Loan Document in favor of the Administrative Agent for the benefit of the Secured Parties. 7.02 INVESTMENTS. Make any Investments, except: (a) Investments that are existing on the date hereof and listed on Schedule 7.02; (b) Investments held by the Borrower or such Subsidiary in the form of cash equivalents or short-term marketable securities; (c) advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $100,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes; (d) Investments of (i) any Subsidiary in the Borrower, (ii) of the Borrower or any Subsidiary in a Guarantor, or (iii) of the Borrower or any Guarantor in any Subsidiary that is not a Guarantor in an amount not to exceed $2,000,000 in the aggregate at any time outstanding; provided that neither the Borrower nor any Guarantor may make an Investment in Telesystem in the form of rights under Capital Leases or any property, plant or equipment or any other item the direct acquisition of which by Telesystem would constitute a Capital Expenditure by Telesystem; (e) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss; and (f) Investments permitted by Sections 7.04 and 7.13; (g) advances extended to subcontractors or suppliers under usual and customary terms in the ordinary course of business in an aggregate amount not to exceed $250,000 at any time outstanding; and (h) other Investments in an aggregate amount not to exceed $2,000,000 at any time outstanding. 7.03 INDEBTEDNESS. Create, incur, assume or suffer to exist any Indebtedness other than: 84 (a) Indebtedness under the Loan Documents; (b) Indebtedness outstanding on the date hereof and listed on Schedule 7.03, including without limitation Indebtedness under the Subordinated Notes, and, subject to Section 7.15, any refinancings, refundings, renewals or extensions thereof; provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the fees and expenses reasonably incurred in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder, (ii) none of the instruments and agreements evidencing or governing such Indebtedness shall be amended, modified or supplemented after the Closing Date, including in connection with any refinancing, refunding, renewal or extension, to change any terms of subordination, repayment or rights of enforcement, conversion, put, exchange or other rights, or to make any covenants or events of default materially more restrictive, or in any event more restrictive than as set forth herein, from such terms and rights as in effect on the Closing Date; (c) Contingent Obligations of (i) the Borrower or any Guarantor in respect of Indebtedness otherwise permitted hereunder of the Borrower or any Guarantor, and (ii) of any Subsidiary that is not a Guarantor in respect of Indebtedness otherwise permitted hereunder of any Subsidiary, provided in each case that such Contingent Obligations with respect to Indebtedness that is subordinated to the Obligations shall be subordinated to the same or greater extent; (d) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under any Swap Contract, provided that such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person and not for purposes of speculation or taking a "market view;" (e) Indebtedness in respect of Capital Leases and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(j); provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $5,000,000; (f) Indebtedness (i) of the Borrower or any Guarantor (other than WLFI) owing to the Borrower or any Guarantor, (ii) of WLFI owing to the Borrower or any Guarantor, so long as such Indebtedness is subordinated to the Obligations of WLFI on terms and conditions reasonably satisfactory to the Administrative Agent and the aggregate principal amount thereof does not exceed $2,000,000 at any time outstanding, and (iii) of WAND owing to the Borrower or any Subsidiary in an aggregate principal amount not to exceed $2,000,000 at any time outstanding; (g) Indebtedness arising from borrowings against the cash value of the Life Insurance Policies from the issuer of such policies in an aggregate principal amount not to exceed $2,000,000 at any time outstanding, provided that any Indebtedness set forth on Schedule 7.03 that would also be permitted under this subpart (g) shall be deemed to be incurred under this subpart (g) regardless of the fact that such Indebtedness may also be permitted under Section 7.03(b); and 85 (h) unsecured Indebtedness in an aggregate principal amount not to exceed $5,000,000 at any time outstanding and maturing in one year or less under lines of credit having financial and negative covenants and events of default no more restrictive than those set forth herein; provided that notwithstanding the foregoing, WLFI will not be permitted to incur any Indebtedness except pursuant to Section 7.03(f)(ii). 7.04 FUNDAMENTAL CHANGES. Merge, consolidate with or into, or convey, transfer, lease or otherwise Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default or Event of Default exists or would result therefrom: (a) any Subsidiary may merge with or transfer all or substantially all its assets (upon voluntary liquidation or otherwise) to the Borrower or any Guarantor (other than Telesystem), provided that, if a merger, the applicable Guarantor or Borrower shall be the continuing or surviving Person, and provided further that when any Guarantor that is a wholly-owned Subsidiary is merging with another Subsidiary, such Guarantor shall be the continuing or surviving Person; (b) any Subsidiary other than a Guarantor may Dispose of all or substantially all its assets (upon voluntary liquidation or otherwise) to any one or more Subsidiaries (other than Telesystem), provided that if the seller in a sale of assets transaction is a wholly-owned Subsidiary, then the purchaser must also be a wholly-owned Subsidiary; and (c) a merger or consolidation necessary to consummate an Acquisition permitted by and in compliance with Section 7.13 and any Disposition of all or substantially all of the assets of any Subsidiary that is permitted by Section 7.05(g). 7.05 DISPOSITIONS. Make any Disposition or enter into any agreement to make any Disposition, except: (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business; (b) Dispositions of inventory in the ordinary course of business; (c) Dispositions by the Borrower or any Subsidiary of equipment or real property which is replaced by equipment or real property of substantially equivalent or greater utility and value within 180 days of the date of disposition thereof, provided that if the fair market value of the property so disposed at one time or in a series of related transactions is greater than $5,000,000, the Administrative Agent shall have received notice of such disposition from the Borrower not less than thirty (30) days prior to the consummation of such disposition; (d) Subject to the limitations contained in Section 7.02(d), dispositions of property, other than those restricted by Section 6.13, (i) by any Subsidiary to the Borrower or any Guarantor, and (ii) by the Borrower to any Guarantor; 86 (e) Dispositions permitted by Section 7.04; (f) Disposition of the interest of the Borrower or any Subsidiary in the Pittsburgh Pirates Baseball Club; and (g) Dispositions not otherwise permitted by (a) through (f) above, so long as the aggregate fair market value of all such property so disposed during the term of this Agreement does not exceed $10,000,000 and the Net Proceeds therefrom are applied as provided in Section 2.06(d). 7.06 RESTRICTED PAYMENTS. Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that: (a) (i) each Guarantor may make Restricted Payments to the Borrower and to other Guarantors, and (ii) each Subsidiary that is not a Guarantor may make Restricted Payments to the Borrower and to other Subsidiaries (and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to the Borrower and any Subsidiary and to each other owner of capital stock of such Subsidiary on a pro rata basis based on their relative ownership interests); (b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock of such Person; (c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire shares of its common stock or warrants or options to acquire any such shares with the proceeds received from the substantially concurrent issue of new shares of its common stock; (d) at all times at which the Total Leverage Ratio as of the end of the fiscal quarter of the Borrower most recently ended prior to the making of such payment shall not be greater than 5.0 to 1.0 before and after giving effect to any payment of such dividends, and the Borrower is in pro forma compliance with all covenants set forth herein giving pro forma effect to the payment of such dividends, the Borrower may declare or pay cash dividends to its stockholders (i) in an aggregate amount not greater than $1,500,000 during the fiscal year of the Borrower ending on December 31, 2002 and (ii) thereafter during each fiscal year of the Borrower and its Subsidiaries in an aggregate amount equal to the greater of $2,000,000 or fifty percent (50%) of Excess Cash Flow for the immediately preceding fiscal year; provided that immediately after giving effect to such proposed action, no Default or Event of Default shall have occurred or be continuing or would otherwise exist; and provided further that in no fiscal year shall the aggregate amount of cash dividends paid under (i) or (ii) above exceed $3,000,000; (e) the Borrower may make Restricted Payments permitted under Section 7.17. 7.07 ERISA. At any time engage in a transaction which could be subject to Section 4069 or 4212(c) of ERISA, or permit any Plan to (a) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable Laws; or (c) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), which, with respect to each event listed above, would reasonably be expected to have a Material Adverse Effect. 87 7.08 CHANGE IN NATURE OF BUSINESS. Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof. 7.09 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any kind with any Affiliate of the Borrower, other than upon fair and reasonable terms with Affiliates in transactions that are otherwise not prohibited hereunder no less favorable to the Borrower or Subsidiary than would be obtained in a comparable arm's-length transaction with a Person other than an Affiliate. 7.10 BURDENSOME AGREEMENTS. Enter into or cause, suffer or permit to exist any Contractual Obligation other than the Subordinated Indenture that limits the ability (a) of any Subsidiary to make Restricted Payments or loans or advances to the Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, or (b) the Borrower or any Subsidiary to comply with Section 6.14. 7.11 USE OF PROCEEDS. Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose. 7.12 FINANCIAL COVENANTS. (a) TOTAL LEVERAGE RATIO. Permit the Total Leverage Ratio at any time during any Four-Quarter Period of the Borrower to be greater than the ratio set forth below opposite such Four-Quarter Period:
Four-Quarter Period ending Maximum Total Leverage Ratio - -------------------------- ---------------------------- March 31, 2002, June 30, 2002, and 5.75 to 1.00 September 30, 2002 December 31, 2002, March 31, 2003, 5.50 to 1.00 June 30, 2003, September 30, 2003, and December 31, 2003 March 31, 2004, 5.25 to 1.00 June 30, 2004, and September 30, 2004
88 December 31, 2004, and 4.75 to 1.00 March 31, 2005 June 30, 2005, and 4.50 to 1.00 September 30, 2005 December 31, 2005, March 31, 2006, 4.00 to 1.00 June 30, 2006, and September 30, 2006 December 31, 2006, March 31, 2007, 3.50 to 1.00 June 30, 2007, and September 30, 2007 December 31, 2007 and thereafter 3.25 to 1.00
; provided that for the Four-Quarter Period ending March 31, 2002, the calculation shall be made pro forma for the issuance of the Subordinated Notes and the Obligations hereunder as of the Closing Date. (b) SENIOR LEVERAGE RATIO. Permit the Senior Leverage Ratio at any time during any Four-Quarter Period of the Borrower to be greater than the ratio set forth below opposite such Four-Quarter Period:
Four-Quarter Period ending Maximum Senior Leverage Ratio - -------------------------- ----------------------------- March 31, 2002, June 30, 2002, and September 30, 2002 3.00 to 1.00 December 31, 2002, March 31, 2003, 2.75 to 1.00 June 30, 2003, September 30, 2003, and December 31, 2003, March 31, 2004, 2.50 to 1.00 June 30, 2004, and September 30, 2004
89
Four-Quarter Period ending Maximum Senior Leverage Ratio - -------------------------- ----------------------------- December 31, 2004, March 31, 2005, 2.25 to 1.00 June 30, 2005, and September 30, 2005 December 31, 2005 and thereafter 2.00 to 1.00
; provided that for the Four-Quarter Period ending March 31, 2002, the calculation shall be made pro forma for the issuance of the Subordinated Notes and the Obligations hereunder as of the Closing Date. (c) INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio as of the end of any Four-Quarter Period of the Borrower to be less than the ratio set forth below opposite such Four-Quarter Period:
Four-Quarter Period ending Minimum Interest Coverage Ratio - -------------------------- ------------------------------- March 31, 2002, June 30, 2002, and 2.00 to 1.00 September 30, 2002 December 31, 2002, March 31, 2003, June 30, 2003, September 30, 2003, December 31, 2003, March 31, 2004, 2.25 to 1.00 June 30, 2004, September 30, 2004, December 31, 2004, March 31, 2005, June 30, 2005, and September 30, 2005 December 31, 2005, March 31, 2006, 2.50 to 1.00 June 30, 2006, and September 30, 2006 December 31, 2006 and thereafter 3.00 to 1.00
90 (d) FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge Coverage Ratio as of the end of any Four-Quarter Period of the Borrower to be less than the ratio set forth below opposite such Four-Quarter Period:
Four-Quarter Period ending Minimum Fixed Charge Ratio - -------------------------- -------------------------- June 30, 2005, September 30, 2005, December 31, 2005, March 31, 2006, June 30, 2006, and 1.00 to 1.00 September 30, 2006 December 31, 2006, March 31, 2007, June 30, 2007, September 30, 2007, 1.10 to 1.00 December 31, 2007, March 31, 2008, June 30, 2008, and September 30, 2008 December 31, 2008 and thereafter 1.20 to 1.00
7.13 ACQUISITIONS. Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition, unless (i) the Person to be (or whose assets are to be) acquired does not oppose such Acquisition and the line or lines of business of the Person to be acquired are substantially the same as one or more line or lines of business conducted by the Borrower and its Subsidiaries, (ii) no Default or Event of Default shall have occurred and be continuing either immediately prior to or immediately after giving effect to such Acquisition and, if the Cost of Acquisition is in excess of $5,000,000, the Borrower shall have furnished to the Administrative Agent (A) pro forma historical financial statements as of the end of the most recently completed fiscal year of the Borrower and most recent interim fiscal quarter, if applicable giving effect to such Acquisition and (B) a Compliance Certificate prepared on a historical pro forma basis as of the date of the Audited Financial Statements or, if later, as of the most recent date for which financial statements have been furnished pursuant to Section 6.01(a) or (b) giving effect to such Acquisition, which Compliance Certificate shall demonstrate that no Default or Event of Default would exist immediately after giving effect thereto, (iii) the Person 91 acquired shall be a wholly-owned Subsidiary, or be merged into the Borrower or a wholly-owned Subsidiary, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquiror shall be the Borrower or a wholly-owned Subsidiary), (iv) upon consummation of the Acquisition each Subsidiary shall have complied with the provisions of Section 6.14, including with respect to any new assets acquired, (v) if the Cost of Acquisition shall exceed $15,000,000, the Required Lenders shall consent to such Acquisition in their discretion, and (vi) after giving effect to such Acquisition, the aggregate Costs of Acquisition incurred since the Closing Date shall not exceed $50,000,000; provided that an agreement, contract, binding commitment or other arrangement providing for an Acquisition that would not otherwise satisfy the provisions of this Section 7.13 at such time may be entered into so long as an express condition to the consummation thereof is the full compliance with this Agreement and the other Loan Documents. 7.14 CAPITAL EXPENDITURES. Make or become legally obligated to make Capital Expenditures, which exceed in the aggregate in any fiscal year of the Borrower described below, the amount set forth opposite each such period:
Fiscal Year Ending Maximum Capital Expenditures - ------------------ ---------------------------- December 31, 2002 $38,000,000 December 31, 2003 $85,000,000 December 31, 2004 $50,000,000 December 31, 2005 $36,000,000
;provided, however, the amounts set forth above are subject to each of the following: (a) all of the amounts not expended during the fiscal year ending December 31, 2002 may be carried forward (the amount carried forward from any fiscal year to any subsequent fiscal year referred to as the "Carry Forward Amount") to be expended during the fiscal year ending December 31, 2003; (b) all of the amounts not expended during the fiscal year ending December 31, 2003, exclusive of any Carry Forward Amount, may be carried forward to be expended during the fiscal year ending December 31, 2004; (c) 50% of the amount not expended during the fiscal years ending December 31, 2004 and thereafter, exclusive of any Carry Forward Amount, may be carried forward to be expended during the immediately following fiscal year; (d) the maximum Capital Expenditures permitted to be expended during the fiscal year ending December 31, 2002 may be increased by an additional $12,000,000 subject to a corresponding decrease in an equivalent amount in the maximum Capital Expenditures permitted to be expended during the fiscal year ending December 31, 2003; and (e) at any time that the Total Leverage Ratio is greater than or equal to 3.75 to 1.00, notwithstanding anything else to the contrary set forth in this Section 7.14, the Borrower shall 92 not, nor shall it permit any Subsidiary (including Telesystem) to, make or become legally obligated to make any Capital Expenditure with respect to, or in connection with the operations of, Telesystem (each a "Telesystem Capital Expenditure") such that the making of such Telesystem Capital Expenditure would cause the aggregate amount of all Telesystem Capital Expenditures during the then-current fiscal year to exceed the amount set forth opposite each such period:
Maximum Capital Fiscal Year Ending Expenditures for Telesystem - ------------------ --------------------------- December 31, 2002 $4,000,000 December 31, 2003 $4,500,000 December 31, 2004 $4,300,000 December 31, 2005 $3,900,000 December 31, 2006 $2,600,000 December 31, 2007 $3,200,000 December 31, 2008 $3,000,000 December 31, 2009 $3,200,000
7.15 PREPAYMENT OF SUBORDINATED INDEBTEDNESS. (a) Except in connection with a refinancing thereof otherwise permitted by Section 7.03(b), prepay, redeem, purchase, repurchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, the Subordinated Notes or the Subordinated Indenture in each case including pursuant to any change of control, sale of assets, issuance of any equity or otherwise as may be set forth in the terms thereof or available to the Borrower at its option; or (b) Amend, modify or change in any manner any term or condition of any Subordinated Indebtedness (including without limitation any of the documents evidencing such Subordinated Indebtedness) so that the terms and conditions thereof are less favorable to the Administrative Agent and the Lenders than the terms of such Indebtedness as of the Closing Date. 7.16 NEGATIVE PLEDGE CLAUSES. Enter into or cause, suffer or permit to exist any agreement with any Person other than the Administrative Agent and the Lenders pursuant to this Agreement or any other Loan Documents, and other than in the Subordinated Indenture, which prohibits or limits the ability of any of the Borrower or any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, provided that the Borrower and any Subsidiary may enter into such an agreement in connection with, and that applies only to, property acquired with the proceeds of purchase money Indebtedness permitted hereunder. 93 7.17 PAYMENTS UNDER STOCK REDEMPTION AGREEMENT. (a) Make any redemption or other payment in any respect under that certain Amendment to and Restatement of Stock Redemption Agreement dated as of December 12, 1991, as it may be amended from time to time (the "Stock Redemption Agreement"), with any cash or cash equivalents of the Borrower or any Subsidiary, including proceeds of Revolving Loans hereunder, until the entire amount of the proceeds of the applicable Life Insurance that have been received up to the date such redemption or payment is made have been used for such purpose. (b) Subject to Section 7.17(a), and except with respect to redemptions or payments made solely with the proceeds of the applicable Life Insurance, make any redemption or other payment in any respect under the Stock Redemption Agreement (i) in advance of the latest to occur of (x) the latest time permitted for any such payment or redemption thereunder and (y) the date which is two months prior to the established next date for payment of an installment of the liability for Death Taxes (as defined in the Stock Redemption Agreement) of any estate of any Principal Shareholder (as defined in the Stock Redemption Agreement) the executor of which has made demand or request for redemption of Stock (as defined in the Stock Redemption Agreement), which executor and estate has made the election required under Section 1.02 of the Stock Redemption Agreement and, in addition to the five year deferral period in such election, has also elected the ten annual equal installments for payment of such tax liability as available under the Code, or (ii) in an amount in excess of that necessary to pay the installment of the liability for Death Taxes next due as set forth in Section 7.17(b)(i)(y) above. 7.18 FOREIGN SUBSIDIARIES. Create, acquire or permit to exist any direct or indirect Subsidiary of the Borrower that is not a Domestic Subsidiary. 7.19 LIMITS ON WLFI. Permit WLFI (a) to own any assets other than its partnership interest in WAND and such other immaterial assets as are necessary for the ownership and maintenance of that interest in WAND, and (b) to have any operations other than the ownership and maintenance of its interest in WAND. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES 8.01 EVENTS OF DEFAULT. Any of the following shall constitute an Event of Default: (a) Non-Payment. The Borrower fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or any L/C Obligation, or (ii) within three days after the same becomes due interest on any Loan or on any L/C Obligation, or any commitment or other fee due hereunder, or (iii) within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or (b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.03(a), 6.05, 6.10, 6.12 or 6.13 or Article VII; or 94 (c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or (d) Representations and Warranties. Any representation, warranty or certification made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document or in any other document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or (e) Cross-Default. (i) The Borrower or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Contingent Obligation (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Contingent Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise) prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which the Borrower or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Borrower or such Subsidiary as a result thereof is greater than the Threshold Amount; or (iii) there occurs any Event of Default under the Subordinated Notes or the Subordinated Note Documents; or (f) Insolvency Proceedings, Etc. The Borrower or any of the Guarantors institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or (g) Inability to Pay Debts; Attachment. (i) The Borrower or any of the Guarantors becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or 95 (h) Judgments. There is entered against the Borrower or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any non-monetary final judgment that has, or would reasonably be expected to have, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 10 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or (j) Invalidity of Loan Documents. Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of all the Lenders or satisfaction in full of all the Obligations, ceases to be in full force and effect, or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; (k) Change of Control. There occurs any Change of Control with respect to the Borrower; (l) Work Stoppage. There occurs any Work Stoppage and such Work Stoppage continues for 90 days, provided that during the time prior to the 90th day the existence of such Work Stoppage shall not be considered a "Default" hereunder. 8.02 REMEDIES UPON EVENT OF DEFAULT. If any Event of Default occurs, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, (a) declare the commitment of each Lender to make Loans, the commitment of each Swing Line Lender to make Swing Line Loans, and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated; (b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof) plus the Letter of Credit fees payable with respect to such Letter of Credit (calculated at the Applicable Margin then in effect for the period from the date of such cash collateralization until the expiry date of such Letter of Credit); and 96 (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law; provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower or any Guarantor under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans, the obligation of each Swing Line Lender to make Swing Line Loans, and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender. Promptly upon the taking of any action in Sections 8.02(a) through (d), the Administrative Agent shall delivery notice thereof to the Borrower, provided that the failure to deliver such notice shall not affect the validity or enforceability of any such action. ARTICLE IX ADMINISTRATIVE AGENT 9.01 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT. (a) Each Lender hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time (and except for so long) as the Administrative Agent may agree at the request of the Required Lenders to act for the L/C Issuer with respect thereto; provided, however, that the L/C Issuer shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent" as used in this 97 Article IX included the L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the L/C Issuer. 9.02 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 9.03 LIABILITY OF ADMINISTRATIVE AGENT. No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof. 9.04 RELIANCE BY ADMINISTRATIVE AGENT. (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders or all the Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and participants. Where this Agreement expressly permits or prohibits an action unless the Required Lenders otherwise determine, the Administrative Agent shall, and in all other instances, the Administrative Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders. 98 (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender. 9.05 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be directed by the Required Lenders in accordance with Article VIII; provided, however, that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. 9.06 CREDIT DECISION; DISCLOSURE OF INFORMATION BY ADMINISTRATIVE AGENT. Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person. 99 9.07 INDEMNIFICATION OF ADMINISTRATIVE AGENT. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Person's own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs and the costs and expenses incurred in connection with the use of Intralinks, Inc. or other comparable information transmission systems in connection with this Agreement) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive termination of the Aggregate Commitments, the payment of all Obligations hereunder and the resignation of the Administrative Agent. 9.08 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Bank of America were not the Administrative Agent or the L/C Issuer hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent or the L/C Issuer, and the terms "Lender" and "Lenders" include Bank of America in its individual capacity. 9.09 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent upon 30 days' notice to the Lenders; provided that any such resignation by Bank of America shall also constitute its resignation as L/C Issuer and a Swing Line Lender. If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor administrative agent for the Lenders which successor administrative agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not be unreasonably withheld or delayed). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor administrative agent from among the 100 Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, the Person acting as such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent, L/C Issuer and Swing Line Lender and the respective terms "Administrative Agent," "L/C Issuer" and "Swing Line Lender" shall mean (or include, in the case of Swing Line Loans) such successor administrative agent, Letter of Credit issuer and swing line lender, and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated and the retiring L/C Issuer's and Swing Line Lender's rights, powers and duties as such shall be terminated, without any other or further act or deed on the part of such retiring L/C Issuer or Swing Line Lender or any other Lender, other than the obligation of the successor L/C Issuer to issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 9.10 OTHER AGENTS; LEAD MANAGERS. None of the Lenders identified on the facing page or signature pages of this agreement as a "Syndication Agent," "Co-Documentation Agent," "Co-Agent," "Lead Manager," "Arranger" or "Joint Lead Arranger" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. ARTICLE X MISCELLANEOUS 10.01 AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however: (a) no such amendment, waiver or consent shall, unless in writing and signed by each of the Lenders directly affected thereby (provided that for purposes of items (v), (vi) and (vii) below, each Lender shall be deemed to be "affected thereby") and by the Borrower, and acknowledged by the Administrative Agent, do any of the following: (i) except as expressly provided for in Section 2.16, increase the Aggregate Revolving Credit Commitments, the Aggregate Term Loan A Commitments, the Outstanding Amount of Term Loan B, the Outstanding Amount of Term Loan C or (after the Term Loan A Advance Expiration Date) the Outstanding Amount of Term Loan A; (ii) reduce any fees or other amounts payable hereunder 101 or under any other Loan Document other than fees and other amounts that specifically pertain and apply only to the Revolving Credit Facility, the Term Loan A Facility, the Term Loan B Facility or the Term Loan C Facility; (iii) change the definition of "Required Lenders" or the percentage of the Aggregate Commitments or of the aggregate unpaid principal amount of the Loans and L/C Obligations which is required for the Lenders or any of them to take any action hereunder; (iv) change the manner of determination of the Pro Rata Revolving Share, Pro Rata Term A Share, Pro Rata Term B Share, Pro Rata Term C Share, share of the Aggregate Commitments or Voting Percentage of any Lender; (v) except with respect to releases expressly provided for herein or in any other Loan Document, release all or substantially all of the Guarantors from the Guaranty; (vi) except with respect to releases expressly provided for herein or in any other Loan Document, release all or a material portion of the Collateral; or (vii) amend this Section 10.01, Section 2.14 or any provision herein providing for consent or other action by all the Lenders; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of "Default Rate"; (b) no such amendment, waiver or consent shall, unless in writing and signed by each of the Revolving Lenders directly affected thereby and by the Borrower, and acknowledged by the Administrative Agent, (i) except as expressly provided for in Section 2.16, extend or increase the Revolving Credit Commitment of such Revolving Lender, including by amendment to Section 2.08, (ii) reduce the principal of, or the rate of interest specified herein on, any Revolving Loan, Swing Line Loan or L/C Borrowing, or any fees or other amounts payable hereunder or under any other Loan Document in respect of the Revolving Credit Facility (including the Letter of Credit subfacility and the Swing Line subfacility), or (iii) extend or postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Revolving Lenders (or any of them) hereunder or under any other Loan Document with respect to the Revolving Credit Facility; provided, however, that only the consent of (A) the Revolving Lenders holding at least 80% of the Pro Rata Revolving Shares shall be necessary to waive, extend or postpone the date fixed for any mandatory prepayment of the Revolving Credit Facility required under Section 2.06(d) and (B) the Required Revolving Lenders shall be necessary to waive any obligation of the Borrower to pay interest at the Default Rate in respect of the Revolving Credit Facility; (c) no such amendment, waiver or consent shall, unless in writing and signed by each of the Term Loan A Lenders directly affected thereby and by the Borrower, and acknowledged by the Administrative Agent, (i) extend or increase the Term Loan A Commitment or the Outstanding Amount of any Term Loan A of such Term Loan A Lender, (ii) reduce the principal of, or the rate of interest specified herein on, any Term Loan A or any fees or other amounts payable hereunder or under any other Loan Document in respect of any Term Loan A, or (iii) extend or postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Term Loan A Lenders (or any of them) hereunder or under any other Loan Document with respect to the Term Loan A Facility; provided, however, that only the consent of (A) the Term Loan A Lenders holding at least 80% of the Pro Rata Term A Shares shall be necessary to waive, extend or postpone the date fixed for any mandatory prepayment of the Term Loan A Facility required under Section 2.06(d) and (B) the Required Term Loan A Lenders shall be necessary to waive any obligation of the Borrower to pay interest at the Default Rate in respect of the Term Loan A Facility; 102 (d) no such amendment, waiver or consent shall, unless in writing and signed by each of the Term Loan B Lenders directly affected thereby and by the Borrower, and acknowledged by the Administrative Agent, (i) increase the Outstanding Amount of any Term Loan B of such Term Loan B Lender, (ii) reduce the principal of, or the rate of interest specified herein on, any Term Loan B or any fees or other amounts payable hereunder or under any other Loan Document in respect of any Term Loan B, or (iii) extend or postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Term Loan B Lenders (or any of them) hereunder or under any other Loan Document with respect to the Term Loan B Facility; provided, however, that only the consent of (A) the Term Loan B Lenders holding at least 80% of the Pro Rata Term B Shares shall be necessary to waive, extend or postpone the date fixed for any mandatory prepayment of the Term Loan B Facility required under Section 2.06(d) and (B) the Required Term Loan B Lenders shall be necessary to waive any obligation of the Borrower to pay interest at the Default Rate in respect of the Term Loan B Facility; (e) no such amendment, waiver or consent shall, unless in writing and signed by each of the Term Loan C Lenders directly affected thereby and by the Borrower, and acknowledged by the Administrative Agent, (i) increase the Outstanding Amount of any Term Loan C of such Term Loan C Lender, (ii) reduce the principal of, or the rate of interest specified herein on, any Term Loan C or any fees or other amounts payable hereunder or under any other Loan Document in respect of any Term Loan C, or (iii) extend or postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Term Loan C Lenders (or any of them) hereunder or under any other Loan Document with respect to the Term Loan C Facility; provided, however, that only the consent of (A) the Term Loan C Lenders holding at least 80% of the Pro Rata Term C Shares shall be necessary to waive, extend or postpone the date fixed for any mandatory prepayment of the Term Loan C Facility required under Section 2.06(d) and (B) the Required Term Loan C Lenders shall be necessary to waive any obligation of the Borrower to pay interest at the Default Rate in respect of the Term Loan C Facility; and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of the L/C Issuer under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by each Swing Line Lender in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of a Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Required Lenders or each directly-affected Lender, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; (iv) the Agent/Arranger Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the respective parties thereto; and (v) no amendment, waiver or consent which has the effect of enabling the Borrower to satisfy any condition to a Borrowing contained in Section 4.02 hereof which, but for such amendment, waiver or consent would not be satisfied, shall be effective to require (1) the Revolving Lenders, the Swing Line Lenders or the L/C Issuer to make any additional Revolving Loan or Swing Line Loan, or to issue any additional or renew any existing Letter of Credit, unless and until the Required Revolving Lenders shall consent 103 thereto, or (2) the Term Loan A Lenders to make (prior to the Term Loan A Expiration Date) an additional Term Loan A unless and until the Term Loan A Lenders having more than 50% of the Pro Rata Term A Shares shall consent thereto. Notwithstanding anything to the contrary herein, any Lender that has a Voting Percentage of zero shall not have any right to approve or disapprove any amendment, waiver or consent hereunder, except that neither the Revolving Credit Commitment, Term Loan A Commitment, share of the Aggregate Commitments, Pro Rata Revolving Share, Pro Rata Term A Share, Pro Rata Term B Share, Pro Rata Term C Share, or Outstanding Amounts of the Term Loan A, Term Loan B or Term Loan C of such Lender may be increased without the consent of such Lender. Further, notwithstanding anything to the contrary in this Section 10.01, and notwithstanding the vote by any other class of Lenders, (A) the Revolving Lenders alone, and only the Revolving Lenders, may waive any condition precedent to making a Revolving Loan contained in Section 4.02 by the vote of (x) all the Revolving Lenders with respect to any waiver that requires the consent of all Lenders affected thereby, or (y) in all other cases, the Required Revolving Lenders, and (B) prior to the Term Loan A Advance Expiration Date, the Term A Lenders alone, and only the Term A Lenders, may waive any condition precedent to a Term Loan A Borrowing contained in Section 4.02 by the vote of (x) all the Term A Lenders with respect to any waiver that requires the consent of all Lenders affected thereby, or (y) in all other cases, the Required Term A Lenders. 10.02 NOTICES AND OTHER COMMUNICATIONS; FACSIMILE COPIES. (a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission) and mailed, faxed or delivered, to the address, facsimile number or (subject to subsection (c) below) electronic mail address specified for notices on Schedule 10.02; or, in the case of the Borrower, the Administrative Agent, the L/C Issuer or a Swing Line Lender, to such other address as shall be designated by such party in a notice to the other parties, and in the case of any other party, to such other address as shall be designated by such party in a notice to the Borrower, the Administrative Agent, the L/C Issuer and a Swing Line Lenders. All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the intended recipient and (ii) (A) if delivered by hand or by courier, when signed for by the intended recipient (which need not be any natural person to whose attention such communication is directed, in the case of communications to Persons other than natural Persons); (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that notices and other communications to the Administrative Agent, the L/C Issuer and the Swing Line Lenders pursuant to Article II shall not be effective until actually received by such Person. Any notice or other communication permitted to be given, made or confirmed by telephone hereunder shall be given, made or confirmed by means of a telephone call to the intended recipient at the number specified on Schedule 10.02, or to such other number as shall be designated by such party in a notice to the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lenders, it being understood and agreed that a voicemail message shall in no event be effective as a notice, communication or confirmation hereunder. 104 (b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually-signed originals and shall be binding on all Loan Parties, the Administrative Agent and the Lenders. The Administrative Agent may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature. (c) Limited Use of Electronic Mail. Electronic mail and Internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 6.02, and to distribute Loan Documents for execution by the parties thereto, and may not be used for any other purpose. (d) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Loan Notices, Term Loan Interest Rate Selection Notice and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 10.03 NO WAIVER; CUMULATIVE REMEDIES. No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein or therein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.04 ATTORNEY COSTS, EXPENSES AND TAXES. The Borrower agrees (a) to pay or reimburse the Administrative Agent, the Arrangers and the Syndication Agent for all reasonable costs and expenses incurred in connection with the development, due diligence, preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated hereby or thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs of the Administrative Agent and the costs and expenses incurred in connection with the use of Intralinks, Inc. or other similar information transmission systems in connection with this Agreement, and (b) to pay or reimburse the Administrative Agent, the Arranger and each Lender for all costs and expenses incurred in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any "workout" or restructuring in respect of the Obligations and during any legal proceeding, including any proceeding under any Debtor Relief Law), including all Attorney Costs of each of them. The foregoing costs and expenses 105 shall include all search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by the Administrative Agent and the cost of independent public accountants and other outside experts retained by the Administrative Agent or any Lender. The agreements in this Section shall survive the termination of the Aggregate Commitments and repayment of all other Obligations. 10.05 INDEMNIFICATION BY THE BORROWER; LIMITATION OF LIABILITY. Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold harmless each Agent-Related Person, the Arrangers, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Revolving Credit Commitment, Term Loan A Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer 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), including any proposed use or use to repay any indebtedness under the Existing Credit Facilities, the Private Notes or the National City Line of Credit, or to finance any Acquisition or Capital Expenditure, (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Borrower or any Subsidiary, or any Environmental Liability related in any way to the Borrower or any Subsidiary, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and non-appealable judgment by a court of competent jurisdiction to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee. The Borrower agrees that no Indemnitee shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it or any of its Subsidiaries, security holders or creditors as a result for any action taken or not taken by it arising out of, related to or taken in connection with any Loan Document or the consummation of the transactions contemplated hereby or the actual or proposed use of Loan or Letter of Credit proceeds, except to the extent that such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have directly resulted from the gross negligence or willful misconduct of such Indemnitee, and in no event shall any Indemnitee be liable thereto for special, consequential, punitive or indirect damages. Without limitation of the foregoing, no Indemnitee shall be liable for any damages arising from the use by others of information or other materials obtained through Intralinks or other comparable electronic transmission systems utilized in connection with the credit facilities provided hereunder. The agreements in this Section shall survive the resignation of the 106 Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations. All amounts due under this Section 10.05 shall be payable within ten Business Days after demand therefor. 10.06 PAYMENTS SET ASIDE. To the extent that the Borrower makes a payment to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, or any amounts are realized by the Administrative Agent or any Lender as proceeds of the Collateral and applied against the Obligations and such payment or the proceeds of such set-off or Collateral or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off or realization of Collateral proceeds had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or paid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Federal Funds Rate from time to time in effect. 10.07 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder or under any of the Loan Documents without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section, or (iv) to an SPC in accordance with the provisions of subsection (g) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement, including all or a portion of its Revolving Credit Commitment and the Revolving Loans (including participations in L/C Obligations and participations in Swing Line Loans) at the time owing to it, its Term Loan A Commitment and Term Loans A owing to it, its Term Loans B, or its Term Loans C (such Lender's portion of Loans, commitments and risk participations with respect to each of the Revolving Credit Facility, the Term Loan A Facility, the Term Loan B Facility and the Term Loan C Facility (each, an "Applicable Facility") being referred to in this Section 10.07 as its "Applicable Share"); provided that (i) except in the case of an assignment of the entire remaining 107 amount of the assigning Lender's Applicable Share of the Applicable Facility, or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Applicable Share with respect to each Applicable Facility of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if a "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $1,000,000 unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed), (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Applicable Facility, except that this clause (ii) shall not (x) apply to rights in respect of Swing Line Loans or (y) prohibit any Lender from assigning all or a portion of its rights and obligations among the Applicable Facilities on a non-pro rata basis, (iii) any assignment of a Revolving Credit Commitment must be approved by the Administrative Agent, the L/C Issuer and the Swing Line Lenders unless the person that is the proposed assignee is itself a Revolving Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee), and (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 paid by such parties. Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, the Borrower (at its expense) shall execute and deliver new or replacement Notes to the assigning Lender and the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section. (c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent's Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Credit Commitments and Term Loan A Commitments of, and principal amounts of the Loans and L/C Obligations 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 and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 108 (d) Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Revolving Credit Commitment, Term Loan A Commitment and/or the Loans (including such Lender's participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in Section 10.01(a), (b), (c), (d) or (e) (but excluding items described in the provisos contained in each such subsection), as applicable, that directly affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15 as though it were a Lender. (e) A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 10.15 as though it were a Lender. (f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (g) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an "SPC") the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. Each party hereto hereby agrees that 109 (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement (including its obligations under Section 3.04), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Loan by an SPC hereunder shall utilize the respective Revolving Credit Commitment or Term Loan A Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Contingent Obligation or credit or liquidity enhancement to such SPC. (h) Notwithstanding anything to the contrary contained herein, any Lender that is a Fund that invests in bank loans may create a security interest in all or any portion of the advances owing to it and the Note or Notes held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities, provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise. (i) (i) Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Revolving Credit Commitment, Term Loan A Commitment and Loans (including its Pro Rata Term A Share of the Term Loan A, Pro Rata Term B Share of the Term Loan B, Pro Rata Term C Share of the Term Loan C and Swing Line Loans) and its participations in the L/C Obligations or any L/C Borrowing pursuant to subsection (b) above, Bank of America may upon thirty (30) days' notice to the Borrower and the Lenders, resign as L/C Issuer and/or upon thirty (30) days' notice to the Borrower, resign as a Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights and obligations of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the 110 right to require any other Swing Line Lender to make Swing Line Loans or the Lenders to make Revolving Loans or fund risk participations in the manner set forth in Section 2.04(c)). If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such termination, including the right to require the Lenders to make Revolving Loans or fund risk participations in outstanding Swing Line Loans in the manner set forth in Section 2.05(c). (ii) Notwithstanding anything to the contrary contained herein, if at any time National City Bank assigns all of its Revolving Credit Commitment, Term Loan A Commitment and Loans (including its Pro Rata Term A Share of the Term Loan A, Pro Rata Term B Share of the Term Loan B, Pro Rata Term C Share of the Term Loan C and Swing Line Loans) and its participations in the L/C Obligations or any L/C Borrowing pursuant to subsection (b) above, National City Bank may upon five Business Days' notice to the Borrower, resign as a Swing Line Lender. In the event of any such resignation as Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of National City Bank as a Swing Line Lender. If National City Bank resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such termination, including the right to require the Lenders to make Revolving Loans or fund participations in outstanding Swing Line Loans in the manner set forth in Section 2.05(c). 10.08 CONFIDENTIALITY. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty's or prospective counterparty's professional advisor) to any credit derivative transaction relating to obligations of the Borrower; (g) with the consent of the Borrower; (h) to the extent such Information (1) becomes publicly available other than as a result of a breach of this Section or (2) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower; or (i) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating agency that requires access to information about a Lender's or its Affiliates' investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates. In addition, the Administrative Agent and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service 111 providers to the lending industry, and service providers to the Administrative Agent and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Aggregate Commitments, and the Credit Extensions. Furthermore, the Administrative Agent and the Lenders shall have the right to (i) list the Borrower's name and logo and describe the transaction that is the subject of this Agreement in their marketing materials and (ii) post such information, including, without limitation, a customary "tombstone," on their respective websites. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified in writing at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 10.09 SET-OFF. In addition to any rights and remedies of the Lenders provided by law, upon the occurrence and during the continuance of any Event of Default, each Lender is authorized at any time and from time to time, without prior notice to the Borrower or any other Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party) to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 10.10 INTEREST RATE LIMITATION. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the "Maximum Rate"). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations. 112 10.11 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.12 INTEGRATION. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 10.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or Event of Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding. 10.14 SEVERABILITY. Any provision of this Agreement and the other Loan Documents to which the Borrower is a party that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.15 TAX FORMS. (a) Each Lender that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code (a "Foreign Lender") shall deliver to the Administrative Agent, prior to receipt of any payment subject to withholding under the Code (or upon accepting an assignment of an interest herein), two duly signed completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Person and entitling it to an exemption from, or reduction of, withholding tax on all payments to be made to such Person by the Borrower pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Person by the Borrower pursuant to this Agreement) or such other evidence satisfactory to the Borrower and the Administrative Agent that such Person is entitled to an exemption from, or reduction of, U.S. withholding tax. Thereafter and from time to time, each such Person shall (i) promptly submit to the Administrative Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and regulations to avoid, or such evidence as is satisfactory to the Borrower and the Administrative Agent of any available exemption from or reduction of, United States withholding taxes in respect of all payments to be made to such 113 Person by the Borrower pursuant to this Agreement, (ii) promptly notify the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws that the Borrower make any deduction or withholding for taxes from amounts payable to such Person. If such Person fails to deliver the above forms or other documentation, then the Administrative Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (b) Upon the request of the Administrative Agent, each Lender that is a "United States person" within the meaning of Section 7701(a)(30) of the Code shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. If such Lender fails to deliver such forms, then the Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable back-up withholding tax imposed by the Code, without reduction. (c) If any Governmental Authority asserts that the Administrative Agent did not properly withhold or backup withhold, as the case may be, any tax or other amount from payments made to or for the account of any Lender, such Lender shall indemnify the Administrative Agent therefor, including all penalties and interest, any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, and costs and expenses (including Attorney Costs) of the Administrative Agent. The obligation of the Lenders under this Section shall survive the termination of the Aggregate Commitments, repayment of all Obligations and the resignation of the Administrative Agent. 10.16 GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE performed ENTIRELY WITHIN SUCH STATE; PROVIDED THAT EACH PARTY HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO. THE BORROWER, THE ADMINISTRATIVE Agent AND EACH LENDER WAIVES PERSONAL SERVICE OF 114 ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE. 10.17 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 10.18 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. [SIGNATURE PAGES FOLLOW.] 115 IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed as of the date first above written. BLOCK COMMUNICATIONS, INC. By: /s/ Allan J. Block ----------------------- Name: Allan J. Block Title: Managing Director BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Derrick C. Bell ----------------------- Name: Derrick C. Bell --------------------- Title: Principal --------------------- Credit Agreement Signature Page 2 BANK OF AMERICA, N.A., as a Lender, a Swing Line Lender and L/C Issuer By: /s/ Derrick C. Bell ----------------------- Name: Derrick C. Bell --------------------- Title: Principal --------------------- Credit Agreement Signature Page 3 NATIONAL CITY BANK, as a Lender and a Swing Line Lender By: /s/ Christian Kalmbach ------------------------ Name: Christian Kalmbach ----------------------- Title: Senior Vice President ---------------------- Credit Agreement Signature Page 4 FLEET NATIONAL BANK, as a Lender By: /s/ Michael P. Lasch ----------------------- Name: Michael P. Lasch ---------------------- Title: Vice President --------------------- Credit Agreement Signature Page 5 BANK OF MONTREAL, as a Lender By: /s/ Karen Klapper ----------------------- Name: Karen Klapper ---------------------- Title: --------------------- Credit Agreement Signature Page 6 COMERICA BANK, as a Lender By: /s/ Richard Hampson ----------------------- Name: Richard Hampson ---------------------- Title: Vice President --------------------- Credit Agreement Signature Page 7 THE BANK OF NEW YORK, as a Lender By: /s/ Reena A. Bhasin --------------------------- Name: Reena A. Bhasin -------------------------- Title: Assistant Vice President ------------------------- Credit Agreement Signature Page 8 FIFTH THIRD BANK, as a Lender By: /s/ Michael R. Miller --------------------------- Name: Michael R. Miller -------------------------- Title: Executive Vice President ------------------------- Credit Agreement Signature Page 9 STANDARD FEDERAL BANK N.A., as a Lender By: /s/ Jason W. Bierlein --------------------------- Name: Jason W. Bierlein -------------------------- Title: Assistant Vice President ------------------------- Credit Agreement Signature Page 10 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: /s/ Molly Fergusson ----------------------- Name: Molly Fergusson ---------------------- Title: Manager, Operations --------------------- Credit Agreement Signature Page 11 SCHEDULE 1.01(a) COMMITMENTS AND PRO RATA SHARES
REVOLVING PRO RATA CREDIT REVOLVING TERM LOAN A PRO RATA PRO RATA TERM LENDER COMMITMENT SHARE COMMITMENT TERM A SHARE TERM LOAN B LOAN B SHARE ------ ---------------- -------------- --------------- -------------- -------------- -------------- Bank of America, N.A $ 10,370,000.00 12.2000000000% $ 4,880,000.00 12.2000000000% $58,000,000.00 77.3333333333% National City Bank $ 10,370,000.00 12.2000000000% $ 4,880,000.00 12.2000000000% 5,000,000.00 6.6666666666% Fleet National Bank $ 10,200,000.00 12.0000000000% $ 4,800,000.00 12.0000000000% 5,000,000.00 6.6666666666% Bank of Montreal $ 9,520,000.00 11.2000000000% $ 4,480,000.00 11.2000000000% 2,500,000.00 3.3333333333% Comerica Bank $ 9,520,000.00 11.2000000000% $ 4,480,000.00 11.2000000000% 2,500,000.00 3.3333333333% Fifth Third Bank $ 9,520,000.00 11.2000000000% $ 4,480,000.00 11.2000000000% 0.00 0.0000000000% The Bank of New York $ 8,500,000.00 10.0000000000% $ 4,000,000.00 10.0000000000% 0.00 0.0000000000% Standard Federal Bank N.A $ 8,500,000.00 10.0000000000% $ 4,000,000.00 10.0000000000% 2,000,000.00 2.6666666667% General Electric Capital Corporation $ 8,500,000.00 10.0000000000% $ 4,000,000.00 10.0000000000% 0.00 0.0000000000% TOTAL $ 85,000,000.00 100.0000000000% $ 40,000,000.00 100.0000000000% $75,000,000.00 100.0000000000% ================ ============== =============== ============== ============== ==============
EXHIBIT A FORM OF LOAN NOTICE Date: ___________, _____ To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement, dated as of May 15, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among Block Communications, Inc., an Ohio corporation (the "Borrower"), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender. The undersigned hereby requests (select one): [ ] A Borrowing of Revolving Loans [ ] A Borrowing of Term Loan A [ ] A Conversion of Loans [ ] A Continuation of Loans 1. On __________________ ___, 20___ (a Business Day). 2. In the amount of ____________________ (Note: If a Revolving Loan, minimum of $5,000,000 and multiples of $1,000,000 in excess thereof and if Term Loan A Borrowing, minimum of $10,000,000 and multiples of $5,000,000 in excess thereof.) 3. Comprised of: [ ] Base Rate Loan [ ] Eurodollar Rate Loan 4. For Eurodollar Rate Loans: with an Interest Period of __________ months. The Borrowing requested herein complies with the proviso to the first sentence of Section 2.01(a) or 2.02 of the Agreement, as applicable. The matters set forth in Section 4.02(a) and (b) are true, correct and complete as of the date hereof and with respect to the requested Credit Extension. BLOCK COMMUNICATIONS, INC. By: _______________________________________ Name: _____________________________________ Title: ____________________________________ A-1-2 EXHIBIT A-2 FORM OF TERM LOAN INTEREST RATE SELECTION NOTICE Date: ___________, 20___ To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement, dated as of May 15, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among Block Communications, Inc., an Ohio corporation (the "Borrower"), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender. The Borrower through its Responsible Officer hereby gives notice to the Administrative Agent of the following with respect to the [Term Loan A Facility] [Term Loan B Facility] [Term Loan C Facility]: [ ] An election of a subsequent Interest Period for Eurodollar Rate Segment(s) [ ] A Conversion of Eurodollar Rate Segment(s) into a Base Rate Segment(s) [ ] A Conversion of Base Rate Segment(s) into Eurodollar Rate Segment(s)
Type of Segment Interest Period(1) Aggregate Amount(2) Date of Segment(3) (check one) _______________ __________________ ___________________ __________________ [ ] Base Rate Segment _______________ _________________ ________________ [ ] Eurodollar Rate Segment _______________ _________________ ________________
Such Conversion or election of a subsequent Interest Period, as applicable, to occur on __________________ ___, 20___ (a Business Day). - ---------------- (1) For any Eurodollar Rate Segment, one, two, three or six months. (2) Must be $5,000,000 or if greater an integral multiple of $1,000,000. (3) At least three (3) Business Days later if a Eurodollar Rate Segment The matters set forth in Section 4.02(a) and (b) of the Agreement are true, correct and complete as of the date hereof and with respect to the requested Conversion or election of an Interest Period, as the case may be. BLOCK COMMUNICATIONS, INC. By: ________________________________ Name: ______________________________ Responsible Officer A-2-2 EXHIBIT B FORM OF SWING LINE LOAN NOTICE Date: ___________, _____ To: [Bank of America, N.A.][National City Bank], as Swing Line Lender Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement, dated as of May 15, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among Block Communications, Inc., an Ohio corporation (the "Borrower"), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender and National City Bank, as Swing Line Lender. The undersigned hereby requests a Swing Line Loan: 1. On ____________________ (a Business Day). 2. In the amount of $__________. (Minimum of $100,000 and multiples of $25,000 in excess thereof) The Swing Line Borrowing requested herein complies with the requirements of the provisos to the first sentence of Section 2.05(a) of the Agreement. The matters set forth in Section 4.02(a) and (b) are true, correct and complete as of the date hereof and with respect to the requested Credit Extension. BLOCK COMMUNICATIONS, INC. By: __________________________________ Name:_________________________________ Title:________________________________ EXHIBIT C-1 FORM OF TERM LOAN A NOTE Date: __________, 20__ FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of _____________________________ (the "Lender"), on the Term Loan A Maturity Date (as defined in the Credit Agreement referred to below) the Lender's Pro Rata Term A Share of the Term Loan A, or such lesser principal amount of the Term Loan A (as defined in such Credit Agreement) due and payable by the Borrower to the Lender on the Term Loan A Maturity Date under that certain Credit Agreement, dated as of May 15, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent; L/C Issuer and Swing Line Lender and National City Bank, as Swing Line Lender. The Borrower promises to pay interest on the unpaid principal amount of the portion of the Term Loan A made by the Lender from the Closing Date until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars, in Same Day Funds at the Administrative Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Term Loan A Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranty and the Security Instruments. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. The portion of the Term Loan A made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of the portion of the Segments made by the Lender and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. BLOCK COMMUNICATIONS, INC. By:__________________________________ Name:________________________________ Title:_______________________________ TERM LOAN A AND PAYMENTS WITH RESPECT THERETO
AMOUNT OF PRINCIPAL OR OUTSTANDING END OF INTEREST PRINCIPAL TYPE OF AMOUNT OF INTEREST PAID THIS BALANCE NOTATION DATE LOAN MADE LOAN MADE PERIOD DATE THIS DATE MADE BY - -------------------------------------------------------------------------------------------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ----------
C-1-2 EXHIBIT C-2 FORM OF TERM LOAN B NOTE Date: __________, 20__ FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of _____________________________ (the "Lender"), on the Term Loan B Maturity Date (as defined in the Credit Agreement referred to below) the Lender's Pro Rata Term A Share of the Term Loan B, or such lesser principal amount of the Term Loan B (as defined in such Credit Agreement) due and payable by the Borrower to the Lender on the Term Loan B Maturity Date under that certain Credit Agreement, dated as of May 15, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent; L/C Issuer and Swing Line Lender and National City Bank, as Swing Line Lender. The Borrower promises to pay interest on the unpaid principal amount of the portion of the Term Loan B made by the Lender from the Closing Date until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars, in Same Day Funds at the Administrative Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Term Loan B Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranty and the Security Instruments. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. The portion of the Term Loan B made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of the portion of the Segments made by the Lender and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. C-1-3 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. BLOCK COMMUNICATIONS, INC. By:___________________________________ Name:_________________________________ Title:________________________________ TERM LOAN B AND PAYMENTS WITH RESPECT THERETO
AMOUNT OF PRINCIPAL OR OUTSTANDING END OF INTEREST PRINCIPAL TYPE OF AMOUNT OF INTEREST PAID THIS BALANCE NOTATION DATE LOAN MADE LOAN MADE PERIOD DATE THIS DATE MADE BY - -------------------------------------------------------------------------------------------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ----------
C-1-5 EXHIBIT C-3 FORM OF REVOLVING LOAN NOTE Date: __________, 20__ FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of _____________________________ (the "Lender"), on the Maturity Date (as defined in the Credit Agreement referred to below) the Lender's Pro Rata Revolving Share, or such lesser principal amount of Revolving Loans (as defined in such Credit Agreement) due and payable by the Borrower to the Lender on the Maturity Date under that certain Credit Agreement, dated as of May 15, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender an National City Bank, as Swing Line Lender. The Borrower promises to pay interest on the unpaid principal amount of each Revolving Loan from the date of such Revolving Loan until such principal amount is paid in full, at such interest rates, and at such times as are specified in the Agreement. All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars, in Same Day Funds at the Administrative Agent's Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Revolving Loan Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranty and the Security Instruments. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Revolving Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Revolving Loans and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. BLOCK COMMUNICATIONS, INC. By:___________________________________ Name:_________________________________ Title:________________________________ REVOLVING LOANS AND PAYMENTS WITH RESPECT THERETO
AMOUNT OF PRINCIPAL OR OUTSTANDING END OF INTEREST PRINCIPAL TYPE OF AMOUNT OF INTEREST PAID THIS BALANCE NOTATION DATE LOAN MADE LOAN MADE PERIOD DATE THIS DATE MADE BY - -------------------------------------------------------------------------------------------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- ---------- ---------- ----------
EXHIBIT C-4 FORM OF SWING LINE NOTE Date: ____________, 20__ FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to the order of [BANK OF AMERICA, N.A.][NATIONAL CITY BANK] ("Swing Line Lender"), on the date when due in accordance with the Credit Agreement referred to below, the aggregate principal amount of each Swing Line Loan from time to time made by the Swing Line Lender to the Borrower under that certain Credit Agreement, dated as of May 15, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender and National City Bank, as Swing Line Lender. The Borrower promises to pay interest on the unpaid principal amount of each Swing Line Loan of the Swing Line Lender from the date of such Swing Line Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement. All payments of principal and interest shall be made to the Swing Line Lender in Dollars, in Same Day Funds at its Lending Office. If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement. This Note is one of the Swing Line Notes referred to in the Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. This Note is also entitled to the benefits of the Guaranty and the Security Instruments. Upon the occurrence of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement. Swing Line Loans made by the Swing Line Lender shall be evidenced by one or more loan accounts or records maintained by Swing Line Lender in the ordinary course of business. The Swing Line Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of the Swing Line Loans and payments with respect thereto. The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. BLOCK COMMUNICATIONS, INC. By:___________________________________ Name:_________________________________ Title:________________________________ C-3-2 SWING LINE LOANS AND PAYMENTS WITH RESPECT THERETO
AMOUNT OF PRINCIPAL OR OUTSTANDING AMOUNT OF LOAN INTEREST PAID PRINCIPAL BALANCE DATE MADE THIS DATE THIS DATE NOTATION MADE BY - ------------------------------------------------------------------------------------------ - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- ----------- - ----------- ----------- ----------- ----------- -----------
C-3-3 EXHIBIT D FORM OF COMPLIANCE CERTIFICATE Financial Statement Date:_______, 2___ To: Bank of America, N.A., as Administrative Agent Ladies and Gentlemen: Reference is made to that certain Credit Agreement, dated as of May 15, 2002 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the "Agreement;" the terms defined therein being used herein as therein defined), among Block Communications, Inc., an Ohio corporation (the "Borrower"), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent. The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the ____________________________________________ of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and that: [Use following for fiscal YEAR-END financial statements] 1. Attached hereto as Schedule 1 are the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section. [Use following for fiscal QUARTER-END financial statements] 1. Attached hereto as Schedule 1 are the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Borrower ended as of the above date. Such financial statements fairly present the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal, recurring year-end audit adjustments and the absence of footnotes. 2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements. 3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and 1 [select one:] [to the best knowledge of the undersigned during such fiscal period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it.] - --or-- [the following covenants or conditions have not been performed or observed and the following is a list of each such Default or Event of Default and its nature and status:] 4. The financial covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date of this Certificate. IN WITNESS WHEREOF, the undersigned has executed this Certificate as of ______________ ,___________. BLOCK COMMUNICATIONS, INC. By:__________________________________ Name:________________________________ Title:_______________________________ E-2 SCHEDULE 2 to The Compliance Certificate ($ in 000's) I. SECTION 7.12(a) - TOTAL LEVERAGE RATIO. A. Consolidated Funded Indebtedness at Statement Date: $_____________ B. Consolidated EBITDA for the Four-Quarter Period ending on above date ("Subject Period"): 1. Consolidated Net Income for Subject Period: $_____________ 2. Extraordinary net non-cash losses: $_____________ 3. Losses from disposition of assets: $_____________ 4. Consolidated Interest Charges for Subject Period: $_____________ 5. Provision for income taxes for Subject Period: $_____________ 6. Depreciation and Amortization expenses for Subject Period: $_____________ 7. Sum of I.B.1 through I.B.6: $_____________ 8. Extraordinary net gains: $_____________ 9. Gains from disposition of assets: $_____________ 10. Consolidated Film Contract Payments: $_____________ 11. Proceeds from any Life Insurance Policies: $_____________ 12. Sum of I.B.8 through I.B.11: $_____________ 13. Consolidated EBITDA (line I.B.7 minus line I.B.12): $_____________ C. Total Leverage Ratio (Line I.A divided by Line I.B.13): __________ to 1.00 Maximum permitted: [INSERT FOR PERIOD FROM CHART AT SECTION 7.12(a)]
E-3 II. SECTION 7.12(b) - SENIOR LEVERAGE RATIO. A. Consolidated Senior Indebtedness at Statement Date: $_____________ B. Consolidated EBITDA for Subject Period (Line I.B.13 above): $_____________ C. Senior Leverage Ratio (Line II.A divided by Line II.B): __________ to 1.00 Maximum permitted: [INSERT FOR PERIOD FROM CHART AT SECTION 7.12(b)]
E-4 III. SECTION 7.12(c) - INTEREST COVERAGE RATIO. A. Consolidated EBITDA for Subject Period (Line I.B.11 above): $_____________ B. Consolidated Interest Charges for Subject Period: $_____________ C. Interest Coverage Ratio (Line III.A. divided by Line III.B): __________to 1.00 Minimum required: [INSERT FOR PERIOD FROM CHART AT SECTION 7.12(c)]
E-5 IV. SECTION 7.12(d) - CONSOLIDATED FIXED CHARGE COVERAGE RATIO. A. Consolidated EBITDA for Subject Period (Line I.B.11 above): $_____________ B. Consolidated Fixed Charges at Statement Date for the Subject Period: 1. Consolidated Interest Charges for Subject Period: $_____________ 2. Capital Expenditures for Covered Period $_____________ 3. Current maturities of Consolidated Funded Indebtedness for Subject Period: $_____________ 4. Provision for income taxes for Subject Period: $_____________ 5. Restricted Payments for Subject Period (exclusive of the amount of stock redemptions funded with the proceeds of any of the Life Insurance Policies): $_____________ 6. Consolidated Fixed Charges (Lines IV.B.1 + 2 + 3 + 4 + 5): $_____________ C. Consolidated Fixed Charge Coverage Ratio (Line IV.A divided by Line IV.B): __________ to 1.00 Minimum required: [INSERT FOR PERIOD FROM CHART AT SECTION 7.12(d)]
E-6 V. SECTION 7.14 - CAPITAL EXPENDITURES A. Capital Expenditures for Subject Period: $_____________ B. Maximum permitted: 1. Amount for Subject Period on chart in Section 7.14: $_____________ 2. Amount permitted to be carried forward or backward to the Subject Period pursuant to Sections 7.14(a), (b), (c) or (d): $_____________ 3. Sum of V.B.1 and V.B.2: $_____________
AMOUNT IN LINE V.A ABOVE MAY NOT BE GREATER THAN THE AMOUNT IN LINE V.B.3 E-7 VI. SECTION 7.14(e) - TELESYSTEM CAPITAL EXPENDITURES A. Telesystem Capital Expenditures for Subject Period: $_____________
Maximum permitted: 1. IF TOTAL LEVERAGE RATIO AS OF THE END OF THE SUBJECT PERIOD IS LESS THAN 3.75 TO 1.00, THE ABOVE IS NOT APPLICABLE. 2. IF THE TOTAL LEVERAGE RATIO AS OF THE END OF THE SUBJECT PERIOD IS GREATER THAN OR EQUAL TO 3.75 TO 1.00, THE AMOUNT IN VI.A MUST BE LESS THAN THE AMOUNT FOR THE SUBJECT PERIOD FROM THE CHART AT SECTION 7.14(e). E-8 VII. SECTION 2.06(d)(i) - EXCESS CASH FLOW. [TO BE COMPUTED ONLY AS OF THE END OF EACH FISCAL YEAR OF THE BORROWER.] A. Consolidated EBITDA for Subject Period 1. Line I.B.11 above: $_____________ 2. Extraordinary net gains: $_____________ 3. Extraordinary net losses: $_____________ 4. Adjusted Consolidated EBITDA (Line VII.A.1. + 2 - 3): $_____________ B. Adjustments for the Subject Period: 1. the lesser of (a) $1,000,000 and (b) the change in Consolidated Working Capital as at the end of the Subject Period (negative if the change in Consolidated Working Capital is negative): $_____________ 2. Capital Expenditures (paid in cash and not prohibited under the Credit Agreement) for the Subject Period $_____________ 3. Consolidated Fixed Charges for the Subject Period (reduced by the amount of Capital Expenditures included in Consolidated Fixed Charges and reduced by the current maturities of Consolidated Funded Indebtedness provided in part (ii) of the definition thereof): $_____________ 4. Optional and mandatory prepayments during Subject Period: $_____________ 5. Sum of Lines VII.B.1 through VII.B.4: $_____________ C. Excess Cash Flow (Line VII.A.4 minus Line VII.B.5): $_____________
E-9 EXHIBIT E ASSIGNMENT AND ASSUMPTION This Assignment and Assumption (this "Assignment and Assumption") is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] (the "Assignee"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the "Credit Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full. For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, (i) all of the Assignor's rights and obligations as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including, without limitation, Letters of Credit and Swing Line Loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including but not limited to contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the "Assigned Interest"). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor. 1. Assignor: ______________________________ 2. Assignee: ______________________________ [and is an Affiliate/Approved Fund of [identify Lender](1)] 3. Borrower: Block Communications, Inc. 4. Administrative Agent: Bank of America, N.A., as the Administrative Agent under the Credit Agreement - ----------------- 1 Select as applicable. E-10 5. Credit Agreement: The Credit Agreement, dated as of May 15, 2002, among Block Communications, Inc., the Lenders parties thereto, and Bank of America, N.A., as Administrative Agent 6. Assigned Interest:
Aggregate Amount of Amount of Percentage Assigned Commitment/Loans Commitment/Loans of Commitment Facility Assigned(2) for all Lenders(3) Assigned(3) /Loans(4) - -------------------- ------------------ ----------- --------- $________________ $________________ ______________% $________________ $________________ ______________% $________________ $________________ ______________%
[7. Trade Date: __________________](5) Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] The terms set forth in this Assignment and Assumption are hereby agreed to: ASSIGNOR [NAME OF ASSIGNOR] By: ______________________________ Title: ASSIGNEE [NAME OF ASSIGNEE] By: ______________________________ Title: - ------------------------ (2) Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. "Revolving Credit Commitment", "Term Loan A Commitment", etc.). (3) Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date. (4) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. (5) To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date. E-11 [Consented to and](6) Accepted: BANK OF AMERICA, N.A., as Administrative Agent By: _________________________________ Title: [Consented to:](7) [BLOCK COMMUNICATIONS, INC.] By: _________________________________ Title: - --------------------- (6) To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement. (7) To be added only if the consent of the Borrower and/or other parties (e.g., Swing Line Lenders, L/C Issuer) is required by the terms of the Credit Agreement. E-12 ANNEX 1 TO ASSIGNMENT AND ASSUMPTION Credit Agreement, dated as of May 15, 2002, among Block Communications, Inc., the Lenders parties thereto, and Bank of America, N.A., as Administrative Agent STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. 1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document. 1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. E-13 1.3 Assignee's Address for Notices, etc. Attached hereto as Schedule 1 is all contact information, address, account and other administrative information relating to the Assignee. 2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to or on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York. E-14 SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION ADMINISTRATIVE DETAILS (Assignee to list names of credit contacts, addresses, phone and facsimile numbers, electronic mail addresses and account and payment information) E-15 EX-10.2 14 j9521601exv10w2.txt EXHIBIT 10.2 Exhibit 10.2 GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (this "Guaranty Agreement"), dated as of May 15, 2002, is made by EACH OF THE UNDERSIGNED AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BE EXECUTION OF A GUARANTY JOINDER AGREEMENT (each a "Guarantor" and collectively the "Guarantors") to BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States, as administrative agent (in such capacity, the "Administrative Agent") for each of the Lenders (as defined in the Credit Agreement (as defined below) and collectively with the Administrative Agent, the "Secured Parties") now or hereafter party to the Credit Agreement. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. W I T N E S S E T H: WHEREAS, the Secured Parties have agreed to provide to Block Communications, Inc., an Ohio corporation (the "Borrower") certain credit facilities, including certain term loan facilities and a revolving credit facility with a letter of credit and swing line sublimit pursuant to the terms of that certain Credit Agreement dated as of May 15, 2002, among the Borrower, the Administrative Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement"); and WHEREAS, each Guarantor is, directly or indirectly, a Domestic Subsidiary of the Borrower and will materially benefit from the Loans made and to be made, and the Letters of Credit issued and to be issued, under the Credit Agreement; and WHEREAS, each Guarantor is required to enter into this Guaranty Agreement pursuant to the terms of the Credit Agreement; and WHEREAS, a material part of the consideration given in connection with and as an inducement to the execution and delivery of the Credit Agreement by the Secured Parties was the obligation of the Borrower to cause each Guarantor to enter into this Guaranty Agreement, and the Secured Parties are unwilling to extend and maintain the credit facilities provided under the Loan Documents unless the Guarantors enter into this Guaranty Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree as follows: 1. GUARANTY. Each Guarantor hereby jointly and severally, unconditionally, absolutely, continually and irrevocably guarantees to the Administrative Agent for the benefit of the Secured Parties the payment and performance in full of the Borrower's Liabilities (as defined below). For all purposes of this Guaranty Agreement, "Borrower's Liabilities" means: (a) the Borrower's prompt payment in full, when due or declared due and at all such times, of all Obligations and all other amounts pursuant to the terms of the Credit Agreement, the Notes, and all other Loan Documents heretofore, now or at any time or times hereafter owing, arising, due or payable from the Borrower to any one or more of the Secured Parties, including principal, interest, premiums and fees (including, but not limited to, loan fees and Attorney Costs); (b) the Borrower's prompt, full and faithful performance, observance and discharge of each and every agreement, undertaking, covenant and provision to be performed, observed or discharged by the Borrower under the Credit Agreement and all other Loan Documents; and (c) the Borrower's prompt payment in full, when due or declared due and at all such times, of obligations and liabilities now or hereafter arising under Related Swap Contracts. The Guarantors' obligations to the Secured Parties under this Guaranty Agreement, including without limitation any such obligations of a Joining Guarantor (as defined in the Guaranty Joinder Agreement), are hereinafter collectively referred to as the "Guarantors' Obligations" and, with respect to each Guarantor and Joining Guarantor individually, the "Guarantor's Obligations". Notwithstanding the foregoing, the liability of each Guarantor individually with respect to its Guarantor's Obligations shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. Each Guarantor agrees that it is jointly and severally, directly and primarily liable (subject to the limitation in the immediately preceding sentence) for the Borrower's Liabilities. The Guarantors' Obligations are secured by various Security Instruments referred to in the Credit Agreement, including without limitation the Pledge Agreement (including the Pledge Joinder Agreements and the Pledge Agreement Supplements), the Security Agreement (including the Security Joinder Agreements), the IP Security Agreement (including the IP Security Joinder Agreements), and all other agreements (including control agreements), instruments and other documents, whether now existing or hereafter in effect, pursuant to which the Borrower or any Subsidiary or other Person shall grant or convey to the Administrative Agent or the Lenders a Lien in, or any other Person shall acknowledge any such Lien in, property as security for all or any portion of the Obligations or any other obligation under any Loan Document, as any of them may be amended, modified, supplemented, amended and restated or replaced from time to time. 2. PAYMENT. If the Borrower shall default in payment or performance of any of the Borrower's Liabilities, whether principal, interest, premium, fee (including, but not limited to, loan fees and Attorney Costs), or otherwise, when and as the same shall become due, and after expiration of any applicable grace period, whether according to the terms of the Credit Agreement, by acceleration, or otherwise, or upon the occurrence and during the continuance of any Event of Default under the Credit Agreement, then any or all of the Guarantors will, upon demand thereof by the Administrative Agent, fully pay to the Administrative Agent, for the benefit of the Secured Parties, subject to any restriction on each Guarantor's Obligations set forth in Section 1 hereof, an amount equal to all the Borrower's Liabilities then due and owing. 3. ABSOLUTE RIGHTS AND OBLIGATIONS. This is a guaranty of payment and not of collection. The Guarantors' Obligations under this Guaranty Agreement shall be joint and several, absolute and unconditional irrespective of, and each Guarantor hereby expressly waives, 2 to the extent permitted by law, any defense to its obligations under this Guaranty Agreement and all Security Instruments to which it is a party by reason of: (a) any lack of legality, validity or enforceability of the Credit Agreement, of any of the Notes, of any other Loan Document, or of any other agreement or instrument creating, providing security for, or otherwise relating to any of the Guarantors' Obligations, any of the Borrower's Liabilities, or any other guaranty of any of the Borrower's Liabilities (the Loan Documents and all such other agreements and instruments being collectively referred to as the "Related Agreements"); (b) any action taken under any of the Related Agreements, any exercise of any right or power therein conferred, any failure or omission to enforce any right conferred thereby, or any waiver of any covenant or condition therein provided; (c) any acceleration of the maturity of any of the Borrower's Liabilities, of the Guarantor's Obligations of any other Guarantor, or of any other obligations or liabilities of any Person under any of the Related Agreements; (d) any release, exchange, non-perfection, lapse in perfection, disposal, deterioration in value, or impairment of any security for any of the Borrower's Liabilities, for any of the Guarantor's Obligations of any Guarantor, or for any other obligations or liabilities of any Person under any of the Related Agreements; (e) any dissolution of the Borrower or any Guarantor or any other party to a Related Agreement, or the combination or consolidation of the Borrower or any Guarantor or any other party to a Related Agreement into or with another entity or any transfer or disposition of any assets of the Borrower or any Guarantor or any other party to a Related Agreement; (f) any extension (including without limitation extensions of time for payment), renewal, amendment, restructuring or restatement of, any acceptance of late or partial payments under, or any change in the amount of any borrowings or any credit facilities available under, the Credit Agreement, any of the Notes or any other Loan Document or any other Related Agreement, in whole or in part; (g) the existence, addition, modification, termination, reduction or impairment of value, or release of any other guaranty (or security therefor) of the Borrower's Liabilities (including without limitation the Guarantor's Obligations of any other Guarantor and obligations arising under any other Facility Guaranty now or hereafter in effect); (h) any waiver of, forbearance or indulgence under, or other consent to any change in or departure from any term or provision contained in the Credit Agreement, any other Loan Document or any other Related Agreement, including without limitation any term pertaining to the payment or performance of any of the Borrower's Liabilities, 3 any of the Guarantor's Obligations of any other Guarantor, or any of the obligations or liabilities of any party to any other Related Agreement; (i) any other circumstance whatsoever (with or without notice to or knowledge of any Guarantor) which may or might in any manner or to any extent vary the risks of such Guarantor, or might otherwise constitute a legal or equitable defense available to, or discharge of, a surety or a guarantor other than the defense of full, strict and indefeasible payment and performance (solely with respect to the amounts so paid and the obligations so performed), including without limitation any right to require or claim that resort be had to the Borrower or any other Loan Party or to any collateral in respect of the Borrower's Liabilities or Guarantors' Obligations. It is the express purpose and intent of the parties hereto that this Guaranty Agreement and the Guarantors' Obligations hereunder shall be absolute and unconditional under any and all circumstances and shall not be discharged except by payment as herein provided. 4. CURRENCY AND FUNDS OF PAYMENT. All Guarantors' Obligations will be paid in lawful currency of the United States of America and in immediately available funds, regardless of any law, regulation or decree now or hereafter in effect that might in any manner affect the Borrower's Liabilities, or the rights of any Secured Party with respect thereto as against the Borrower, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower of any or all of the Borrower's Liabilities. 5. EVENTS OF DEFAULT. Without limiting the provisions of Section 2 hereof, in the event that there shall occur and be continuing an Event of Default, then notwithstanding any collateral or other security or credit support for the Borrower's Liabilities, at the Administrative Agent's election and without notice thereof or demand therefor, the Guarantors' Obligations shall immediately be and become due and payable. 6. SUBORDINATION. Until this Guaranty Agreement is terminated in accordance with Section 22 hereof, each Guarantor hereby unconditionally subordinates all present and future debts, liabilities or obligations now or hereafter owing to such Guarantor (i) of the Borrower, to the payment in full of the Borrower's Liabilities, (ii) of every other Guarantor (an "obligated guarantor"), to the payment in full of the Guarantors' Obligations of such obligated guarantor, and (iii) of each other Person now or hereafter constituting a Loan Party, to the payment in full of the obligations of such Loan Party owing to any Secured Party and arising under the Loan Documents. All amounts due under such subordinated debts, liabilities, or obligations shall, upon the occurrence and during the continuance of an Event of Default, be collected and, upon request by the Administrative Agent, paid over forthwith to the Administrative Agent for the benefit of the Secured Parties on account of the Borrower's Liabilities, the Guarantors' Obligations, or such other obligations, as applicable, and, after such request and pending such payment, shall be held by such Guarantor as agent and bailee of the Secured Parties separate and apart from all other funds, property and accounts of such Guarantor. 7. SUITS. Each Guarantor from time to time shall pay to the Administrative Agent for the benefit of the Secured Parties, on demand, at the Administrative Agent's place of 4 business set forth in the Credit Agreement or such other address as the Administrative Agent shall give notice of to such Guarantor, the Guarantors' Obligations as they become or are declared due, and in the event such payment is not made forthwith, the Administrative Agent may proceed to suit against any one or more or all of the Guarantors. At the Administrative Agent's election, one or more and successive or concurrent suits may be brought hereon by the Administrative Agent against any one or more or all of the Guarantors, whether or not suit has been commenced against the Borrower, any other Guarantor, or any other Person and whether or not the Secured Parties have taken or failed to take any other action to collect all or any portion of the Borrower's Liabilities or have taken or failed to take any actions against any collateral securing payment or performance of all or any portion of the Borrower's Liabilities, and irrespective of any event, occurrence, or condition described in Section 3 hereof. 8. SET-OFF AND WAIVER. Each Guarantor waives any right to assert against any Secured Party as a defense, counterclaim, set-off, recoupment or cross claim in respect of its Guarantor's Obligations, any defense (legal or equitable) or other claim which such Guarantor may now or at any time hereafter have against the Borrower or any or all of the Secured Parties without waiving any additional defenses, set-offs, counterclaims or other claims otherwise available to such Guarantor. Each Guarantor agrees that each Secured Party shall have a lien for all the Guarantor's Obligations upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts, now or hereafter pledged, mortgaged, transferred or assigned to such Secured Party or otherwise in the possession or control of such Secured Party for any purpose (other than solely for safekeeping) for the account or benefit of such Guarantor, including any balance of any deposit account or of any credit of such Guarantor with the Secured Party, whether now existing or hereafter established, and hereby authorizes each Secured Party from and after the occurrence of an Event of Default at any time or times with or without prior notice to apply such balances or any part thereof to such of the Guarantor's Obligations to the Secured Parties then due and in such amounts as provided for in the Credit Agreement or otherwise as they may elect. For the purposes of this Section 8, all remittances and property shall be deemed to be in the possession of a Secured Party as soon as the same may be put in transit to it by mail or carrier or by other bailee. 9. WAIVER OF NOTICE; SUBROGATION. (a) Each Guarantor hereby waives to the extent permitted by law notice of the following events or occurrences: (i) acceptance of this Guaranty Agreement; (ii) the Lenders' heretofore, now or from time to time hereafter making Loans and issuing Letters of Credit and otherwise loaning monies or giving or extending credit to or for the benefit of the Borrower, whether pursuant to the Credit Agreement or the Notes or any other Loan Document or Related Agreement or any amendments, modifications, or supplements thereto, or replacements or extensions thereof; (iii) presentment, demand, default, non-payment, partial payment and protest; and (iv) any other event, condition, or occurrence described in Section 3 hereof. Each Guarantor agrees that each Secured Party may heretofore, now or at any time hereafter do any or all of the foregoing in such manner, upon such terms and at such times as each Secured Party, in its sole and absolute discretion, deems advisable, without in any way or respect impairing, affecting, reducing 5 or releasing such Guarantor from its Guarantor's Obligations, and each Guarantor hereby consents to each and all of the foregoing events or occurrences. (b) Each Guarantor hereby agrees that payment or performance by such Guarantor of its Guarantor's Obligations under this Guaranty Agreement may be enforced by the Administrative Agent on behalf of the Secured Parties upon demand by the Administrative Agent to such Guarantor without the Administrative Agent being required, such Guarantor expressly waiving to the extent permitted by law any right it may have to require the Administrative Agent, to (i) prosecute collection or seek to enforce or resort to any remedies against the Borrower or any other Guarantor or any other guarantor of the Borrower's Liabilities, or (ii) seek to enforce or resort to any remedies with respect to any security interests, Liens or encumbrances granted to the Administrative Agent or any Lender or other party to a Related Agreement by the Borrower, any other Guarantor or any other Person on account of the Borrower's Liabilities or any guaranty thereof, IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY SUCH GUARANTOR THAT DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE ADMINISTRATIVE AGENT, AND THE PROVISIONS HEREOF ENFORCED BY THE ADMINISTRATIVE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER THE CREDIT AGREEMENT. (c) Each Guarantor further agrees with respect to this Guaranty Agreement that it shall have no right of subrogation, reimbursement, contribution or indemnity, nor any right of recourse to security for the Borrower's Liabilities unless and until 93 days immediately following the Facility Termination Date (as defined below) shall have elapsed without the filing or commencement, by or against any Loan Party, of any state or federal action, suit, petition or proceeding seeking any reorganization, liquidation or other relief or arrangement in respect of creditors of, or the appointment of a receiver, liquidator, trustee or conservator in respect to, such Loan Party or its assets. This waiver is expressly intended to prevent the existence of any claim in respect to such subrogation, reimbursement, contribution or indemnity by any Guarantor against the estate of any other Loan Party within the meaning of Section 101 of the Bankruptcy Code, in the event of a subsequent case involving any other Loan Party. If an amount shall be paid to any Guarantor on account of such rights at any time prior to termination of this Guaranty Agreement in accordance with the provisions of Section 22 hereof, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent, for the benefit of the Secured Parties, to be credited and applied upon the Guarantors' Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement or otherwise as the Secured Parties may elect. The agreements in this subsection shall survive repayment of all of the Guarantors' Obligations, the termination or expiration of this Guaranty Agreement in any manner, including but not limited to termination in accordance with Section 22 hereof, and occurrence of the Facility Termination Date. For purposes of this Guaranty Agreement, "Facility Termination Date" means the date as of which all of the following shall have occurred: (a) the Borrower shall have permanently terminated the credit facilities under 6 the Loan Documents by final payment in full of all Outstanding Amounts, together with all accrued and unpaid interest and fees thereon, other than (i) the undrawn portion of Letters of Credit and (ii) all letter of credit fees relating thereto accruing after such date (which fees shall be payable solely for the account of the L/C Issuer and shall be computed (based on interest rates then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made; (b) all Related Swap Contracts shall have been terminated, expired or Cash Collateralized; (c) all Commitments shall have terminated or expired; and (d) the Borrower and each other Loan Party shall have fully, finally and irrevocably paid and satisfied in full all of their respective obligations and liabilities arising under the Loan Documents, including with respect to the Borrower and its Obligations (except for future Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Loan Party that may be owing to any Agent-Related Person or any Lender pursuant to the Loan Documents and expressly survive termination of the Credit Agreement). 10. EFFECTIVENESS; ENFORCEABILITY. This Guaranty Agreement shall be effective as of the date first above written and shall continue in full force and effect until termination in accordance with Section 22 hereof. Any claim or claims that the Secured Parties may at any time hereafter have against a Guarantor under this Guaranty Agreement may be asserted by the Administrative Agent on behalf of the Secured Parties by written notice directed to such Guarantor in accordance with Section 24 hereof. 11. REPRESENTATIONS AND WARRANTIES. Each Guarantor warrants and represents to the Administrative Agent, for the benefit of the Secured Parties, that it is duly authorized to execute and deliver this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable), and to perform its obligations under this Guaranty Agreement, that this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable) has been duly executed and delivered on behalf of such Guarantor by its duly authorized representatives; that this Guaranty Agreement (and any Guaranty Joinder Agreement to which such Guarantor is a party) is legal, valid, binding and enforceable against such Guarantor in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; and that such Guarantor's execution, delivery and performance of this Guaranty Agreement (and any Guaranty Joinder Agreement to which such Guarantor is a party) do not violate or constitute a breach of any of its Organizational Documents, any agreement or instrument to which such Guarantor is a party, or any law, order, regulation, decree or award of any governmental authority or arbitral body to which it or its properties or operations is subject. 12. EXPENSES. Each Guarantor agrees to be jointly and severally liable for the payment of all reasonable fees and expenses, including Attorney Costs, incurred by any Secured Party in connection with the enforcement of this Guaranty Agreement, whether or not suit be brought. 7 13. REINSTATEMENT. Each Guarantor agrees that this Guaranty Agreement shall continue to be effective or be reinstated, as the case may be, at any time payment received by any Secured Party in respect of any Borrower's Liabilities is rescinded or must be restored for any reason, or is repaid by any Secured Party in whole or in part in good faith settlement of any pending or threatened avoidance claim. 14. ATTORNEY-IN-FACT. To the extent permitted by law, each Guarantor hereby appoints the Administrative Agent, for the benefit of the Secured Parties, as such Guarantor's attorney-in-fact for the purposes of carrying out the provisions of this Guaranty Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is coupled with an interest and is irrevocable; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default. 15. RELIANCE. Each Guarantor represents and warrants to the Administrative Agent, for the benefit of the Secured Parties, that: (a) such Guarantor has adequate means to obtain on a continuing basis (i) from the Borrower, information concerning the Borrower and the Borrower's financial condition and affairs and (ii) from other reliable sources, such other information as it deems material in deciding to provide this Guaranty Agreement and any Guaranty Joinder Agreement ("Other Information"), and has full and complete access to the Borrower's books and records and to such Other Information; (b) such Guarantor is not relying on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, to provide any such information, now or in the future; (c) such Guarantor has been furnished with and reviewed the terms of the Credit Agreement and such other Loan Documents as it has requested, is executing this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable) freely and deliberately, and understands the obligations and financial risk undertaken by providing this Guaranty Agreement (and any Guaranty Joinder Agreement); (d) such Guarantor has relied solely on the Guarantor's own independent investigation, appraisal and analysis of the Borrower, the Borrower's financial condition and affairs, the "Other Information", and such other matters as it deems material in deciding to provide this Guaranty Agreement (and any Guaranty Joinder Agreement) and is fully aware of the same; and (e) such Guarantor has not depended or relied on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, for any information whatsoever concerning the Borrower or the Borrower's financial condition and affairs or any other matters material to such Guarantor's decision to provide this Guaranty Agreement (and any Guaranty Joinder Agreement), or for any counseling, guidance, or special consideration or any promise therefor with respect to such decision. Each Guarantor agrees that no Secured Party has any duty or responsibility whatsoever, now or in the future, to provide to such Guarantor any information concerning the Borrower or the Borrower's financial condition and affairs, or any Other Information, other than as expressly provided herein, and that, if such Guarantor receives any such information from any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, such Guarantor will independently verify the information and will not rely on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, with respect to such information. 8 16. RULES OF INTERPRETATION. The rules of interpretation contained in Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this Guaranty Agreement and each Guaranty Joinder Agreement and are hereby incorporated by reference. All representations and warranties contained herein shall survive the delivery of documents and any extension of credit referred to herein or guaranteed hereby. 17. ENTIRE AGREEMENT. This Guaranty Agreement and each Guaranty Joinder Agreement, together with the Credit Agreement and other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior negotiations, agreements, understandings, inducements, commitments or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. Except as provided in Section 22, neither this Guaranty Agreement nor any Guaranty Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 18. BINDING AGREEMENT; ASSIGNMENT. This Guaranty Agreement, each Guaranty Joinder Agreement and the terms, covenants and conditions hereof and thereof, shall be binding upon and inure to the benefit of the parties hereto and thereto, and to their respective heirs, legal representatives, successors and assigns; provided, however, that no Guarantor shall be permitted to assign any of its rights, powers, duties or obligations under this Guaranty Agreement, any Guaranty Joinder Agreement or any other interest herein or therein without the prior written consent of the Administrative Agent. Without limiting the generality of the foregoing sentence of this Section 18, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.07 thereof concerning assignments and participations. All references herein to the Administrative Agent shall include any successor thereof. Notwithstanding the foregoing, nothing in this Section 18 is intended to preclude any merger between or among two or more Guarantors or between or among the Borrower and one or more Guarantors to the extent otherwise permitted under the Credit Agreement. 19. RELATED SWAP CONTRACTS. All obligations of the Borrower under Related Swap Contracts to which any Lender or its Affiliates are a party shall be deemed to be Borrower's Liabilities, and each Lender or Affiliate of a Lender party to any such Related Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Borrower's Liabilities; provided, however, that such obligations shall cease to be Borrower's Liabilities at such time as such Person (or Affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. No Person who obtains the benefit of this Guaranty Agreement by virtue of the provisions of this Section shall have any right to notice of any action or to consent to, direct or 9 object to any action hereunder or under any other Loan Document or otherwise in respect of the Guarantors' Obligations (including the release or modification of any Guarantors' Obligations or security therefor) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents. 20. SEVERABILITY. The provisions of this Guaranty Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this Guaranty Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 21. COUNTERPARTS. This Guaranty Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Guaranty Agreement to produce or account for more than one such counterpart executed by the Guarantor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 21, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Guaranty Agreement. 22. TERMINATION. (a) Subject to reinstatement pursuant to Section 13 hereof, this Guaranty Agreement and each Guaranty Joinder Agreement, and all of the Guarantors' Obligations hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate on the Facility Termination Date. (b) In the event that all of the Subsidiary Securities issued by any Guarantor are Disposed of by the Borrower and/or any Guarantor, and such Disposition is expressly permitted by the Credit Agreement, then all obligations of such disposed Guarantor hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party, and the Administrative Agent shall, at the request and sole expense of the Guarantors, promptly deliver such termination statements and take such further actions as may reasonably be requested to terminate of record, or otherwise to give appropriate notice of the termination of, any Lien conferred hereunder with respect to such disposed Guarantor. 23. REMEDIES CUMULATIVE; LATE PAYMENTS. All remedies hereunder are cumulative and are not exclusive of any other rights and remedies of the Administrative Agent or any other Secured Party provided by law or under the Credit Agreement, the other Loan Documents or other applicable agreements or instruments. The making of the Loans and other Credit Extensions pursuant to the Credit Agreement shall be conclusively presumed to have been made or extended, respectively, in reliance upon each Guarantor's guaranty of the Borrower's Liabilities pursuant to the terms hereof. Any amounts not paid when due under this Guaranty Agreement shall bear interest at the Default Rate. 10 24. NOTICES. Any notice required or permitted hereunder or under any Guaranty Joinder Agreement shall be given, (a) with respect to each Guarantor, at the address for such Guarantor set forth below its signature on this Guaranty Agreement or the Guaranty Joinder Agreement of such Guarantor, as applicable and (b) with respect to the Administrative Agent or any other Secured Party, at the Administrative Agent's address indicated in Schedule 10.02 of the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder. 25. JOINDER. Each Person who shall at any time execute and deliver to the Administrative Agent a Guaranty Joinder Agreement substantially in the form attached as Exhibit A hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Guarantor, and all references herein and in the other Loan Documents to the Guarantors or to the parties to this Guaranty Agreement shall be deemed to include such Person as a Guarantor hereunder. 26. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. (a) THIS GUARANTY AGREEMENT AND EACH GUARANTY JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (b) EACH GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS GUARANTY AGREEMENT OR A GUARANTY JOINDER AGREEMENT, SUCH GUARANTOR EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) EACH GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS FOR NOTICES TO SUCH 11 GUARANTOR IN EFFECT PURSUANT TO SECTION 24 HEREOF, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (d) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT OR ANY OTHER LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE ANY GUARANTOR OR ANY OF SUCH GUARANTOR'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, EACH GUARANTOR AND THE ADMINISTRATIVE AGENT ON BEHALF OF THE SECURED PARTIES HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT ANY SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (f) EACH GUARANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [SIGNATURE PAGES FOLLOW.] 12 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Guaranty Agreement as of the day and year first written above. GUARANTORS: BUCKEYE CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ ERIE COUNTY CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ BUCKEYE TELESYSTEMS, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ CORPORATE PROTECTION SERVICES, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ COMMUNITY COMMUNICATION SERVICES, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ Guaranty Agreement Signature Page 1 PG PUBLISHING COMPANY By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ MONROE CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ LIMA COMMUNICATIONS CORPORATION By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ WLFI-TV, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: President ------------------------------------ INDEPENDENCE TELEVISION COMPANY By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ Guaranty Agreement Signature Page 2 TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ METRO FIBER & CABLE CONSTRUCTION COMPANY By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ IDAHO INDEPENDENT TELEVISION, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ CARS HOLDING, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: President ------------------------------------ ACCESS TOLEDO, LTD. By: BLOCK COMMUNICATIONS, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ Guaranty Agreement Signature Page 3 ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A. By: /s/ Derrick C. Bell ------------------------------------ Name: Derrick C. Bell ------------------------------------ Title: Principal ------------------------------------ Guaranty Agreement Signature Page 4 EXHIBIT A FORM OF GUARANTY JOINDER AGREEMENT GUARANTY JOINDER AGREEMENT THIS GUARANTY JOINDER AGREEMENT (the "Guaranty Joinder Agreement"), dated as of _____________, 20__ is made by and between _______________________________, a ________________ (the "Joining Guarantor"), and BANK OF AMERICA, N.A., in its capacity as Administrative Agent (the "Administrative Agent") under that certain Credit Agreement (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement") dated as of May 15, 2002, by and among Block Communications, Inc., an Ohio corporation (the "Borrower"), the Administrative Agent and the Lenders (as defined in the Credit Agreement) from time to time party thereto. All capitalized terms not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement. WHEREAS, the Joining Guarantor is a Domestic Subsidiary and required by the terms of the Credit Agreement to become a "Guarantor" under the Credit Agreement and be joined as a party to that certain Guaranty Agreement dated as of May 15, 2002 by and among the Administrative Agent and certain Subsidiaries of the Borrower (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Guaranty Agreement"); and WHEREAS, the Joining Guarantor will materially benefit directly and indirectly from the credit facilities made available and to be made available to the Borrower by the Lenders under the Credit Agreement; NOW, THEREFORE, the Joining Guarantor hereby agrees as follows with the Administrative Agent, for the benefit of the Secured Parties (as defined in the Guaranty Agreement and including any Lender or Affiliate of any Lender party to a Related Swap Contract): 1. JOINDER. The Joining Guarantor hereby irrevocably, absolutely and unconditionally becomes a party to the Guaranty Agreement as a Guarantor and is bound by all the terms, conditions, obligations, liabilities and undertakings of each Guarantor or to which each Guarantor is subject thereunder, including without limitation the joint and several, unconditional, absolute, continuing and irrevocable guarantee to the Administrative Agent for the benefit of the Secured Parties of the payment and performance in full of the Borrower's Liabilities (as defined in the Guaranty Agreement) whether now existing or hereafter arising, and all references to "Guarantors' Obligations" and "Guarantor's Obligations" as used in the Guaranty Agreement shall fully and completely include such guarantee, obligations, liabilities and undertakings of the Joining Guarantor hereunder, all with the same force and effect as if the Joining Guarantor were a signatory to the Guaranty Agreement. A-1 2. AFFIRMATIONS. The Joining Guarantor hereby acknowledges and reaffirms as of the date hereof with respect to itself, its properties and its affairs each of the waivers, representations, warranties, acknowledgements and certifications applicable to any Guarantor contained in the Guaranty Agreement. 3. SEVERABILITY. The provisions of this Guaranty Joinder Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this Guaranty Joinder Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 4. COUNTERPARTS. This Guaranty Joinder Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Guaranty Joinder Agreement to produce or account for more than one such counterpart executed by the Joining Guarantor. Without limiting the foregoing provisions of this Section 4, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Guaranty Joinder Agreement. 5. DELIVERY. The Joining Guarantor hereby irrevocably waives notice of acceptance of this Guaranty Joinder Agreement and acknowledges that the Borrower's Liabilities are and shall be deemed to be incurred, and credit extensions under the Loan Documents made and maintained, in reliance on this Guaranty Joinder Agreement and the Guarantor's joinder as a party to the Guaranty Agreement as herein provided. 6. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. The provisions of Section 26 of the Guaranty Agreement are hereby incorporated by reference as if fully set forth herein. IN WITNESS WHEREOF, the Joining Guarantor has duly executed and delivered this Guaranty Joinder Agreement as of the day and year first written above. JOINING GUARANTOR: ------------------------------------------ By: ------------------------------------ Name: ------------------------------------ Title: ------------------------------------ [Address for Notices: ------------------------------------------ ------------------------------------------ ------------------------------------------ Telefacsimile: (---) --- - ----] [Complete if Borrower's address is not to be used pursuant to Section 24 of the Guaranty] A-2 EX-10.3 15 j9521601exv10w3.txt EXHIBIT 10.3 Exhibit 10.3 SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Security Agreement") is made and entered into as of May 15, 2002 by BLOCK COMMUNICATIONS, INC., an Ohio corporation (the "Borrower" and a "Grantor"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF A SECURITY JOINDER AGREEMENT (each a "Guarantor" and a "Grantor", and collectively with the Borrower, the "Grantors"), and BANK OF AMERICA, N. A., a national banking association, as Administrative Agent (in such capacity, the "Administrative Agent") for each of the Lenders (as defined in the Credit Agreement (as defined below) and collectively with the Administrative Agent, the "Secured Parties") now or hereafter party to the Credit Agreement. All capitalized terms used but not otherwise defined herein or pursuant to Section 1 hereof shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: WHEREAS, the Secured Parties have agreed to provide to the Borrower certain term loan facilities and revolving credit facility with a letter of credit sublimit and swing line facility pursuant to the Credit Agreement dated as of May 15, 2002 by and among the Borrower, the Administrative Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement"); and WHEREAS, as collateral security for payment and performance of its Obligations, the Borrower is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in all of its personal property and assets pursuant to the terms of this Security Agreement; and WHEREAS, each Guarantor will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Guarantor is a party (as signatory or by joinder) to a Guaranty pursuant to which each Guarantor guarantees the Obligations of the Borrower; and WHEREAS, as collateral security for payment and performance by each Guarantor of its Guarantor's Obligations (as defined in the Guaranty to which such Guarantor is a party), and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party, each Guarantor is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in all of its personal property and assets pursuant to the terms of this Security Agreement; and WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents unless the Borrower and the Guarantors enter into this Security Agreement; NOW, THEREFORE, in order to induce the Secured Parties to enter into the Loan Documents and to make Loans and issue Letters of Credit, and in further consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. CERTAIN DEFINITIONS. (a) Terms used in this Security Agreement, not otherwise expressly defined herein or in the Credit Agreement, and for which meanings are provided in the Uniform Commercial Code of the State of New York (the "UCC"), shall have such meanings. (b) "Qualifying Control Agreement" shall have the meaning set forth on Schedule 1(a) hereto. (c) "Excluded Collateral" means (i) any cable television franchise or other license, permit or contract right awarded by a Governmental Authority as to which the applicable Grantor is prohibited from granting a security interest pursuant to the terms of such franchise, license, permit or contract or by applicable Law or as to which such assignment or pledge requires the prior approval or consent of any third party, including any Governmental Authority, provided that (A) to the extent that any such prohibition is rendered ineffective by the provisions of Article 9 of the applicable Uniform Commercial Code, any such franchise, license, permit or contract shall not constitute Excluded Collateral but shall be included hereunder as Collateral (as defined below), (B) upon the applicable Grantor obtaining all consents and giving all notices required under any such franchise, license, permit or contract, or any Law applicable thereto, then the affected asset shall automatically, without any further action on the part of any Person, cease to constitute Excluded Collateral and shall then and thereafter be included hereunder as Collateral, (C) upon a change in any applicable Law such that there is no longer a prohibition on the grant of a security interest in any franchise, license, permit or contract, then the affected asset shall automatically, without any further action on the part of any Person, cease to constitute Excluded Collateral and shall then and thereafter be included hereunder as Collateral, and (D) the proceeds of any Disposition of any franchise, license, permit or contract that constitutes Excluded Collateral shall at all times constitute Collateral and shall not be a part of this definition of Excluded Collateral; (ii) the ownership or equity interest of any Grantor in WAND (TV) Partnership, an Illinois partnership ("WAND"), to the extent the applicable Grantor is prohibited from granting a security interest pursuant to the terms of the partnership agreement under which WAND is created (the "WAND Partnership Agreement") without the prior approval or consent of the other partner in WAND, provided that (A) to the extent that any such prohibition is rendered ineffective by the provisions of Article 9 of the applicable Uniform Commercial Code, any such interest in WAND shall not constitute Excluded Collateral but shall be included hereunder as Collateral (as defined below), (B) if at any time the applicable Grantor obtains the consent required under the WAND Partnership Agreement with respect to any interest in WAND, then such interest in WAND shall automatically, without any further action on the part of any Person, cease to constitute Excluded Collateral and shall then and thereafter be included hereunder as Collateral, (C) upon an amendment to or other change in the WAND Partnership Agreement such that there is no longer a prohibition on the grant of a security interest in any interest in WAND, then such interest in WAND shall automatically, without any further action 2 on the part of any Person, cease to constitute Excluded Collateral and shall then and thereafter be included hereunder as Collateral, and (D) the proceeds of any Disposition of any interest in WAND that constitutes Excluded Collateral shall at all times constitute Collateral and shall not be a part of this definition of Excluded Collateral; (iii) the securities set forth on Schedule 1(b) hereto, but only to the extent that, and so long as, such securities are not Subsidiary Securities and the owner of such securities is subject to a restriction specifically prohibiting the pledge or other grant of a security interest in such securities, and at any time that any prohibition shall cease to be in force or be unenforceable either by contract or operation of applicable Law, the applicable Grantor's interest in such security shall automatically, without any further action on the part of any Person, cease to constitute Excluded Collateral and shall then and thereafter be included hereunder as Collateral; and (iv) any other asset that is subject to a restriction on the granting of a security interest therein, to the extent that such restriction is permitted by Section 7.16 of the Credit Agreement, but only to the extent and so long as such restriction is in force and enforceable, and at any time that any such restriction shall cease to be in force or be unenforceable either by contract or operation of applicable Law, the applicable Grantor's interest in such asset shall automatically, without any further action on the part of any Person, cease to constitute Excluded Collateral and shall then and thereafter be included hereunder as Collateral. 2. GRANT OF SECURITY INTEREST. The Borrower hereby grants as collateral security for the payment, performance and satisfaction of all of the Borrower's Obligations, and each Guarantor hereby grants as collateral security for the payment, performance and satisfaction of all of its Guarantor's Obligations (as defined in its Guaranty) and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party (all such obligations and liabilities of the Borrower and the other Grantors referred to collectively as the "Secured Obligations"), to the Administrative Agent for the benefit of the Secured Parties a continuing first priority security interest in and to, and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties, all of the personal property of such Grantor or in which such Grantor has or may have or acquire an interest or the power to transfer rights therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located, including the following: (a) All accounts, and including accounts receivable, contracts, bills, acceptances, choses in action, and other forms of monetary obligations at any time owing to such Grantor arising out of property sold, leased, licensed, assigned or otherwise disposed of or for services rendered or to be rendered by such Grantor, and all of such Grantor's rights with respect to any property represented thereby, whether or not delivered, property returned by customers and all rights as an unpaid vendor or lienor, including rights of stoppage in transit and of recovering possession by proceedings including replevin and reclamation (collectively referred to hereinafter as "Accounts"); (b) All inventory, including all goods manufactured or acquired for sale or lease, and any piece goods, raw materials, work in process and finished merchandise, component materials, and all supplies, goods, incidentals, office supplies, packaging materials and any and all items used or consumed in the operation of the business of such Grantor or which may contribute to the finished product or to the sale, promotion and 3 shipment thereof, in which such Grantor now or at any time hereafter may have an interest, whether or not the same is in transit or in the constructive, actual or exclusive occupancy or possession of such Grantor or is held by such Grantor or by others for such Grantor's account (collectively referred to hereinafter as "Inventory"); (c) All goods, including all machinery, equipment, motor vehicles, parts, supplies, apparatus, appliances, tools, patterns, molds, dies, blueprints, fittings, furniture, furnishings, fixtures and articles of tangible personal property of every description, and all computer programs embedded in any of the foregoing and all supporting information relating to such computer programs (collectively referred to hereinafter as "Equipment"); (d) All general intangibles, including all rights now or hereafter accruing to such Grantor under contracts, leases, agreements or other instruments, including all contracts or contract rights to perform or receive services, to purchase or sell goods, or to hold or use land or facilities, and to enforce all rights thereunder, all causes of action, corporate or business records, inventions, patents and patent rights, rights in mask works, designs, trade names and trademarks and all goodwill associated therewith, trade secrets, trade processes, copyrights, licenses, permits, franchises, customer lists, computer programs and software, all internet domain names and registration rights thereto, all internet websites and the content thereof, all payment intangibles, all claims under guaranties, tax refund claims, all rights and claims against carriers and shippers, leases, all claims under insurance policies, all interests in general and limited partnerships, limited liability companies, and other Persons not constituting Investment Property (as defined below), all rights to indemnification and all other intangible personal property and intellectual property of every kind and nature (collectively referred to hereinafter as "General Intangibles"); (e) All deposit accounts, including demand, time, savings, passbook, or other similar accounts maintained with any bank by or for the benefit of such Grantor (collectively referred to hereinafter as "Deposit Accounts"); (f) All chattel paper, including tangible chattel paper, electronic chattel paper, or any hybrid thereof (collectively referred to hereinafter as "Chattel Paper"); (g) All investment property, including all securities, security entitlements, securities accounts, commodity contracts and commodity accounts of or maintained for the benefit of such Grantor, but excluding Pledged Interests subject to any Pledge Agreement (collectively referred to hereinafter as "Investment Property"); (h) All instruments, including all promissory notes (collectively referred to hereinafter as "Instruments"); (i) All documents, including warehouse receipts, bills of lading and other documents of title (collectively referred to hereinafter as "Documents"); 4 (j) All rights to payment or performance under letters of credit including rights to proceeds of letters of credit ("Letter-of-Credit Rights"), and all guaranties, endorsements, Liens, other Guaranty Obligations or supporting obligations of any Person securing or supporting the payment, performance, value or liquidation of any of the foregoing (collectively, with Letter-of-Credit Rights, referred to hereinafter as "Supporting Obligations"); (k) The commercial tort claims identified on Schedule 9(i) hereto, as such Schedule may be supplemented from time to time in accordance with the terms hereof (collectively referred to hereinafter as "Commercial Tort Claims"); (l) All books and records relating to any of the forgoing (including customer data, credit files, ledgers, computer programs, printouts, and other computer materials and records (and all media on which such data, files, programs, materials and records are or may be stored)); and (m) All proceeds, products and replacements of, accessions to, and substitutions for, any of the foregoing, including without limitation proceeds of insurance policies insuring any of the foregoing; provided, however, that the Excluded Collateral is expressly excluded from the grant contained in this Section 2, and each definition in subsections (a) through (k) above shall exclude any asset fitting such description that is Excluded Collateral. All of the property and interests in property described in subsections (a) through (m), other than property and interests in property constituting Excluded Collateral, are herein collectively referred to as the "Collateral." 3. PERFECTION. As of the date of execution of this Security Agreement or a Security Joinder Agreement by each Grantor, as applicable (with respect to each Grantor, its "Applicable Date"), other than with respect to motor vehicles (as applicable), such Grantor shall have: (a) furnished the Administrative Agent with properly executed financing statements in form, number and substance suitable for filing, sufficient under applicable law, and satisfactory to the Administrative Agent in order that upon the filing of the same the Administrative Agent, for the benefit of the Secured Parties, shall have a duly perfected security interest in all Collateral in which a security interest can be perfected by the filing of financing statements; (b) to the extent expressly required by the terms hereof or of the Credit Agreement, or otherwise as the Administrative Agent may request, furnished the Administrative Agent with properly executed Qualifying Control Agreements, issuer acknowledgments of the Administrative Agent's interest in Letter-of-Credit Rights, and evidence of the placement of a restrictive legend on tangible chattel paper (and the tangible components of electronic Chattel Paper), and taken appropriate action acceptable to the Administrative Agent sufficient to establish the Administrative Agent's control of electronic Chattel Paper (and the electronic components of hybrid Chattel Paper), as appropriate, with respect to Collateral in which either (i) a security interest can be 5 perfected only by control or such restrictive legending, or (ii) a security interest perfected by control or accompanied by such restrictive legending shall have priority as against a lien creditor, a purchaser of such Collateral from the applicable Grantor, or a security interest perfected by Persons not having control or not accompanied by such restrictive legending, in each case in form and substance acceptable to the Administrative Agent and sufficient under applicable law so that the Administrative Agent, for the benefit of the Secured Parties, shall have a security interest in all such Collateral perfected by control; and (c) delivered to the Administrative Agent possession of all Collateral with respect to which either a security interest can be perfected only by possession or a security interest perfected by possession shall have priority as against Persons not having possession, and including in the case of Instruments, Documents, and Investment Property in the form of certificated securities, duly executed endorsements or stock powers in blank, as the case may be, affixed thereto in form and substance acceptable to the Administrative Agent and sufficient under applicable law so that the Administrative Agent, for the benefit of the Secured Parties, shall have a security interest in all such Collateral perfected by possession; with the effect that the Liens conferred in favor of the Administrative Agent shall be and remain duly perfected and of first priority subject only, to the extent applicable, to Liens allowed to exist under Section 7.01 of the Credit Agreement ("Permitted Liens"). All financing statements (including all amendments thereto and continuations thereof), control agreements, certificates, acknowledgments, stock powers and other documents, electronic identification, restrictive legends, and instruments furnished in connection with the creation, enforcement, protection, perfection or priority of the Administrative Agent's security interest in Collateral, including such items as are described above in this Section 3, are sometimes referred to herein as "Perfection Documents". The delivery of possession of items of or evidencing Collateral, causing other Persons to execute and deliver Perfection Documents as appropriate, the filing or recordation of Perfection Documents, the establishment of control over items of Collateral, and the taking of such other actions as may be necessary or advisable in the determination of the Administrative Agent to create, enforce, protect, perfect, or establish or maintain the priority of, the security interest of the Administrative Agent for the benefit of the Secured Parties in the Collateral is sometimes referred to herein as "Perfection Action". 4. MAINTENANCE OF SECURITY INTEREST; FURTHER ASSURANCES. (a) Each Grantor will from time to time at its own expense, deliver specific assignments of Collateral or such other Perfection Documents, and take such other or additional Perfection Action, as may be required by the terms of the Loan Documents or as the Administrative Agent may reasonably request in connection with the administration or enforcement of this Security Agreement or related to the Collateral or any part thereof in order to carry out the terms of this Security Agreement, to perfect, protect, maintain the priority of or enforce the Administrative Agent's security interest in the Collateral, subject only to Permitted Liens, or otherwise to better assure and confirm unto the Administrative Agent its rights, powers and remedies for the benefit of the 6 Secured Parties hereunder. Without limiting the foregoing, each Grantor hereby irrevocably authorizes the Administrative Agent to file (with, or to the extent permitted by applicable law, without the signature of the Grantor appearing thereon) financing statements (including amendments thereto and initial financing statements in lieu of continuation statements) or other Perfection Documents (including copies thereof) showing such Grantor as "debtor" at such time or times and in all filing offices as the Administrative Agent may from time to time determine to be necessary or advisable to perfect or protect the rights of the Administrative Agent and the Secured Parties hereunder, or otherwise to give effect to the transactions herein contemplated, any of which Perfection Documents, at the Administrative Agent's election, may describe the Collateral as or including all personal property of the Grantor. Each Grantor hereby irrevocably ratifies and acknowledges the Administrative Agent's authority to have effected filings of Perfection Documents made by the Administrative Agent prior to its Applicable Date. (b) With respect to any and all Collateral, each Grantor agrees to do and cause to be done all things necessary to perfect, maintain the priority of and keep in full force the security interest granted in favor of the Administrative Agent for the benefit of the Secured Parties, including, but not limited to, the prompt payment upon demand therefor by the Administrative Agent of all fees and expenses (including documentary stamp, excise or intangibles taxes) incurred in connection with the preparation, delivery, or filing of any Perfection Document or the taking of any Perfection Action to perfect, protect or enforce a security interest in Collateral in favor of the Administrative Agent for the benefit of the Secured Parties, subject only to Permitted Liens. All amounts not so paid when due shall constitute additional Secured Obligations and (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (c) Each Grantor agrees to maintain among its books and records appropriate notations or evidence of, and to make or cause to be made appropriate disclosure upon its financial statements (in accordance with the requirements of GAAP) of, the security interest granted hereunder to the Administrative Agent for the benefit of the Secured Parties. 5. RECEIPT OF PAYMENT. In the event an Event of Default shall occur and be continuing and a Grantor (or any of its Affiliates, subsidiaries, stockholders, directors, officers, employees or agents on behalf of such Grantor) shall receive any proceeds of Collateral, including without limitation monies, checks, notes, drafts or any other items of payment, each Grantor shall hold all such items of payment in trust for the Administrative Agent for the benefit of the Secured Parties, and as the property of the Administrative Agent for the benefit of the Secured Parties, separate from the funds and other property of such Grantor, and no later than the first Business Day following the receipt thereof, at the election of the Administrative Agent, such Grantor shall cause such Collateral to be forwarded to the Administrative Agent for its custody, possession and disposition on behalf of the Secured Parties in accordance with the terms hereof and of the other Loan Documents. 7 6. PRESERVATION AND PROTECTION OF COLLATERAL. (a) Except for the exercise of reasonable care in the custody and preservation of any Collateral in its possession and accounting for monies received by it pursuant to this Security Agreement, the Administrative Agent shall be under no duty or liability with respect to the collection, protection or preservation of the Collateral. Each Grantor shall be responsible for the safekeeping of its Collateral, and in no event shall the Administrative Agent have any responsibility for (i) any loss or damage thereto or destruction thereof occurring or arising in any manner or fashion from any cause, (ii) any diminution in the value thereof, or (iii) any act or default of any carrier, warehouseman, bailee or forwarding agency thereof or other Person in any way dealing with or handling such Collateral. (b) Each Grantor shall keep and maintain its tangible personal property Collateral in good operating condition and repair, ordinary wear and tear excepted. No Grantor shall permit any such items to become a fixture to real property (unless either such Grantor has granted the Administrative Agent for the benefit of the Secured Parties a Lien on such real property having a priority acceptable to the Administrative Agent or the Administrative Agent has determined in its reasonable discretion that such a Lien on such real property is not required) or accessions to other personal property. (c) Each Grantor agrees (i) to pay when due all taxes, charges and assessments against the Collateral in which it has any interest, unless being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established in accordance with GAAP applied on a consistent basis and evidenced to the satisfaction of the Administrative Agent and provided that all enforcement proceedings in the nature of levy or foreclosure are effectively stayed, and (ii) to cause to be terminated and released all Liens (other than Permitted Liens) on the Collateral. Upon the failure of any Grantor to so pay or contest such taxes, charges, or assessments, or cause such Liens to be terminated, the Administrative Agent at its option may pay or contest any of them or amounts relating thereto (the Administrative Agent having the sole right to determine the legality or validity and the amount necessary to discharge such taxes, charges, Liens or assessments) but shall not have any obligation to make any such payment or contest. All sums so disbursed by the Administrative Agent, including reasonable Attorneys' Costs, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Grantor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. 7. STATUS OF GRANTORS AND COLLATERAL GENERALLY. Each Grantor represents and warrants to, and covenants with, the Administrative Agent for the benefit of the Secured Parties, with respect to itself and the Collateral as to which it has or acquires any interest, that: 8 (a) It is at its Applicable Date (or as to Collateral acquired after its Applicable Date will be upon the acquisition of the same) and, except as permitted by the Credit Agreement and subsection (b) of this Section 7, will continue to be, the owner of the Collateral, free and clear of all Liens, other than the security interest hereunder in favor of the Administrative Agent for the benefit of the Secured Parties and Permitted Liens, and that it will at its own cost and expense defend such Collateral and any products and proceeds thereof against all claims and demands of all Persons (other than holders of Permitted Liens) at any time claiming the same or any interest therein adverse to the Secured Parties. Upon the failure of any Grantor to so defend, the Administrative Agent may do so at its option but shall not have any obligation to do so. All sums so disbursed by the Administrative Agent, including reasonable Attorneys' Costs, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Grantor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (b) It shall not (i) sell, assign, transfer, lease, license or otherwise dispose of any of, or grant any option with respect to, the Collateral, except for dispositions permitted under the Credit Agreement, (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral except for the security interests created by this Security Agreement and Permitted Liens, or (iii) take any other action in connection with any of the Collateral that would materially impair the interest or rights of such Grantor in the Collateral taken as a whole or that would materially impair the interest or rights of the Administrative Agent for the benefit of the Secured Parties. (c) It has full power, legal right and lawful authority to enter into this Security Agreement (and any Security Joinder Agreement applicable to it) and to perform its terms, including the grant of the security interests in the Collateral herein provided for. (d) No authorization, consent, approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required either (i) for the grant by such Grantor of the security interests granted hereby or the collateral assignment hereunder, or for the execution, delivery or performance of this Security Agreement (or any Security Joinder Agreement applicable to it) by such Grantor, or (ii) for the perfection of or the exercise by the Administrative Agent, on behalf of the Secured Parties, of its rights and remedies hereunder, except for action required by the Uniform Commercial Code to perfect the security interest conferred hereunder. (e) Upon the filing of those UCC termination statements referred to in Section 4.01 of the Credit Agreement and related releases in connection with the termination of the Existing Credit Facilities, no effective financing statement or other Perfection Document similar in effect, nor any other Perfection Action, covering all or any part of the Collateral purported to be granted or taken by or on behalf of such Grantor (or by or on behalf of any other Person and which remains effective as against all or any part of the Collateral) will be on file in any recording office, delivered to another Person for filing 9 (whether upon the occurrence of a contingency or otherwise), or otherwise taken, as the case may be, except such as pertain to Permitted Liens and such as may have been filed for the benefit of, delivered to, or taken in favor of, the Administrative Agent for the benefit of the Secured Parties in connection with the security interests conferred hereunder. (f) Schedule 7(f) attached hereto contains true and complete information as to the information required to be contained in Schedule 2A.03 of the Credit Agreement by Section 2A.03 of the Credit Agreement. No Grantor shall change its name, change its jurisdiction of formation (whether by reincorporation, merger or otherwise), change the location of its chief executive office, utilize any additional location where tangible personal property Collateral (including Account Records and Account Documents) may be located, change or use any additional or different trade name or style, except in each case upon giving written notice to the Administrative Agent not later than ten (10) days after taking such action and taking or causing to be taken at such Grantor's expense all such Perfection Action, including the delivery of such Perfection Documents, as may be reasonably requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent for the benefit of the Secured Parties in Collateral contemplated hereunder. (g) No Grantor shall engage in any consignment transaction in respect of any of the Collateral, whether as consignee or consignor, without the prior written consent of the Administrative Agent in each instance. (h) No Grantor shall cause, suffer or permit any of the tangible personal property Collateral (i) to be evidenced by any document of title (except for shipping documents as necessary or customary to effect the receipt of raw materials or components or the delivery of inventory to customers, in each case in the ordinary course of business) or (ii) to be in the possession, custody or control of any warehouseman or other bailee unless such location and Person are set forth on Schedule 7(f) or the Administrative Agent shall have received not less than 30 days' prior written notice of each such transaction, the Administrative Agent shall have received a duly executed Qualifying Control Agreement from such bailee, and the Grantor shall have caused at its expense to be prepared and executed such additional Perfection Documents and to be taken such other Perfection Action as the Administrative Agent may deem necessary or advisable to carry out the transactions contemplated by this Security Agreement. (i) No tangible personal property Collateral is or shall be located at any location that is leased by such Grantor from any other Person, unless (x) such location and lessor is set forth on Schedule 7(f) attached hereto or such Grantor provides written notice of such location and lessor to the Administrative Agent not later than ten (10) days after locating such tangible personal property at such location, (y) unless otherwise agreed to by the Administrative Agent, such lessor acknowledges the Lien in favor of the Administrative Agent for the benefit of the Secured Parties conferred hereunder and waives its statutory and consensual liens and rights with respect to such Collateral in form and substance acceptable to the Administrative Agent and delivered in writing to 10 the Administrative Agent prior to any Collateral being located at any such location, and (z) the Grantor shall have caused at its expense to be prepared and executed such additional Perfection Documents and to be taken such other Perfection Action as the Administrative Agent may deem necessary or advisable to carry out the transactions contemplated by this Security Agreement. 8. INSPECTION. The Administrative Agent (by any of its officers, employees and agents), on behalf of the Secured Parties, shall have the right upon prior notice to an executive officer of any Grantor, and at any reasonable times during such Grantor's usual business hours, at the expense of the Borrower, to inspect the Collateral, all records related thereto (and to make extracts or copies from such records), and the premises upon which any of the Collateral is located, to discuss such Grantor's affairs and finances with any Person (other than Persons obligated on any Accounts ("Account Debtors") except as expressly otherwise permitted in the Loan Documents) and to verify with any Person other than (except as expressly otherwise permitted in the Loan Documents) Account Debtors the amount, quality, quantity, value and condition of, or any other matter relating to, the Collateral and, if an Event of Default has occurred and is continuing, to discuss such Grantor's affairs and finances with such Grantor's Account Debtors and to verify the amount, quality, value and condition of, or any other matter relating to, the Collateral with such Account Debtors. Upon or after the occurrence and during the continuation of an Event of Default, the Administrative Agent may at any time and from time to time employ and maintain on such Grantor's premises a custodian selected by the Administrative Agent who shall have full authority, to the extent permitted to the Administrative Agent under this Security Agreement or the other Loan Documents, to do all acts necessary to protect the Administrative Agent's (for the benefit of the Secured Parties) interest. All expenses incurred by the Administrative Agent, on behalf of the Secured Parties, by reason of the employment of such custodian shall be paid by such Grantor on demand from time to time and shall be added to the Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. 9. SPECIFIC COLLATERAL. (a) ACCOUNTS. With respect to its Accounts whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall keep accurate and complete records of its Accounts ("Account Records") and from time to time at reasonable intervals designated by the Administrative Agent such Grantor shall provide the Administrative Agent with a schedule of Accounts in form and substance acceptable to the Administrative Agent describing all Accounts created or acquired by such Grantor ("Schedule of Accounts"); provided, however, that such Grantor's failure to execute and deliver any such Schedule of Accounts shall not affect or limit the Administrative Agent's security interest or other rights in and to any Accounts for the benefit of the Secured Parties. If requested by the Administrative Agent, each Grantor shall furnish the Administrative Agent with 11 copies of proof of delivery and other documents relating to the Accounts so scheduled, including without limitation repayment histories and present status reports (collectively, "Account Documents") and such other matter and information relating to the status of then existing Accounts as the Administrative Agent shall request. (ii) All Account Records and Account Documents are and shall at all times be located only at such Grantor's current chief executive office as set forth on Schedule 7(f) attached hereto, such other locations as are specifically identified on Schedule 7(f) attached hereto as an "Account Documents location," or as to which the Grantor has complied with Section 7(f) hereof. (iii) The Accounts are genuine, are in all respects what they purport to be, are not evidenced by an instrument or document or, if evidenced by an instrument or document, are only evidenced by one original instrument or document. (iv) The Accounts cover bona fide sales, leases, licenses or other dispositions of Inventory or other property or property rights usually dealt in by such Grantor, or the rendition by such Grantor of services, to an Account Debtor in the ordinary course of business. (v) The amounts of the face value of any Account shown or reflected on any Schedule of Accounts, invoice statement, or certificate delivered to the Administrative Agent, are actually owing to such Grantor and are not contingent for any reason. Other than as set forth on a supplemental schedule maintained and delivered by the applicable Grantor to the Administrative Agent with the applicable Schedule of Accounts (the "Supplemental Schedule"), there are no setoffs, discounts, allowances, claims, counterclaims or disputes of any kind or description in an aggregate amount greater than 3% of the face value of all Accounts shown on the Schedule of Accounts existing or asserted with respect thereto. (vi) Except for conditions generally applicable to such Grantor's industry and markets, there are no facts, events, or occurrences known to such Grantor pertaining particularly to any Accounts which are reasonably expected to materially impair in any way the validity, collectibility or enforcement of Accounts that would reasonably be likely, in the aggregate, to be of material economic value, or in the aggregate materially reduce the amount payable thereunder from the amount of the invoice face value shown on any Schedule of Accounts, or on any certificate, contract, invoice or statement delivered to the Administrative Agent with respect thereto. (vii) The property or services giving rise thereto are not, and were not at the time of the sale or performance thereof, subject to any Lien, claim, 12 encumbrance or security interest, except those of the Administrative Agent for the benefit of Secured Parties and Permitted Liens. (viii) With respect to Accounts that are shown on any Schedule of Accounts, in the event any amounts due and owing in excess of $1,000,000 individually, or $2,000,000 in the aggregate amount, are in dispute between any Account Debtor and the applicable Grantor (which shall include without limitation any dispute in which an offset claim or counterclaim may result), unless such disputed amount is set forth and described on the applicable Supplemental Schedule, such Grantor shall provide the Administrative Agent with written notice thereof as soon as practicable, explaining in detail the reason for the dispute, all claims related thereto and the amount in controversy. (b) INVENTORY. With respect to its Inventory whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall keep accurate and complete records of Inventory in commercially reasonable detail in the ordinary course of its business, and shall furnish to the Administrative Agent from time to time at reasonable intervals designated by the Administrative Agent, a current schedule of Inventory ("Schedule of Inventory") based upon its most recent physical inventory and its daily inventory records. Each Grantor shall conduct a physical inventory no less frequently than annually, and shall furnish to the Administrative Agent such other documents and reports thereof as the Administrative Agent shall reasonably request with respect to the Inventory. (ii) All Inventory shall at all times be located only at such Grantor's locations as set forth on Schedule 7(f) attached hereto or at such other locations as to which such Grantor has complied with Section 7(f) hereof. (c) EQUIPMENT. With respect to its Equipment whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) The Grantors, as soon as practicable following a request therefor by the Administrative Agent, shall deliver to the Administrative Agent any and all evidence of ownership of any of the Equipment (including without limitation certificates of title and applications for title). (ii) The Grantors shall maintain accurate, itemized records describing the kind, type, quantity and value of its Equipment and shall furnish the Administrative Agent upon request with a current schedule containing the foregoing information, but, other than during the continuance of an Event of Default, not more often than once per fiscal quarter. 13 (iii) All Equipment is and shall at all times be located only at such Grantor's locations as set forth on Schedule 7(f) attached hereto or at such other locations as to which such Grantor has complied with Section 7(f) hereof. No Grantor shall, other than to the extent not prohibited by the Credit Agreement or any of the other Loan Documents, sell, lease, transfer, dispose of or remove any Equipment (other than motor vehicles) from such locations. (d) SUPPORTING OBLIGATIONS. With respect to its Supporting Obligations whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall (A) maintain at all times, and furnish to the Administrative Agent from time to time at the Administrative Agent's request, a current list identifying in reasonable detail each Supporting Obligation relating to any Collateral from a single obligor in excess of $1,000,000, and (B) upon the request of the Administrative Agent from time to time following the occurrence and during the continuance of any Event of Default, deliver to the Administrative Agent the originals of all documents evidencing or constituting Supporting Obligations, together with such other documentation (executed as appropriate by the Grantor) and information as may be necessary to enable the Administrative Agent to realize upon the Supporting Obligations in accordance with their respective terms or transfer the Supporting Obligations as may be permitted under the Loan Documents or by applicable law. (ii) With respect to each letter of credit giving rise to Letter-of-Credit Rights that has an aggregate stated amount available to be drawn in excess of $1,000,000, each Grantor shall, within thirty (30) days of the issuance of each such letter of credit, cause the issuer thereof to execute and deliver to the Administrative Agent a Qualifying Control Agreement. (iii) With respect to each transferable letter of credit giving rise to Letter-of-Credit Rights that has an aggregate stated amount available to be drawn in excess of $1,000,000, each Grantor shall, within thirty (30) days of the issuance of each such letter of credit, deliver to the Administrative Agent a duly executed, undated transfer form in blank sufficient in form and substance under the terms of the related letter of credit to effect, upon completion and delivery to the letter of credit issuer together with any required fee, the transfer of such letter of credit to the transferee identified in such form. Each Grantor hereby expressly authorizes the Administrative Agent following the occurrence and during the continuance of any Event of Default to complete and tender each such transfer form as transferor in its own name or in the name, place and stead of the Grantor in order to effect any such transfer, either to the Administrative Agent or to another transferee, as the case may be, in connection with any sale or other disposition of Collateral or for any other purpose permitted under the Loan Documents or by applicable law. 14 (e) INVESTMENT PROPERTY. With respect to its Investment Property whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Schedule 9(e) attached hereto contains a true and complete description of (x) the name and address of each securities intermediary with which such Grantor maintains a securities account in which Investment Property is or may at any time be credited or maintained, and (y) all other Investment Property of such Grantor other than interests in Subsidiaries in which such Grantor has granted a Lien to the Administrative Agent for the benefit of the Secured Parties pursuant to a Pledge Agreement. (ii) Except with the express prior written consent of the Administrative Agent in each instance as to the form of the Investment Property or the required deliveries thereto set forth below, all Investment Property other than interests in Subsidiaries in which such Grantor has granted a Lien to the Administrative Agent for the benefit of the Secured Parties pursuant to a Pledge Agreement shall be maintained at all times in the form of (A) certificated securities, which certificates shall have been delivered to the Administrative Agent together with duly executed undated stock powers endorsed in blank pertaining thereto, or (B) security entitlements credited to one or more securities accounts as to each of which the Administrative Agent has received (1) copies of the account agreement between the applicable securities intermediary and the Grantor and the most recent statement of account pertaining to such securities account (each certified to be true and correct by an officer of the Grantor) and (2) a Qualifying Control Agreement from the applicable securities intermediary which remains in full force and effect and as to which the Administrative Agent has not received any notice of termination. Without limiting the generality of the foregoing, no Grantor shall cause, suffer or permit any Investment Property to be credited to or maintained in any securities account not listed on Schedule 9(e) attached hereto except in each case upon giving not less than thirty (30) days' prior written notice to the Administrative Agent and taking or causing to be taken at such Grantor's expense all such Perfection Action, including the delivery of such Perfection Documents, as may be reasonably requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent for the benefit of the Secured Parties in Collateral contemplated hereunder. (iii) All dividends and other distributions with respect to any of the Investment Property shall be subject to the security interest conferred hereunder, provided, however, that cash dividends paid to a Grantor as record owner of the Investment Property may be disbursed to and retained by such Grantor so long as no Event of Default shall have occurred and be continuing, free from any Lien hereunder. 15 (iv) So long as no Event of Default shall have occurred and be continuing, the registration of Investment Property in the name of a Grantor as record and beneficial owner shall not be changed and such Grantor shall be entitled to exercise all voting and other rights and powers pertaining to Investment Property for all purposes not inconsistent with the terms hereof or of any Qualifying Control Agreement relating thereto. (v) Upon the occurrence and during the continuance of any Event of Default, at the option of the Administrative Agent, all rights of the Grantors to exercise the voting or consensual rights and powers which it is authorized to exercise pursuant to clause (iv) immediately above shall cease and the Administrative Agent may thereupon (but shall not be obligated to), at its request, cause such Collateral to be registered in the name of the Administrative Agent or its nominee or agent for the benefit of the Secured Parties and/or exercise such voting or consensual rights and powers as appertain to ownership of such Collateral, and to that end each Grantor hereby appoints the Administrative Agent as its proxy, with full power of substitution, to vote and exercise all other rights as a shareholder with respect to such Investment Property upon the occurrence and during the continuance of any Event of Default, which proxy is coupled with an interest and is irrevocable until the Facility Termination Date, and each Grantor hereby agrees to provide such further proxies as the Administrative Agent may request; provided, however, that the Administrative Agent in its discretion may from time to time refrain from exercising, and shall not be obligated to exercise, any such voting or consensual rights or such proxy. For purposes of this Security Agreement, "Facility Termination Date" means the date as of which all of the following shall have occurred: (a) the Borrower shall have permanently terminated the credit facilities under the Loan Documents by final payment in full of all Outstanding Amounts, together with all accrued and unpaid interest and fees thereon, other than (i) the undrawn portion of Letters of Credit and (ii) all letter of credit fees relating thereto accruing after such date (which fees shall be payable solely for the account of the L/C Issuer and shall be computed (based on interest rates then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made; (b) all Related Swap Contracts shall have been terminated, expired or Cash Collateralized; (c) all Commitments shall have terminated or expired; and (d) the Borrower and each other Loan Party shall have fully, finally and irrevocably paid and satisfied in full all of their respective obligations and liabilities arising under the Loan Documents, including with respect to the Borrower and its Obligations (except for future Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Loan Party that may be owing to any Agent-Related Person or any Lender pursuant to the Loan Documents and expressly survive termination of the Credit Agreement). 16 (vi) Upon the occurrence and during the continuance of any Event of Default, all rights of the Grantors to receive and retain cash dividends and other distributions upon or in respect to Investment Property pursuant to clause (iii) above shall cease and shall thereupon be vested in the Administrative Agent for the benefit of the Secured Parties, and each Grantor shall, or shall cause, all such cash dividends and other distributions with respect to the Investment Property to be promptly delivered to the Administrative Agent (together, if the Administrative Agent shall request, with any documents related thereto) to be held, released or disposed of by it hereunder or, at the option of the Administrative Agent, to be applied to the Secured Obligations. (f) DEPOSIT ACCOUNTS. With respect to its Deposit Accounts whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Schedule 9(f) attached hereto contains a true and complete description of (x) the name and address of each depositary institution with which such Grantor maintains a Deposit Account. (ii) Except with the express prior written consent of the Administrative Agent in each instance, all Deposit Accounts shall be maintained at all times with depositary institutions as to which the Administrative Agent shall have received a Qualifying Control Agreement. Without limiting the generality of the foregoing, no Grantor shall cause, suffer or permit (x) any deposit in excess of $500,000 to be evidenced by a certificate of deposit unless such certificate of deposit is a negotiable instrument and immediately upon receipt thereof such certificate shall have been delivered to the Administrative Agent, together with a duly executed undated assignment in blank affixed thereto, or (y) any Deposit Account not listed on Schedule 9(f) attached hereto to be opened or maintained except in each case upon giving not less than two business days' prior written notice to the Administrative Agent and taking or causing to be taken at such Grantor's expense all such Perfection Action, including the delivery of such Perfection Documents, as may be reasonably requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent for the benefit of the Secured Parties in Collateral contemplated hereunder; provided that no Perfection Action need be taken, or Perfection Documents delivered, with respect to Deposit Accounts that are specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Grantor's employees, but such exclusion shall apply only so long as the amount on deposit in such Deposit Account does not at any time exceed the amount that is reasonably required for such purposes. (g) CHATTEL PAPER. With respect to its Chattel Paper whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: 17 (i) Each Grantor shall at all times retain sole physical possession of the originals of all Chattel Paper (other than electronic Chattel Paper and the electronic components of hybrid Chattel Paper); provided, however, that (x) upon the request of the Administrative Agent upon the occurrence and during the continuance of any Event of Default, such Grantor shall immediately deliver physical possession of such Chattel Paper to the Administrative Agent or its designee, and (y) in the event that there shall be created more than one original counterpart of any physical document that alone or in conjunction with any other physical or electronic document constitutes Chattel Paper, then such counterparts shall be numbered consecutively starting with "1" and such Grantor shall retain the counterpart numbered "1". (ii) All counterparts of all tangible Chattel Paper (and the tangible components of hybrid Chattel Paper) shall immediately upon the creation or acquisition thereof by any Grantor be conspicuously legended as follows: "A FIRST PRIORITY SECURITY INTEREST IN THIS CHATTEL PAPER HAS BEEN GRANTED TO BANK OF AMERICA, N.A., FOR ITSELF AND AS ADMINISTRATIVE AGENT FOR CERTAIN LENDERS PURSUANT TO A SECURITY AGREEMENT DATED AS OF MAY 15, 2002 AS AMENDED FROM TIME TO TIME. NO SECURITY INTEREST OR OTHER INTEREST IN FAVOR OF ANY OTHER PERSON MAY BE CREATED BY THE TRANSFER OF PHYSICAL POSSESSION OF THIS CHATTEL PAPER OR OF ANY COUNTERPART HEREOF EXCEPT BY OR WITH THE CONSENT OF THE AFORESAID ADMINISTRATIVE AGENT AS PROVIDED IN SUCH SECURITY AGREEMENT." In the case of electronic Chattel Paper (including the electronic components of hybrid Chattel Paper), no Grantor shall create or acquire any such Chattel Paper unless, prior to such acquisition or creation, it shall have taken such Perfection Action as the Administrative Agent may require to perfect by control the security interest of the Administrative Agent for the benefit of the Secured Parties in such Collateral. (iii) Other than in the ordinary course of business and in keeping with reasonable and customary practice, no Grantor shall amend, modify, waive or terminate any provision of, or fail to exercise promptly and diligently each material right or remedy conferred under or in connection with, any Chattel Paper, in any case in such a manner as could reasonably be expected to materially adversely affect the value of affected Chattel Paper as collateral. (h) INSTRUMENTS. With respect to its Instruments whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Each Grantor shall (i) maintain at all times, and furnish to the Administrative Agent from time to time at the Administrative Agent's reasonable request, a current list identifying in reasonable detail Instruments of which such 18 Grantor is the payee or holder and having a face amount payable in excess of $250,000, and (ii) upon the request of the Administrative Agent from time to time following the occurrence and during the continuance of any Event of Default, deliver to the Administrative Agent the originals of all such Instruments, together with duly executed undated endorsements in blank affixed thereto and such other documentation and information as may be necessary to enable the Administrative Agent to realize upon the Instruments in accordance with their respective terms or transfer the Instruments as may be permitted under the Loan Documents or by applicable law. (ii) Other than in the ordinary course of business and in keeping with reasonable and customary practice, no Grantor shall amend, modify, waive or terminate any provision of, or fail to exercise promptly and diligently each material right or remedy conferred under or in connection with, any Instrument, in any case in such a manner as could reasonably be expected to materially adversely affect the value of affected Instrument as collateral. (i) COMMERCIAL TORT CLAIMS. With respect to its Commercial Tort Claims whether now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Schedule 9(i) attached hereto contains a true and complete list of all Commercial Tort Claims in which any Grantor has an interest and which have been identified by a Grantor as of the Closing Date, or as of any later date on which such Schedule 9(i) is updated either by virtue of the delivery of a Security Joinder Agreement or by virtue of subection (ii) below or any other provision of this Security Agreement, and as to which the applicable Grantor believes in good faith there exists the possibility of recovery (including by way of settlement) of monetary relief in excess of $1,000,000 ("Grantor Claims"). (ii) In the event that any Grantor at any time has an interest in any Grantor Claims not listed on Schedule 9(i) at such time, (A) such Grantor shall not later than ten (10) days after obtaining such an interest in a Grantor Claim, give written notice to the Administrative Agent of the making of such Grantor Claim, including the name of the parties thereto and a description of the cause of action and the claim for relief, and (B) to the extent required by the Administrative Agent, take such Perfection Action (including adding such Grantor Claim to Schedule 9(i)), and deliver such Perfection Documents, and do all such other things as the Administrative Agent may reasonably request, to perfect the security interest of the Administrative Agent in the Grantor Claim and Commercial Tort Claim as Collateral hereunder. (j) INTERNET PROPERTY RIGHTS. With respect to its rights, titles and interests in and to any internet domain names or registration rights relating thereto, and any internet websites or the content thereof (collectively, "Internet Property Rights") whether 19 now existing or hereafter created or acquired and wheresoever located, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) Schedule 9(j) attached hereto contains a true and complete description of (t) each internet domain name registered to such Grantor or in which such Grantor has ownership, operating or registration rights, (u) the name and address of the registrar for such internet domain name, (v) the registration identification information for such internet domain name, (w) the name of each internet website operated (whether individually or jointly with others) by such Grantor, (x) the name and address of each internet service provider through whom each such website is operated, (y) the name and address of each operator of each other internet site, internet search engine, internet directory or Web browser with whom such Grantor maintains any advertising or linking relationship which is material to the operation of or flow of internet traffic to such Grantor's website, and (z) each technology licensing and other agreement that is material either to the operation of, or flow of internet traffic to, such Grantor's website or to the advertising and linking relationships described in clause (y), and the name and address of each other party to such agreement. (ii) Such Grantor shall cause to be delivered to the Administrative Agent at or prior to the Closing Date with respect to each internet domain name registered to such Grantor an undated transfer document, duly executed in blank by such Grantor and in the form required by the applicable internet domain name registrar, sufficient to effect the transfer of each internet domain name to the transferee thereof named in such transfer form upon delivery to such registrar. Without limiting the generality of the foregoing, no Grantor shall acquire any rights to any internet domain name not listed on Schedule 9(j) attached hereto except in each case upon giving written notice thereof to the Administrative Agent not later than ten (10) days after such acquisition, which notice shall be accompanied by an appropriate supplement to Schedule 9(j) reflecting such additional name, the delivery of additional executed internet domain name transfer documents executed in blank with respect thereto, and taking or causing to be taken at such Grantor's expense all such Perfection Action, including the delivery of such Perfection Documents, as may be reasonably requested by the Administrative Agent to perfect or protect, or maintain the perfection and priority of, the Lien of the Administrative Agent for the benefit of the Secured Parties in Collateral contemplated hereunder. Without limiting the foregoing, each Grantor shall furnish to the Administrative Agent and the Lenders such supplements to Schedule 9(j) from time to time as shall be necessary to keep such Schedule true and complete at all times. (iii) So long as no Event of Default shall have occurred and be continuing, the registration of Internet Property Rights in the name of a Grantor shall not be changed and such Grantor shall be entitled to exercise all rights and powers with respect thereto not inconsistent with the terms hereof. 20 (iv) Each Grantor hereby expressly authorizes the Administrative Agent following the occurrence and during the continuance of any Event of Default to (i) complete and tender each internet domain name transfer document in its own name or in the name, place and stead of the Grantor in order to effect the transfer of any internet domain name registration, either to the Administrative Agent or to another transferee, as the case may be, and (ii) maintain, obtain access to, and continue to operate, in its own name or in the name, place and stead of such Grantor, such Grantor's internet website and the contents thereof, and all related advertising, linking and technology licensing and other contractual relationships, in each case in connection with the maintenance, preservation, operation, sale or other disposition of Collateral or for any other purpose permitted under the Loan Documents or by applicable law. (j) EXCLUDED COLLATERAL. With respect to any Grantor's right, title and interest in and to any asset that constitutes Excluded Collateral, each Grantor represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties that: (i) to the extent any asset constitutes Excluded Collateral solely by reason of consents and/or notices being required in order for a security interest therein to be granted, upon the reasonable request of the Administrative Agent with respect to any particular asset (other than any interest in WAND unless expressly agreed to with the Borrower), the applicable Grantor shall use its best efforts, including taking all actions reasonably requested by the Administrative Agent in connection therewith, at its sole cost and expense, to obtain such consents and give such notices; (ii) to the extent at any time any item of Excluded Collateral becomes Collateral pursuant to the terms of this Security Agreement, the applicable Grantor shall take all Perfection Action, and deliver all Perfection Documents, and do all such other things as the Administrative Agent may reasonably request to perfect the security interest of the Administrative Agent in such interest as Collateral hereunder; (iii) no interest of any Grantor in WAND (A) constitutes a "security" under Article 8 (including by election of WAND), or (B) is held or maintained in the form of a security entitlement or credited to a securities account; and (iv) no Grantor shall at any time take any action, without the consent of the Administrative Agent, to (A) elect to have, or othewise cause, any interest in WAND constitute a "security" under Article 8 of the applicable Uniform Commercial Code, (B) permit any interest in WAND to be represented by a certificate or to be held or maintained in the form of a security entitlement or credited to a securities account. 21 10. CASUALTY AND LIABILITY INSURANCE REQUIRED. (a) Each Grantor will keep the Collateral continuously insured against such risks as are customarily insured against by businesses of like size and type engaged in the same or similar operations including: (i) casualty insurance on the Inventory and the Equipment (including self-insurance with respect to motor vehicles) in an amount not less than the full insurable value thereof, against loss or damage by theft, fire, lightning and other hazards ordinarily included under uniform broad form standard extended coverage policies, limited only as may be provided in the standard broad form of extended coverage endorsement at the time in use in the states in which the Collateral is located; (ii) comprehensive general liability insurance against claims for bodily injury, death or property damage occurring with or about such Collateral (such coverage to include provisions waiving subrogation against the Secured Parties), with the Administrative Agent and the Lenders as additional insureds thereunder, in amounts as shall be reasonably satisfactory to Administrative Agent; (iii) liability insurance with respect to the operation of its facilities under the workers' compensation laws of the states in which such Collateral is located, in amounts as shall be reasonably satisfactory to Administrative Agent; and (iv) business interruption insurance in amounts as shall be reasonably satisfactory to Administrative Agent. (b) Each insurance policy obtained in satisfaction of the requirements of Section 10(a): (i) may be provided by blanket policies now or hereafter maintained by each or any Grantor or by the Borrower; (ii) shall be issued by such insurer (or insurers) as shall be financially responsible, of recognized standing and reasonably acceptable to the Administrative Agent; (iii) shall be in such form and have such provisions (including without limitation the loss payable clause, the waiver of subrogation clause, the deductible amount, if any, and the standard mortgagee endorsement clause) as are generally considered standard provisions for the type of insurance involved and are reasonably acceptable in all respects to the Administrative Agent; (iv) shall prohibit cancellation or substantial modification, termination or lapse in coverage by the insurer without at least 30 days' prior written notice to 22 the Administrative Agent, except for non-payment of premium, as to which such policies shall provide for at least ten (10) days' prior written notice to the Administrative Agent; and (v) without limiting the generality of the foregoing, all insurance policies where applicable under Section 10(a)(i) carried on the Collateral shall name the Administrative Agent, for the benefit of the Secured Parties, as a loss payee and the Administrative Agent and Lenders as parties insured thereunder in respect of any claim for payment. (c) Prior to expiration of any such policy, such Grantor shall furnish the Administrative Agent with evidence satisfactory to the Administrative Agent that the policy or certificate has been renewed or replaced or is no longer required by this Security Agreement. (d) Each Grantor hereby makes, constitutes and appoints the Administrative Agent (and all officers, employees or agents designated by the Administrative Agent), for the benefit of the Secured Parties, as such Grantor's true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item or payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance, which appointment is coupled with an interest and is irrevocable; provided, however, that the powers pursuant to such appointment shall be exercisable only upon the occurrence and during the continuation of an Event of Default. (e) In the event such Grantor shall fail to maintain, or fail to cause to be maintained, the full insurance coverage required hereunder, the Administrative Agent may (but shall be under no obligation to), without waiving or releasing any Secured Obligation or Default or Event of Default by such Grantor hereunder, contract for the required policies of insurance and pay the premiums on the same; and all sums so disbursed by Administrative Agent, including reasonable Attorneys' Costs, court costs, expenses and other charges related thereto, shall be payable on demand by such Grantor to the Administrative Agent, shall be additional Secured Obligations secured by the Collateral, and (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (f) Each Grantor agrees that to the extent that it shall fail to maintain, or fail to cause to be maintained, the full insurance coverage required by Section 10(a), it shall in the event of any loss or casualty pay promptly to the Administrative Agent, for the benefit of the Secured Parties, to be held in a separate account for application in accordance with the provisions of Section 10(h), such amount as would have been received as Net Proceeds (as hereinafter defined) by the Administrative Agent, for the benefit of the Secured Parties, under the provisions of Section 10(h) had such insurance been carried to the extent required. 23 (g) The Net Proceeds of the insurance carried pursuant to the provisions of Sections 10(a)(ii) and 10(a)(iii) shall be applied by such Grantor toward satisfaction of the claim or liability with respect to which such insurance proceeds may be paid. (h) The Net Proceeds of the insurance carried with respect to the Collateral pursuant to the provisions of Section 10(a)(i) hereof shall be paid to such Grantor and held by such Grantor in a separate account and applied, as long as no Event of Default shall have occurred and be continuing, as follows: after any loss under any such insurance and payment of the proceeds of such insurance, each Grantor shall have a period of 120 days after payment of the insurance proceeds with respect to such loss to elect to either (x) repair or replace the Collateral so damaged, (y) deliver such Net Proceeds to the Administrative Agent, for the benefit of the Secured Parties, as additional Collateral or (z) apply such Net Proceeds to the acquisition of tangible assets constituting Collateral used or useful in the conduct of the business of such Grantor, subject to the provisions of this Security Agreement. If such Grantor elects to repair or replace the Collateral so damaged, such Grantor agrees the Collateral shall be repaired to a condition substantially similar to or of better quality or higher value than its condition prior to damage or replaced with Collateral in a condition substantially similar to or of better quality or higher value than the condition of the Collateral so replaced prior to damage. At all times during which an Event of Default shall have occurred and be continuing, the Administrative Agent shall be entitled to receive direct and immediate payment of the proceeds of such insurance and such Grantor shall take all action as the Administrative Agent may reasonably request to accomplish such payment. Notwithstanding the foregoing, in the event such Grantor shall receive any such proceeds, such Grantor shall immediately deliver such proceeds to such Administrative Agent for the benefit of the Secured Parties as additional Collateral, and pending such delivery shall hold such proceeds in trust for the benefit of the Secured Parties and keep the same segregated from its other funds. (i) "Net Proceeds" when used with respect to any insurance proceeds shall mean the gross proceeds from such proceeds, award or other amount, less all taxes, fees and expenses (including Attorneys' Costs) incurred in the realization thereof. (j) In case of any material damage to, destruction or loss of, or claim or proceeding against, all or any material part of the Collateral pledged hereunder by a Grantor, such Grantor shall give prompt notice thereof to the Administrative Agent. Each such notice shall describe generally the nature and extent of such damage, destruction, loss, claim or proceeding. Subject to Section 10(d), each Grantor is hereby authorized and empowered to adjust or compromise any loss under any such insurance other than losses relating to claims made directly against any Secured Party as to which the insurance described in Section 10(a)(ii) or (iii) is applicable. (k) The provisions contained in this Security Agreement pertaining to insurance shall be cumulative with any additional provisions imposing additional insurance requirements with respect to the Collateral or any other property on which a Lien is conferred under any Security Instrument. 24 11. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT. Upon and after an Event of Default, the Administrative Agent shall have the following rights and remedies on behalf of the Secured Parties in addition to any rights and remedies set forth elsewhere in this Security Agreement or the other Loan Documents, all of which may be exercised with or, if allowed by law, without notice to a Grantor: (a) All of the rights and remedies of a secured party under the UCC or under other applicable law, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, to the extent permitted by law, in addition to any other rights and remedies contained in this Security Agreement or any other Loan Document; (b) The right to foreclose the Liens and security interests created under this Security Agreement by any available judicial procedure or without judicial process; (c) The right to (i) enter upon the premises of a Grantor through self-help and without judicial process, without first obtaining a final judgment or giving such Grantor notice or opportunity for a hearing on the validity of the Administrative Agent's claim and without any obligation to pay rent to such Grantor, or any other place or places where any Collateral is located and kept, and remove the Collateral therefrom to the premises of the Administrative Agent or any agent of the Administrative Agent, for such time as the Administrative Agent may desire, in order effectively to collect or liquidate the Collateral, (ii) require such Grantor or any bailee or other agent of such Grantor to assemble the Collateral and make it available to the Administrative Agent at a place to be designated by the Administrative Agent that is reasonably convenient to both parties, and (iii) notify any or all Persons party to a Qualifying Control Agreement or who otherwise have possession of or control over any Collateral of the occurrence of an Event of Default and other appropriate circumstances, and exercise control over and take possession or custody of any or all Collateral in the possession, custody or control of such other Persons; (d) The right to (i) exercise all of a Grantor's rights and remedies with respect to the collection of Accounts, Chattel Paper, Instruments, Supporting Obligations and General Intangibles (collectively, "Payment Collateral"), including the right to demand payment thereof and enforce payment, by legal proceedings or otherwise; (ii) settle, adjust, compromise, extend or renew all or any Payment Collateral or any legal proceedings pertaining thereto; (iii) discharge and release all or any Payment Collateral; (iv) take control, in any manner, of any item of payment or proceeds referred to in Section 5 above; (v) prepare, file and sign a Grantor's name on any Proof of Claim in bankruptcy, notice of Lien, assignment or satisfaction of Lien or similar document in any action or proceeding adverse to any obligor under any Payment Collateral or otherwise in connection with any Payment Collateral; (vi) endorse the name of a Grantor upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to any Collateral; (vii) use the information recorded on or contained on a Grantor's internet website or otherwise in any data processing equipment and computer hardware and software relating to any Collateral to which a 25 Grantor has access; (viii) open such Grantor's mail and collect any and all amounts due to such Grantor from any Account Debtors or other obligor in respect of Payment Collateral; (ix) take over such Grantor's post office boxes or make other arrangements as the Administrative Agent, on behalf of the Secured Parties, deems necessary to receive such Grantor's mail, including notifying the post office authorities to change the address for delivery of such Grantor's mail to such address as the Administrative Agent, on behalf of the Secured Parties, may designate; (x) notify any or all Account Debtors or other obligor on any Payment Collateral that such Payment Collateral has been assigned to the Administrative Agent for the benefit of the Secured Parties and that Administrative Agent has a security interest therein for the benefit of the Secured Parties (provided that the Administrative Agent may at any time give such notice to an Account Debtor that is a department, agency or authority of the United States government); each Grantor hereby agrees that any such notice, in the Administrative Agent's sole discretion, may (but need not) be sent on such Grantor's stationery, in which event such Grantor shall co-sign such notice with the Administrative Agent if requested to do so by the Administrative Agent; and (xi) do all acts and things and execute all documents necessary, in Administrative Agent's sole discretion, to collect the Payment Collateral; and (e) The right to sell all or any Collateral in its then existing condition, or after any further manufacturing or processing thereof, at such time or times, at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, with or without representations and warranties, all as the Administrative Agent, in its sole discretion, may deem advisable. The Administrative Agent shall have the right to conduct such sales on a Grantor's premises or elsewhere and shall have the right to use a Grantor's premises without charge for such sales for such time or times as the Administrative Agent may see fit. The Administrative Agent may, if it deems it reasonable, postpone or adjourn any sale of the Collateral from time to time by an announcement at the time and place of such postponed or adjourned sale, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor agrees that the Administrative Agent has no obligation to preserve rights to the Collateral against prior parties or to marshal any Collateral for the benefit of any Person. To the extent not violative of any applicable Law or agreement to which such Grantor is a party or is bound or subject (provided any such agreement does not violate the Credit Agreement or any other Loan Document, and provided further that, other than contracts entered into in the ordinary course of its business, no Grantor shall enter into any such agreement after the Closing Date without the consent of the Administrative Agent), the Administrative Agent for the benefit of the Secured Parties is hereby granted an irrevocable fully paid license or other right (including each Grantor's rights under any license or any franchise agreement), each of which shall remain in full force and effect until the Facility Termination Date, to use, without charge, each of the labels, patents, copyrights, names, trade secrets, trade names, trademarks and advertising matter, or any property of a similar nature owned or licensed by any Grantor, as it pertains to the Collateral, in completing production of, advertising for sale and selling any Collateral. If any of the Collateral shall require repairs, maintenance, preparation or the like, or is in process or other unfinished state, the Administrative Agent shall have the right, but shall not be obligated, to perform such repairs, maintenance, preparation, 26 processing or completion of manufacturing for the purpose of putting the same in such saleable form as the Administrative Agent shall deem appropriate, but the Administrative Agent shall have the right to sell or dispose of the Collateral without such processing and no Grantor shall have any claim against the Administrative Agent for the value that may have been added to such Collateral with such processing. In addition, each Grantor agrees that in the event notice is necessary under applicable law, written notice mailed to such Grantor in the manner specified herein seven (7) days prior to the date of public sale of any of the Collateral or prior to the date after which any private sale or other disposition of any of the Collateral will be made shall constitute commercially reasonable notice to such Grantor. All notice is hereby waived with respect to any of the Collateral which threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Administrative Agent may purchase all or any part of the Collateral at public or, if permitted by law, private sale, free from any right of redemption which is hereby expressly waived by such Grantor and, in lieu of actual payment of such purchase price, may set off the amount of such price against the Secured Obligations. Each Grantor recognizes that the Administrative Agent may be unable to effect a public sale of certain of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state law, and may be otherwise delayed or adversely affected in effecting any sale by reason of present or future restrictions thereon imposed by governmental authorities ("Affected Collateral"), and that as a consequence of such prohibitions and restrictions the Administrative Agent may be compelled (i) to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire Affected Collateral for their own account, for investment and not with a view to the distribution or resale thereof, or (ii) to seek regulatory approval of any proposed sale or sales, or (iii) to limit the amount of Affected Collateral sold to any Person or group. Each Grantor agrees and acknowledges that private sales so made may be at prices and upon terms less favorable to such Grantor than if such Affected Collateral was sold either at public sales or at private sales not subject to other regulatory restrictions, and that the Administrative Agent has no obligation to delay the sale of any Affected Collateral for the period of time necessary to permit the Grantor or any other Person to register or otherwise qualify them under or exempt them from any applicable restriction, even if such Grantor or other Person would agree to register or otherwise qualify or exempt such Affected Collateral so as to permit a public sale under the Securities Act or applicable state law. Each Grantor further agrees, to the extent permitted by applicable law, that the use of private sales made under the foregoing circumstances to dispose of Affected Collateral shall be deemed to be dispositions in a commercially reasonable manner. Each Grantor hereby acknowledges that a ready market may not exist for Affected Collateral that is not traded on a national securities exchange or quoted on an automated quotation system. The net cash proceeds resulting from the collection, liquidation, sale, or other disposition of the Collateral shall be applied first to the expenses (including all Attorneys' Costs) of retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating and the like, and then to the satisfaction of all Secured Obligations in accordance with the terms of Section 2.14(c) of the Credit Agreement. Each Grantor shall be liable to the Administrative 27 Agent, for the benefit of the Secured Parties, and shall pay to the Administrative Agent, for the benefit of the Secured Parties, on demand any deficiency which may remain after such sale, disposition, collection or liquidation of the Collateral. The Administrative Agent shall provide prompt notice to the Borrower of its exercise of remedies under this Section 11, provided that such notice may be general in nature and neither the failure to give, nor any delay in giving, such notice shall have any effect on the validity or effectiveness of any action taken hereunder. 12. ATTORNEY-IN-FACT. Each Grantor hereby appoints the Administrative Agent as the Grantor's attorney-in-fact for the purposes of carrying out the provisions of this Security Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right and power (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (a) above; (c) to endorse such Grantor's name on any checks, notes, drafts or any other payment relating to or constituting proceeds of the Collateral which comes into the Administrative Agent's possession or the Administrative Agent's control, and deposit the same to the account of the Administrative Agent, for the benefit of the Secured Parties, on account and for payment of the Secured Obligations. (d) to file any claims or take any action or institute any proceedings that the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent, for the benefit of the Secured Parties, with respect to any of the Collateral; and (e) to execute, in connection with any sale or other disposition of Collateral provided for herein, any endorsement, assignments, or other instruments of conveyance or transfer with respect thereto. 13. REINSTATEMENT. The granting of a security interest in the Collateral and the other provisions hereof shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or is repaid by any Secured Party in whole or in part in good faith settlement of a pending or threatened avoidance claim, whether upon the insolvency, bankruptcy or reorganization of any Grantor or any other Loan Party or otherwise, all as though such payment had not been made. The provisions of this Section 13 shall survive repayment of all of the 28 Secured Obligations and the termination or expiration of this Security Agreement in any manner, including but not limited to termination upon occurrence of the Facility Termination Date. 14. CERTAIN WAIVERS BY THE GRANTORS. Each Grantor waives to the extent permitted by applicable law (a) any right to require any Secured Party or any other obligee of the Secured Obligations to (x) proceed against any Person or entity, including without limitation any Loan Party, (y) proceed against or exhaust any Collateral or other collateral for the Secured Obligations, or (z) pursue any other remedy in its power; (b) any defense arising by reason of any disability or other defense of any other Person, or by reason of the cessation from any cause whatsoever of the liability of any other Person or entity, (c) any right of subrogation, (d) any right to enforce any remedy which any Secured Party or any other obligee of the Secured Obligations now has or may hereafter have against any other Person and any benefit of and any right to participate in any collateral or security whatsoever now or hereafter held by the Administrative Agent for the benefit of the Secured Parties. Each Grantor authorizes each Secured Party and each other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Loan Documents from time to time to: (i) take and hold security, other than the Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Collateral herein described or any part thereof or any such other security; and (ii) apply such Collateral or other security and direct the order or manner of sale thereof as such Secured Party or obligee in its discretion may determine. The Administrative Agent may at any time deliver (without representation, recourse or warranty) the Collateral or any part thereof to a Grantor and the receipt thereof by such Grantor shall be a complete and full acquittance for the Collateral so delivered, and the Administrative Agent shall thereafter be discharged from any liability or responsibility therefor. 15. CONTINUED POWERS. Until the Facility Termination Date shall have occurred, and to the extent permitted by applicable Law, the power of sale and other rights, powers and remedies granted to the Administrative Agent for the benefit of the Secured Parties hereunder shall continue to exist and may be exercised by the Administrative Agent at any time and from time to time irrespective of the fact that any of the Secured Obligations or any part thereof may have become barred by any statute of limitations or that any part of the liability of any Grantor may have ceased. 16. OTHER RIGHTS. The rights, powers and remedies given to the Administrative Agent for the benefit of the Secured Parties by this Security Agreement shall be in addition to all rights, powers and remedies given to the Administrative Agent or any Secured Party under any other Loan Document or by virtue of any statute or rule of law. Any forbearance or failure or delay by the Administrative Agent in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of the Secured Parties shall continue in full force and effect until such right, power or remedy is specifically waived in accordance with the terms of the Credit Agreement. 29 17. ANTI-MARSHALING PROVISIONS. The right is hereby given by each Grantor to the Administrative Agent, for the benefit of the Secured Parties, to make releases (whether in whole or in part) of all or any part of the Collateral agreeable to the Administrative Agent without notice to, or the consent, approval or agreement of other parties and interests, including junior lienors, which releases shall not impair in any manner the validity of or priority of the Liens and security interests in the remaining Collateral conferred hereunder, nor release any Grantor from personal liability for the Secured Obligations. Notwithstanding the existence of any other security interest in the Collateral held by the Administrative Agent, for the benefit of the Secured Parties, the Administrative Agent shall have the right to determine the order in which any or all of the Collateral shall be subjected to the remedies provided in this Security Agreement. To the extent permitted by applicable Law, each Grantor hereby waives any and all right to require the marshaling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein or in any other Loan Document. 18. ENTIRE AGREEMENT. This Security Agreement and each Security Joinder Agreement, together with the Credit Agreement and other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, except as contained in the Loan Documents. The express terms hereof and of the Security Joinder Agreements control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof or thereof. Neither this Security Agreement nor any Security Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 19. THIRD PARTY RELIANCE. Each Grantor hereby consents and agrees that all issuers of or obligors in respect of any Collateral, and all securities intermediaries, warehousemen, bailees, public officials and other Persons having any interest in, possession of, control over or right, privilege, duty or discretion in respect of, any Collateral shall be entitled to accept the provisions hereof and of the Security Joinder Agreements as conclusive evidence of the right of the Administrative Agent, on behalf of the Secured Parties, to exercise its rights hereunder or thereunder with respect to the Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Grantor or any other Person to any of such Persons. 20. BINDING AGREEMENT; ASSIGNMENT. This Security Agreement and each Security Joinder Agreement, and the terms, covenants and conditions hereof and thereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns, except that no Grantor shall be permitted to assign this Security Agreement, any Security Joinder Agreement or any interest herein or therein or, except as expressly permitted herein or in the Credit Agreement, in the Collateral or any part thereof or interest therein. Without limiting the generality of the foregoing sentence of this Section 20, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to 30 such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.07 thereof (concerning assignments and participations). All references herein to the Administrative Agent and to the Secured Parties shall include any successor thereof or permitted assignee, and any other obligees from time to time of the Secured Obligations. 21. RELATED SWAP CONTRACTS. All obligations of each Grantor under or in respect of Related Swap Contracts (which are not prohibited under the terms of the Credit Agreement) to which any Lender or any Affiliate of any Lender is a party, shall be deemed to be Secured Obligations secured hereby, and each Lender or Affiliate of a Lender party to any such Related Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Secured Obligations; provided, however, that such obligations shall cease to be Secured Obligations at such time as such Person (or Affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. No Person who obtains the benefit of any Lien by virtue of the provisions of this Section shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents. 22. SEVERABILITY. The provisions of this Security Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this Security Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 23. COUNTERPARTS. This Security Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Security Agreement to produce or account for more than one such counterpart executed by the Grantor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 23, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Security Agreement. 24. TERMINATION. (a) Subject to the provisions of Section 13, this Security Agreement and each Security Joinder Agreement, and all obligations of the Grantors hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date. Upon such termination of this Security Agreement, the Administrative Agent shall, at the request and sole expense of the Grantors, promptly deliver to the Grantors such termination statements and take such further actions as the Grantors may reasonably request to terminate of record, or otherwise to give appropriate notice of the termination of, any Lien conferred hereunder. 31 (b) In the event that all of the Subsidiary Securities issued by any Grantor are Disposed of by the Borrower and/or any Grantor, and such Disposition is permitted by the Credit Agreement, then all obligations of such disposed Grantor hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party, and the Administrative Agent shall, at the request and sole expense of the Grantors, promptly deliver such termination statements and take such further actions as may reasonably be requested to terminate of record, or otherwise to give appropriate notice of the termination of, any Lien conferred hereunder with respect to such disposed Grantor. 25. NOTICES. Any notice required or permitted hereunder shall be given (a) with respect to the Borrower, at the address for the giving of notice then in effect under the Credit Agreement, (b) with respect to any Grantor, at the address then in effect for the giving of notices to such Grantor under the Guaranty to which it is a party, and (c) with respect to the Administrative Agent or a Lender, at the Administrative Agent's address indicated in Schedule 10.02 of the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder. 26. JOINDER. Each Person who shall at any time execute and deliver to the Administrative Agent a Security Joinder Agreement substantially in the form attached as Exhibit A hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Grantor and shall have thereupon pursuant to Section 2 hereof granted a security interest in and collaterally assigned to the Administrative Agent for the benefit of the Secured Parties all Collateral in which it has at its Applicable Date or thereafter acquires any interest or the power to transfer, and all references herein and in the other Loan Documents to the Grantors or to the parties to this Security Agreement shall be deemed to include such Person as a Grantor hereunder. Each Security Joinder Agreement shall be accompanied by the Supplemental Schedules referred to therein, appropriately completed with information relating to the Grantor executing such Security Joinder Agreement and its property. Each of the applicable Schedules attached hereto shall be deemed amended and supplemented without further action by such information reflected on the Supplemental Schedules. 27. RULES OF INTERPRETATION. The rules of interpretation contained in Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this Security Agreement and each Security Joinder Agreement and are hereby incorporated by reference. All representations and warranties contained herein shall survive the delivery of documents and any Credit Extensions referred to herein or secured hereby. 28. RELEASE. Upon the Disposition of any item of Collateral, so long as such Disposition is permitted under Section 7.05 of the Credit Agreement and all conditions to such Disposition contained therein have been satisfied: (a) the Lien of the Administrative Agent for the benefit of the Secured Parties in such disposed Collateral shall, subject to the provision at the end of this subsection (a), be deemed to be released without any further action on the part of the Administrative Agent or the relevant Grantor, provided that in the event following any such Disposition 32 any Grantor shall thereafter acquire any interest in (or the power to transfer rights in) any asset that constituted Collateral hereunder prior to its Disposition and release from the security interests hereunder, the pledge, assignment and security interest granted hereunder shall be deemed to automatically apply and attach to such asset and it shall from such time forward continue to constitute Collateral hereunder notwithstanding any prior release; and (b) the Administrative Agent will (other than in connection with sales of Inventory in the ordinary course of business), at the Grantors' expense, execute and deliver to each Grantor such documents as such Grantor shall reasonably request on reasonable advance notice to evidence the release of such item of Collateral from the pledge, assignment and security interest granted hereunder, provided that such Grantor shall have delivered to the Collateral Agent a written request for release describing the item of Collateral and the terms of the Disposition thereof in reasonable detail, including the price thereof and any expenses in connection therewith. 28. GOVERNING LAW; WAIVERS. (a) THIS SECURITY AGREEMENT AND EACH SECURITY JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE; PROVIDED THAT (i) WITH RESPECT TO THOSE INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE, INCLUDING SECTION 9-301 OF THE UCC, REQUIRE THAT THE MANNER OF CREATION OF A SECURITY INTEREST IN SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF PERFECTION OR NONPERFECTION OR THE RULES GOVERNING PRIORITY OF SECURITY INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS, (ii) EACH CONTROL AGREEMENT (INCLUDING EACH QUALIFYING CONTROL AGREEMENT) APPLICABLE TO ANY SECURITIES ACCOUNT OR DEPOSIT ACCOUNT SHALL BE GOVERNED BY THE LAWS OF THE JURISDICTION SPECIFIED IN SUCH CONTROL AGREEMENT, OR OTHERWISE BY THE LAWS OF THE JURISDICTION THAT GOVERN THE SECURITIES ACCOUNT OR DEPOSIT ACCOUNT TO WHICH SUCH CONTROL AGREEMENT RELATES, AND (iii) IN THOSE INSTANCES IN WHICH THE LAWS OF THE JURISDICTION IN WHICH COLLATERAL IS LOCATED GOVERN MATTERS PERTAINING TO THE METHODS AND EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE GIVEN EFFECT WITH RESPECT TO SUCH MATTERS. (b) EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY 33 STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT OR A SECURITY JOINDER AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 25 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS SECURITY AGREEMENT OR ANY SECURITY JOINDER AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. 34 (f) EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [SIGNATURE PAGES FOLLOW.] 35 IN WITNESS WHEREOF, the parties have duly executed this Security Agreement on the day and year first written above. GRANTORS: BLOCK COMMUNICATIONS, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Managing Director ------------------------------------ BUCKEYE CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ ERIE COUNTY CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ BUCKEYE TELESYSTEMS, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ CORPORATE PROTECTION SERVICES, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ COMMUNITY COMMUNICATION SERVICES, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ PG PUBLISHING COMPANY By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ MONROE CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ LIMA COMMUNICATIONS CORPORATION By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ WLFI-TV, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: President ------------------------------------ INDEPENDENCE TELEVISION COMPANY By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ Security Agreement Signature Page 2 TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ METRO FIBER & CABLE CONSTRUCTION COMPANY By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Vice President ------------------------------------ IDAHO INDEPENDENT TELEVISION, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: Chairman ------------------------------------ CARS HOLDING, INC. By: /s/ Allan J. Block ------------------------------------ Name: Allan J. Block ------------------------------------ Title: President ------------------------------------ ACCESS TOLEDO, LTD. By: BLOCK COMMUNICATIONS, INC. By: /s/ Allan J. Block ------------------------------ Name: Allan J. Block ------------------------------ Title: Vice President ------------------------------ Security Agreement Signature Page 3 ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent for the Lenders By: /s/ Derrick C. Bell ------------------------------------ Name: Derrick C. Bell ------------------------------------ Title: Principal ------------------------------------ Security Agreement Signature Page 4 SCHEDULE 1(a) For purposes of this Security Agreement, a "Qualifying Control Agreement" shall mean each of the following, as applicable to the respective items or types of property in which the Grantor now has or may hereafter acquire an interest: (a) With respect to Investment Property credited to any securities account, an agreement executed by the applicable securities intermediary substantially in the form of Schedule 1(a)-A hereto or in such other form as may be consented to by the Administrative Agent in its discretion; (b) With respect to Deposit Accounts or tangible personal property Collateral in the possession, custody or control of any warehouseman or other bailee, an acknowledgment and agreement executed by the depositary institution or bailee (each, a "Custodian"), as the case may be, and (as to Deposit Accounts) the applicable Grantor, in form and substance acceptable to the Administrative Agent and in which the Custodian (i) acknowledges the Lien created hereunder (and, in the case of any Custodian of tangible personal property, that such Custodian holds such Collateral for the Administrative Agent for the benefit of the Secured Parties), (ii) agrees to discontinue accepting requests or demands from or on behalf of the applicable Grantor for access to or possession of any Collateral of which it is Custodian upon receipt of notice from the Administrative Agent that a Default or Event of Default has occurred and is continuing (a "Default Notice"), until such time as the Administrative Agent may furnish it with a subsequent notice that such Default or Event of Default has been cured or waived, (iii) agrees that it will comply with instructions from the Administrative Agent directing the disposition of the Collateral of which it is Custodian, without requiring further consent from the Grantor, following receipt of any Default Notice from the Administrative Agent, (iv) agrees that it will not consent to or acknowledge any Lien on Collateral of which it is Custodian in favor of any other Person and, as to Deposit Accounts only, agrees that it will not permit any withdrawals from such deposit accounts, until it receives notice from the Administrative Agent that all Liens on such Collateral in favor of the Secured Parties have been released or terminated, (v) agrees to waive or subordinate to the Lien conferred hereunder, on terms acceptable to the Administrative Agent, any lien, claim, or right of setoff or recoupment (whether statutory or consensual) in favor of the Custodian on any of the Collateral; provided, however, Deposit Account Custodians may retain a prior Lien solely for the payment of routine deposit account maintenance and activity charges, and (vi) in the case of any warehouseman or other bailee of tangible personal property collateral, agrees to deliver (and accompanies such agreement with any then existing) warehouse receipts or other Documents pertaining to such Collateral; (c) With respect to Letter-of-Credit Rights, an acknowledgment and agreement of the issuer or other applicable person nominated to accept drafts and or effect payment thereunder (the "Issuer") of the related letter of credit in form and substance acceptable to the Administrative Agent and in which the Issuer (i) consents to and acknowledges the Lien in favor of the Administrative Agent conferred hereunder in proceeds of drawings under the related letter of credit, (ii) agrees that it will not acknowledge any Lien in favor of any other Person on Letter-of-Credit Rights until it receives notice from the Administrative Agent that all Liens on such Collateral in favor of the Secured Parties have been released or terminated, and (iii) to the extent not inconsistent with the express terms of the related letter of credit, agrees that upon receipt of notice from the Administrative Agent that an Event of Default has occurred and is continuing, it will make all payments of drawings honored by it under the related letter of credit to the Administrative Agent, notwithstanding any contrary instruction received from the Grantor; and (d) With respect to any Investment Property in the form of uncertificated securities, an agreement of the issuer of such Investment Property in form and substance acceptable to the Administrative Agent sufficient to confer control (within the meaning of Section 9-106 of the UCC) over such property and containing such other terms and provisions as the Administrative Agent may reasonably request. S-2 SCHEDULE 1(a)-A ACCOUNT CONTROL AGREEMENT Bank of America, N.A., as Administrative Agent (in such capacity, the "Administrative Agent") for the Lenders (the "Lenders" and, together with the Administrative Agent, the "Secured Parties") under that certain Credit Agreement dated as of May 15, 2002 (as amended, supplemented or restated from time to time, the "Credit Agreement") among the Administrative Agent, the Lenders, and Block Communications, Inc., an Ohio corporation ("Debtor"), the undersigned Broker-Dealer ("Broker"), and Debtor hereby agree as follows: PREAMBLE: 1. Broker has established a securities account number __________ in the name of Debtor (the "Account"). 2. Debtor has granted the Administrative Agent a security interest in the Account Administrative Agent for the benefit of the Secured Parties pursuant to agreement. 3. Administrative Agent, Debtor and Broker are entering into this Agreement to provide for the control of the Account and to perfect the security interest of Administrative Agent in the Account. TERMS: SECTION 1. THE ACCOUNT. Broker hereby represents and warrants to Administrative Agent and Debtor that (a) the Account has been established in the name of Debtor as recited above, (b) Exhibit A hereto is a complete and accurate statement of the Account and the financial assets carried therein and any free credit balance thereunder as of the date thereof, (c) Exhibit A does not reflect any financial assets which are registered in the name of Debtor, payable to its order, or specially endorsed to it, which have not been endorsed to Broker or in blank, (d) the security entitlements arising out of the financial assets carried in the Account and such free credit balance are valid and legally binding obligations of Broker, and (e) except for the claims and interest of Administrative Agent and Debtor in the Account (subject to any claim in favor of Broker permitted under Section 2), Broker does not know any of claim to or interest in Account. Broker will treat all property held by it in the Account as financial assets under Article 8 of the Uniform Commercial Code of the State of New York (the "State"). SECTION 2. PRIORITY OF LIEN. Broker hereby acknowledges the security interest granted to Administrative Agent for the benefit of the Secured Parties by Debtor. Broker hereby confirms that the Account is a cash account and that it will not advance any margin or other credit to Debtor therein, either directly by executing purchase orders in excess of any credit balance or money market mutual funds held in the Account, executing sell orders on securities S-3 not held in the Account, or by allowing Debtor to trade in instruments such as options and commodities contracts that create similar obligations, nor hypothecate any securities carried in the Account. Broker hereby subordinates, to Administrative Agent's security interest in the Account and to the payment and performance of all obligations and liabilities of Debtor to any of the Secured Parties secured by the Account, all liens, encumbrances, claims and rights of setoff or recoupment it may have against the Account or any property in the Account and agrees that, except for payment of its customary fees and commissions pursuant to its agreement with Debtor pertaining to the Account (the "Customer Agreement") and for payment of the purchase price of property purchased for the Account in compliance with this Agreement, it will not assert any such lien, encumbrance, claim or right against the Account or any property in the Account. In the event that, notwithstanding the foregoing subordination, Broker shall receive any cash or other property in respect of any subordinated claim, lien, or right, Broker shall hold such cash or other property in trust for Administrative Agent and, pending delivery thereof to Administrative Agent, maintain such cash or other property in a segregated account. Broker will not agree with any third party that Broker will comply with entitlement orders concerning the Account originated by such third party without the prior written consent of Administrative Agent and Debtor. SECTION 3. CONTROL. Broker will comply with entitlement orders originated by Administrative Agent concerning the Account without further consent by Debtor. Except as otherwise provided in Section 2 above and 4 below, Broker may make trades of financial assets held in the Account at the direction of Debtor, or his authorized representatives, and comply with entitlement orders concerning the Account from Debtor, or its authorized representatives, until such time as Administrative Agent delivers a written notice to Broker that Administrative Agent is thereby exercising exclusive control over the Account. Such notice may be referred to herein as the "Notice of Exclusive Control". After Broker receives the Notice of Exclusive Control, it will immediately cease complying with entitlement orders or other directions concerning the Account originated by Debtor or its representatives. SECTION 4. NO WITHDRAWALS. Notwithstanding the provisions of Section 3 above, Broker shall neither accept nor comply with any entitlement order from Debtor withdrawing any financial assets from the Account nor deliver any such financial assets (or dividends or income received in respect of such property) to Debtor nor pay any free credit balance or other amount owing from Broker to Debtor with respect to the Account without the specific prior written consent of Administrative Agent, except that until Broker receives a Notice of Exclusive Control, Broker may distribute to Debtor all interest and regular cash dividends received in respect of property in the Account. SECTION 5. STATEMENTS, CONFIRMATIONS AND NOTICES OF ADVERSE Claims. Broker will send copies of all statements, confirmations and other correspondence concerning the Account simultaneously to each of Debtor and Administrative Agent at the address set forth on the signature pages of this Agreement. If any person asserts any lien, encumbrance or claim in or against the Account or in any financial asset carried therein adverse to Debtor or Administrative Agent, Broker will promptly notify Administrative Agent and Debtor thereof. S-4 SECTION 6. RESPONSIBILITY OF BROKER. Except for permitting a withdrawal or payment in violation of Section 4 above or advancing margin or other credit to Debtor in violation of Section 2 above, Broker shall have no responsibility or liability to Administrative Agent for making trades of financial assets held in the Account at the direction of Debtor, or his authorized representatives, or complying with entitlement orders concerning the Account from Debtor, or his authorized representatives, which are received by Broker before Broker receives a Notice of Exclusive Control. Broker shall have no responsibility or liability to Debtor for complying with a Notice of Exclusive Control or complying with entitlement orders concerning the Account originated by Administrative Agent. Broker shall have no duty to investigate or make any determination as to whether a default exists under the Credit Agreement or any other agreement between Debtor and any Secured Party and shall comply with a Notice of Exclusive Control even if it believes that no such default exists. This Agreement does not create any obligation or duty of Broker other than those expressly set forth herein. SECTION 7. TAX REPORTING. All items of income, gain, expense, and loss recognized in the Account shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name of taxpayer identification number of Debtor. SECTION 8. CUSTOMER AGREEMENT. In the event of a conflict between this Agreement and any other agreement between the Broker and the Debtor, the terms of this Agreement will prevail. Regardless of any provision in such agreement, the State shall be deemed to be Broker's location for the purposes of this Agreement and the perfection and priority of Administrative Agent's security interest in the Account. SECTION 9. TERMINATION. The rights and powers granted herein to Administrative Agent have been granted in order to perfect its security interest for the benefit of the Secured Parties in the Account, are powers coupled with an interest and will neither be affected by the death, dissolution or insolvency of Debtor nor by the lapse of time. The obligations and agreements of Broker under Section 2, 3, 4 and 5 above shall continue in effect until the security interest of Administrative Agent in the Account has been terminated and Administrative Agent has notified Broker of such termination in writing. Upon receipt of such notice the obligations of Broker under Section 2, 3, 4 and 5 above with respect to the operation and maintenance of the Account after the receipt of such notice shall terminate, Administrative Agent shall have no further right to originate entitlement orders concerning the Account and Broker may take such steps as Debtor may request to vest full ownership and control of Account in Debtor including, but not limited to, transferring all of the financial assets and credit balances in the Account to another securities account in the name of Debtor or its designee. Broker may terminate this Agreement only upon not less than thirty (30) days' prior written notice to Administrative Agent. SECTION 10. THIS AGREEMENT. This Agreement, the schedules and exhibits hereto and the agreements and instruments required to be executed and delivered hereunder set forth the entire agreement of the parties with respect to the subject matter hereof and supersede and discharge all prior agreements (written or oral) and negotiations and all contemporaneous oral agreements concerning such subject matter and negotiations. There are no oral conditions precedent to the effectiveness of this Agreement. S-5 SECTION 11. AMENDMENTS. No amendment, modification or termination of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by the party to be charged. SECTION 12. SEVERABILITY. If any term or provision set forth in this Agreement shall be invalid or unenforceable, the remainder of this Agreement, or the application of such terms or provisions to persons or circumstances, other than those to which it is held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted. SECTION 13. SUCCESSORS. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives, and the assignees of any Secured Party. SECTION 14. RULES OF CONSTRUCTION. In this Agreement, words in the singular number include the plural, and in the plural include the singular; words of the masculine gender include the feminine and the neuter, and when the sense so indicates words of the neuter gender may refer to any gender and the word "or" is disjunctive, but not exclusive. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit or describe the scope or intent of the provisions of this Agreement. SECTION 15. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth immediately following the signature of its authorized representative set forth below. Any party may change his address for notices in the manner set forth above. SECTION 16. FINANCIAL ASSETS. All property credited to the Account will be treated as financial assets under Article 8 of the Uniform Commercial Code of the State. SECTION 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart executed by the party against whom enforcement is sought. Any party hereto may execute this Agreement by signing and delivering one or more counterparts. SECTION 18. CHOICE OF LAW. The parties hereto agree that certain material events, occurrences and transactions relating to this Agreement bear a reasonable relationship to the State. The validity, terms, performance and enforcement of this Agreement shall be governed by those laws of the State which are applicable to agreements which are negotiated, executed, delivered and performed solely in the State. S-6 SIGNATURES: BANK OF AMERICA, N.A., as Administrative Agent By: ------------------------------------ Name: ------------------------------------ Title: ------------------------------------ Address for Notices: ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ Fax: ( ) ---- - -------- DEBTOR: By: ------------------------------------ Name: ------------------------------------ Title: ------------------------------------ Address for Notices: ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ Fax: ( ) ---- - -------- [BROKER NAME] By: ------------------------------------ Name: ------------------------------------ Title: ------------------------------------ Address for Notices: ------------------------------------------ ------------------------------------------ ------------------------------------------ ------------------------------------------ Fax: ( ) ---- - -------- S-7 EXHIBIT A FORM OF SECURITY JOINDER AGREEMENT SECURITY JOINDER AGREEMENT THIS SECURITY JOINDER AGREEMENT (the "Security Joinder Agreement"), dated as of _____________, 20__ is made by and between _______________________________, a ________________ (the "Subsidiary"), and BANK OF AMERICA, N.A., in its capacity as Administrative Agent (in such capacity, the "Administrative Agent") under that certain Credit Agreement (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement"), dated as of May 15, 2002, by and among Block Communications, Inc. (the "Borrower"), the Lenders party thereto and the Administrative Agent. All capitalized terms not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement. WHEREAS, the Joining Grantor is a Subsidiary and required by the terms of the Credit Agreement to become a "Guarantor" under the Credit Agreement and be joined as a party to that certain Security Agreement dated as of May 15, 2002 by and among the Administrative Agent, the Borrower and certain Subsidiaries of the Borrower (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Security Agreement") as a Grantor (as defined in the Security Agreement); and WHEREAS, the Joining Grantor will materially benefit directly and indirectly from the credit facilities made available and to be made available to the Borrower by the Lenders under the Credit Agreement; NOW, THEREFORE, the Joining Grantor hereby agrees as follows with the Administrative Agent, for the benefit of the Secured Parties (as defined in the Security Agreement): 1. JOINDER. The Joining Grantor hereby irrevocably, absolutely and unconditionally becomes a party to the Security Agreement as a Grantor and bound by all the terms, conditions, obligations, liabilities and undertakings of each Grantor or to which each Grantor is subject thereunder, including without limitation the grant pursuant to Section 2 of the Security Agreement of a security interest to the Administrative Agent for the benefit of the Secured Parties in the property and property rights constituting Collateral (as defined in Section 2 of the Security Agreement) of such Grantor or in which such Grantor has or may have or acquire an interest or the power to transfer rights therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located, as security for the payment and performance of the Secured Obligations (as defined in the Security Agreement), all with the same force and effect as if the Joining Grantor were a signatory to the Security Agreement. 2. AFFIRMATIONS. The Joining Grantor hereby acknowledges and reaffirms as of the date hereof with respect to itself, its properties and its affairs each of the waivers, A-1 representations, warranties, acknowledgements and certifications applicable to any Grantor contained in the Security Agreement. 3. SUPPLEMENTAL SCHEDULES. Attached to this Security Joinder Agreement are duly completed schedules (the "Supplemental Schedules") supplementing as thereon indicated the respective Schedules to the Security Agreement. The Joining Grantor represents and warrants that the information contained on each of the Supplemental Schedules with respect to such Joining Grantor and its properties and affairs is true, complete and accurate as of the date hereof. 4. SEVERABILITY. The provisions of this Security Joinder Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this Security Joinder Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 5. COUNTERPARTS. This Security Joinder Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Security Joinder Agreement to produce or account for more than one such counterpart executed by the Joining Grantor. Without limiting the foregoing provisions of this Section 4, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Security Joinder Agreement. 6. DELIVERY. Joining Grantor hereby irrevocably waives notice of acceptance of this Security Joinder Agreement and acknowledges that the Secured Obligations are and shall be deemed to be incurred, and credit extensions under the Loan Documents made and maintained, in reliance on this Security Joinder Agreement and the Grantor's joinder as a party to the Security Agreement as herein provided. 6. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. The provisions of Section 28 of the Security Agreement are hereby incorporated by reference as if fully set forth herein. IN WITNESS WHEREOF, the Joining Grantor has duly executed and delivered this Security Joinder Agreement as of the day and year first written above. JOINING GRANTOR: ------------------------------------------ By: ------------------------------------ Name: ------------------------------------ Title: ------------------------------------ A-2 EX-10.4 16 j9521601exv10w4.txt EXHIBIT 10.4 Exhibit 10.4 INTELLECTUAL PROPERTY SECURITY AGREEMENT THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "IP Security Agreement") is made and entered into as of May 15, 2002 by BLOCK COMMUNICATIONS, INC., an Ohio corporation (herein referred to as a "Grantor" and the "Borrower"), and EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF AN IP SECURITY JOINDER AGREEMENT (each a "Guarantor" and a "Grantor", and collectively with the Borrower, the "Grantors"), and BANK OF AMERICA, N.A., a national banking association, as Administrative Agent (in such capacity, the "Administrative Agent") for each of the Lenders (as defined in the Credit Agreement (as defined below), and together with the Administrative Agent, the "Secured Parties") now or hereafter party to the Credit Agreement. All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: WHEREAS, pursuant to that certain Credit Agreement dated as of May 15, 2002 by and among the Borrower, the Administrative Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated or replaced, renewed, refunded or refinanced, the "Credit Agreement"), the Lenders have made available to the Borrower certain term loan facilities and a revolving credit facility with a letter of credit sublimit and a swing line facility; and WHEREAS, as collateral security for payment and performance of the Borrower's Obligations, the Borrower is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in the Collateral (as defined below) pursuant to the terms of this IP Security Agreement; and WHEREAS, each Guarantor will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Guarantor is a party (as signatory hereto or to an IP Security Joinder Agreement) to a Guaranty pursuant to which each Guarantor guarantees the Obligations of the Borrower; and WHEREAS, as collateral security for payment and performance by each Guarantor of its Guarantor's Obligations (as defined in the Guaranty to which such Guarantor is a party) and for payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party, each Guarantor is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in the Collateral pursuant to the terms of this IP Security Agreement; and WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents unless the Borrower and the Guarantors enter into this IP Security Agreement; NOW, THEREFORE, in order to induce the Secured Parties to enter into the Loan Documents and to make Loans and issue Letters of Credit, and in further consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. GRANT OF SECURITY INTEREST. The Borrower hereby grants as collateral security for the payment, performance and satisfaction of all of the Borrower's Obligations, and each Guarantor hereby grants as collateral security for the payment, performance and satisfaction of all of its Guarantor's Obligations (as defined in the Guaranty), and each of them hereby grants as collateral security for the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party (such Borrower's Obligations, Guarantor's Obligations and all other obligations and liabilities of the Borrower and the other Grantors referred to collectively as the "Secured Obligations"), to the Administrative Agent for the benefit of the Secured Parties a continuing first priority security interest in and to, and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties, the following property of such Grantor or in which such Grantor has or may have or acquire an interest or the power to transfer rights therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located: (a) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign patents and patent applications (including without limitation the patents and patent applications identified on Schedule I attached hereto and incorporated herein by reference) and including the right to recover for all past, present and future infringements thereof and all reissues, divisions, continuations, continuations in part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (collectively, the "Patents"); (b) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign trademarks, trade names, domain names, trade dress, service marks, trademark and service mark registrations, and applications for trademark or service mark registration and any renewals thereof (including without limitation each trademark, trade name, domain name and service mark registration and application identified in Schedule II attached hereto and incorporated herein by reference) and including all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto (including without limitation damages for past or future infringements thereof), the right to sue or otherwise recover for all past, present and future infringements thereof, all rights corresponding thereto throughout the world (but only such rights as now exist or may come to exist under applicable local law) and all other rights of any kind whatsoever of each Grantor accruing thereunder or pertaining thereto, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark and service mark (collectively, the "Trademarks"); 2 (c) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign copyrights and copyright applications (including without limitation the copyright registrations identified on Schedule III attached hereto and incorporated herein by reference) and including the right to recover for all past, present and future infringements thereof and all supplemental registrations, renewals, and extensions thereof, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (collectively, the "Copyrights"); and (d) all proceeds of any of the foregoing. All of the property and interests in property described in clauses (a) through (d) are herein collectively referred to as the "Collateral." The security interests granted under this IP Security Agreement are herein referred to as the "Security Interests." 2. PERFECTION. As of the date of execution of this IP Security Agreement or an IP Security Joinder Agreement by each Grantor, as applicable (with respect to each Grantor, its "Applicable Date"), such Grantor shall have furnished the Administrative Agent with properly executed financing statements in form, number and substance suitable for filing, sufficient under applicable law, and satisfactory to the Administrative Agent in order that upon the filing of the same the Administrative Agent, for the benefit of the Secured Parties, shall have a duly perfected security interest in all Collateral in which a security interest can be perfected by the filing of financing statements, subject only to Liens allowed to exist under Section 7.01 of the Credit Agreement ("Permitted Liens") with the effect that the Liens conferred in favor of the Administrative Agent shall be and remain duly perfected and of first priority. All financing statements (including all amendments thereto and continuations thereof), certificates, acknowledgments, instruments and other documents furnished in connection with the creation, enforcement, protection, perfection or priority of the Administrative Agent's security interest in or collateral assignment of Collateral, including such items as are described above in this Section 2 or in Sections 3 and 4 below, are referred to herein as "Perfection Documents." The delivery of possession of items of or evidencing Collateral, causing other Persons to execute and deliver Perfection Documents as appropriate, the filing or recordation of Perfection Documents, the establishment of control over items of Collateral, and the taking of such other actions as may be necessary or advisable in the determination of the Administrative Agent to create, enforce, protect, perfect, or establish or maintain the priority of, the security interest of or collateral assignment to, the Administrative Agent for the benefit of the Secured Parties in the Collateral is referred to herein as "Perfection Action." 3. SECURITY FOR SECURED OBLIGATIONS. The Security Interests granted under this IP Security Agreement by (a) the Borrower secure the payment, performance and satisfaction of all of the Secured Obligations now or hereafter owing by the Borrower and (b) each Guarantor to secure the payment, performance and satisfaction of all of the Secured Obligations now or hereafter owing by such Guarantor. 3 The Security Interests granted by this IP Security Agreement are granted in conjunction with the security interests granted to the Administrative Agent, for the benefit of the Secured Parties, in other assets of each Grantor pursuant to the other Loan Documents. 4. COLLATERAL ASSIGNMENT. In addition to, and not in limitation of, the grant of the Security Interests in the Patents, Trademarks and Copyrights in Section 1 above, each Grantor hereby grants, assigns, transfers, conveys and sets over to the Administrative Agent, for the benefit of the Secured Parties, the Grantor's entire right, title and interest in and to the Patents, Trademarks and Copyrights; provided, that such grant, assignment, transfer, conveyance and set over shall become effective only at the election of the Administrative Agent following the occurrence of an Event of Default that is continuing at the time of such election. Each Grantor hereby agrees that after the effectiveness of such grant, assignment, transfer, conveyance and set over of any of the Patents, Trademarks and Copyrights, the use by the Administrative Agent of any of such Patents, Trademarks and Copyrights shall be without any liability for royalties or other related charges from the Administrative Agent to any Grantor. In furtherance of the foregoing, each Grantor has executed in blank and delivered to the Administrative Agent an assignment of federally registered patents, trademarks and copyrights (the "IP Assignment") owned by it in the form of Exhibit A hereto. Each Grantor hereby authorizes the Administrative Agent to complete as assignee, execute, and record with the United States Patent and Trademark Office (the "Patent and Trademark Office") and the United States Copyright Office (the "Copyright Office") and with other applicable state and federal agencies and authorities, each IP Assignment upon the occurrence of an Event of Default that is continuing at the time of filing. 5. FURTHER ASSURANCES. (a) Each Grantor agrees that from time to time, at the expense of such Grantor, such Grantor will promptly execute and deliver all further instruments and documents, including such other Perfection Documents and take all further action and such other or additional Perfection Action, as may be required by the terms of the Loan Documents or as the Administrative Agent may reasonably request, in order to (i) continue, perfect and protect any Security Interest or collateral assignment granted or purported to be granted hereby, and (ii) enable the Administrative Agent, for the benefit of the Secured Parties, to exercise and enforce its rights and remedies hereunder with respect to any part of the Collateral. Without limiting the generality of the foregoing, each Grantor will execute and file (with the appropriate governmental offices, authorities, agencies and regulatory bodies) such joinders or supplements to this IP Security Agreement and such financing or continuation statements, or amendments thereto, and such other instruments or notices, including executed IP Assignments (but the filing of such IP Assignments shall be effected only in accordance with Section 4 above), with the Patent and Trademark Office and the Copyright Office, as may be necessary or desirable, or as the Administrative Agent, on behalf of the Secured Parties, may reasonably request, in order to perfect and preserve the Security Interests and collateral assignments granted hereby. 4 (b) Each Grantor hereby authorizes the Administrative Agent, on behalf of the Secured Parties, to file, where permitted by law, one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor. A carbon, photographic or other reproduction of this IP Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Each Grantor will furnish to the Administrative Agent, on behalf of the Secured Parties, from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent, on behalf of the Secured Parties, may reasonably request, all in reasonable detail. (d) Each Grantor agrees to maintain among its books and records appropriate notations or evidence of, and to make or cause to be made appropriate disclosure upon its financial statements or, the Security Interests granted hereunder to the Administrative Agent for the benefit of the Secured Parties. (e) Each Grantor agrees that, should it have or obtain an ownership interest in any material United States patent or patent application that is not now identified on Schedule I, any material trademark or trademark application that is not now identified on Schedule II or any material copyright registration or copyright application that is not now identified on Schedule III: (i) the provisions of this IP Security Agreement shall automatically apply to such item, and such item shall automatically become part of the Collateral; (ii) such Grantor shall, within one month after acquiring or becoming aware of such ownership interest, (A) give written notice thereof to the Administrative Agent, (B) take all reasonable and appropriate steps to protect Patents, Trademarks and Copyrights, as, for example, by filing applications for their registration with the Patent and Trademark Office or the Copyright Office, as applicable, and (C) with respect to Patents, Trademarks and Copyrights, prepare, execute and file in the Patent and Trademark Office or the Copyright Office, as applicable, within the requisite time period, all documents that are known by such Grantor to be necessary or that the Administrative Agent, on behalf of the Secured Parties, reasonably requests in order to perfect the Security Interest of the Administrative Agent, on behalf of the Secured Parties, therein, including delivery to the Administrative Agent of an executed IP Assignment. Each Grantor authorizes the Administrative Agent, on behalf of the Secured Parties, to execute and file (subject in the case of the filing of IP Assignments, to the limitation contained in Section 4 above) such a document in the name of such Grantor if such Grantor fails to do so. 5 (e) Without limiting Article IIA or Section 6.14 of the Credit Agreement, each Grantor agrees that should any of its Subsidiaries (other than a Subsidiary which is a party hereto and whether now or hereafter existing) obtain any ownership interest in any intellectual property of a nature that would be Collateral hereunder if owned by such Grantor, such Grantor shall either cause such Subsidiary (i) to become a party hereto by executing an IP Security Joinder Agreement and a party to the Guaranty by executing a Guaranty Joinder Agreement and other Security Instruments in accordance with Section 6.14 of the Credit Agreement, or (ii) to transfer and assign, all such Subsidiary's ownership interests therein to such Grantor, whereupon the provisions of subsection (d) of this Section 5 shall be applicable thereto. (f) Each Grantor agrees: (i) to take all necessary steps in any proceeding before the Patent and Trademark Office, the Copyright Office or any similar office or agency in any other country or any political subdivision thereof or in any court, to maintain and pursue each patent application now or hereafter included in the Collateral which the Grantor determines to be material or otherwise useful to the conduct of its business, and to maintain each such Patent, and each Trademark or Copyright now or hereafter included in the Collateral, including the filing of divisional, continuation, continuation-in-part and substitute applications, the filing of applications for reissue, renewal or extensions, the payment of fees, and the participation in interference, reexamination, opposition and infringement proceedings; (ii) to take corresponding steps with respect to unpatented inventions which the Grantor determines to be material or otherwise useful to the conduct of its business and on which such Grantor is now or hereafter becomes entitled to seek protection, including maintaining the confidentiality of such inventions if filing a patent application is not justified in the reasonable judgment of such Grantor; and (iii) to bear any expenses incurred in connection with such activities. (g) No Grantor shall do any act or omit to do any act whereby any of the Collateral may become dedicated or abandoned, except where such dedication or abandonment either (i) is of an immaterial portion of the Collateral, or (ii) is permitted under the Credit Agreement. (h) Each Grantor agrees that in the event that any of the Collateral which is material to the operation of its business and as to which it has granted the Security Interests is infringed or misappropriated by a third party, such Grantor shall take all reasonable steps to terminate the infringement or misappropriation, and take such other actions as such Grantor shall deem appropriate under the circumstances to protect such Collateral. Any expense incurred in connection with such activities shall be borne by such Grantor. 6. GENERAL REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It has full power, legal right and lawful authority to enter into this Security Agreement (and any IP Joinder Security Agreement applicable to it) and to perform its terms, including the grant of the Security Interests herein provided for. 6 (b) No authorization, consent, approval or other action by, and no notice to or filing with, any Governmental Authority or other regulatory body or any other Person is required either (i) for the grant by such Grantor of the Security Interests granted hereby, or the collateral assignment hereunder, or for the execution, delivery or performance of this IP Security Agreement (or any IP Joinder Security Agreement applicable to it) by such Grantor, or (ii) for the perfection of or the exercise by the Administrative Agent, on behalf of the Secured Parties, of its rights and remedies hereunder, except (x) with respect to the Security Interests, the filing of this IP Security Agreement with the Patent and Trademark Office and the Copyright Office, as applicable, and the filings required by the Uniform Commercial Code of the State in which such Grantor is formed, (y) with respect to the consummation of assignment pursuant to Section 4 above, the filing in the Patent and Trademark Office or the Copyright Office, as applicable, of the IP Assignments, and (z) to the extent that the exercise of rights and remedies may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors rights generally or by general principles of equity. (c) No action or proceeding is pending or, to such Grantor's knowledge, threatened seeking to limit, cancel or question the validity of any part of the Collateral. (d) It has not granted any release, covenant not to sue, or non-assertion assurance to any third person with respect to any part of the Collateral. (e) The actions contemplated under or in connection with the Loan Documents will not impair the legal right of such Grantor to use any of the Collateral. (f) Such Grantor has no knowledge of the existence of any right under any patent, trademark, license agreement, trade name, trade secret, know-how, confidential research, development and commercial information, or other proprietary information held by any other Person that would materially interfere with the ability of such Grantor to carry on its business as currently carried on, and such Grantor has no knowledge of any claim to the contrary that is likely to be made. (g) None of such Grantor's Domestic Subsidiaries (except to the extent that such Subsidiaries are also Grantors hereunder or grantors under any other Security Instrument relating to such property) has an ownership interest in any patents, patent applications, copyrights, copyright applications, trademark, trade name, trade dress, service marks, trademark or service mark registrations or any applications for trademark or service mark registration or any other intellectual property of a nature that would be Collateral hereunder if owned by such Grantor. (h) No claim has been, and such Grantor has no knowledge of any claim that is likely to be made, that the use by such Grantor of any Collateral does or may violate the rights of any Person. 7 7. PATENT REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It is the sole, legal and beneficial owner of the entire right, title and interest in and to the Patents purported to be granted by it hereunder, free and clear of any Lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for non-exclusive licenses as to which such Grantor is the licensor, Permitted Liens, and the Security Interests created by this IP Security Agreement. No financing statement or other instrument similar in effect covering all or any part of the Patents purported to be granted by such Grantor hereunder is on file in any recording office, including, without limitation, the Patent and Trademark Office, except such as may have been filed in favor of the Administrative Agent, for the benefit of the Secured Parties. (b) Set forth on Schedule I is a list of all of the Patents owned by such Grantor and utilized in the conduct of its business as currently conducted and material in such Grantor's operations or used in the selling or marketing of such Grantor's products or services. (c) Each Patent of such Grantor identified on Schedule I hereto is validly subsisting and has not been adjudged unpatentable, invalid or unenforceable, in whole or in part, and to the knowledge of such Grantor is patentable, valid and enforceable, and each of such Patent applications has been filed in conformity with applicable rules and procedures of the Patent and Trademark Office and will be prosecuted in conformity therewith so as not to become improperly abandoned. 8. TRADEMARK REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (d) It is the sole, legal and beneficial owner of the entire right, title and interest in and to the Trademarks purported to be granted by it hereunder, free and clear of any Lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for non-exclusive licenses as to which such Grantor is the licensor, Permitted Liens, and the Security Interests created by this IP Security Agreement. No financing statement or other instrument similar in effect covering all or any part of the Trademarks purported to be granted by such Grantor hereunder is on file in any recording office, including, without limitation, the Patent and Trademark Office, except such as may have been filed in favor of the Administrative Agent, for the benefit of the Secured Parties. (e) Set forth on Schedule II is a list of all of the Trademarks owned by such Grantor and utilized in the conduct of its business as currently conducted and material in such Grantor's operations or used in the selling or marketing of such Grantor's products or services. 8 (f) Each Trademark of such Grantor identified on Schedule II, is validly subsisting and has not been abandoned or adjudged invalid, unregistrable or unenforceable, in whole or in part, and is, to such Grantor's knowledge, valid, registrable and enforceable, and each of such Trademark applications has been filed in conformity with applicable rules and procedures of the Patent and Trademark Office and will be prosecuted in conformity therewith so as not to become improperly abandoned. 9. COPYRIGHT REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (g) It is the sole, legal and beneficial owner of the entire right, title and interest in and to the Copyrights purported to be granted by it hereunder, free and clear of any Lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for the Permitted Liens, Security Interests created or permitted by this IP Security Agreement or the Credit Agreement. No financing statement or other instrument similar in effect covering all or any part of the Copyrights purported to be granted by such Grantor hereunder is on file in any recording office, including, without limitation, the Copyright Office, except such as may have been filed in favor of the Administrative Agent, for the benefit of the Secured Parties. (h) Set forth on Schedule III is a list of all of the federally registered Copyrights owned by such Grantor and utilized in the conduct of its business as currently conducted and material in such Grantor's operations or used in the selling or marketing of such Grantor's products or services. (i) Each Copyright of such Grantor identified on Schedule III is validly subsisting and has not been abandoned or adjudged invalid, unregistrable or unenforceable, in whole or in part, and is, to such Grantor's knowledge, valid, registrable and enforceable, and each of such Copyright applications has been filed in conformity with applicable rules and procedures of the Copyright Office and will be prosecuted in conformity therewith so as not to become improperly abandoned. 10. TRANSFERS AND OTHER LIENS. No Grantor shall: (j) sell, assign (by operation of law or otherwise) or otherwise dispose of any of, or grant any option with respect to, the Collateral, except as permitted by the Credit Agreement, except that any Grantor may license the Collateral either on an exclusive or a non-exclusive basis (i) in the ordinary course of such Grantor's business, provided that such license is necessary or desirable in the conduct of such Grantor's business, or (ii) in connection with a sale of assets in compliance with Section 7.05 of the Credit Agreement. The Administrative Agent, for the benefit of the Secured Parties, shall execute any documents that such Grantor may reasonably request in order to permit the Grantor to exercise its right hereunder to license the Collateral, provided that the Administrative Agent shall not be required to do anything that may, in the sole judgment of the Administrative Agent, adversely affect the validity of the Security Interests; 9 (k) create or suffer to exist any Lien, security interest or other charge or encumbrance upon or with respect to any of the Collateral except for Permitted Liens or the Security Interests created by this IP Security Agreement; or (l) take any other action in connection with any of the Collateral that would impair the value of the interest or rights of such Grantor in the Collateral taken as a whole or that would impair the interest or rights of the Administrative Agent for the benefit of the Secured Parties. 11. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. Each Grantor hereby appoints the Administrative Agent as the Grantor's attorney-in-fact for the purposes of carrying out the provisions of this IP Security Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right and power (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (a) above; (c) to endorse such Grantor's name on any checks, notes, drafts or any other payment relating to or constituting proceeds of the Collateral which comes into the Administrative Agent's possession or the Administrative Agent's control, and deposit the same to the account of the Administrative Agent, for the benefit of the Secured Parties, on account and for payment of the Secured Obligations. (d) to file any claims or take any action or institute any proceedings that the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent, for the benefit of the Secured Parties, with respect to any of the Collateral; and (e) to execute, in connection with any sale or other disposition of Collateral provided for herein, any endorsement, assignments, or other instruments of conveyance or transfer with respect thereto. 10 12. ADMINISTRATIVE AGENT MAY PERFORM. (a) If any Grantor fails to perform any agreement contained herein, the Administrative Agent may itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by such Grantor under Section 16 hereof to the fullest extent permitted by applicable law. (b) The Administrative Agent or its designated representatives shall have the right to the extent reasonably requested and upon reasonable prior written notice, at any reasonable time during normal business hours of such Grantors and from time to time, to inspect the Grantors' premises and to examine the Grantors' books, records and operations relating to the Collateral. 13. THE ADMINISTRATIVE AGENT'S DUTIES. (a) Except for the exercise of reasonable care in the custody and preservation of any Collateral in its possession and accounting for monies received by it pursuant to this Security Agreement, the Administrative Agent shall be under no duty or liability with respect to the collection, protection or preservation of the Collateral. (b) Each Grantor agrees to pay when due all taxes, charges, Liens and assessments against the Collateral in which it has an interest, unless being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established in accordance with GAAP and evidenced to the satisfaction of the Administrative Agent and provided that all enforcement proceedings in the nature of levy or foreclosure are effectively stayed. Upon the failure of any Grantor to so pay or contest such taxes, charges, Liens or assessments, or upon the failure of any Grantor to pay any amount pursuant to this IP Security Agreement, the Administrative Agent at its option may pay or contest any of them (the Administrative Agent having the sole right to determine the legality or validity and the amount necessary to discharge such taxes, charges, Liens or assessments) but shall not have any obligation to make any such payment or contest. All sums so disbursed by the Administrative Agent, including reasonable Attorneys' Costs, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Grantor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (c) Each Grantor hereby irrevocably authorizes the Administrative Agent to file (with, or to the extent permitted by applicable law, without the signature of the Grantor appearing thereon) financing statements (including amendments thereto and continuations and copies thereof) showing such Grantor as "debtor" at such time or times and in all filing offices as the Administrative Agent may from time to time determine to be necessary or advisable to perfect or protect the rights of the Administrative Agent and 11 the Secured Parties hereunder, or otherwise to give effect to the transactions herein contemplated. 14. REINSTATEMENT. The granting of a security interest in the Collateral and the other provisions hereof shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or is repaid by any Secured Party in whole or in part in good faith settlement of a pending or threatened avoidance claim, whether upon the insolvency, bankruptcy or reorganization of any Grantor or any other Loan Party or otherwise, all as though such payment had not been made. The provisions of this Section 14 shall survive repayment of all of the Secured Obligations, the termination of the Aggregate Commitments and the termination or expiration of this IP Security Agreement in any manner, including but not limited to termination upon occurrence of the Facility Termination Date (as defined in Section 29 hereof). 15. REMEDIES UPON AN EVENT OF DEFAULT. If an Event of Default shall have occurred and be continuing: (a) The Administrative Agent, for the benefit of the Secured Parties, may exercise in respect of the Collateral of any defaulting Grantor, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code as in effect in the State of New York (the "UCC") and also may (i) exercise any and all rights and remedies of such Grantor under, in connection with, or otherwise in respect of, such Collateral, including the completion and filing of the IP Assignment, (ii) require such Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the documents embodying such Collateral as directed by the Administrative Agent and make it available to the Administrative Agent, for the benefit of the Secured Parties, at a place to be designated by the Administrative Agent that is reasonably convenient to both the Administrative Agent and such Grantor, (iii) occupy any premises owned or leased by such Grantor where documents embodying such Collateral or any part thereof are assembled for a reasonable period in order to effectuate the Administrative Agent's rights and remedies hereunder or under applicable law, without obligation to such Grantor in respect of such occupation, (iv) license such Collateral or any part thereof, and (v) without notice except as specified below, sell such Collateral or any part thereof at public or private sale, at any of the Administrative Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. Each Grantor agrees that at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 12 (b) All payments received by any defaulting Grantor under or in connection with any of such Collateral shall be received in trust for the benefit of the Secured Parties, shall be segregated from other funds of such Grantor and shall be immediately paid over to the Administrative Agent, for the benefit of the Secured Parties, in the same form as so received (with any necessary endorsement). (c) The net cash proceeds resulting from the collection, liquidation, sale, or other disposition of the Collateral of any defaulting Grantor shall be applied first to the expenses (including all Attorneys' Costs) owing pursuant to Section 16 hereof, of retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating and the like, and then to the satisfaction of all Secured Obligations in accordance with the terms of Section 2.14 of the Credit Agreement. Each Grantor shall be liable to the Administrative Agent, for the benefit of the Secured Parties, and shall pay to the Administrative Agent, for the benefit of the Secured Parties, on demand any deficiency which may remain after such sale, disposition, collection or liquidation of the Collateral. The Administrative Agent shall provide prompt notice to the Borrower of its exercise of remedies under this Section 15, provided that such notice may be general in nature and neither the failure to give, nor any delay in giving, such notice shall have any effect on the validity or effectiveness of any action taken hereunder. 16. EXPENSES. Each Grantor will upon demand pay to the Administrative Agent the amount of any and all reasonable expenses, including Attorneys' Costs and the reasonable fees and disbursements of any experts and agents, that the Administrative Agent, for the benefit of the Secured Parties, may incur in connection with (i) the administration of this IP Security Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Secured Parties, or (iv) the failure by any Grantor to perform or observe any of the provisions hereof. 17. WAIVER. Each Grantor waives to the extent permitted by applicable law (a) any right to require any Secured Party or any other obligee of the Secured Obligations to (x) proceed against any Person or entity, including without limitation any Loan Party, (y) proceed against or exhaust any Collateral or other collateral for the Secured Obligations, or (z) pursue any other remedy in its power; (b) any defense arising by reason of any disability or other defense of any other Person, or by reason of the cessation from any cause whatsoever of the liability of any other Person or entity, (c) any right of subrogation, (d) any right to enforce any remedy which any Secured Party or any other obligee of the Secured Obligations now has or may hereafter have against any other person and any benefit of and any right to participate in any collateral or security whatsoever now or hereafter held by the Administrative Agent for the benefit of the Secured Parties. Each Grantor authorizes each Secured Party and each other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Loan Documents from time to time to: (i) take and hold security, other than the Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Collateral 13 herein described or any part thereof or any such other security; and (ii) apply such Collateral or other security and direct the order or manner of sale thereof as such Secured Party or obligee in its discretion may determine. 18. AMENDMENTS. No amendment, modification, or termination or waiver of any provision of this IP Security Agreement nor consent to any departure by any Grantor therefrom shall in any event be effective unless effected in accordance with Section 10.01 of the Credit Agreement, then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 19. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE CREDIT AGREEMENT (a) This IP Security Agreement shall create a continuing Security Interest in the Collateral and shall remain in full force and effect until terminated in accordance with the provisions of Section 29 hereof. (b) Except as permitted by this IP Security Agreement or the Credit Agreement, no Grantor shall sell, lease, transfer or otherwise dispose of any item of Collateral during the term of this IP Security Agreement without the prior written consent of the Required Lenders to such sale, lease, transfer or other disposition. (c) Upon the termination of this IP Security Agreement in accordance with Section 29 hereof, the Collateral shall be automatically released from the Liens created hereby, all rights to the Collateral shall automatically revert to the Grantors, and this IP Security Agreement and all obligations of the Grantors hereunder shall terminate without delivery of any instrument or performance of any act by any party. Upon such termination of this IP Security Agreement, the Administrative Agent shall reassign and redeliver such Collateral then held by or for the Secured Parties and execute and deliver to each Grantor such documents as it shall reasonably request to evidence such termination. 20. ADDITIONAL COLLATERAL. If any Grantor shall acquire or hold any additional material Patents, Trademarks or Copyrights not listed on Schedules I, II, or III hereto (any such Patents, Trademarks or Copyrights being referred to herein as the "Additional Collateral"), such Grantor shall promptly deliver to the Administrative Agent for the benefit of the Secured Parties a revised Schedule I, II, or III hereto, as applicable, reflecting the ownership and pledge of such Additional Collateral. Each Grantor shall comply with the requirements of this Section 20 and Section 5 hereof concurrently with the acquisition of any such Additional Collateral. 21. JOINDER. Each Person who shall at any time execute and deliver to the Administrative Agent an IP Security Joinder Agreement substantially in the form attached as Exhibit A hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Grantor and shall have thereupon pursuant to Section 1 hereof granted a security interest in and collaterally assigned to the Administrative Agent for the benefit of the Secured Parties all Collateral in which it has at its Applicable Date or thereafter acquires any interest or the power to transfer, and all references herein and in the other Loan 14 Documents to the Grantors or to the parties to this IP Security Agreement shall be deemed to include such Person as a Grantor hereunder. Each IP Security Joinder Agreement shall be accompanied by the Supplemental Schedules referred to therein, appropriately completed with information relating to the Grantor executing such IP Security Joinder Agreement and its property. Each of the applicable Schedules attached hereto shall be deemed amended and supplemented without further action by such information reflected on the Supplemental Schedules. 22. DEFINITIONS. All terms used herein unless otherwise defined herein shall be defined in accordance with the appropriate definitions appearing in the Uniform Commercial Code in effect in New York, and such definitions are hereby incorporated herein by reference and made a part hereof. 23. ENTIRE AGREEMENT. This IP Security Agreement and each IP Security Joinder Agreement, together with the Credit Agreement and the other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, except as contained in the Loan Documents. The express terms hereof and of the IP Security Joinder Agreements control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof or thereof. Neither this IP Security Agreement or any IP Security Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 24. EVIDENCE OF LIEN. Each Grantor hereby consents and agrees that the issuers of or obligors in respect of the Collateral shall be entitled to accept the provisions hereof and of the IP Security Joinder Agreements as conclusive evidence of the right of the Administrative Agent, on behalf of the Secured Parties, to exercise its rights hereunder or thereunder with respect to the Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Grantor or any other Person to any of such issuers or obligors. 25. BINDING AGREEMENT; ASSIGNMENT. This IP Security Agreement and each IP Security Joinder Agreement, and the terms, covenants, conditions, rights and remedies hereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns; provided, however, that no Grantor shall be permitted to assign this IP Security Agreement, any IP Security Joinder Agreement or any interest herein or therein or in the Collateral. Without limiting the generality of the foregoing sentence of this Section 25, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.7 thereof (concerning assignments and participations.) All references herein to the Administrative Agent and to the Secured Parties shall include any 15 successor thereof or permitted assignee, and any other obligees from time to time of the Secured Obligations. 26. RELATED SWAP CONTRACTS. All obligations of each Grantor under or in respect of Related Swap Contracts (which are not prohibited under the terms of the Credit Agreement) to which any Lender or any Affiliate of any Lender is a party, shall be deemed to be Secured Obligations secured hereby, and each Lender or Affiliate of a Lender party to any such Related Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Secured Obligations; provided, however, that such obligations shall cease to be Secured Obligations at such time as such Person (or Affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. No Person who obtains the benefit of any Lien by virtue of the provisions of this Section shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents. 27. SEVERABILITY. The provisions of this IP Security Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this IP Security Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 28. COUNTERPARTS. This IP Security Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this IP Security Agreement to produce or account for more than one such counterpart executed by the Grantor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 28, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this IP Security Agreement. 29. TERMINATION. (a) Subject to the provisions of Section 14, this IP Security Agreement and each IP Security Joinder Agreement, and all obligations of the Grantors hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date. For purposes of this IP Security Agreement, "Facility Termination Date" means the date as of which all of the following shall have occurred: (a) the Borrower shall have permanently terminated the credit facilities under the Loan Documents by final payment in full of all Outstanding Amounts, together with all accrued and unpaid interest and fees thereon, other than (i) the undrawn portion of Letters of Credit and (ii) all letter of credit fees relating thereto accruing after such date (which fees shall be payable solely for the account of the Issuing Bank and shall be computed (based on interest rates then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash 16 Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made; (b) all Related Swap Contracts shall have been terminated, expired or Cash Collateralized; (c) all Aggregate Commitments shall have terminated or expired; and (d) the Borrower shall have fully, finally and irrevocably paid and satisfied in full all other Obligations (except for Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Loan Party that may be owing to any Agent-Related Person or any Lender pursuant to the Loan Documents and expressly survive termination of this IP Security Agreement). Upon such termination of this IP Security Agreement, the Administrative Agent shall, at the request and sole expense of the Grantors, promptly deliver to the Grantors such termination statements and take such further actions as the Grantors may reasonably request to terminate of record, or otherwise to give appropriate notice of the termination of, any Lien conferred hereunder. (b) In the event that all of the Subsidiary Securities issued by any Grantor are Disposed of by the Borrower and/or any Grantor, and such Disposition is expressly permitted by the Credit Agreement, then all obligations of such disposed Grantor hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party, and the Administrative Agent shall, at the request and sole expense of the Grantors, promptly deliver to the Grantors such termination statements and take such further actions as the Grantors may reasonably request to terminate of record, or otherwise to give appropriate notice of the termination of, any Lien conferred hereunder. 30. NOTICES. Any notice required or permitted hereunder shall be given (a) with respect to the Borrower, at the address for the giving of notice then in effect under the Credit Agreement, (b) with respect to any Grantor, at the address then in effect for the giving of notices to such Grantor under the Guaranty to which it is a party, and (c) with respect to the Administrative Agent or a Lender, at the Administrative Agent's address for the giving of notice then in effect under the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder 31. RULES OF INTERPRETATION. The rules of interpretation contained in Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this IP Security Agreement and each IP Security Joinder Agreement and are hereby incorporated by reference All representations and warranties contained herein shall survive the delivery of documents and any Credit Extensions referred to herein or secured hereby. 32. RELEASE. Upon the Disposition of any item of Collateral, so long as such Disposition is permitted under Section 7.05 of the Credit Agreement and all conditions to such Disposition contained therein have been satisfied: (a) the Lien of the Administrative Agent for the benefit of the Secured Parties in such disposed Collateral shall, subject to the provision at the end of this subsection (a), be deemed to be released without any further action on the part of the Administrative Agent or the relevant Grantor, provided that in the event following any such Disposition 17 any Grantor shall thereafter acquire any interest in (or the power to transfer rights in) any asset that constituted Collateral hereunder prior to its Disposition and release from the security interests hereunder, the pledge, assignment and security interest granted hereunder shall be deemed to automatically apply and attach to such asset and it shall from such time forward continue to constitute Collateral hereunder notwithstanding any prior release; and (b) the Administrative Agent will (other than in connection with sales of Inventory in the ordinary course of business), at the Grantors' expense, execute and deliver to each Grantor such documents as such Grantor shall reasonably request on reasonable advance notice to evidence the release of such item of Collateral from the pledge, assignment and security interest granted hereunder, provided that such Grantor shall have delivered to the Collateral Agent a written request for release describing the item of Collateral and the terms of the Disposition thereof in reasonable detail, including the price thereof and any expenses in connection therewith. 33. GOVERNING LAW; WAIVERS. (a) THIS IP SECURITY AGREEMENT AND EACH IP SECURITY JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE (i) WITH RESPECT TO THOSE INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE, INCLUDING SECTION 9-301 OF THE UCC, REQUIRE THAT THE MANNER OF CREATION OF A SECURITY INTEREST IN SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF PERFECTION OR NONPERFECTION OR THE RULES GOVERNING PRIORITY OR SECURITY INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS, AND (ii) IN THOSE INSTANCES IN WHICH THE LAWS OF THE JURISDICTION IN WHICH COLLATERAL IS LOCATED GOVERN MATTERS PERTAINING TO THE METHODS AND EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE GIVEN EFFECT WITH RESPECT TO SUCH MATTERS. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS IP SECURITY AGREEMENT OR ANY IP SECURITY JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS IP SECURITY AGREEMENT OR AN IP SECURITY JOINDER AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING 18 OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) EACH GRANTOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 30 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS IP SECURITY AGREEMENT OR ANY IP SECURITY JOINDER AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS IP SECURITY AGREEMENT OR ANY IP SECURITY JOINDER AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (f) EACH GRANTOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. 19 IN WITNESS WHEREOF, the parties have duly executed this Intellectual Property Security Agreement on the day and year first written above. GRANTORS: BLOCK COMMUNICATIONS, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Managing Director ------------------------------------------- BUCKEYE CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Chairman ------------------------------------------- ERIE COUNTY CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Chairman ------------------------------------------- BUCKEYE TELESYSTEMS, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Chairman ------------------------------------------- CORPORATE PROTECTION SERVICES, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Chairman ------------------------------------------- COMMUNITY COMMUNICATION SERVICES, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Vice President ------------------------------------------- PG PUBLISHING COMPANY By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Vice President ------------------------------------------- MONROE CABLEVISION, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Chairman ------------------------------------------- LIMA COMMUNICATIONS CORPORATION By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Chairman ------------------------------------------- WLFI-TV, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: President ------------------------------------------- INDEPENDENCE TELEVISION COMPANY By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Chairman ------------------------------------------- Intellectual Property Security Agreement Signature Page 2 TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Vice President ------------------------------------------- METRO FIBER & CABLE CONSTRUCTION COMPANY By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Vice President ------------------------------------------- IDAHO INDEPENDENT TELEVISION, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Chairman ------------------------------------------- CARS HOLDING, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: President ------------------------------------------- ACCESS TOLEDO, LTD. By: BLOCK COMMUNICATIONS, INC. By: /s/ Allan J. Block ------------------------------------------- Name: Allan J. Block ------------------------------------------- Title: Vice President ------------------------------------------- Intellectual Property Security Agreement Signature Page 3 ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent for the Lenders By: /s/ Derrick C. Bell ------------------------------------------- Name: Derrick C. Bell ------------------------------------------- Title: Principal ------------------------------------------- Intellectual Property Security Agreement Signature Page 4 EXHIBIT A ASSIGNMENT OF PATENTS, TRADEMARKS AND COPYRIGHTS THIS ASSIGNMENT OF PATENTS, TRADEMARKS AND COPYRIGHTS (this "Agreement") is made as of ______________ ___, 20__ by BLOCK COMMUNICATIONS, INC., an Ohio corporation (herein referred to as the "Borrower" and a "Grantor"), and EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER (each a "Guarantor" and a "Grantor," and collectively with the Borrower, the "Grantors") in favor of BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the "Administrative Agent") for each of the Lenders (as defined in the Credit Agreement (as defined below)) (the "Secured Parties"). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: WHEREAS, pursuant to that certain Credit Agreement dated as of May 15, 2002 by and among the Borrower, the Administrative Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated, or replaced, renewed, refunded or refinanced, the "Credit Agreement"), the Lenders have made available to the Borrower certain term loan facilities and a revolving credit facility with a letter of credit sublimit and a swing line facility sublimit; and WHEREAS, the Borrower and each Guarantor will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Guarantor is a party to a Guaranty pursuant to which each Guarantor guarantees the Obligations of the Borrower; and WHEREAS, each Grantor has entered into that certain Intellectual Property Security Agreement (by joinder or otherwise) (the "IP Security Agreement") dated as of May 15, 2002 pursuant to which each Grantor has granted to the Administrative Agent for the benefit of the Secured Parties a security interest in the Trademarks, Copyrights, and Patents defined below in order to secure the Secured Obligations (as defined in the IP Security Agreement). WHEREAS, each Grantor (a) has adopted, registered and used and is using the trademarks and service marks (the "Trademarks") identified on Annex I hereto, and is the owner of the registrations of and pending registration applications for such Trademarks in the United States Patent and Trademark Office identified on Annex I hereto, (b) is the owner of and uses the copyright registrations set forth on Annex II hereto (the "Copyrights"), and (c) is the owner of and uses the patents, patent registrations and pending registration applications set forth on Annex III hereto (the "Patents" and together with the Trademarks and the Copyrights, the "Collateral"); and WHEREAS, the Administrative Agent for the benefit of the Secured Parties desires to acquire the Trademarks, the Copyrights, and the Patents and the registrations thereof and applications therefor, as applicable, in connection with the exercise of its remedies after the occurrence of an Event of Default and pursuant to the terms of the IP Security Agreement; NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, each Grantor does hereby assign, sell and transfer unto the Administrative Agent all right, title and interest in and to the Trademarks, Copyrights, and Patents, together with (i) the registrations of and applications therefor, as applicable, (ii) all reissues, divisions, continuations, continuations in part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto, (iii) the goodwill of the business symbolized by and associated with the Trademarks and the registrations thereof, and (iv) the right to sue and recover for, and the right to profits or damages due or accrued arising out of or in connection with, any and all past, present or future infringements or dilution of or damage or injury to the Trademarks, Copyrights, Patents or the registrations thereof or such associated goodwill. Each Grantor hereby grants to the Administrative Agent, for the benefit of the Secured Parties, and notice is hereby given that each Grantor has granted to the Administrative Agent, for the benefit of the Secured Parties, a first priority security interest in the Collateral to secure the payment and performance in full of all Secured Obligations (as defined in the IP Security Agreement) and all obligations of each Grantor under its respective Guaranty (if applicable) and any other Loan Documents to which it is a party. This Agreement is intended to and shall take effect as a sealed instrument at such time as the Administrative Agent shall complete this instrument by signing its acceptance of this IP Security Agreement below. [SIGNATURE PAGES FOLLOW.] A-2 IN WITNESS WHEREOF, the parties have duly executed this Assignment of Patents, Trademarks and Copyrights on the day and year first written above. GRANTORS: By: /s/ Allan J. Block ---------------------------------------- Allan J. Block As Managing Director of: Block Communications, Inc. As Chairman of: Buckeye Cablevision, Inc. Buckeye Telesystems, Inc. Corporate Protection Services, Inc. Erie County Cablevision, Inc. Idaho Independent Television, Inc. Independence Television Company Lima Communications Corporation Monroe Cablevision, Inc. As President of: CARS Holding, Inc. WLFI-TV, Inc. As Vice President of: Community Communications Services, Inc. Metro Fiber & Cable Construction Company PG Publishing Company Toledo Area Telecommunications Services, Inc. Access Toledo, Ltd. The foregoing Assignment of the Patents, Trademarks and Copyrights and the registrations thereof and registration applications therefor by the Grantors is hereby accepted as of the --- day of ------------, 20--. BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Derrick C. Bell ---------------------------------------- Name: Derrick C. Bell ---------------------------------------- Title: Principal ---------------------------------------- A-3 EXHIBIT B FORM OF IP SECURITY JOINDER AGREEMENT THIS INTELLECTUAL PROPERTY SECURITY JOINDER AGREEMENT (this "IP Security Joinder Agreement"), dated as of ______________, 2___ is made by and between ___________________________, _____________________________ (the "Joining Grantor"), and BANK OF AMERICA, N.A., in its capacity as Administrative Agent (in such capacity, the "Administrative Agent"), under that certain Credit Agreement (as from time to time amended, revised, modified, supplemented, amended and restated, or replaced, renewed, refunded or refinanced, the "Credit Agreement"), dated as of May 15, 2002, by and among Block Communications, Inc. (the "Borrower"), the Lenders (as defined in the Credit Agreement) party thereto and the Administrative Agent. All capitalized terms not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement or the IP Security Agreement, as applicable. WHEREAS, the Joining Grantor is a Subsidiary and required by the terms of the Credit Agreement to become a "Guarantor" under the Credit Agreement and be joined as a party to the IP Security Agreement as a Grantor (as defined in the IP Security Agreement); and WHEREAS, the Joining Grantor will materially benefit directly and indirectly from the credit facilities made available and to be made available to the Borrower by the Lenders under the Credit Agreement; and NOW, THEREFORE, the Joining Grantor hereby agrees as follows with the Administrative Agent, for the benefit of the Secured Parties (as defined in the IP Security Agreement): 1. JOINDER. The Joining Grantor hereby irrevocably, absolutely and unconditionally becomes a party to the IP Security Agreement as a Grantor and is bound by all the terms, conditions, obligations, liabilities, covenants and undertakings of each Grantor or to which each Grantor is subject thereunder, including without limitation the grant pursuant to Section 1 of the IP Security Agreement of a Security Interest to the Administrative Agent for the benefit of the Secured Parties in the property and property rights constituting Collateral (as defined in Section 1 of the IP Security Agreement) of such Grantor or in which such Grantor has or may have or acquire an interest or the power to transfer rights therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located, and the collateral assignment of the Collateral pursuant to Section 4 of the IP Security Agreement, all as security for the payment and performance of the Secured Obligations (as defined in the IP Security Agreement), all with the same force and effect as if the Joining Grantor were a signatory to the IP Security Agreement. 2. AFFIRMATIONS. The Joining Grantor hereby acknowledges and reaffirms as of the date hereof with respect to itself, its properties and its affairs each of the waivers, representations, warranties, acknowledgements and certifications applicable to any Grantor contained in the IP Security Agreement. 3. SUPPLEMENTAL SCHEDULES. Attached to this IP Security Joinder Agreement are duly completed schedules (the "Supplemental Schedules") supplementing as thereon indicated the respective Schedules to the IP Security Agreement. The Joining Grantor represents and warrants that the information contained on each of the Supplemental Schedules with respect to such Joining Grantor and its Collateral, properties and affairs is true, complete and accurate as of the date hereof. 4. IP ASSIGNMENT. Attached to this IP Security Joinder agreement is a duly executed IP Assignment in which the Joining Grantor grants, assigns, transfers, conveys and sets over the Administrative Agent, for the benefit of the Secured Parties, the Grantor's entire right, title and interest in and to the Collateral described in the Supplemental Schedules. 5. SEVERABILITY. The provisions of this IP Security Joinder Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this IP Security Joinder Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 6. COUNTERPARTS. This IP Security Joinder Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this IP Security Joinder Agreement to produce or account for more than one such counterpart executed by the Joining Grantor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 6, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this IP Security Joinder Agreement. 7. DELIVERY. Joining Grantor hereby irrevocably waives notice of acceptance of this IP Security Joinder Agreement and acknowledges that the Secured Obligations are and shall be deemed to be incurred, and credit extensions under the Loan Documents made, in reliance on this IP Security Joinder Agreement and the Grantor's joinder as a party to the IP Security Agreement as herein provided. 8. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. The provisions of Section 32 of the IP Security Agreement are hereby incorporated by reference as if fully set forth herein. [SIGNATURE PAGE FOLLOWS.] B-2 IN WITNESS WHEREOF, the Joining Grantor has duly executed and delivered this IP Security Joinder Agreement as of the day and year first written above. JOINING GRANTOR: ------------------------------------------ By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- B-3 EX-10.5 17 j9521601exv10w5.txt EXHIBIT 10.5 EXHIBIT 10.5 ASSIGNMENT OF PATENTS, TRADEMARKS AND COPYRIGHTS THIS ASSIGNMENT OF PATENTS, TRADEMARKS AND COPYRIGHTS (this "Agreement") is made as of ______________ ___, 20__ by BLOCK COMMUNICATIONS, INC., an Ohio corporation (herein referred to as the "Borrower" and a "Grantor"), and EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER (each a "Guarantor" and a "Grantor," and collectively with the Borrower, the "Grantors") in favor of BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the "Administrative Agent") for each of the Lenders (as defined in the Credit Agreement (as defined below)) (the "Secured Parties"). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: WHEREAS, pursuant to that certain Credit Agreement dated as of May 15, 2002 by and among the Borrower, the Administrative Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated, or replaced, renewed, refunded or refinanced, the "Credit Agreement"), the Lenders have made available to the Borrower certain term loan facilities and a revolving credit facility with a letter of credit sublimit and a swing line facility sublimit; and WHEREAS, the Borrower and each Guarantor will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Guarantor is a party to a Guaranty pursuant to which each Guarantor guarantees the Obligations of the Borrower; and WHEREAS, each Grantor has entered into that certain Intellectual Property Security Agreement (by joinder or otherwise) (the "IP Security Agreement") dated as of May 15, 2002 pursuant to which each Grantor has granted to the Administrative Agent for the benefit of the Secured Parties a security interest in the Trademarks, Copyrights, and Patents defined below in order to secure the Secured Obligations (as defined in the IP Security Agreement). WHEREAS, each Grantor (a) has adopted, registered and used and is using the trademarks and service marks (the "Trademarks") identified on Annex I hereto, and is the owner of the registrations of and pending registration applications for such Trademarks in the United States Patent and Trademark Office identified on Annex I hereto, (b) is the owner of and uses the copyright registrations set forth on Annex II hereto (the "Copyrights"), and (c) is the owner of and uses the patents, patent registrations and pending registration applications set forth on Annex III hereto (the "Patents" and together with the Trademarks and the Copyrights, the "Collateral"); and WHEREAS, the Administrative Agent for the benefit of the Secured Parties desires to acquire the Trademarks, the Copyrights, and the Patents and the registrations thereof and applications therefor, as applicable, in connection with the exercise of its remedies after the occurrence of an Event of Default and pursuant to the terms of the IP Security Agreement; NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, each Grantor does hereby assign, sell and transfer unto the Administrative Agent all right, title and interest in and to the Trademarks, Copyrights, and Patents, together with (i) the registrations of and applications therefor, as applicable, (ii) all reissues, divisions, continuations, continuations in part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto, (iii) the goodwill of the business symbolized by and associated with the Trademarks and the registrations thereof, and (iv) the right to sue and recover for, and the right to profits or damages due or accrued arising out of or in connection with, any and all past, present or future infringements or dilution of or damage or injury to the Trademarks, Copyrights, Patents or the registrations thereof or such associated goodwill. Each Grantor hereby grants to the Administrative Agent, for the benefit of the Secured Parties, and notice is hereby given that each Grantor has granted to the Administrative Agent, for the benefit of the Secured Parties, a first priority security interest in the Collateral to secure the payment and performance in full of all Secured Obligations (as defined in the IP Security Agreement) and all obligations of each Grantor under its respective Guaranty (if applicable) and any other Loan Documents to which it is a party. This Agreement is intended to and shall take effect as a sealed instrument at such time as the Administrative Agent shall complete this instrument by signing its acceptance of this IP Security Agreement below. [SIGNATURE PAGES FOLLOW.] 2 IN WITNESS WHEREOF, the parties have duly executed this Assignment of Patents, Trademarks and Copyrights on the day and year first written above. GRANTORS: BLOCK COMMUNICATIONS, INC. BUCKEYE CABLEVISION, INC. ERIE COUNTY CABLEVISION, INC. BUCKEYE TELESYSTEM, INC. CORPORATE PROTECTION SERVICES, INC. COMMUNITY COMMUNICATION SERVICES, INC. PG PUBLISHING COMPANY MONROE CABLEVISION, INC. LIMA COMMUNICATIONS CORPORATION WLFI-TV, INC. INDEPENDENCE TELEVISION COMPANY TOLEDO AREA TELECOMMUNICATIONS SERVICES, INC. METRO FIBER & CABLE CONSTRUCTION COMPANY IDAHO INDEPENDENT TELEVISION, INC. CARS HOLDING, INC. ACCESS TOLEDO, LTD. By: /s/ Allan J. Block ------------------------------------------ Allan J. Block As Managing Director of: Block Communications, Inc. As Chairman of: Buckeye Cablevision, Inc. Buckeye Telesystems, Inc. Corporate Protection Services, Inc. Erie County Cablevision, Inc. Idaho Independent Television, Inc. Independence Television Company Lima Communications Corporation Monroe Cablevision, Inc. As President of: CARS Holding, Inc. WLFI-TV, Inc. [continued] As Vice President of: Community Communication Services, Inc. Metro Fiber & Cable Construction Company PG Publishing Company Toledo Area Telecommunications Services, Inc. Access Toledo, Ltd. The foregoing Assignment of the Patents, Trademarks and Copyrights and the registrations thereof and registration applications therefor by the Grantors is hereby accepted as of the --- day of ------------, 20--. BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Derrick C. Bell --------------------------------------- Name: Derrick C. Bell --------------------------------------- Title: Principal --------------------------------------- S-2 EX-10.6 18 j9521601exv10w6.txt EXHIBIT 10.6 EXHIBIT 10.6 SECURITIES PLEDGE AGREEMENT THIS SECURITIES PLEDGE AGREEMENT (this "Pledge Agreement") is made and entered into as of this 15th day of May, 2002 by BLOCK COMMUNICATIONS, INC., an Ohio corporation (the "Borrower" and a "Pledgor"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF A PLEDGE JOINDER AGREEMENT (each a "Pledgor" and, collectively with the Borrower, the "Pledgors") and BANK OF AMERICA, N.A., a national banking association, as Administrative Agent (as defined in the Credit Agreement referred to below) for each of the Lenders (as defined in the Credit Agreement referred to below and, collectively with the Administrative Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: WHEREAS, the Secured Parties have agreed to provide to the Borrower a revolving credit facility with a letter of credit sublimit and a swingline sublimit and certain term loan facilities pursuant to the Credit Agreement dated as of May 15, 2002 among the Borrower, the Administrative Agent and the Lenders (as from time to time amended, revised, modified, supplemented, amended and restated, or replaced, renewed, refunded or refinanced, the "Credit Agreement"); and WHEREAS, each Pledgor (other than the Borrower) is a Domestic Subsidiary of the Borrower and will materially benefit from the Loans and other credit facilities made or to be made available under the Credit Agreement, and in connection therewith and pursuant to the terms of the Credit Agreement each Pledgor (other than the Borrower) is a party (as signatory or by joinder) to a Guaranty pursuant to which it has guaranteed the full and prompt payment and performance of the Obligations and is required to execute and deliver this Pledge Agreement; and WHEREAS, the Secured Parties are unwilling to make available or maintain the credit facilities under the Credit Agreement, or to enter into any of the Loan Documents, unless each Pledgor enters into this Pledge Agreement; and WHEREAS, each of (i) the Borrower, as collateral security for the payment and performance of its Obligations, and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party, and (ii) each other Pledgor, as collateral security for the payment and performance of its Guarantor's Obligations (as defined in the Guaranty to which it is a party), and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party (such obligations and liabilities of the Borrower and the other Pledgors described in clauses (i) and (ii) being referred to collectively as "Secured Obligations"), is willing to pledge and grant to the Administrative Agent for the benefit of the Secured Parties a security interest in all of the Subsidiary Securities of all of its Domestic Subsidiaries, whether now existing or hereafter created or acquired (collectively, the "Pledged Interests"), and certain related property, including without limitation the Pledged Interests more particularly described on Schedule I hereto (such Subsidiaries, together with all other Subsidiaries whose Subsidiary Securities may be required to be subject to this Pledge Agreement from time to time, are hereinafter referred to collectively as the "Pledged Subsidiaries"); NOW, THEREFORE, in order to induce the Secured Parties to enter into the Credit Agreement and the other Loan Documents and to make or maintain the credit facilities provided for therein available to or for the account of the Borrower, and in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. PLEDGE OF PLEDGED INTERESTS; OTHER COLLATERAL. (a) As collateral security for the payment and performance by each Pledgor of its now or hereafter existing Secured Obligations, each Pledgor hereby grants, pledges and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties a first priority security interest in all of the following items of property in which it now has or may at any time hereafter acquire an interest or the power to transfer rights therein, and wheresoever located: (i) the Pledged Interests; and (ii) all money, securities, security entitlements and other investment property, dividends, rights, general intangibles and other property at any time and from time to time (x) declared or distributed in respect of or in exchange for or on conversion of any Pledged Interest, or (y) by its or their terms exchangeable or exercisable for or convertible into any Pledged Interest; and (iii) all other property of whatever character or description, including money, securities, security entitlements and other investment property, and general intangibles hereafter delivered to the Administrative Agent in substitution for or as an addition to any of the foregoing; and (iv) all securities accounts to which may at any time be credited any or all of the foregoing or any proceeds thereof and all certificates and instruments representing or evidencing any of the foregoing or any proceeds thereof; and (v) all proceeds of any of the foregoing. All such Pledged Interests, certificates, instruments, cash, securities, interests, dividends, rights and other property referred to in clauses (i) through (v) of this Section 1 are herein collectively referred to as the "Collateral." (b) Subject to Section 10(a), each Pledgor agrees to deliver all certificates, instruments or other documents representing any Collateral to the Administrative Agent 2 at such location as the Administrative Agent shall from time to time designate by written notice pursuant to Section 22 for its custody at all times until termination of this Pledge Agreement, together with such instruments of assignment and transfer as requested by the Administrative Agent. (c) Each Pledgor agrees to execute and deliver, or cause to be executed and delivered by other Persons, at Pledgor's expense, all share certificates, documents, instruments, agreements, financing statements (and amendments thereto and continuations thereof), assignments, control agreements, or other writings as the Administrative Agent may request from time to time to carry out the terms of this Pledge Agreement or to protect or enforce the Administrative Agent's Lien and security interest in the Collateral hereunder granted to the Administrative Agent for the benefit of the Secured Parties and further agrees to do and cause to be done upon the Administrative Agent's request, at Pledgor's expense, all things determined by the Administrative Agent to be necessary or advisable to perfect and keep in full force and effect the Lien in the Collateral hereunder granted to the Administrative Agent for the benefit of the Secured Parties, including the prompt payment of all out-of-pocket fees and expenses incurred in connection with any filings made to perfect or continue the Lien and security interest in the Collateral hereunder granted in favor of the Administrative Agent for the benefit of the Secured Parties. (d) All filing fees, advances, charges, costs and expenses, including reasonable Attorney Costs, incurred or paid by the Administrative Agent or any Lender in exercising any right, power or remedy conferred by this Pledge Agreement, or in the enforcement thereof, shall become a part of the Secured Obligations secured hereunder and shall be paid to the Administrative Agent for the benefit of the Secured Parties by the Pledgor in respect of which the same was incurred immediately upon demand therefor, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (e) Each Pledgor agrees to register and cause to be registered the interest of the Administrative Agent, for the benefit of the Secured Parties, in the Collateral on its own books and records and the registration books of each of the Pledged Subsidiaries. 2. STATUS OF PLEDGED INTERESTS. Each Pledgor hereby represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties, with respect to itself and the Collateral as to which it has or acquires any interest, that: (a) All of the Pledged Interests are, as of the date of execution of this Pledge Agreement or Pledge Joinder Agreement or Pledge Agreement Supplement by each Pledgor pledging such Pledged Interests (such date as applicable with respect to each Pledgor, its "Applicable Date"), and shall at all times thereafter be validly issued and outstanding, fully paid and non-assessable and constitute all of the issued and outstanding Subsidiary Securities of all Domestic Subsidiaries, and are accurately described on Schedule I. 3 (b) The Pledgor is as at its Applicable Date and shall at all times thereafter be the sole registered and record and beneficial owner of the Pledged Interests, free and clear of all Liens (except Liens allowed to exist under Section 7.01 of the Credit Agreement), charges, equities, options, hypothecations, encumbrances and restrictions on pledge or transfer, including transfer of voting rights (other than the pledge hereunder and applicable restrictions pursuant to federal and state and applicable foreign securities laws). Without limiting the foregoing, the Pledged Interests are not and will not be subject to any voting trust, shareholders agreement, right of first refusal, voting proxy, power of attorney or other similar arrangement (other than the rights hereunder in favor of the Administrative Agent). (c) At no time shall any Pledged Interests (i) be held or maintained in the form of a security entitlement or credited to any securities account and (ii) which constitute a "security" (or as to which the related Pledged Subsidiary has elected to have treated as a "security") under Article 8 of the Uniform Commercial Code of the State of New York or of any other jurisdiction whose laws may govern (the "UCC") be maintained in the form of uncertificated securities. With respect to Pledged Interests that are "securities" under the UCC, or as to which the issuer has elected at any time to have such interests treated as "securities" under the UCC, such Pledged Interests are, and shall at all times be, represented by the share certificates listed on Schedule I hereto, which share certificates, with stock powers duly executed in blank by the Pledgor, have been delivered to the Administrative Agent or are being delivered to the Administrative Agent simultaneously herewith or, in the case of Additional Interests as defined in Section 21, shall be delivered pursuant to Section 21. In addition, with respect to all Pledged Interests, including Pledged Interests that are not "securities" under the UCC and as to which the applicable Pledged Subsidiary has not elected to have such interests treated as "securities" under the UCC, the Pledgor has at its Applicable Date delivered to the Administrative Agent (or has previously delivered to the Administrative Agent or, in case of Additional Interests shall deliver pursuant to Section 21) Uniform Commercial Code financing statements (or appropriate amendments thereto) duly executed (if necessary) by or on behalf of the Pledgor as "debtor" and naming the Administrative Agent for the benefit of the Secured Parties as "secured party," in form, substance and number sufficient in the reasonable opinion of the Administrative Agent to be filed in all UCC filing offices and in all jurisdictions in which filing is necessary or advisable to perfect in favor of the Administrative Agent for the benefit of the Secured Parties the Lien on such Pledged Interests, together with all required filing fees. (d) It has full corporate power, legal right and lawful authority to execute this Pledge Agreement (and any Pledge Joinder Agreement or Pledge Agreement Supplement applicable to it) and to pledge, assign and transfer its Pledged Interests in the manner and form hereof. (e) The pledge, assignment and delivery of its Pledged Interests (along with undated stock powers executed in blank, financing statements and other items referred to in Section 2(c) hereof) to the Administrative Agent for the benefit of the Secured Parties pursuant to this Pledge Agreement (or any Pledge Joinder Agreement or Pledge Agreement Supplement) creates or continues, as applicable, a valid and perfected first 4 priority security interest in such Pledged Interests in favor of the Administrative Agent for the benefit of the Secured Parties, securing the payment of the Secured Obligations, assuming, in the case of the Pledged Interests which constitute certificated "securities" under the UCC, continuous and uninterrupted possession by or on behalf of the Administrative Agent. The Pledgor will defend the Secured Parties' right, title and security interest in and to the Collateral against the claims and demands of all persons whomsoever. (f) Except as otherwise expressly provided herein or in the Credit Agreement, none of the Pledged Interests (nor any interest therein or thereto) shall be sold, transferred or assigned without the Administrative Agent's prior written consent, which may be withheld for any reason. (g) It shall at all times cause the Pledged Interests of such Pledgor that constitute "securities" (or as to which the issuer elects to have treated as "securities") under the UCC to be represented by the certificates now and hereafter delivered to the Administrative Agent in accordance with Sections 1, 2 and 21 hereof and that it shall cause each of the Pledged Subsidiaries as to which it is the Pledgor not to issue any Subsidiary Securities, or securities convertible into, or exchangeable or exercisable for, Subsidiary Securities, at any time during the term of this Pledge Agreement unless the Pledged Interests of such Pledge Subsidiary are issued solely to either (y) such Pledgor who shall immediately comply with Sections 2 and 21 hereof with respect to such property or (z) the Borrower or another Guarantor who shall immediately pledge such additional Subsidiary Securities to the Administrative Agent for the benefit of the Secured Parties pursuant to Section 21 or 23 hereof, as applicable, on substantially identical terms as are contained herein and deliver or cause to be delivered the appropriate documents described in Section 2(c) hereof to the Administrative Agent and take such further actions as the Administrative Agent may deem necessary in order to perfect a first priority security interest in such Subsidiary Securities. (h) The exact legal name and address, type of Person, jurisdiction of formation, jurisdiction of formation identification number, and location of the chief executive office of such Pledgor are (i) with respect to each Pledgor granting a Lien to the Administrative Agent under a Security Instrument at the Closing Date, as specified on Schedule 2A.03 to the Credit Agreement, and (ii) with respect to each other Pledgor, as specified on Schedule II attached hereto. No Pledgor shall change its name, jurisdiction of formation (whether by reincorporation, merger or otherwise), or the location of its chief executive office, except upon giving written notice to the Administrative Agent not more than ten (10) days after the taking of such action and taking or causing to be taken all such action at such Pledgor's expense as may be reasonably requested by the Administrative Agent to perfect or maintain the perfection of the Lien of the Administrative Agent in Collateral. 3. PRESERVATION AND PROTECTION OF COLLATERAL. (a) Except for the exercise of reasonable care in the custody and preservation of any Collateral in its possession and accounting for monies received by it pursuant to 5 this Security Agreement, the Administrative Agent shall be under no duty or liability with respect to the collection, protection or preservation of the Collateral. (b) Each Pledgor agrees to pay when due all taxes, charges, Liens and assessments against the Collateral in which it has an interest, unless being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established in accordance with GAAP applied on a basis consistent with that used in preparing the Audited Financial Statements and evidenced to the satisfaction of the Administrative Agent and provided that all enforcement proceedings in the nature of levy or foreclosure are effectively stayed. Upon the failure of any Pledgor to so pay or contest such taxes, charges, Liens or assessments, or upon the failure of any Pledgor to pay any amount pursuant to Section 1(c), the Administrative Agent at its option may pay or contest any of them (the Administrative Agent having the sole right to determine the legality or validity and the amount necessary to discharge such taxes, charges, Liens or assessments) but shall not have any obligation to make any such payment or contest. All sums so disbursed by the Administrative Agent, including reasonable Attorney Costs, court costs, expenses and other charges related thereto, shall be payable on demand by the applicable Pledgor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate. (c) Each Pledgor hereby (i) irrevocably authorizes the Administrative Agent to file (with, or to the extent permitted by applicable law, without the signature of the Pledgor appearing thereon) financing statements (including amendments thereto and continuations and copies thereof) showing such Pledgor as "debtor" at such time or times and in all filing offices as the Administrative Agent may from time to time determine to be necessary or advisable to perfect or protect the rights of the Administrative Agent and the Secured Parties hereunder, or otherwise to give effect to the transactions herein contemplated, and (ii) irrevocably ratifies and acknowledges all such actions taken by or on behalf of the Administrative Agent prior to the Applicable Date. 4. DEFAULT. Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent is given full power and authority, then or at any time thereafter, to sell, assign, deliver or collect the whole or any part of the Collateral, or any substitute therefor or any addition thereto, in one or more sales, with or without any previous demands or demand of performance or, to the extent permitted by law, notice or advertisement, in such order as the Administrative Agent may elect; and any such sale may be made either at public or private sale at the Administrative Agent's place of business or elsewhere, either for cash or upon credit or for future delivery, at such price or prices as the Administrative Agent may reasonably deem fair; and the Administrative Agent or any other Secured Party may be the purchaser of any or all Collateral so sold and hold the same thereafter in its own right free from any claim of any Pledgor or right of redemption. Demands of performance, advertisements and presence of property and sale and notice of sale are hereby waived to the extent permissible by law. Any sale hereunder may be conducted by an auctioneer or any officer or agent of the Administrative Agent. Each Pledgor recognizes that the Administrative Agent may be unable to effect a public sale of the Collateral by reason of certain prohibitions contained in the Securities 6 Act of 1933, as amended (the "Securities Act"), and applicable state law, and may be otherwise delayed or adversely affected in effecting any sale by reason of present or future restrictions thereon imposed by governmental authorities, and that as a consequence of such prohibitions and restrictions the Administrative Agent may be compelled (i) to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof, or (ii) to seek regulatory approval of any proposed sale or sales, or (iii) to limit the amount of Collateral sold to any Person or group. Each Pledgor agrees and acknowledges that private sales so made may be at prices and upon terms less favorable to such Pledgor than if such Collateral was sold either at public sales or at private sales not subject to other regulatory restrictions, and that the Administrative Agent has no obligation to delay the sale of any of the Collateral for the period of time necessary to permit the Pledged Subsidiary to register or otherwise qualify the Collateral, even if such Pledged Subsidiary would agree to register or otherwise qualify such Collateral for public sale under the Securities Act or applicable state law. Each Pledgor further agrees, to the extent permitted by applicable law, that the use of private sales made under the foregoing circumstances to dispose of the Collateral shall be deemed to be dispositions in a commercially reasonable manner. Each Pledgor hereby acknowledges that a ready market may not exist for the Pledged Interests if they are not traded on a national securities exchange or quoted on an automated quotation system and agrees and acknowledges that in such event the Pledged Interests may be sold for an amount less than a pro rata share of the fair market value of the Pledged Subsidiary's assets minus its liabilities. In addition to the foregoing, the Secured Parties may exercise such other rights and remedies as may be available under the Loan Documents, at law (including without limitation the UCC) or in equity. The Administrative Agent shall provide prompt notice to the Borrower of its exercise of remedies under this Section 4, provided that such notice may be general in nature and neither the failure to give, nor any delay in giving, such notice shall have any effect on the validity or effectiveness of any action taken hereunder. 5. PROCEEDS OF SALE. The net cash proceeds resulting from the collection, liquidation, sale or other disposition of the Collateral shall be applied first to the expenses (including all Attorneys' Costs) of retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating and the like, and then to the satisfaction of all Secured Obligations in accordance with the terms of Section 2.14 of the Credit Agreement. Each Pledgor shall be liable to the Administrative Agent, for the benefit of the Secured Parties, and shall pay to the Administrative Agent, for the benefit of the Secured Parties, on demand any deficiency which may remain after such sale, disposition, collection or liquidation of the Collateral. 6. PRESENTMENTS, DEMANDS AND NOTICES. The Administrative Agent shall not be under any duty or obligation whatsoever to make or give any presentments, demands for performances, notices of nonperformance, protests, notice of protest or notice of dishonor in connection with any obligations or evidences of indebtedness held thereby as collateral, or in connection with any obligations or evidences of indebtedness which constitute in whole or in part the Secured Obligations secured hereunder. 7. ATTORNEY-IN-FACT. Each Pledgor hereby appoints the Administrative Agent as the Pledgor's attorney-in-fact for the purposes of carrying out the provisions of this Pledge Agreement and taking any action and executing any instrument which the Administrative Agent 7 may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to any Pledgor representing any dividend, interest payment, principal payment or other distribution payable or distributable in respect to the Collateral or any part thereof and to give full discharge for the same. 8. REINSTATEMENT. The granting of a security interest in the Collateral and the other provisions hereof shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or is repaid by any Secured Party in whole or in part in good faith settlement of a pending or threatened avoidance claim, whether upon the insolvency, bankruptcy or reorganization of any Pledgor or any other Loan Party or otherwise, all as though such payment had not been made. The provisions of this Section 8 shall survive repayment of all of the Secured Obligations and the termination or expiration of this Pledge Agreement in any manner, including but not limited to termination upon occurrence of the Facility Termination Date. For purposes of this Pledge Agreement, "Facility Termination Date" means the date as of which all of the following shall have occurred: (a) the Borrower shall have permanently terminated the credit facilities under the Loan Documents by final payment in full of all Outstanding Amounts, together with all accrued and unpaid interest and fees thereon, other than (i) the undrawn portion of Letters of Credit and (ii) all letter of credit fees relating thereto accruing after such date (which fees shall be payable solely for the account of the Issuing Bank and shall be computed (based on interest rates then in effect) on such undrawn amounts to the respective expiry dates of the Letters of Credit), in each case as have been fully Cash Collateralized or as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made; (b) all Related Swap Contracts shall have been terminated, expired or Cash Collateralized (or other arrangements satisfactory to the Administrative Agent shall have been made); (c) all Aggregate Commitments shall have terminated or expired; and (d) the Borrower shall have fully, finally and irrevocably paid and satisfied in full all other Obligations (except for Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Loan Party that may be owing to any Agent-Related Person or any Lender pursuant to the Loan Documents and expressly survive termination of this Pledge Agreement). 9. WAIVER BY THE PLEDGORS. Each Pledgor waives to the extent permitted by applicable law (a) any right to require any Secured Party or any other obligee of the Secured Obligations to (i) proceed against any Person or entity, including without limitation any Loan Party, (ii) proceed against or exhaust any Collateral or other collateral for the Secured Obligations, or (iii) pursue any other remedy in its power, (b) any defense arising by reason of any disability or other defense of any other Person, or by reason of the cessation from any cause whatsoever of the liability of any other Person or entity, (c) any right of subrogation, (d) any right to enforce any remedy which any Secured Party or any other obligee of the Secured Obligations now has or may hereafter have against any other Person and any benefit of and any right to participate in any collateral or security whatsoever now or hereafter held by the Administrative Agent for the benefit of the Secured Parties. Each Pledgor authorizes each 8 Secured Party and each other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Loan Documents from time to time to: (x) take and hold security, other than the Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Collateral herein described or any part thereof or any such other security; and (y) apply such Collateral or other security and direct the order or manner of sale thereof as such Secured Party or obligee in its discretion may determine. The Administrative Agent may at any time deliver (without representation, recourse or warranty) the Collateral or any part thereof to a Pledgor and the receipt thereof by such Pledgor shall be a complete and full acquittance for the Collateral so delivered, and the Administrative Agent shall thereafter be discharged from any liability or responsibility therefor. 10. DIVIDENDS AND VOTING RIGHTS. (a) All dividends and other distributions with respect to any of the Pledged Interests shall be subject to the pledge hereunder, provided, however, that cash dividends paid to a Pledgor as record owner of the Pledged Interests, to the extent permitted by the Credit Agreement to be declared and paid, may be retained by such Pledgor so long as no Event of Default shall have occurred and be continuing, free from any Liens hereunder. (b) So long as no Event of Default shall have occurred and be continuing, the registration of the Collateral in the name of a Pledgor as record and beneficial owner shall not be changed and such Pledgor shall be entitled to exercise all voting and other rights and powers pertaining to the Collateral for all purposes not inconsistent with the terms hereof. (c) Upon the occurrence and during the continuance of any Event of Default, and notice by the Administrative Agent to the Pledgors with respect thereto, all rights of the Pledgors to receive and retain cash dividends and other distributions upon the Collateral pursuant to subsection (a) above shall cease and shall thereupon be vested in the Administrative Agent for the benefit of the Secured Parties, and each Pledgor shall promptly deliver, or shall cause to be promptly delivered, all such cash dividends and other distributions with respect to the Pledged Interests to the Administrative Agent (together, if the Administrative Agent shall request, with the documents described in Sections 1(c) and 2(c) hereof or other negotiable documents or instruments so distributed) to be held by it hereunder or, at the option of the Administrative Agent, to be applied to the Secured Obligations. Pending delivery to the Administrative Agent of such property, each Pledgor shall keep such property segregated from its other property and shall be deemed to hold the same in trust for the benefit of the Secured Parties. (d) Upon the occurrence and during the continuance of any Event of Default, at the option of the Administrative Agent, all rights of each of the Pledgors to exercise the voting or consensual rights and powers which it is authorized to exercise pursuant to subsection (b) above shall cease and the Administrative Agent may thereupon (but shall not be obligated to), at its request, cause such Collateral to be registered in the name of the Administrative Agent or its nominee or agent for the benefit of the Secured Parties 9 and/or exercise such voting or consensual rights and powers as appertain to ownership of such Collateral, and to that end each Pledgor hereby appoints the Administrative Agent as its proxy, with full power of substitution, to vote and exercise all other rights as a shareholder with respect to such Pledged Interests hereunder upon the occurrence and during the continuance of any Event of Default, which proxy is coupled with an interest and is irrevocable until the Facility Termination Date, and each Pledgor hereby agrees to provide such further proxies as the Administrative Agent may request; provided, however, that the Administrative Agent in its discretion may from time to time refrain from exercising, and shall not be obligated to exercise, any such voting or consensual rights or such proxy. 11. CONTINUED POWERS. Until the Facility Termination Date shall have occurred, the power of sale and other rights, powers and remedies granted to the Administrative Agent for the benefit of the Secured Parties hereunder shall continue to exist and may be exercised by the Administrative Agent at any time and from time to time irrespective of the fact that any of the Secured Obligations or any part thereof may have become barred by any statute of limitations or that any part of the liability of any Pledgor may have ceased. 12. OTHER RIGHTS. The rights, powers and remedies given to the Administrative Agent for the benefit of the Secured Parties by this Pledge Agreement shall be in addition to all rights, powers and remedies given to the Administrative Agent or any Secured Party under any Related Agreement or by virtue of any statute or rule of law. Any forbearance or failure or delay by the Administrative Agent in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of the Secured Parties shall continue in full force and effect until such right, power or remedy is specifically waived in accordance with the terms of the Credit Agreement. 13. ANTI-MARSHALING PROVISIONS. The right is hereby given by each Pledgor to the Administrative Agent, for the benefit of the Secured Parties, to make releases (whether in whole or in part) of all or any part of the Collateral agreeable to the Administrative Agent without notice to, or the consent, approval or agreement of other parties and interests, including junior lienors, which releases shall not impair in any manner the validity of or priority of the Liens and security interests in the remaining Collateral conferred hereunder, nor release any Pledgor from personal liability for the Secured Obligations. Notwithstanding the existence of any other security interest in the Collateral held by the Administrative Agent, for the benefit of the Secured Parties, the Administrative Agent shall have the right to determine the order in which any or all of the Collateral shall be subjected to the remedies provided in this Pledge Agreement. Each Pledgor hereby waives any and all right to require the marshaling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein or in any Related Agreement. 14. ENTIRE AGREEMENT. This Pledge Agreement and each Pledge Joinder Agreement and each Pledge Agreement Supplement, together with the Credit Agreement and other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, 10 except as herein contained. The express terms hereof and of the Pledge Joinder Agreements and of the Pledge Agreement Supplements control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof and thereof. Neither this Pledge Agreement nor any Pledge Joinder Agreement nor any Pledge Agreement Supplement, nor any portion or provision hereof or thereof, may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement. 15. FURTHER ASSURANCES. Each Pledgor agrees at its own expense to do such further acts and things, and to execute and deliver, and cause to be executed and delivered as may be necessary or advisable to give effect thereto, such additional conveyances, assignments, financing statements, control agreements, documents, certificates, stock powers, agreements and instruments, as the Administrative Agent may at any time reasonably request in connection with the administration or enforcement of this Pledge Agreement or any Pledge Joinder Agreement or any Pledge Agreement Supplement or related to the Collateral or any part thereof or in order better to assure and confirm unto the Administrative Agent its rights, powers and remedies for the benefit of the Secured Parties hereunder or thereunder. Each Pledgor hereby consents and agrees that the Pledged Subsidiaries and all other Persons, shall be entitled to accept the provisions hereof and of the Pledge Joinder Agreements and of the Pledge Agreement Supplements as conclusive evidence of the right of the Administrative Agent, on behalf of the Secured Parties, to exercise its rights, privileges, and remedies hereunder and thereunder with respect to the Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Pledgor or any other Person to any of such Pledged Subsidiaries or other Persons. 16. BINDING AGREEMENT; ASSIGNMENT. This Pledge Agreement and each Pledge Joinder Agreement and each Pledge Agreement Supplement, and the terms, covenants and conditions hereof and thereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns, except that no Pledgor shall be permitted to assign this Pledge Agreement, any Pledge Joinder Agreement, any Pledge Agreement Supplement, or any interest herein or therein or in the Collateral, or any part thereof or interest therein, or otherwise pledge, encumber or grant any option with respect to the Collateral, or any part thereof, or any cash or property held by the Administrative Agent as Collateral under this Pledge Agreement. Without limiting the generality of the foregoing sentence of this Section 16, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.07 thereof (concerning assignments and participations). All references herein to the Administrative Agent and to the Secured Parties shall include any successor thereof or permitted assignee, and any other obligees from time to time of the Secured Obligations. 17. RELATED SWAP CONTRACTS. All obligations of each Pledgor under or in respect of Related Swap Contracts (which are not prohibited under the terms of the Credit Agreement) to 11 which any Lender or any Affiliate of any Lender is a party, shall be deemed to be Secured Obligations secured hereby, and each Lender or Affiliate of a Lender party to any such Related Swap Contract shall be deemed to be a Secured Party hereunder with respect to such Secured Obligations; provided, however, that such obligations shall cease to be Secured Obligations at such time as such Person (or Affiliate of such Person) shall cease to be a "Lender" under the Credit Agreement. No Person who obtains the benefit of any Lien by virtue of the provisions of this Section 17 shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and only to the extent expressly provided in the Loan Documents. 18. SEVERABILITY. The provisions of this Pledge Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this Pledge Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 19. COUNTERPARTS. This Pledge Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Pledge Agreement to produce or account for more than one such counterpart executed by the Pledgor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 19, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Pledge Agreement. 20. TERMINATION. (a) Subject to the provisions of Section 8, this Pledge Agreement and each Pledge Joinder Agreement and each Pledge Agreement Supplement, and all obligations of the Pledgors hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date. Upon such termination of this Pledge Agreement, the Administrative Agent shall, at the sole expense of the Pledgors, promptly deliver to the Pledgors the certificates evidencing its shares of Pledged Interests (and any other property received as a dividend or distribution or otherwise in respect of such Pledged Interests to the extent then held by the Administrative Agent as additional Collateral hereunder), together with any cash then constituting the Collateral not then sold or otherwise disposed of in accordance with the provisions hereof, and take such further actions at the request of the Pledgors as may be necessary to effect the same. (b) In the event that all of the Subsidiary Securities issued by any Pledgor are Disposed of by the Borrower and/or any Pledgor, and such Disposition is expressly permitted by the Credit Agreement, then all obligations of such disposed Pledgor hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party, and the Administrative Agent 12 shall, at the request and sole expense of the Pledgor, promptly deliver to the Pledgors such termination statements and take such further actions as the Pledgors may reasonably request to terminate of record, or otherwise to give appropriate notice of the termination of, any Lien conferred hereunder. 21. ADDITIONAL INTERESTS. If any Pledgor shall at any time acquire or hold any additional Pledged Interests, including any Pledged Interests issued by any Subsidiary not listed on Schedule I hereto which are required to be subject to a Lien pursuant to a Pledge Agreement by the terms hereof or of Article IIA or Section 6.14 or any other provision of the Credit Agreement (any such shares being referred to herein as the "Additional Interests"), such Pledgor shall deliver to the Administrative Agent for the benefit of the Secured Parties (i) a Pledge Agreement Supplement in the form of Exhibit A hereto with respect to such Additional Interests duly completed and executed by such Pledgor and (iii) any other document required in connection with such Additional Interests as described in Section 2(c). Each Pledgor shall comply with the requirements of this Section 21 concurrently with the acquisition of any such Additional Interests or, in the case of Additional Interests to which Section 6.14 of the Credit Agreement applies, within the time period specified in Article IIA, Section 6.14 or elsewhere in the Credit Agreement with respect to such Additional Interests; provided, however, that the failure to comply with the provisions of this Section 21 shall not impair the Lien on Additional Interests conferred hereunder. 22. NOTICES. Any notice required or permitted hereunder shall be given (a) with respect to the Borrower, at the address for the giving of notice thereto then in effect under the Credit Agreement, (b) with respect to each Subsidiary which is a Pledgor hereunder, at the address then in effect for the giving of notices to such Subsidiary under the Guaranty to which it is a party, and (c) with respect to the Administrative Agent or a Lender, at the Administrative Agent's address indicated in Schedule 10.02 of the Credit Agreement. All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder. 23. JOINDER. Each Person who shall at any time execute and deliver to the Administrative Agent a Pledge Joinder Agreement substantially in the form attached as Exhibit B hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Pledgor and shall have thereupon pursuant to Section 1 hereof granted a security interest in and collaterally assigned and pledged to the Administrative Agent for the benefit of the Secured Parties all Pledged Interests which it has at its Applicable Date or thereafter acquires any interest or the power to transfer, and all references herein and in the other Loan Documents to the Pledgors or to the parties to this Pledge Agreement shall be deemed to include such Person as a Pledgor hereunder. Each Pledge Joinder Agreement shall be accompanied by the Supplemental Schedules referred to therein, appropriately completed with information relating to the Pledgor executing such Pledge Joinder Agreement and its property. Each of the applicable Schedules attached hereto shall be deemed amended and supplemented without further action by such information reflected on the Supplemental Schedules. 24. RULES OF INTERPRETATION. The rules of interpretation contained in Sections 1.02 and 1.05 of the Credit Agreement shall be applicable to this Pledge Agreement and each Pledge 13 \Joinder Agreement and each Pledge Agreement Supplement and are hereby incorporated by reference. All representations and warranties contained herein shall survive the delivery of documents and any Credit Extensions referred to herein or secured hereby. 26. RELEASE. Upon the Disposition of any item of Collateral, so long as such Disposition is permitted under Section 7.05 of the Credit Agreement and all conditions to such Disposition contained therein have been satisfied: (a) the Lien of the Administrative Agent for the benefit of the Secured Parties in such disposed Collateral shall, subject to the provision at the end of this subsection (a), be deemed to be released without any further action on the part of the Administrative Agent or the relevant Grantor, provided that in the event following any such Disposition any Grantor shall thereafter acquire any interest in (or the power to transfer rights in) any asset that constituted Collateral hereunder prior to its Disposition and release from the security interests hereunder, the pledge, assignment and security interest granted hereunder shall be deemed to automatically apply and attach to such asset and it shall from such time forward continue to constitute Collateral hereunder notwithstanding any prior release; and (b) the Administrative Agent will (other than in connection with sales of Inventory in the ordinary course of business), at the Grantors' expense, execute and deliver to each Grantor such documents as such Grantor shall reasonably request on reasonable advance notice to evidence the release of such item of Collateral from the pledge, assignment and security interest granted hereunder, provided that such Grantor shall have delivered to the Collateral Agent a written request for release describing the item of Collateral and the terms of the Disposition thereof in reasonable detail, including the price thereof and any expenses in connection therewith. 25. GOVERNING LAW; WAIVERS. (a) THIS PLEDGE AGREEMENT AND EACH PLEDGE JOINDER AGREEMENT AND EACH PLEDGE AGREEMENT SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE; PROVIDED THAT (i) WITH RESPECT TO THOSE INSTANCES IN WHICH THE APPLICABLE CHOICE OF LAWS RULES OF SUCH STATE, INCLUDING SECTION 9-301 OF THE UCC, REQUIRE THAT THE MANNER OF CREATION OF A SECURITY INTEREST IN SPECIFIC COLLATERAL OR THE MANNER OR EFFECT OF PERFECTION OR NONPERFECTION OR THE RULES GOVERNING PRIORITY OF SECURITY INTERESTS ARE TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION, THEN THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS, AND (ii) IN THOSE INSTANCES IN WHICH THE LAWS OF THE JURISDICTION IN WHICH COLLATERAL IS LOCATED GOVERN MATTERS PERTAINING TO THE METHODS AND EFFECT OF REALIZING ON COLLATERAL, SUCH LAWS SHALL BE GIVEN EFFECT WITH RESPECT TO SUCH MATTERS. 14 (b) EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT OR ANY PLEDGE AGREEMENT SUPPLEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS PLEDGE AGREEMENT OR A PLEDGE JOINDER AGREEMENT OR A PLEDGE AGREEMENT SUPPLEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (c) EACH PLEDGOR AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PLEDGOR PROVIDED IN SECTION 22 OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT OR ANY PLEDGE AGREEMENT SUPPLEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY PLEDGOR OR ANY OF SUCH PLEDGOR'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE UNDER APPLICABLE LAW. (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT OR ANY PLEDGE AGREEMENT SUPPLEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE 15 LAW, THAT ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION, SUIT OR PROCEEDING. (F) EACH PLEDGOR HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE TERMS HEREOF IS AN INCONVENIENT FORUM. [SIGNATURE PAGES FOLLOW.] 16 IN WITNESS WHEREOF, the parties have duly executed this Securities Pledge Agreement on the day and year first written above. PLEDGORS: BLOCK COMMUNICATIONS, INC. By: /s/ Allan J. Block --------------------------------- Name: Allan J. Block --------------------------------- Title: Managing Director --------------------------------- BUCKEYE CABLEVISION, INC. By: /s/ Allan J. Block --------------------------------- Name: Allan J. Block --------------------------------- Title: Chairman --------------------------------- ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A., as Administrative Agent for the Lenders By: /s/ Derrick C. Bell --------------------------------- Name: Derrick C. Bell --------------------------------- Title: Principal --------------------------------- Pledge Agreement Signature Page 2 EXHIBIT A PLEDGE AGREEMENT SUPPLEMENT THIS PLEDGE AGREEMENT SUPPLEMENT (as from time to time amended, modified or restated, this "Supplement"), dated as of ______________ ___, ____ is made by and between ____________, a __________ corporation (the "Pledgor"), and BANK OF AMERICA, N.A., a national banking association, as Administrative Agent for each of the Lenders (as described in the Pledge Agreement referred to below) now or hereafter party to the Credit Agreement (as defined in the Pledge Agreement referred to below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Pledge Agreement (as defined below). WHEREAS, the Pledgor is required under the terms of that certain Securities Pledge Agreement dated as of May 15, 2002 executed by the Pledgor (among others), or to which the Pledgor has been joined as a party pursuant to a Pledge Joinder Agreement, in favor of the Administrative Agent for the benefit of the Secured Parties (as from time to time amended, modified, supplemented or amended and restated, the "Pledge Agreement"), to cause certain Pledged Interests held by it and listed on Annex A to this Supplement (the "Additional Interests") to be specifically identified as subject to the Pledge Agreement; and WHEREAS, a material part of the consideration given in connection with and as an inducement to the execution and delivery of the Credit Agreement by the Secured Parties was the obligation of the Pledgor to pledge to the Administrative Agent for the benefit of the Secured Parties the Additional Interests, whether then owned or subsequently acquired or created; and WHEREAS, the Pledgor has acquired rights in the Additional Interests and desires to pledge, and evidence its prior pledge, to the Administrative Agent for the benefit of the Secured Parties all of the Additional Interests in accordance with the terms of the Credit Agreement and the Pledge Agreement; NOW, THEREFORE, the Pledgor hereby agrees as follows with the Administrative Agent, for the benefit of the Secured Parties: The Pledgor hereby reaffirms and acknowledges the pledge and collateral assignment to, and the grant of security interest in, the Additional Interests contained in the Pledge Agreement and pledges and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties, and grants to the Administrative Agent for the benefit of the Secured Parties a first priority lien and security interest in, the Additional Interests and all of the following: (a) all money, securities, security entitlements and other investment property, dividends, rights, general intangibles and other property at any time and from time to time (x) declared or distributed in respect of or in exchange for or on conversion of any or all of the Additional Interests or (y) by its or their terms exchangeable or exercisable for or convertible into any Additional Interest or other Pledged Interest; (b) all other property of whatever character or description, including money, securities, security entitlements and other investment property, and general intangibles hereafter delivered to the Administrative Agent in substitution for or as an addition to any of the foregoing; (c) all securities accounts to which may at any time be credited any or all of the foregoing or any proceeds thereof and all certificates and instruments representing or evidencing any of the foregoing or any proceeds thereof; and (d) all proceeds of any of the foregoing. The Pledgor hereby acknowledges, agrees and confirms by its execution of this Supplement that the Additional Interests constitute "Pledged Interests" under and are subject to the Pledge Agreement, and the items of property referred to in clauses (a) through (d) above (the "Additional Collateral") shall collectively constitute "Collateral" under and are subject to the Pledge Agreement. Each of the representations and warranties with respect to Pledged Interests and Collateral contained in the Pledge Agreement is hereby made by the Pledgor with respect to the Additional Interests and the Additional Collateral, respectively. The Pledgor further represents and warrants that Annex A attached to this Supplement contains a true, correct and complete description of the Additional Interests, and that all other documents required to be furnished to the Administrative Agent pursuant to Section 2(c) of the Pledge Agreement in connection with the Additional Collateral have been delivered or are being delivered simultaneously herewith to the Administrative Agent. The Pledgor further acknowledges that Schedule I to the Pledge Agreement shall be deemed, as to it, to be supplemented as of the date hereof to include the Additional Interests as described on Annex A to this Supplement. IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly executed by its authorized officer as of the day and year first above written. PLEDGOR: -------------------------------------- By: -------------------------------- Name: -------------------------------- Title: -------------------------------- Acknowledged and accepted: BANK OF AMERICA, N. A., as Administrative Agent for the Lenders By: ---------------------------------- Name: ---------------------------------- Title: ---------------------------------- A-2 ANNEX A (to Pledge Agreement Supplement of __________ dated __________) Additional Interests
Total Name, Amount of Jurisdiction Class Class or Total of or Type Type Amount of Certificate Name of Formation and of Additional of Additional Class or Type Total Amount Number (if Par Value (if Name of Pledgor Type of Entity Interest Interests Outstanding Pledged applicable) applicable) Transfer of Pledged Authorized Agent Subsidiary (if any)
EXHIBIT B PLEDGE JOINDER AGREEMENT THIS PLEDGE JOINDER AGREEMENT (the "Pledge Joinder Agreement"), dated as of _____________, 20__ is made by and between ______________________________, a ________________ (the "Joining Pledgor"), and BANK OF AMERICA, N.A., in its capacity as Administrative Agent (the "Administrative Agent") under that certain Credit Agreement (as from time to time amended, revised, modified, supplemented, amended and restated, or replaced, renewed, refunded or refinanced, the "Credit Agreement"), dated as of May 15, 2002, by and among BLOCK COMMUNICATIONS, INC., an Ohio corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement) party thereto and the Administrative Agent. All capitalized terms not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement. WHEREAS, the Joining Pledgor is a Subsidiary and required by the terms of the Credit Agreement to become a "Guarantor" under the Credit Agreement and be joined as a party to the Pledge Agreement as a Pledgor (as defined in the Pledge Agreement); and WHEREAS, the Joining Pledgor will materially benefit directly and indirectly from the credit facilities made available and to be made available to the Borrower by the Lenders under the Credit Agreement; and NOW, THEREFORE, the Joining Pledgor hereby agrees as follows with the Administrative Agent, for the benefit of the Secured Parties (as defined in the Pledge Agreement): 1. JOINDER. The Subsidiary hereby irrevocably, absolutely and unconditionally becomes a party to the Pledge Agreement as a Pledgor and bound by all the terms, conditions, obligations, liabilities and undertakings of each Pledgor or to which each Pledgor is subject thereunder, including without limitation the grant pursuant to Section 1 of the Pledge Agreement of a security interest to the Administrative Agent for the benefit of the Secured Parties in, and collateral assignment and pledge to the Administrative Agent of, the Pledged Interests and other property constituting Collateral (as defined in Section 1 of the Pledge Agreement) of such Pledgor or in which such Pledgor has or may have or acquire an interest or the power to transfer rights therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located, as security for the payment and performance of the Secured Obligations (as defined in the Pledge Agreement), all with the same force and effect as if the Joining Pledgor were a signatory to the Pledge Agreement. 2. AFFIRMATIONS. The Joining Pledgor hereby acknowledges and reaffirms as of the date hereof with respect to itself, its properties and its affairs each of the waivers, representations, warranties, acknowledgements and certifications applicable to any Pledgor contained in the Pledge Agreement. 3. SUPPLEMENTAL SCHEDULES. Attached to this Pledge Joinder Agreement are duly completed schedules (the "Supplemental Schedules") supplementing as thereon indicated the respective Schedules to the Pledge Agreement. The Joining Pledgor represents and warrants that the information contained on each of the Supplemental Schedules with respect to such Joining Pledgor and its properties and affairs is true, complete and accurate as of its Applicable Date (as defined in the Pledge Agreement). 4. SEVERABILITY. The provisions of this Pledge Joinder Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this Pledge Joinder Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 5. COUNTERPARTS. This Pledge Joinder Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same instrument, and it shall not be necessary in making proof of this Pledge Joinder Agreement to produce or account for more than one such counterpart executed by the Joining Pledgor against whom enforcement is sought. Without limiting the foregoing provisions of this Section 5, the provisions of Section 10.02(b) of the Credit Agreement shall be applicable to this Pledge Joinder Agreement. 6. DELIVERY. The Joining Pledgor hereby irrevocably waives notice of acceptance of this Pledge Joinder Agreement and acknowledges that the Secured Obligations are and shall be deemed to be incurred, and credit extensions under the Loan Documents made and maintained, in reliance on this Pledge Joinder Agreement and the Pledgor's joinder as a party to the Pledge Agreement as herein provided. 7. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. The provisions of Section 25 of the Pledge Agreement are hereby incorporated by reference as if fully set forth herein. [SIGNATURE PAGE FOLLOWS.] B-2 IN WITNESS WHEREOF, the Joining Pledgor has duly executed and delivered this Pledge Joinder Agreement as of the day and year first written above. JOINING PLEDGOR: ------------------------------------------ By: ----------------------------------- Name: ----------------------------------- Title: ----------------------------------- ADMINISTRATIVE AGENT: BANK OF AMERICA, N. A., as Administrative Agent for the Lenders By: ----------------------------------- Name: ----------------------------------- Title: ----------------------------------- B-3 SUPPLEMENTAL SCHEDULE I
Name, Total Jurisdiction Amount of of Class Class Total Formation or Type or Type Amount of Certificate Name of and of Pledged of Pledged Class or Type Total Amount Number (if Par Value (if Name of Pledgor Type of Entity Interest Interests Outstanding Pledged applicable) applicable) Transfer of Pledged Authorized Agent Subsidiary (if any)
Delivered Pursuant to Pledge Joinder Agreement of: ____________________________ Applicable Date: __________, 20__ SUPPLEMENTAL SCHEDULE II
Jurisdiction of Formation Jurisdiction of Formation Address of Chief Name and Address of Pledgor Type of Person of Pledgor Identification Number Executive Office
Delivered Pursuant to Pledge Joinder Agreement of: ____________________________ Applicable Date: __________, 20__ EX-10.7 19 j9521601exv10w7.txt EXHIBIT 10.7 Exhibit 10.7 PREPARED BY AND WHEN RECORDED MAIL TO: Elizabeth W. Goode, Esq. Helms Mulliss & Wicker, PLLC 201 North Tryon Street Charlotte, North Carolina 28202 ================================================================================ A MORTGAGE, OPEN-END MORTGAGE, LEASEHOLD MORTGAGE, OPEN-END LEASEHOLD MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING, ASSIGNMENT OF LEASES AND RENTS AND FINANCING STATEMENT Dated and effective as of May 15, 2002 between BLOCK COMMUNICATIONS, INC., an Ohio corporation, formerly known as BLADE COMMUNICATIONS, INC. Grantor and BANK OF AMERICA, N.A., as Agent Beneficiary THE INITIAL TERM OF THE INDEBTEDNESS SECURED BY THIS INSTRUMENT WILL EXPIRE ON NOVEMBER 15, 2009. IF THE PROPERTY TO BE ENCUMBERED BY THIS INSTRUMENT IS LOCATED IN PENNSYLVANIA, THE FOLLOWING SHALL BE APPLICABLE. THIS INSTRUMENT IS INTENDED TO BE AN OPEN END MORTGAGE AS DEFINED IN 42 PA.C.S.A. Section 8143, AND SHALL BE ENTITLED TO THE BENEFITS OF SUCH STATUTE. THE MAXIMUM AMOUNT OF INDEBTEDNESS SECURED BY THIS INSTRUMENT AT ANY TIME IS $300,000,000.00, PLUS AMOUNTS PROVIDED IN SECTION 2.3(b) OF THIS INSTRUMENT. THIS INSTRUMENT SECURES FUTURE ADVANCES THIS INSTRUMENT SECURES DEBT WHICH INCLUDES FUTURE ADVANCES BY BENEFICIARY AND/OR CERTAIN SECURED CREDITORS TO GRANTOR INCLUDING, AMONG OTHER THINGS, TERM LOANS, SWING LINE LOANS, REVOLVING CREDIT LOANS AND REIMBURSEMENT OF ADVANCES MADE UNDER LETTERS OF CREDIT. THIS INSTRUMENT COVERS GOODS WHICH ARE OR ARE TO BECOME FIXTURES RELATED TO THE REAL ESTATE DESCRIBED HEREIN AND IS TO BE RECORDED IN THE DEED RECORDS AND IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS OR OF FIXTURE FILINGS. REFER TO PAGE ONE OF THIS INSTRUMENT FOR ADDITIONAL INFORMATION CONCERNING THE DEBTOR AND SECURED PARTY. THE INDEBTEDNESS SECURED HEREBY INCLUDES A REVOLVING CREDIT FACILITY. IF THE STATE IS OHIO, THIS INSTRUMENT SECURES DEBT WHICH INCLUDES FUTURE ADVANCES THAT ANY SECURED CREDITOR MAY BE OBLIGATED TO MAKE HEREUNDER OR UNDER THE CREDIT AGREEMENT TO THE EXTENT THAT THE MAXIMUM AMOUNT OF UNPAID LOAN INDEBTEDNESS, EXCLUSIVE OF INTEREST, DOES NOT EXCEED $300,000,000.00. Table of Contents
Page ARTICLE I DEFINITIONS 1.1 Definitions.......................................................... 3 1.2 Defined Terms........................................................ 10 ARTICLE II GRANT 2.1 Grant................................................................ 11 2.2 Defeasance and Reconveyance.......................................... 11 2.3 Provisions Concerning Particular States.............................. 12 2.4 Credit Agreement..................................................... 12 ARTICLE III WARRANTIES AND REPRESENTATIONS 3.1 Title to Mortgaged Property and Lien of this Instrument.............. 13 3.2 [Intentionally Omitted].............................................. 13 3.3 Encumbered Leases.................................................... 13 3.4 Powers of Termination and Rights of Reverter......................... 13 3.5 Wetlands............................................................. 14 3.6 Environmental Matters................................................ 14 ARTICLE IV AFFIRMATIVE COVENANTS 4.1 Payment and Performance.............................................. 15 4.2 Compliance with Legal Requirements................................... 15 4.3 Lien Status.......................................................... 15 4.4 [Intentionally Deleted].............................................. 16 4.5 [Intentionally Deleted].............................................. 16 4.6 Insurance............................................................ 16 4.7 Restoration Following Casualty....................................... 16 4.8 Application of Proceeds.............................................. 17 4.9 [Intentionally Deleted].............................................. 17 4.10 [Intentionally Deleted].............................................. 17 4.11 Appraisals........................................................... 17 4.12 Taxes................................................................ 17 4.13 Collection Costs..................................................... 17 4.14 [Intentionally Deleted].............................................. 18 4.15 [Intentionally Deleted].............................................. 18 4.16 Creation and Recordation of Additions and Betterments................ 18 4.17 Consents............................................................. 18
i Table of Contents (continued)
Page 4.18 Covenants Relating to Encumbered Leases.............................. 18 4.19 Lessor's Bankruptcy.................................................. 20 4.20 [Intentionally Deleted].............................................. 22 4.21 Change of Name or Address............................................ 22 4.22 Environmental Assessment Reports..................................... 22 4.23 Response to Environmental Complaint.................................. 23 4.24 Indemnification...................................................... 23 4.25 [Intentionally Deleted].............................................. 23 4.26 Transfer of License.................................................. 23 ARTICLE V NEGATIVE COVENANTS 5.1 Rights of Reverter and Powers of Termination......................... 24 ARTICLE VI DEFAULT AND FORECLOSURE 6.1 Remedies............................................................. 24 6.2 No Conditions Precedent to Exercise of Remedies...................... 29 6.3 Release of and Resort to Collateral.................................. 30 6.4 Waivers.............................................................. 30 6.5 Discontinuance of Proceedings........................................ 30 6.6 Application of Proceeds.............................................. 30 6.7 Cooperation.......................................................... 31 ARTICLE VII CONDEMNATION 7.1 General.............................................................. 31 7.2 Rebuilding, Restoration and Repair................................... 31 ARTICLE VIII SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS 8.1 Assignment........................................................... 32 8.2 Collection of Rents.................................................. 33 8.3 Beneficiary's Powers of Attorney..................................... 34 8.4 Grantor Remains Liable............................................... 35 8.5 Grantor's Representations and Warranties............................. 35 8.6 Grantor's Covenants.................................................. 36 8.7 Effect of Release of Mortgaged Property.............................. 37 8.8 Hold Harmless........................................................ 37
ii Table of Contents (continued)
Page ARTICLE IX INDIVIDUAL BENEFICIARY 9.1 Individual Beneficiary............................................... 38 ARTICLE X MISCELLANEOUS 10.1 Performance at Grantor's Expense..................................... 39 10.2 Survival of Obligations.............................................. 39 10.3 Further Assurances................................................... 39 10.4 Recording and Filing................................................. 39 10.5 Notices.............................................................. 40 10.6 No Waiver; Remedies.................................................. 41 10.7 Beneficiary's and Secured Creditors' Right to Perform the Obligations 41 10.8 Covenants Running with the Land...................................... 42 10.9 Successors and Assigns............................................... 42 10.10 Severability......................................................... 42 10.11 Entire Agreement and Modification.................................... 43 10.12 APPLICABLE LAW....................................................... 43 10.13 No Partnership; Control in Grantor................................... 44 10.14 Headings............................................................. 45 10.15 Hold Harmless........................................................ 45 10.16 Pronouns and Plurals................................................. 45 10.17 WAIVER OF TRIAL BY JURY.............................................. 46 10.18 Assignment........................................................... 46 10.19 No Merger............................................................ 46 10.20 Enforceability of Lien............................................... 46 10.21 Knowledge............................................................ 46 10.22 Best Efforts......................................................... 46 10.23 Usury Savings Clause................................................. 46 10.24 Payment of Prior Encumbrances........................................ 46 10.25 Industrial Plant Mortgage............................................ 47 10.26 Release.............................................................. 47 EXHIBIT A Land or Encumbered Leases.................................... 1 EXHIBIT B Fee Owner of Land Underlying Encumbered Lease................ 2
iii THIS INSTRUMENT IS A MORTGAGE, OPEN-END MORTGAGE, LEASEHOLD MORTGAGE, OPEN-END LEASEHOLD MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING, ASSIGNMENT OF LEASES AND RENTS AND FINANCING STATEMENT OF BOTH REAL AND PERSONAL PROPERTY, INCLUDING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN, AND IS TO BE FILED FOR RECORD IN THE RECORDS WHERE MORTGAGES OF REAL ESTATE ARE RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A MORTGAGE BUT ALSO AS A FINANCING STATEMENT OR FIXTURE FILING COVERING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE NAMES OF THE GRANTOR (DEBTOR/MORTGAGOR) AND BENEFICIARY (SECURED PARTY/MORTGAGEE), THE MAILING ADDRESSES OF THE GRANTOR (DEBTOR/MORTGAGOR), THE ADDRESS OF BENEFICIARY (SECURED PARTY/MORTGAGEE) FROM WHICH INFORMATION CONCERNING THE SECURITY INTEREST MAY BE OBTAINED, AND A STATEMENT INDICATING THE TYPES, OR DESCRIBING THE ITEMS OF COLLATERAL, ARE SET FORTH BELOW IN SECTIONS 1.1 AND 8.1 OF THIS INSTRUMENT, RESPECTIVELY. IF THE MORTGAGED PROPERTY IS A LEASEHOLD, THE NAME OF THE FEE OWNER IS SET FORTH IN EXHIBIT "B" HERETO. THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS AND SECURES OBLIGATIONS CONTAINING PROVISIONS FOR CHANGES IN INTEREST RATES, EXTENSIONS OF TIME FOR PAYMENT AND OTHER MODIFICATIONS IN THE TERMS OF THE OBLIGATIONS. TO THE EXTENT THE MORTGAGED PROPERTY IS LOCATED IN THE STATE OF OHIO OR PENNSYLVANIA, THIS INSTRUMENT SHALL BE DEEMED TO BE AND SHALL BE ENFORCEABLE AS AN OPEN-END MORTGAGE, MORTGAGE, LEASEHOLD MORTGAGE AND/OR LEASEHOLD OPEN-END MORTGAGE AND AS A SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FINANCING STATEMENT. THIS INSTRUMENT SECURES FUTURE ADVANCES MADE PURSUANT TO THE PROVISIONS HEREOF AND THE CREDIT AGREEMENT REFERRED TO BELOW. THE ADDRESS AT WHICH COMMUNICATIONS TO THE SECURED CREDITORS MAY BE MAILED OR DELIVERED IS: CARE OF BANK OF AMERICA, N.A., AS AGENT, 901 MAIN STREET, 14TH FLOOR, TX1-492-14-11 DALLAS, TEXAS 75202, ATTENTION: AGENCY MANAGEMENT. MORTGAGE, OPEN-END MORTGAGE, LEASEHOLD MORTGAGE, OPEN-END LEASEHOLD MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING, ASSIGNMENT OF LEASES AND RENTS AND FINANCING STATEMENT A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER OF SALE MAY ALLOW THE BENEFICIARY TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE GRANTOR UNDER THIS MORTGAGE. THIS MORTGAGE, OPEN-END MORTGAGE, LEASEHOLD MORTGAGE, OPEN-END LEASEHOLD MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING, ASSIGNMENT OF LEASES AND RENTS, AND FINANCING STATEMENT (hereinafter referred to as this "Deed of Trust" or this "Mortgage"), is entered into as of the 15th day of May, 2002, by and among BLOCK COMMUNICATIONS, INC., an Ohio corporation, formerly known as BLADE COMMUNICATIONS, INC., the mortgagor, grantor and trustor hereunder (herein called "Grantor"), whose address for all purposes hereunder is 541 N. Superior Street, Toledo, Ohio 43660 Attention: Gary Blair, Chief Financial Officer; and BANK OF AMERICA, N.A., a national banking association, acting in its capacity as Agent for the Secured Creditors (as defined herein), under the Credit Agreement (as defined herein), the mortgagee hereunder (herein called "Beneficiary", which term shall include each of its successors and assigns), whose address for all purposes hereunder is 901 Main Street, TX1-492-14-11, 14th Floor, Dallas, Texas 75202, Attention: Agency Management. Beneficiary shall hold the interests and exercise the rights granted hereunder in trust as Agent for the benefit of and as security for the Secured Creditors, as more fully provided in the Credit Agreement. This Mortgage secures the Obligations (as defined below in Section 1.1) and any modifications, extensions and renewals of the Obligations, it being the intention of the parties hereto that this Mortgage shall be deemed an open and continuing lien instrument to secure all such Obligations now existing or hereafter arising regardless of the extinguishment and payment of any one or more obligations owed to the Secured Creditors. This Mortgage secures future advances made by the Secured Creditors to the Grantor under the Credit Agreement, the other Loan Documents and hereunder, and each future advance, whether or not evidenced by a note, and each note or other instrument evidencing the same, shall be secured hereby. All provisions of this Mortgage shall apply to each future advance as well as to all other Obligations secured hereby, whether or not evidenced by a note, and all such advances and other Obligations, and any modifications, extensions and renewals of the same shall have the same lien priority as if made on the date this Mortgage is recorded. This Mortgage secures the Obligations (as defined below in Section 1.1), and any modifications, extensions and renewals of the same, which shall be construed in all cases to consist of, among other obligations, the covenants of Grantor set forth in, and the amounts advanced to or for the account, use or benefit of Grantor from time to time pursuant to the Loan Documents (as defined below), the aggregate amount of the Secured Indebtedness (as defined below) actually outstanding at any particular time being subject to fluctuations up or down due to further advances of loan proceeds and/or future repayments of such loan proceeds from time to time over the term of such Secured Indebtedness and/or changes in the rate of interest charged in respect of Secured Indebtedness bearing interest at a floating rate (all of which advances and 2 repayments are hereby declared to be contemplated by the Grantor and the Beneficiary at the time this Mortgage is executed). WITNESSETH: ARTICLE I DEFINITIONS 1.1 DEFINITIONS: As used herein, the following terms shall have the following meanings: AGENT: Initially Bank of America, N.A. in its capacity as Administrative Agent for the Secured Creditors and any successor Administrative Agent pursuant to the Credit Agreement. ASSIGNMENT: The assignment and delivery to Beneficiary as security for the payment and performance of the Obligations of all of the rights, titles, interests and estates of Grantor in and to all of the following: (a) the Encumbered Leases and the Election, (b) the Leases, (c) the Rents, (d) the Fixtures and (e) the Personalty. BAS: Banc of America Securities LLC and its successors. BANKRUPTCY CODE: The Bankruptcy Code, 11 U.S.C. Section 101, et seq., as the same may be amended from time to time. BENEFICIARY: Bank of America, N.A., as Agent for the Secured Creditors, and, if Bank of America, N.A. is not permitted to act as Beneficiary in any State, then in that State the Individual Beneficiary to the extent and solely for the purpose described in Section 9.1, and each of their successors and assigns. BUILDINGS: Any and all buildings, parking structures, utility sheds, workrooms, air conditioning towers, open parking areas, and other structures or improvements, and any and all additions, alterations, betterments or appurtenances thereto, now or at any time hereafter situated, placed or constructed upon the Land or any part thereof. COMMITMENTS: The commitments by the Lenders to make the term loans, swing line loans and the revolving credit loans as set forth in the Credit Agreement (which includes commitments to issue Letters of Credit as more particularly set forth therein). CREDIT AGREEMENT: The Credit Agreement dated as of May 15, 2002, among the Grantor, the Lenders, and the Agent, which agreement is incorporated by reference in this Mortgage and which provides for the making of term loans, swing line loans and revolving credit loans and the issuance of, and participation in, Letters of Credit as contemplated therein (as the same may be amended, modified, extended, renewed, restated and/or supplemented from time to time), provided, however, that references herein to sections or provisions of, schedules or exhibits to, or capitalized terms or phrases contained in, the Credit Agreement shall have the respective meanings defined or provided in the Credit Agreement as it exists on the date hereof, and as it may be modified from time to time. 3 DEBTOR RELIEF LAWS: As defined in the Credit Agreement. DEFAULT: As defined in the Credit Agreement. DEFAULT RATE: As defined in the Credit Agreement. ELECTION: The election available to a lessee under 11 U.S.C. Section 365(h) of the Bankruptcy Code, as the same may be amended from time to time, together with any comparable right under any other state or federal law relating to bankruptcy, reorganization or other relief for debtors, whether now or hereafter in effect. ENCUMBERED LEASES: The lease or leases described as "Encumbered Leases" in Exhibit "A" attached hereto, if any, together with all rights, options and other benefits inuring to the Grantor as lessee thereunder and together with all claims and rights of damages made from a rejection of the same. ENVIRONMENTAL LAWS: All Laws relating to environmental matters applicable to the Mortgaged Property. EQUIPMENT: All of the Grantor's right, title and interest in and to all "equipment", as such term is defined in Article 9 of the UCC (as defined below), now or hereafter existing, now owned or hereafter acquired by the Grantor, which are now or hereafter located or to be located upon, within or about the Land and the Buildings, or which are used in or related to the operation of the Mortgaged Property, including, but not limited to, all machinery, equipment, furnishings, fixtures, electrical equipment, vehicles and computer and other electronic data-processing and other office equipment, any movable walls and partitions and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. EVENT OF DEFAULT: As defined in the Credit Agreement, or with respect to an Encumbered Lease, a default by Grantor under the Encumbered Lease which is not cured in the cure period provided under the Encumbered Lease. EXHIBITS: The exhibits attached hereto and incorporated herein by this reference. EXPENSES: All out-of-pocket costs and expenses (including reasonable fees and expenses of counsel and court costs) actually incurred and all advances made, by the Beneficiary or any trustee, co-trustee or agent of the Beneficiary pursuant to the provisions of, or in furtherance of the Beneficiary's duties or rights under, the Loan Documents, including, without limitation, expenses of retaking, holding, preparing for sale or lease, selling and/or leasing the Mortgaged Property or of assuming the rights of the lessee under any Encumbered Lease, but excluding any of the same specifically described in the Loan Documents as being the responsibility of the Beneficiary. FACILITY TERMINATION DATE: As defined in the Security Agreement. FINANCING STATEMENT: As defined in Section 8.5 below. 4 FIXTURES: Goods (as defined in the UCC) now owned or the ownership of which is hereafter acquired by Grantor which is so related to the Land and Buildings forming part of the Mortgaged Property that it is deemed a fixture or real property under the laws of the State, including, without limitation, all building or construction materials intended for construction, reconstruction, alteration or repair of or installation on the Mortgaged Property, construction equipment, appliances, machinery, plant equipment, fittings, apparatuses, fixtures and other items now owned or the ownership of which is hereafter acquired by Grantor and now or hereafter attached to, installed on or in, or used in connection with (temporarily or permanently), any of the Buildings or the Land, or which in some fashion are deemed to be fixtures to the Land or Buildings under the laws of the State, including, but not limited to, the items described in the definition of Equipment, furnaces, boilers, heaters, engines, devices for the operation of pumps, pipes, plumbing, cleaning, call and sprinkler systems, fire and theft protection apparatus and equipment, water tanks, air and water pollution control, waste disposal, heating, ventilating, plumbing, lighting, refrigerating, laundry, incinerating, air conditioning and air cooling equipment and systems, gas and electric machinery, appurtenances and equipment, pollution control equipment, disposals, dishwashers, refrigerators and ranges, recreational equipment and facilities of all kinds, carpet, moveable or immoveable walls or partitions, built-in oxygen and vacuum systems and water, gas, electrical, storm and sanitary sewer facilities, utility lines and equipment (whether owned individually or jointly with others, and, if owned jointly, to the extent of Grantor's interest therein) and all other utilities whether or not situated in easements, all water tanks, water supply, water power sites, fuel stations, fuel tanks, fuel supply, and all other structures, together with all accessions, appurtenances, additions, replacements, betterments and substitutions for any of the foregoing and the proceeds thereof. Notwithstanding the foregoing, "Fixtures" shall not include any property which tenants are entitled to remove pursuant to their Leases. GRANTOR: The above-defined Grantor and any and all subsequent owners of the Mortgaged Property. GOVERNMENTAL AUTHORITY: Any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. HAZARDOUS MATERIAL: 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, the generation, handling, storage, transportation, disposal, treatment, release, discharge or emission of which is subject to any Environmental Law. HIGHEST LAWFUL RATE: As defined in Section 10.23 hereof. IMPOSITIONS: All real estate and personal property taxes; water, gas, sewer, electricity and other utility rates and charges; charges for any easement, license or agreement maintained 5 for the benefit of the Mortgaged Property; and all other taxes, standby fees, levies, claims, charges and assessments, general and special, ordinary and extraordinary, foreseen and unforeseen of any kind and nature whatsoever which at any time prior to or after the execution hereof may be assessed, levied or imposed upon the Mortgaged Property or the Rents or the ownership, use, occupancy or enjoyment thereof, and any interest, costs or penalties with respect to any of the foregoing. INDEBTEDNESS: As defined in the Credit Agreement. INDIVIDUAL BENEFICIARY: Any individual who shall be hereafter named of record as Individual Beneficiary, and who shall be co-Beneficiary hereunder to the extent and subject to the limitations described in Section 9.1 hereof. INVENTORY: All of the Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all inventory in all of its forms, wherever located, now or hereafter existing, including, but not limited to, (i) goods in which the Grantor has an interest in mass or a joint or other interest or right of any kind (including, without limitation, goods in which the Grantor has an interest or right as consignee or consignor) and (ii) goods that are returned to or repossessed by the Grantor, and all accessions thereto and products thereof and documents therefor. LAND: The real estate owned in fee or leased by the Grantor and described in Exhibit "A" attached hereto, and all rights, titles and interests appurtenant thereto. LAWS: Collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. L/C ISSUER: Bank of America, N.A. in its capacity as issuer of Letters of Credit in accordance with the Credit Agreement, or any successor issuer of Letters of Credit thereunder. LEASES: Any and all leases, subleases, licenses, concessions or other agreements (written or verbal, now or hereafter in effect) through which Grantor directly or indirectly grants a possessory interest in and to, or the right to occupy and use, all or any portion of the Mortgaged Property that constitutes real property together with any renewals or extensions thereof and all leases, subleases, licenses, concessions or other agreements in substitution therefor. LEGAL REQUIREMENTS: (i) Any and all present and future decisions, statutes, rulings, rules, regulations, permits, certificates or ordinances of any governmental authority in any way applicable to Grantor or the Mortgaged Property, including, without limitation, the ownership, use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction thereof, (ii) Grantor's presently or subsequently effective Certificate of Incorporation and Bylaws, (iii) any and all Leases and other contracts (written or oral) of any nature by which the Grantor or the Mortgaged Property may be bound, and (iv) any and all restrictions, reservations, conditions, easements or other covenants or agreements of record affecting the Mortgaged Property. 6 LENDERS: As defined in the Credit Agreement, and specifically including Bank of America, N.A., as the L/C Issuer, or any successor L/C Issuer and each other lender which may hereafter become a party to the Credit Agreement pursuant to the terms thereof. LETTER OF CREDIT: As defined in the Credit Agreement. LESSOR: The landlord under the Encumbered Lease, if any. LOAN: As defined in the Credit Agreement. LOAN DOCUMENTS: As defined in the Credit Agreement. MATERIAL ADVERSE EFFECT: As defined in the Credit Agreement. MORTGAGE STATE: Each state defined as a "Mortgage State" in Section 2.3 hereof. MORTGAGED PROPERTY OR MORTGAGED PROPERTIES: The Land, Buildings, Fixtures, Personalty, Encumbered Leases, Leases and Rents together with: (i) all rights, privileges, tenements, licenses, hereditaments, rights-of-way, easements, utility use, air rights, appendages, division rights, and appurtenances in any way appertaining thereto, and all right, title, interest or estate of Grantor in and to any streets, ways, alleys, roadbeds, inclines, tunnels, culverts, strips or gores of land adjoining or serving the Land or any part thereof; (ii) all betterments, additions, alterations, appurtenances, substitutions, replacements and revisions thereof and thereto and all reversions and remainders therein; (iii) all of Grantor's right, title and interest in and to any awards, remuneration, settlements or compensation hereafter to be made by any insurer, governmental authority or other person or entity as a result of the destruction, loss, theft, taking by eminent domain or other involuntary conversion of whatever nature (whether occurring prior to or after the date of this Mortgage) of any of the Land, Buildings, Fixtures, Leases, Encumbered Leases, Rents or Personalty, including those for any condemnation and vacation of, or change of grade in, any streets affecting the Land or the Buildings; (iv) any and all other security and collateral of any nature whatsoever, now or hereafter given by Grantor to secure the payment and performance of the Obligations; (v) all water and water rights (whether riparian, appropriative, or otherwise and whether or not appurtenant) in or hereafter relating to or used in connection with the Land, including, without limitation, any surface water management permits, any consumption use permits or general permits; (vi) any right, title, interest or estate hereafter acquired by Grantor in any of the foregoing and in and to the Land, Buildings, Fixtures, Personalty (except as otherwise provided herein), Leases, Encumbered Leases and Rents. To the extent permitted by law, all of the Fixtures are to be deemed and held to be a part of and affixed to the Land. In 7 the event the estate of the Grantor in and to any of the Land and Buildings is a leasehold estate, this conveyance shall include and the lien, security interest and assignment created hereby shall encumber and extend to all other, further or additional title, estates, interest or rights which may exist now or at any time be acquired by Grantor in or to the property demised under the lease creating such leasehold estate and including Grantor's rights, if any, to purchase the property demised under such lease and, if fee simple title to any of such property shall ever become vested in Grantor, such fee simple interest shall be encumbered by this Mortgage in the same manner as if Grantor had fee simple title to such property as of the date of execution hereof; (vii) all of Grantor's right, title and interest in and to any and all funds deposited by or on behalf of Grantor with any city, county, public body or agency, irrigation, sewer or water district or company, gas or electric company, telephone company, and any other body or agency for the installation, or to secure the installation, of any utility pertaining to the Land, Buildings, Fixtures and all betterments, additions, alterations, appurtenances, substitutions, replacements and revisions thereof and thereto; (viii) all of Grantor's right, title and interest in and to (i) all oil, gas and other minerals located in, on or under the Land, (ii) all oil, gas or mineral leases, royalty agreements and other contracts that have been or in the future are entered into with respect to the Land or with respect to any oil, gas or other minerals located in, on or under the Land ("Mineral Leases"), and (iii) all rents, profits, royalties and income at any time arising from the Mineral Leases or from the sale of oil, gas or other minerals located in, on or under the Land; and (ix) all proceeds and products of the foregoing. As used in this Mortgage, the term "Mortgaged Property", including each component thereof, shall be expressly interpreted as meaning all or, where the context permits or requires, any portion of the above, and all or, where the context permits or requires, any interest of Grantor therein. NOTES: As defined in the Credit Agreement, and any notes issued in replacement, substitution, renewal or refinance of the same. OBLIGATIONS: All advances to, and debts, liabilities, obligations, covenants and duties of the Grantor arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, including without limitation the Secured Indebtedness, or arising under any Related Swap Contract, (provided, however, obligations arising under a Related Swap Contract shall cease to be obligations secured hereby at such time as the counterparty thereto shall cease to be a Lender or an Affiliate of a Lender), in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Grantor or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. 8 PARCEL: A single parcel of real property identified as a unit in Exhibit "A" hereto. For purposes of legal description and real property title records, a Parcel may be comprised of more than one lot. PERMITTED ENCUMBRANCES: Those Liens and other encumbrances permitted under Section 7.01 of the Credit Agreement. PERSONALTY: All of the right, title and interest of Grantor in and to all tangible and intangible personal property including all furniture, furnishings, Equipment, machinery, goods, tools, supplies, appliances, general intangibles, construction contracts, architect's contracts, technical services agreements, contract rights, franchises, licenses, certificates, operating rights, approvals, consents, authorizations and permits, and all other personal property (other than Inventory, accounts receivable, and Fixtures) of any kind or character (as defined in and subject to the provisions of the UCC) which are now or hereafter located or to be located upon, within or about the Land and the Buildings, or which are used in or related to the construction of the Buildings or the use, occupancy or operation of the Mortgaged Property, together with all accessories, replacements and substitutions thereto or therefor and the proceeds thereof; and all insurance proceeds and condemnation proceeds received by Grantor with respect to the Mortgaged Property to the extent provided herein. Furthermore, with respect to any of the above-described personal property represented by a contract, agreement or other instrument or consisting of a permit, certificate or similar item issued by a governmental authority, then, to the extent that the granting of the lien or security interest or exercise of Beneficiary's rights under this Mortgage would constitute a breach or violation of the terms of such instrument, or any Legal Requirement applicable to such permit, certificate or similar item that would impose material liability on the Grantor or that would result in a revocation or forfeiture of such item of personal property, such personal property shall not constitute "Personalty" hereunder. RELATED SWAP CONTRACT: As defined in the Credit Agreement. RENTS: All of the rents, revenues, income, proceeds, profits, security and other types of deposits, and other benefits paid or payable and to become due or payable to Grantor by parties to the Leases for using, leasing, licensing, possessing, operating from, residing in, selling or otherwise enjoying any portion or portions of the Mortgaged Property. REQUIRED LENDERS: As defined in the Credit Agreement. SECURED CREDITORS: The Agent, BAS and the Lenders that are parties to the Credit Agreement, and specifically including Bank of America, N.A., in its capacities as L/C Issuer and a Swing Line Lender, and National City Bank as a Swing Line Lender, or any successor L/C Issuer or successor Lender making Swing Line Loans, and each of their successors or assigns, and each Lender or an Affiliate of a Lender party to any Related Swap Contract. SECURED INDEBTEDNESS: (a) Subject to Section 2.3(b) below, the principal, interest, premium (if any) and other sums (including, without limitation the L/C Obligations) owing or payable by the Grantor pursuant to the Loan Documents, which includes present advances and future advances to be incurred within the terms specified in the Credit Agreement, including without limitation, indebtedness to the Lenders under the Credit Agreement in the original 9 aggregate principal amount of Two Hundred Million Dollars ($200,000,000.00) evidenced by the Notes and the Credit Agreement; (b) any and all additional advances made by Beneficiary to protect or preserve the Mortgaged Property (as defined above) or the security title, security interest and lien hereof on the Mortgaged Property or to repair or maintain the Mortgaged Property, or to complete improvements on the Mortgaged Property (whether or not Grantor remains the owner of the Mortgaged Property at the time of such advances and whether or not the Beneficiary or the Lenders remain the owner of the Obligations and this Mortgage) in accordance with the provisions hereof; and (c) any and all expenses incident to effecting the collection, performance and/or satisfaction of the Obligations secured hereby and the foreclosure hereof by action in court or by exercise of the power of sale herein contained; provided, however, that in no event shall more than Two Hundred Million Dollars ($200,000,000.00) of the total Secured Indebtedness represent original principal amount due under the Credit Agreement. The Credit Agreement provides that the interest rate and payment terms of the indebtedness may be adjusted as provided therein. AT THE OPTION OF THE GRANTOR AND SUBJECT TO TERMS AND PROVISIONS OF THE CREDIT AGREEMENT, THE PRINCIPAL AMOUNT OF THE LOANS MAY BE INCREASED FROM $200,000,000 TO $300,000,000 AND IN SUCH EVENT THE PRINCIPAL AMOUNT SET FORTH IN (a) AND (c) ABOVE SHALL BE $300,000,000. SECURITY AGREEMENT: As defined in the Credit Agreement. STATE: The State in which the applicable portion of the Mortgaged Property is situated. For example, with respect to the portion of the Mortgaged Property situated in Ohio, the term "State" shall mean the State of Ohio. SUBSIDIARY: Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a "Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of the Grantor. SWAP CONTRACT: As defined in the Credit Agreement. UCC: The Uniform Commercial Code as adopted in the State. WORK: As defined in Section 4.7 hereof. 1.2 DEFINED TERMS: The terms "Administrative Agent," "Affiliate," "Business Day," "Capital Expenditures," "GAAP," "Lien," and "Person" together with any other capitalized term used herein but not otherwise defined herein, shall have the same respective meanings given to them in the Credit Agreement as it existed on the date hereof, and as it may be modified from time to time. 10 ARTICLE II GRANT 2.1 GRANT: NOW THEREFORE, for and in consideration of Ten Dollars ($10.00), and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Grantor, and to secure the Grantor's full and faithful performance and satisfaction of the Obligations, Grantor, intending to be legally bound hereby, has GIVEN, ALIENATED, REMISED, GRANTED, BARGAINED, MORTGAGED, SOLD, RELEASED, CONVEYED, ASSIGNED, TRANSFERRED, WARRANTED, SET OVER AND CONFIRMED WITH MORTGAGE COVENANTS and by these presents does GIVE, ALIENATE, REMISE, GRANT, BARGAIN, MORTGAGE, SELL, RELEASE, CONVEY, ASSIGN, TRANSFER, WARRANT, SET OVER AND CONFIRM WITH MORTGAGE COVENANTS AND GRANT A SECURITY INTEREST IN unto Beneficiary with POWER OF SALE and right to entry for the benefit of Beneficiary, all of the Mortgaged Property, subject only to the Permitted Encumbrances, TO HAVE AND TO HOLD the Mortgaged Property and (except as otherwise set forth herein) all parts, rights, members and appurtenances thereof for the use, benefit and behoof of the Beneficiary and its successors and assigns, in fee simple forever, or to the extent of Grantor's leasehold interest therein, forever, hereby releasing and waiving all rights under and by virtue of the homestead exemption laws of the State, to the extent permitted by the applicable Legal Requirements of such State; and Grantor hereby absolutely and irrevocably assigns to Beneficiary the Leases and Rents for the purposes and upon the terms and conditions herein set forth; and Grantor does hereby bind itself, its successors and assigns to FOREVER WARRANT AND DEFEND the title to the Mortgaged Property and every part thereof, subject only to the Permitted Encumbrances, unto Beneficiary, against every person whomsoever lawfully claiming or to claim the same or any part thereof. 2.2 DEFEASANCE AND RECONVEYANCE: If the Secured Indebtedness shall have been paid in full and all the other Obligations shall have been performed and discharged in full, and all of the Commitments shall have been terminated in whole, and all of the Letters of Credit shall have been canceled and returned to the L/C Issuer, and the Facility Termination Date has occurred, and provided that there exists no pending or threatened unsatisfied obligation pursuant to the environmental indemnification in Section 10.05 of the Credit Agreement, then the liens, security interests, estates and rights granted by this Mortgage shall terminate; whereupon the Beneficiary promptly shall execute such documents in recordable form as may be necessary to release and/or satisfy the Mortgaged Property, or that portion thereof then held hereunder, from the lien of and security interests created or purported to be created by this Mortgage. To the extent permitted by law, any reconveyance delivered hereunder may describe the grantee as "the person or persons legally entitled thereto." Beneficiary shall not have any duty to determine the rights of persons claiming to be rightful grantees of any reconveyance. Each reconveyance of Mortgaged Property or portions thereof shall also operate as a reassignment of all future rents, issues and profits appertaining to the Parcel(s) or portions thereof covered by such reconveyance to the person or persons legally entitled thereto, unless its reconveyance expressly provides otherwise. 11 2.3 PROVISIONS CONCERNING PARTICULAR STATES: Notwithstanding anything to the contrary herein contained: (a) if the State is Ohio or Pennsylvania (each, a "Mortgage State"), this instrument shall be deemed to be and shall be enforceable as a mortgage or open-end mortgage and/or leasehold mortgage or open-end leasehold mortgage, and as an assignment of leases and rents, security agreement and financing statement; (b) If the State is Pennsylvania, the following provisions shall apply: This Mortgage is an OPEN-END MORTGAGE as defined in 42 Pa. Con. Stat. Ann. Section 8143 and secures advances made pursuant to the Notes and other Loan Documents. The maximum total principal indebtedness outstanding hereunder and secured hereby may not exceed Three Hundred Million Dollars ($300,000,000.00), plus accrued and unpaid interest and protective advances made by Beneficiary pursuant to the terms of the Notes and other Loan Documents. The Mortgage secures, and the Loan Documents executed in connection herewith evidence, the obligation of Grantor to repay protective advances made by Beneficiary pursuant to this Mortgage and the other Loan Documents for, among other things, payment of taxes, assessments, maintenance charges, insurance premiums, costs incurred for the protection of the Mortgaged Property or the lien of the Mortgage, costs incurred by Beneficiary by reason of the occurrence of an Event of Default, and advances made to complete construction of any improvements at the Mortgaged Property. Beneficiary's address for receiving notices under 42 Pa. Con. Stat. Ann. Section 8143 shall be 901 Main Street, 14th Floor, TX1-492-14-11, Dallas, Texas 75202, Attention: Agency Management. Grantor waives all of Grantor's rights under 42 Pa. Con. Stat. Ann. Section 8143(c). 2.4 CREDIT AGREEMENT: The Credit Agreement includes term loans, swing line loans, revolving credit loans, and in connection therewith there may be repayments and disbursements of principal from time to time. It is expressly agreed that the outstanding principal balance of the Indebtedness evidenced by the Notes and governed by the Credit Agreement may, from time to time, be reduced to a zero balance without such repayment operating to extinguish and release the lien, security titles and security interests created by this Mortgage. This Mortgage shall remain in full force and effect as to any subsequent future advances made after the zero balance without loss of priority until the Obligations are paid in full and fully performed and satisfied, all of the Commitments shall have been terminated in whole, all of the Letters of Credit shall have been canceled and returned to the L/C Issuer, the Facility Termination Date has occurred, and the Credit Agreement and all other agreements between the Grantor and the Secured Creditors for further advances have been terminated. Grantor waives the operation of any applicable statute, law or regulation having a contrary effect. ARTICLE III WARRANTIES AND REPRESENTATIONS For the consideration aforesaid and to protect the security of this Mortgage, Grantor hereby unconditionally warrants and represents to Beneficiary as follows: 12 3.1 TITLE TO MORTGAGED PROPERTY AND LIEN OF THIS INSTRUMENT: Grantor has good and record and marketable title in fee (or, if and to the extent that the Mortgaged Property includes any Encumbered Lease, good title in the leasehold) to the Land, Buildings and Fixtures and good title to the Personalty and Leases, in all cases free and clear of any Liens and claims of Liens except the Permitted Encumbrances. This Mortgage constitutes a valid lien and mortgage on the Grantor's fee and leasehold interests in the Land, the Buildings and the Fixtures, including without limitation all of Grantor's right, title and interest in and to any Encumbered Lease, and a valid security agreement which creates a valid security interest in and to, and a valid assignment of, the Fixtures, Personalty, Leases and Rents, all in accordance with the terms hereof, in each case subject only to the Permitted Encumbrances. 3.2 [INTENTIONALLY OMITTED] 3.3 ENCUMBERED LEASES: The Grantor hereby unconditionally warrants and represents to the Beneficiary as follows with respect to each Encumbered Lease: (a) The Encumbered Lease constitutes, to the best of Grantor's knowledge, the legal, valid and binding obligation of the lessor thereof, and is enforceable by the lessee in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights and remedies generally or by application of general equity principles and the terms thereof are as set forth in the lease documents described on Exhibit "A", copies of which have been delivered to the Beneficiary; (b) All rent, additional rent and other charges reserved therein have been paid to the extent they are payable to the date hereof; (c) The Grantor enjoys the quiet and peaceful possession of the property demised thereby in accordance with and subject to the terms of such Encumbered Lease; (d) The Encumbered Lease is not subject to any other assignments by the Grantor, and the Grantor has good right and authority to assign and encumber the Encumbered Lease to the Beneficiary; (e) The Grantor is not in default in any material respect under any of the terms thereof and, to the best of its knowledge, there are no circumstances that, with the passage of time or the giving of notice or both, would constitute any material event of default thereunder; and (f) To the best of Grantor's knowledge the landlord under the Encumbered Lease is not in default under any of the material terms or provisions thereof on the part of the landlord to be observed or performed. 3.4 POWERS OF TERMINATION AND RIGHTS OF REVERTER: With respect to any fee-owned Parcel of Mortgaged Property subject to a right of reverter or power of termination, no event has occurred or is threatened, or is likely to occur by virtue of the performance by Grantor of any of its Obligations under any of the Loan Documents, which would enable the beneficiary of such right or power to cause such reversion or termination. 13 3.5 WETLANDS: To Grantor's knowledge, there are no wetlands, tidelands or swamp and overflow lands on the Mortgaged Property. GRANTOR SHALL BE SOLELY RESPONSIBLE FOR AND AGREES TO INDEMNIFY BENEFICIARY AND EACH SECURED CREDITOR, PROTECT AND DEFEND WITH COUNSEL REASONABLY ACCEPTABLE TO BENEFICIARY, AND HOLD BENEFICIARY AND EACH SECURED CREDITOR HARMLESS FROM AND AGAINST ANY CLAIMS (INCLUDING WITHOUT LIMITATION THIRD PARTY CLAIMS FOR PERSONAL INJURY OR REAL OR PERSONAL PROPERTY DAMAGE), ACTIONS, ADMINISTRATIVE PROCEEDINGS (INCLUDING INFORMAL PROCEEDINGS) JUDGMENTS, DAMAGES, PUNITIVE DAMAGES, PENALTIES, FINES, COSTS, LIABILITIES (INCLUDING SUMS PAID IN SETTLEMENTS OF CLAIMS), INTEREST OR LOSSES, REASONABLE ATTORNEYS' FEES (INCLUDING ANY FEES AND EXPENSES INCURRED IN ENFORCING THIS INDEMNITY), CONSULTANT FEES, AND EXPERT FEES THAT ARISE DIRECTLY OR INDIRECTLY FROM OR IN CONNECTION WITH THE PRESENCE ON THE MORTGAGED PROPERTY OF WETLANDS, TIDELANDS OR SWAMP AND OVERFLOW LANDS, OR ANY BREACH OF THE FOREGOING REPRESENTATION AND WARRANTY; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PARTY, BE AVAILABLE TO THE EXTENT THAT SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED PRIMARILY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. THE PROVISIONS OF THIS SECTION 3.5 SHALL SURVIVE THE TERMINATION AND RECONVEYANCE OF THIS MORTGAGE. 3.6 ENVIRONMENTAL MATTERS: Except as disclosed in the Credit Agreement, or to the extent that any deviation from any representation in this Section 3.6 would not reasonably be expected to have a Material Adverse Effect, the Grantor and each Subsidiary is in compliance with all applicable Environmental Laws and has been issued and will maintain and keep current all required federal, state and local permits, licenses, certificates and approvals. Except as disclosed in the Credit Agreement, neither the Grantor nor, to the Grantor's knowledge, any previous owner or operator of the Mortgaged Property or any other Person, (a) has used or is using the Mortgaged Property in violation of any Environmental Law in effect at the time of such use; (b) has managed, generated, stored, released, discharged, treated, or disposed of any Hazardous Material on any portion of the Mortgaged Property in a manner that could be reasonably expected to have a Material Adverse Effect; or (c) has transferred or caused to be transferred any Hazardous Material from the Mortgaged Property to any other location except in compliance with any and all applicable Environmental Laws. Except for Hazardous Materials necessary for the routine maintenance of the Mortgaged Property and as used in the ordinary course of the Grantor's business, which Hazardous Material shall be used in accordance with all applicable Environmental Laws, the Grantor covenants that it shall not permit any Hazardous Materials to be brought on to the Mortgaged Property, or if so brought or found located thereon, shall be immediately removed, with proper treatment, disposal, or other management or remediation, and all environmental cleanup requirements, if any, shall be diligently undertaken pursuant to all Environmental Laws. Except as disclosed in the Credit Agreement, or to the 14 extent that any deviation from any representation in this Section 3.6 would not reasonably be expected to have a Material Adverse Effect, neither the Grantor nor any Subsidiary has been notified of any pending or threatened action, suit, proceeding or investigation, and neither the Grantor nor any Subsidiary is aware of any facts, which (i) calls into question, or could reasonably be expected to call into question, compliance by the Grantor or any Subsidiary with any Environmental Laws, (ii) seeks, or could reasonably be expected to form the basis of a meritorious proceeding to seek, to suspend, revoke or terminate any license, permit or approval necessary for the operations of the Grantor's or Subsidiary's business or facilities or for the generation, handling, storage, treatment or disposal of any Hazardous Materials, or (iii) seeks to cause, or could reasonably be expected to form the basis of a meritorious proceeding to cause, any property of the Grantor or any Subsidiary to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Laws. ARTICLE IV AFFIRMATIVE COVENANTS Grantor hereby unconditionally covenants and agrees with Beneficiary as follows: 4.1 PAYMENT AND PERFORMANCE: Grantor will satisfy and perform the Obligations, including the payment of any sums required thereby, in full and on or before the dates the same are to be satisfied and performed. 4.2 COMPLIANCE WITH LEGAL REQUIREMENTS: Grantor will promptly and faithfully comply with, conform to and obey in all material respects all Legal Requirements whether or not the same shall necessitate structural changes in or improvements to, or interfere with the use or enjoyment of, the Mortgaged Property; and provided, that Grantor shall have the right in good faith to contest any such Legal Requirement only so long as the Mortgaged Property affected thereby shall be in no danger of being sold, forfeited or lost pursuant to such contest and adequate reserves have been set aside by Grantor, in accordance with GAAP, to pay the cost necessary to comply with such Legal Requirement in the event Grantor fails to prevail in such contest. Grantor will procure and continuously maintain in full force and effect all permits, licenses and other authorizations required for construction of improvements, for any permitted use of the Mortgaged Property or any part thereof then being made and for the lawful and proper installation, operation and maintenance of the Mortgaged Property. Grantor will not knowingly maintain any nuisance on the Mortgaged Property. 4.3 LIEN STATUS: Grantor will defend and protect the lien, security title and security interest status of this Mortgage subject only to the Permitted Encumbrances. If Grantor shall fail to satisfy its obligations under this Section 4.3, Beneficiary shall have the rights granted by Section 10.7 hereof to take such actions as Beneficiary deems necessary to defend and protect the lien, security title and security interest status of this Mortgage, subject as aforesaid. Grantor shall reimburse Beneficiary for any losses or Expenses actually incurred by Beneficiary if an interest in the Mortgaged Property, other than as permitted hereunder, is claimed by others. 15 4.4 [INTENTIONALLY DELETED] 4.5 [INTENTIONALLY DELETED] 4.6 INSURANCE: Grantor will maintain or cause to be maintained with financially sound and reputable insurance companies not Affiliates of the Borrower, upon and relating to the Mortgaged Property policies of liability, casualty, business interruption, "all-risk" permanent and, if applicable, flood insurance in amounts and on terms customarily maintained by owners of property located in the general vicinity of the Mortgaged Property and on which is located similar improvements and shall insure against such risks as are customarily insured against by businesses of like size and type engaged in the same or similar operations. Each such policy of liability insurance shall name Beneficiary as an additional insured party with respect to the Mortgaged Property, and each such casualty insurance policy shall name Beneficiary as a loss payee. Each such insurance policy shall be renewed, if renewal is available, and shall not be canceled and further, shall not be endorsed, altered or reissued to effect a change in coverage in any manner materially adverse to the Beneficiary, for any reason and to any extent whatsoever unless such insurer shall have first given Beneficiary thirty (30) days' prior written notice thereof. Beneficiary shall be furnished with the original of each such initial policy or a certificate with a duplicate of such original policy coincident with the execution of this Mortgage and satisfactory evidence of renewal thereof not less than thirty (30) days prior to the expiration of the initial or each preceding renewal policy together with receipts or other evidence that the premiums thereon have been paid, with the original of each renewal policy or a certificate with a duplicate of such renewal policy to follow as soon as available or, in any such case, an appropriate broker's certificate in respect thereto. 4.7 RESTORATION FOLLOWING CASUALTY: If any acts or occurrences of any kind or nature, ordinary or extraordinary, foreseen or unforeseen, shall result in damage to or loss or destruction of the Mortgaged Property, Grantor will give prompt notice thereof to Beneficiary. If (a) there are sufficient insurance proceeds or sufficient other amounts available to Grantor to fully pay for the restoration, repair or replacement (hereinafter called "Work") of the Mortgaged Property, (b) no Default or Event of Default shall have occurred and be continuing, (c) neither Grantor nor Lessor has elected to terminate the Encumbered Lease, if any, pursuant to the terms thereof and confirmation of the same has been delivered to Beneficiary, (d) the Grantor presents sufficient evidence to the Beneficiary that the damaged property will be restored prior to the earliest to occur of the Revolving Credit Maturity Date, the Term Loan A Maturity Date, the Term Loan B Maturity Date or the Term Loan C Maturity Date and (e) the Beneficiary will not incur any liability to any other person as a result of such use or release of insurance proceeds, then Grantor may so certify to Beneficiary, and if Grantor delivers such certificate, will certify that it will, and shall, within 90 days following reaching an agreement with the insurer under the casualty insurance policy relating thereto with regard to the disbursement of insurance proceeds commence and thereafter continue diligently to completion, to restore, repair, replace and rebuild such Mortgaged Property as nearly as possible to its value, condition and character immediately prior to such damage, loss or destruction with such alterations, modifications and/or betterments reasonably deemed necessary or desirable by Grantor in its business judgment. If the conditions set forth in such certificate of Grantor are not satisfied with respect to a casualty, or if Grantor fails to deliver such a certificate to Beneficiary by the date that is the later of 90 days after so reaching an agreement with the insurer or 180 days following the casualty, or if Grantor shall 16 thereafter fail to diligently pursue the restoration, repair, replacement or rebuilding of such Mortgaged Property as provided herein, the insurance proceeds related thereto shall be promptly paid to Beneficiary and applied to the outstanding balance of the Obligations in accordance with Section 2.06(d) of the Credit Agreement. 4.8 APPLICATION OF PROCEEDS: Insurance proceeds to be used for Work, which proceeds are equal to or greater than $5,000,000 on a per occurrence or claim basis, initially shall be paid to Beneficiary, and provided no Default or Event of Default shall have occurred and be continuing, shall be paid out by Beneficiary to Grantor at such time as Grantor makes the election set forth below. Insurance proceeds to be used for Work, which proceeds are less than $5,000,000 on a per occurrence or claim basis, initially shall be paid to Grantor. Insurance proceeds shall be used by Grantor to perform such Work in accordance with Section 4.7, with any excess thereof used to repay the Obligations in accordance with Section 4.7. As long as no Default or Event of Default shall have occurred and be continuing, Grantor shall have 180 days after such casualty to elect to either (i) perform such Work or (ii) deliver such proceeds to Beneficiary to be applied to the outstanding balance of the Obligations in accordance with Section 2.06(d) of the Credit Agreement. In the event Grantor elects to restore, repair, replace or rebuild the Mortgaged Property and subsequently fails to comply with any of the conditions set forth in Section 4.7 and this Section 4.8, any proceeds remaining to be disbursed, whether held by Grantor, Beneficiary or an insurance company, shall be paid to Beneficiary and, at its option, applied to the outstanding balance of the Obligations in accordance with Section 2.06(d) of the Credit Agreement. 4.9 [INTENTIONALLY DELETED] 4.10 [INTENTIONALLY DELETED] 4.11 APPRAISALS: Upon the occurrence of an Event of Default, the Grantor agrees and consents to the Beneficiary ordering a current written appraisal or re-appraisal of the Mortgaged Property (at the Grantor's expense). Such appraisal shall be by a qualified appraiser designated by and satisfactory to the Beneficiary and must be satisfactory to the Beneficiary in form and substance. 4.12 TAXES: Grantor shall pay, together with interest, fines, and penalties, if any, any documentary stamp, recording, transfer, mortgage, intangibles (including without limitation all recurring intangible taxes) or other taxes or fees whatsoever due under the laws of the State in connection with the making, execution, delivery, filing of record, recordation, assignment, release, or discharge of any of the Loan Documents or in connection with any advances made thereunder. This obligation shall survive the repayment of the Obligations and shall continue for so long as Beneficiary could be assessed for such taxes or fees, or for penalties or interest with respect to such taxes or fees. 4.13 COLLECTION COSTS: In the event that this Mortgage is foreclosed, or in the event this Mortgage is put into the hands of an attorney for collection, suit, action or foreclosure, or in the event of the foreclosure of any mortgage prior to or subsequent to this Mortgage, in which proceeding Beneficiary is made a party, or in the event of the bankruptcy of the Grantor, or an assignment by the Grantor for the benefit of creditors, Grantor, its successors and assigns, shall 17 be chargeable with and agrees to pay all costs of collection and defense, including an amount as attorneys' fees not to exceed such amount as may be permitted by the laws of the applicable State including reasonable actual attorneys' fees for all appellate proceedings and post-judgment action involved therein, the payment of which charges, fees and taxes together with all costs and expenses, shall be secured hereby. 4.14 [INTENTIONALLY DELETED] 4.15 [INTENTIONALLY DELETED] 4.16 CREATION AND RECORDATION OF ADDITIONS AND BETTERMENTS: Grantor shall arrange for timely recording or filing, as required, of all documents having to do with additions to or betterments of any portion of the Mortgaged Property, and the covenants and agreements set forth in this Mortgage shall apply to all such additions and betterments. 4.17 CONSENTS: Grantor will obtain and maintain the consent or approval of any Person whose consent or approval is required to the granting of a Lien on any interest in the Mortgaged Property to the Beneficiary. 4.18 COVENANTS RELATING TO ENCUMBERED LEASES: With respect to the Encumbered Leases, if any: (a) Grantor will make all payments and otherwise perform in all material respects all obligations in respect of all Encumbered Leases, and, subject to subsection (b) below, will maintain such Encumbered Leases in full force and effect and not allow such Encumbered Leases to lapse or be terminated (except in connection with the exercise by Grantor of a purchase option in respect of the real and other property subject to such Encumbered Lease) or any rights to renew such Encumbered Leases or options to purchase the premises demised thereby to be forfeited or canceled. Grantor will notify Beneficiary of any material default by any party with respect to such Encumbered Leases and Grantor will promptly notify Beneficiary of the giving of any notice by the Lessor to Grantor of any default by Grantor in the performance or observance of any of the terms, covenants or conditions of the Encumbered Lease on the part of Grantor, as tenant under the Encumbered Lease, to be performed or observed and promptly deliver to Beneficiary a true copy of each such notice. (b) Except with respect to the termination of an Encumbered Lease in connection with the exercise by Grantor of a purchase option in respect of any real and other property subject to any Encumbered Lease, Grantor will not, without the written consent of the Beneficiary, cancel or terminate any Encumbered Lease or consent to or accept any cancellation or termination thereof, or amend or otherwise modify any Encumbered Lease or give any consent, waiver or approval thereunder, or waive any default thereunder or breach thereof, agree in any manner to any other amendment, modification or change of any term or condition of any Encumbered Lease, or take any other action in connection with any Encumbered Lease that would, or would be reasonably likely to, individually or in the aggregate, (A) impair the rights and interests of the Beneficiary, (B) result in expiration or termination of any Encumbered Lease prior 18 to November 15, 2009, or (C) prevent the unfettered use by the Grantor of the premises leased thereunder for any and all activities being conducted on the Mortgaged Property as of the date hereof. Grantor shall exercise all rights to renew the Encumbered Lease by timely notice to the Lessor as required by the Encumbered Lease so that the Encumbered Lease will not expire or terminate prior to November 15, 2009. Grantor hereby authorizes and appoints Beneficiary its attorney in fact to exercise any option to renew the Encumbered Lease in the name of and upon behalf of Grantor, which power of attorney shall be irrevocable and deemed to be coupled with an interest. As further security for the payment and performance of the Obligations, Grantor hereby assigns to Beneficiary, as further security for the payment and performance of the Obligations, all of the rights, privileges, and prerogatives of Grantor, as tenant under the Encumbered Lease, to surrender the leasehold estate created by the Encumbered Lease or to terminate, cancel, modify, change, supplement or alter the Encumbered Lease, and any such surrender of the leasehold estate created by the Encumbered Lease or termination, cancellation, modification, change, supplement, alteration or amendment of the Encumbered Lease without the prior consent of Beneficiary shall be null and void and of no force and effect. (c) Subject to the foregoing, if Grantor defaults under subsection (a) hereof by failing to make any payment required to be made by Grantor pursuant to the provisions of any Encumbered Lease or to keep, observe or perform, or cause to be kept, observed or performed, any of the terms, covenants, provisions or agreements of any Encumbered Lease (unless waived by lessor under such Encumbered Lease), Grantor agrees that Beneficiary may (but shall not be obligated to) take any action on behalf of Grantor (with right of entry onto the Mortgaged Property), to keep or cause to be kept, observed or performed any such terms, covenants, provisions or agreements and to enter upon the Mortgaged Properties (after reasonable advance notice to Grantor) and take all such action thereon as may be reasonably necessary therefor, and all money so expended by Beneficiary, with interest thereon at the Default Rate from the date of each such expenditure, shall be paid by Grantor to Beneficiary promptly upon demand by Beneficiary and shall be added to the indebtedness secured by this Mortgage. If Beneficiary shall make any payment or perform any act or take any action in accordance with the preceding sentence, then the payment, performance or action shall not remove or waive, as between Grantor and Beneficiary, the corresponding default under the terms of this Mortgage. (d) Grantor covenants and agrees that, unless Beneficiary shall otherwise expressly consent in writing, neither Grantor nor its successors or assigns shall suffer or permit the fee title to the property demised by any Encumbered Lease and the leasehold estate thereunder to merge, it being understood and agreed that said estates shall always remain separate and distinct, notwithstanding the union of said estates in any person whomever by purchase or otherwise; and in case Grantor acquires the fee title or any other estate, title or interest in the Mortgaged Property, this Mortgage shall attach to and cover and be a lien upon the fee title or such other estate so acquired, and such fee title or other estate shall, without further assignment, mortgage or conveyance, become and be subject to the lien of and covered by this Mortgage. 19 (e) If any Encumbered Lease shall be terminated prior to the natural expiration of its term due to default by the lessee or tenant thereunder, and if, pursuant to any provision of such Encumbered Lease or pursuant to Beneficiary's exercise of its rights hereunder or under any other Loan Document, the Beneficiary or its designee shall acquire from the lessor a new lease of the Mortgaged Property, Grantor shall have no right, title, or interest in or to such new lease or the leasehold estate created thereby, or renewal privileges therein contained. (f) Grantor will not subordinate or consent to the subordination of the Encumbered Lease to any mortgage, deed of trust, lease or other interest on or in the Lessor's interest in all or any part of the Mortgaged Property, unless, in each such case, the written consent of Beneficiary shall have been first had and obtained. 4.19 LESSOR'S BANKRUPTCY: (a) Grantor acknowledges that pursuant to Section 365 of the Bankruptcy Code it is possible that a trustee in bankruptcy of the Lessor under an Encumbered Lease, if any, or Lessor as a debtor-in-possession could reject the Encumbered Lease, if any, in which case Grantor, as lessee, would have the Election described in Section 365(h) of the Bankruptcy Code to treat such Encumbered Lease as terminated by such rejection or, in the alternative, to remain in possession for the balance of the term of the Encumbered Lease and any renewal or extension thereof that is enforceable by the lessee under applicable nonbankruptcy law. (b) Grantor covenants that it will not suffer or permit the termination of the Encumbered Lease by exercise of the Election or otherwise without the prior written consent of Beneficiary. Grantor acknowledges that since the Encumbered Lease is a primary part of the security for the Obligations secured hereby, it is not anticipated that Beneficiary would consent to termination of the Encumbered Lease in connection with any such election and Beneficiary shall not under any circumstances be obliged to give such consent. (c) In order to secure the covenant made in this Section 4.19 and as security for the Obligations, Grantor assigns the Election and all rights related thereto to Beneficiary. Grantor acknowledges and agrees that the foregoing assignment of the Election and related rights is one of the rights which Beneficiary may use at any time in order to protect and preserve the other rights and interests of Beneficiary under this Mortgage, since exercise of the Election in favor of terminating the Encumbered Lease would constitute waste hereunder. (d) Grantor acknowledges and agrees that the Election is in the nature of a remedy and is not a property interest which Grantor can separate from the Encumbered Lease. Therefore, Grantor agrees that exercise of the Election in favor of preserving the right to possession under the Encumbered Lease shall not be deemed to constitute a taking or sale of the Mortgaged Property by Beneficiary and shall not entitle Grantor to any credit against the Obligations secured by this Mortgage. 20 (e) Grantor acknowledges and agrees that in the event the Election is exercised in favor of Grantor remaining in possession, Grantor's resulting rights under the Encumbered Lease, as adjusted by the effect of Section 365 of the Bankruptcy Code, shall then be part of the Mortgaged Property and shall be subject to the lien created by this Mortgage. (f) Beneficiary shall have the right to proceed in its own name or in the name of Grantor in respect of any claim, suit, action or proceeding relating to the rejection of the Encumbered Lease by the Lessor or any other party, including, without limitation, the right to file and prosecute under the Bankruptcy Code, without joining or the joinder of Grantor, any proofs of claim, complaints, motions, applications, notices and other documents. Any amounts received by Beneficiary as damages arising out of the rejection of the Encumbered Lease as aforesaid shall be applied first to all costs and expenses of Beneficiary (including, without limitation, attorneys' fees) incurred in connection with the exercise of any of its rights or remedies under this paragraph. Grantor acknowledges that the assignment of all claims and rights to the payment of damages from the rejection of the Encumbered Lease made under the granting clauses of this Mortgage constitutes a present irreversible and unconditional assignment and Grantor shall, at the request of Beneficiary, promptly make, execute, acknowledge and deliver, in form and substance satisfactory to Beneficiary, a UCC Financing Statement (Form UCC-1) and all such additional instruments, agreements and other documents, as may at any time hereafter be required by Beneficiary to carry out such assignment. (g) If pursuant to Subsection 365(h)(2) of the Bankruptcy Code, Grantor shall seek to offset against the rent reserved in the Encumbered Lease the amount of any damages caused by the nonperformance by the Lessor or any other party of any of their respective obligations under such Encumbered Lease after the rejection by the Lessor or such other party of such Encumbered Lease under the Bankruptcy Code, then Grantor shall, prior to effecting such offset, notify Beneficiary of its intent to do so, setting forth the amount proposed to be so offset and the basis therefor. Beneficiary shall have the right to object to all or any part of such offset that, in the reasonable judgment of Beneficiary, would constitute a breach of such Encumbered Lease, and in the event of such objection, Grantor shall not effect any offset of the amounts found objectionable by Beneficiary. Neither Bank's failure to object as aforesaid nor any objection relating to such offset shall constitute an approval of any such offset by Beneficiary. (h) If any action, proceeding, motion or notice shall be commenced or filed in respect of the Lessor under the Encumbered Lease or any other party or in respect of the Encumbered Lease in connection with any case under the Bankruptcy Code, then Beneficiary shall have the option, exercisable upon notice from Beneficiary to Grantor, to conduct and control any such litigation with counsel of Beneficiary's choice. Beneficiary may proceed in its own name or in the name of Grantor in connection with any such litigation, and Grantor agrees to execute any and all powers, authorizations, consents or other documents required by Beneficiary in connection therewith. Grantor shall, upon demand, pay to Beneficiary all costs and expenses (including attorneys' fees) paid or incurred by Beneficiary in connection with the prosecution or conduct of any such proceedings. Grantor shall not commence any action, suit, proceeding or case, or file any 21 application or make any motion, in respect of the Encumbered Lease in any such case under the Bankruptcy Code without the prior written consent of Beneficiary. (i) Grantor shall, after obtaining knowledge thereof, promptly notify Beneficiary of any filing by or against the Lessor or other party with an interest in the Land of a petition under the Bankruptcy Code. Grantor shall promptly deliver to Beneficiary, following receipt, copies of any and all notices, summonses, pleadings, applications and other documents received by Grantor in connection with any such petition and any proceedings relating thereto. (j) If there shall be filed by or against Grantor a petition under the Bankruptcy Code and Grantor, as lessee under the Encumbered Lease, shall determine to reject the Encumbered Lease pursuant to Section 365(a) of the Bankruptcy Code, then Grantor shall give Beneficiary not less than twenty (20) days' prior notice of the date on which Grantor shall apply to the Bankruptcy Court for authority to reject the Encumbered Lease. Beneficiary shall have the right, but not the obligation, to serve upon Grantor within such twenty (20) day period a notice stating that Beneficiary demands that Grantor assume and assign the Encumbered Lease to Beneficiary pursuant to Section 365 of the Bankruptcy Code. If Beneficiary shall serve upon Grantor the notice described in the preceding sentence, Grantor shall not seek to reject such Encumbered Lease and shall comply with the demand provided for in the preceding sentence. In addition, effective upon the entry of an order for relief with respect to Grantor under the Bankruptcy Code, Grantor hereby assigns and transfers to Beneficiary a non-exclusive right to apply to the Bankruptcy Court under subsection 365(d)(4) of the Bankruptcy Code for an order extending the period during which the Encumbered Lease may be rejected or assumed. 4.20 [INTENTIONALLY DELETED] 4.21 CHANGE OF NAME OR ADDRESS: Within 10 days following any change in Grantor's name or address (as specified in the Loan Documents), Grantor shall give written notice of such change to Beneficiary, and shall promptly execute (and acknowledge, as necessary) all documents and agreements reasonably required by Beneficiary or the Secured Creditors to confirm or maintain the security interests granted herein or in the other Loan Documents. 4.22 ENVIRONMENTAL ASSESSMENT REPORTS: The Grantor agrees, upon reasonable request of the Beneficiary after an Event of Default has occurred and is continuing or if Beneficiary reasonably suspects that there exists a violation of any Environmental Law that could possibly result in a Material Adverse Effect or a release of Hazardous Materials that is not otherwise incompliance with any and all Environmental Laws with respect to the Mortgaged Property, to provide the Beneficiary (at the Grantor's expense) with a current environmental assessment report of the Mortgaged Property within a reasonable time after such request. Such assessment report shall focus on such suspected violation or release only, be in a form satisfactory to the Beneficiary and from an environmental engineer or consultant reasonably satisfactory to the Beneficiary. The results of any such assessment report shall be deemed confidential Information (as defined in Section 10.08 of the Credit Agreement) and shall be subject to the confidentiality provisions set forth in Section 10.08 of the Credit Agreement. 22 4.23 RESPONSE TO ENVIRONMENTAL COMPLAINT: Grantor shall, within the time period permitted and to the extent required by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, remove, remedy or respond to (which may include without limitation the defense of any such enforcement action so long as such enforcement action is being contested in good faith by appropriate proceedings diligently conducted and a bona fide dispute exists with respect thereto) or cause to be removed, remedied or responded to, any violation of any Environmental Law or any release of any Hazardous Material or satisfy any liability for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials. 4.24 INDEMNIFICATION: THE GRANTOR HEREBY AGREES THAT IT WILL REIMBURSE THE BENEFICIARY AND THE SECURED CREDITORS FOR, AND DEFEND, INDEMNIFY AND HOLD THE BENEFICIARY AND THE SECURED CREDITORS, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS, COSTS, EXPENSES, LOSSES, PENALTIES, LIABILITIES AND DAMAGES (INCLUDING, WITHOUT LIMITATION, ASSESSMENT AND CLEANUP COSTS AND REASONABLE ATTORNEYS', CONSULTANTS' AND OTHER EXPERTS' FEES, EXPENSES AND DISBURSEMENTS) AND ALL JUDGMENTS, FINES AND PENALTIES INCURRED, ENTERED OR LEVIED AGAINST THE BENEFICIARY OR SECURED CREDITORS BY ANY GOVERNMENTAL AGENCY OR AUTHORITY ARISING DIRECTLY OR INDIRECTLY FROM, OR AS A RESULT OF OR IN CONNECTION WITH (A) THE USE OF THE MORTGAGED PROPERTY; (B) THE USE OF THE FACILITIES THEREON; (C) THE USE, GENERATION, STORAGE, TRANSPORTATION, TREATMENT, EMISSION, DISCHARGE, DISPOSAL, RELEASE OR HANDLING OF ANY HAZARDOUS MATERIALS AT, UPON OR FROM THE MORTGAGED PROPERTY; OR (D) THE VIOLATION OR ALLEGED VIOLATION OF ANY ENVIRONMENTAL LAW BY GRANTOR OR ANY SUBSIDIARY; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PARTY, BE AVAILABLE TO THE EXTENT THAT SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED PRIMARILY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. THE GRANTOR'S OBLIGATIONS UNDER THIS SECTION 4.24 SHALL SURVIVE THE REPAYMENT OF THE OBLIGATIONS AS DEFINED IN THE CREDIT AGREEMENT, CANCELLATION OF THE LETTERS OF CREDIT, THE OCCURRENCE OF THE FACILITY TERMINATION DATE, AND EXPIRATION OR TERMINATION OF THIS MORTGAGE OR ANY FORECLOSURE OR A DEED IN LIEU OF FORECLOSURE OF THIS MORTGAGE OR OTHER COLLATERAL SECURING THE OBLIGATIONS. 4.25 [INTENTIONALLY DELETED] 4.26 TRANSFER OF LICENSE: If Beneficiary acquires title to the Mortgaged Property, Grantor shall execute, deliver and file or use its best efforts to cause the tenant under the Lease 23 of the Mortgaged Property to execute, deliver and file all documents and statements requested by Beneficiary to effect the transfer of the licenses and other governmental authorizations necessary for the continued use and operation of the Mortgaged Property, subject to any required approval of governmental regulatory authorities, and shall provide to Beneficiary all information and records required in connection therewith. ARTICLE V NEGATIVE COVENANTS Grantor hereby covenants and agrees with Beneficiary that, until all of the Obligations shall have been fully paid, performed, satisfied and discharged, all of the Commitments shall have been terminated in whole, all of the Letters of Credit shall have been cancelled and returned to the L/C Issuer and the Facility Termination Date has occurred: 5.1 RIGHTS OF REVERTER AND POWERS OF TERMINATION: With respect to any fee-owned Parcel of Mortgaged Property subject to a right of reverter or power of termination, and so long as such right or power is or may be enforceable, Grantor: (a) will not take or omit to take any action or change the use of such Parcel or otherwise so as to enable the beneficiary of such right or power to enforce or obtain the benefit of such reversion or termination; and (b) will not file for or otherwise initiate any proceedings to abandon such Parcel. ARTICLE VI DEFAULT AND FORECLOSURE 6.1 REMEDIES: If an Event of Default shall have occurred, and all or any portion of the Obligations then remaining unpaid shall have been declared due and payable in accordance with the Loan Documents, then, without notice or demand, which are hereby expressly waived to the extent permitted under applicable law, the Beneficiary may exercise any or all of the following rights, remedies and recourses: (a) Entry Upon Mortgaged Property: To the extent permitted by applicable Legal Requirements, enter upon all or any part of the Mortgaged Property and take exclusive possession thereof and of all books, records and accounts relating thereto. If Grantor remains in possession of all or any part of the Mortgaged Property after an Event of Default and without Beneficiary's prior written consent thereto, Beneficiary may invoke any and all legal remedies to dispossess Grantor, including without limitation one or more actions for forcible entry and detainer, trespass to try title and writ of restitution. Nothing contained in the foregoing sentence shall, however, be construed to impose any greater obligation or any prerequisites to acquiring possession of the Mortgaged Property after an Event of Default than would have existed in the absence of such sentence. 24 (b) Operation of Mortgaged Property: (i) To the extent permitted by applicable Legal Requirements, by itself or by the appointment of a receiver in accordance with applicable Legal Requirements, hold, lease, manage, operate or otherwise use or permit the use of all or any portion of the Mortgaged Property, either by itself or by other persons, firms or entities, in such manner, for such time and upon such other terms as Beneficiary may deem to be prudent and reasonable under the circumstances (making such repairs, alterations, additions and improvements thereto and taking any and all other action with reference thereto, from time to time, as Beneficiary shall reasonably deem necessary or desirable), and apply all Rents and other amounts collected by Beneficiary in connection therewith in accordance with the provisions of Section 6.6 below. (ii) To the extent permitted by applicable Legal Requirements, as attorney-in-fact or agent of the Grantor, or in its own name as Beneficiary or by the appointment of a receiver in accordance with applicable Legal Requirements and under the powers herein granted, hold, operate, manage, and control all or any portion of the Mortgaged Property and conduct the business, if any, thereof, either personally or by its agents, and to exercise the powers described in Section 8.3 hereof. Such remedies may be exercised cumulatively and concurrently, and in this respect Beneficiary shall be entitled to avail itself of the benefits and rights stated in Section 6.3 below. (c) Foreclosure: Institute a proceeding, judicial or otherwise, for the complete foreclosure of this Mortgage to the fullest extent permitted by law; or (ii) institute a proceeding or proceedings, judicial or otherwise, for the partial foreclosure of this Mortgage, as permitted by applicable Legal Requirements for the portion of the Obligations then due and payable, with this Mortgage then continuing unimpaired and without loss of priority so as to secure the balance of the Obligations. (d) Special State Provisions: (i) Pennsylvania. To the extent the applicable portion of the Mortgaged Property is situated in the Commonwealth of Pennsylvania, the following provisions shall apply. In addition to all other rights and remedies hereunder: (A) Beneficiary may (1) institute and maintain an action of mortgage foreclosure against any or all of the Mortgaged Property, (2) institute and maintain an action on the Loan Documents, (3) sell any of the Mortgaged Property, or (4) take such other action at law or in equity for the enforcement of any Loan Document as the law may allow. Beneficiary may proceed in any such action to final judgment and execution thereon for (1) all sums due herein or under any Loan Document, together with interest on such sums as provided herein, all costs of suit and reasonable attorneys' fees, or, at Beneficiary's option (2) 25 all amounts due under the Loan Documents without acceleration, together with interest as provided herein, all costs of suit and reasonable attorneys' fees. Interest at the Default Rate shall be due on any judgment obtained by Beneficiary from the date of judgment until actual payment is made of the full amount of the judgment by the Sheriff or otherwise. (B) Beneficiary may, without releasing Grantor from any obligation under any Loan Document or under any Lease, or any Encumbered Lease or waiving any Event of Default: (i) collect (or, continue to collect) any or all of the Rents, including any Rents past due and unpaid, (ii) perform any obligation or exercise any right or remedy of Grantor under any Lease or Encumbered Lease, or (iii) enforce any obligation of any tenant of any of the Mortgaged Property. Beneficiary shall not be obligated to do any of the foregoing, even if Beneficiary may have performed any obligation or exercised any remedy of landlord or have enforced any obligation of a tenant. Beneficiary may exercise any right under this paragraph whether or not Beneficiary shall have entered into possession of any of the Mortgaged Property; and nothing herein contained shall be construed as constituting Beneficiary a "mortgagee in possession," unless Beneficiary shall have entered into and shall remain in actual possession of the Mortgaged Property. Grantor hereby authorizes and instructs each and every present and future tenant of any of the Mortgaged Property to perform all obligations (in addition to the payment of Rents) of that tenant for the direct benefit of Beneficiary, as if Beneficiary were the landlord under the Lease with that tenant, immediately upon receipt of a demand by Beneficiary to perform such obligations. No tenant shall have any responsibility to ascertain whether such demand is permitted hereunder or whether an Event of Default shall have occurred; Grantor hereby waives any right, claim or demand it may now or hereafter have against any such tenant by reason of such performance of obligations for the benefit of Beneficiary; and any such performance for the benefit of Beneficiary shall discharge the obligations of the tenant to make such performance for the benefit of Grantor. Grantor shall indemnify Beneficiary and hold Beneficiary harmless from any and all liability under any Lease and/or Encumbered Lease and from any and all claims and demands which may be asserted against Beneficiary by reason of any alleged obligations to perform any provision of any Lease or Encumbered Lease. (C) Beneficiary may, without releasing Grantor from any obligation under any Loan Document or under any Lease or Encumbered Lease or waiving any Event of Default, enter upon and take possession of any of the Mortgaged Property, with or without legal action and by force if necessary, or have a receiver appointed without proof of depreciation or inadequacy of the value of the Mortgaged Property or other security, proof of the insolvency of Grantor or proof of fraud or waste. Beneficiary or said receiver may manage and operate any of the Mortgaged Property; 26 make, cancel, enforce or modify Leases, Encumbered Lease or any other contract relating to the operation or management of any of the Mortgaged Property; obtain and evict tenants; establish or change the amount of any Rents; make additions, repairs, improvements and/or alterations to any of the Mortgaged Property; and perform any other acts which Beneficiary deems proper to protect the security of this Mortgage. Any Lease, Encumbered Lease or other contract made by Beneficiary shall survive the cure of any Event of Default or payment of the Obligations, except to the extent that such Lease, Encumbered Lease or contract provides otherwise. Beneficiary may apply the Rents received by Beneficiary to the payment of any or all of the following, in such order and amounts as Beneficiary, in its sole discretion, may elect: all actual costs and expenses, whenever and by whomever incurred, of operation, alteration and management of the Mortgaged Property and of collection of the Rents (including reasonable attorneys' fees, administration expenses, management fees and brokers' commissions), liens on any of the Mortgaged Property, Impositions, claims, insurance premiums, other carrying charges, invoices of persons who have supplied goods or services to or for the benefit of any of the Mortgaged Property, costs and expenses of maintenance, repair, restoration, alteration or improvement of any of the Mortgaged Property, or the Obligations. Beneficiary may, in its sole discretion, determine the method by which, and extent to which, the Rents will be collected and obligations of tenants and other contract parties enforced; and Beneficiary may waive or fail to enforce any right or remedy of the landlord under a Lease or of Grantor or Beneficiary under any other contract. Beneficiary shall not be accountable for any Rents or other sums it does not actually receive. Grantor hereby appoints Beneficiary as its attorney-in-fact to perform all acts which Grantor is required or permitted to perform under any and all Leases and the Encumbered Lease. (D) Beneficiary may disaffirm and cancel any Lease which is subordinate to this Mortgage at any time before the expiration of sixty days after Beneficiary acquires the legal title to the Mortgaged Property by any transfer pursuant to the exercise of a remedy hereunder or otherwise, even though Beneficiary shall have enforced such Lease, collected Rents thereunder or taken any action that might be deemed by law to constitute an affirmance of the Lease. Such disaffirmance shall be made by notice addressed to the tenant at the Mortgaged Property or, at Beneficiary's option, such other address of the tenant as may be provided in that tenant's Lease. (E) Beneficiary may take possession of any of the Mortgaged Property and may sell such property pursuant to the provisions of the applicable Uniform Commercial Code and exercise such other rights and remedies with respect to such property as may be provided to a secured party by said Code. Grantor shall, if Beneficiary so requests, assemble 27 any such property and make it available to Beneficiary at a place or places designated by Beneficiary. (e) Sale: To the extent permitted by applicable Legal Requirements, sell or offer for sale the Mortgaged Property, in such portions, order and parcels as Beneficiary may determine, with or without having first taken possession of same, to the highest bidder for cash in lawful money of the United States at public auction in accordance with applicable Legal Requirements, or the UCC, and in the event of a sale, by foreclosure or otherwise, of less than all of the Mortgaged Property, this Mortgage shall continue as a lien and security interest on the remaining portion of the Mortgaged Property. Beneficiary may postpone any sale by public announcement at the time and place noticed for the sale. If the Mortgaged Property consists of several lots, Parcels or items of property, Beneficiary may, in its sole discretion and to the extent permitted by applicable law: (i) designate the order in which such lots, parcels or items shall be offered for sale or sales, or (ii) elect to sell such lots, parcels or items through a single sale, or through two or more successive sales or in any other manner Beneficiary deems in its best interest. Should Beneficiary desire that more than one sale or other disposition of the Mortgaged Property or any portion thereof be conducted simultaneously, or successively, on the same day, or at such different days or times and in such order as Beneficiary may deem to be in its best interests, no such sale shall terminate or otherwise affect the lien and security interest of this Mortgage on any part of the Mortgaged Property not sold until all the Obligations have been fully satisfied and all Commitments of the Lenders under the Credit Agreement have been fully terminated and all Letters of Credit issued under the Credit Agreement shall have been canceled and returned to the L/C Issuer, and the Facility Termination Date has occurred. Grantor shall pay the Expenses of any sale of the Mortgaged Property, whether one or more, and of any judicial proceedings wherein the same may be made, including reasonable compensation to Beneficiary, its agents and counsel, and shall pay all expenses, liabilities and advances actually made or incurred by Beneficiary in connection with such sale or sales, together with interest on all such advances made by Beneficiary at the Default Rate. Upon any sale hereunder, Beneficiary shall execute and deliver to the purchaser or purchasers a deed or deeds conveying the property so sold, but without any covenant or warranty whatsoever, express or implied, whereupon such purchaser or purchasers shall be let into immediate possession; and the recitals in any such deed or deeds of facts, such as default, the giving of notice of default and notice of sale, and other facts affecting the regularity or validity of such sale or disposition, shall be conclusive proof of the truth of such facts; and any such deed or deeds shall be conclusive against all persons as to such facts recited therein. (f) Trustee or Receiver: Prior to, upon or at any time after, commencement of foreclosure of the lien, security title and security interest provided for herein or any legal proceedings pursuant hereto, make application to a court of competent jurisdiction for appointment of a receiver of the Mortgaged Property. Such application may be made as a matter of strict right and without notice to Grantor (unless notice is required by applicable Legal Requirements and such right of notice may not be waived) or regard to the adequacy of the Mortgaged Property or insolvency of the Grantor or any person who may be legally or equitably liable to pay the Obligations and without giving bond to Grantor (unless bond is required by applicable Legal Requirements and such right of bond may 28 not be waived), and Grantor does hereby irrevocably consent to such appointment. Any such receiver shall have all the usual powers and duties of receivers in similar cases, including the full power to rent, maintain and otherwise operate the Mortgaged Property all upon such terms as may be approved by the court, and shall apply the Rents in accordance with the provisions of this Mortgage. (g) Separate Sales: To the extent permitted by applicable Legal Requirements, the Mortgaged Property may be sold in one or more Parcels and in such manner and order as Beneficiary, in its sole discretion, may elect, it being expressly understood and agreed that the right of sale arising out of any Event of Default shall not be exhausted by any one or more sales. (h) Other: Exercise any and all other rights, remedies and recourses granted under the Loan Documents or now or hereafter existing in equity or at law, by virtue of statute or otherwise, including, without limitation, the right to bring an action in any court of competent jurisdiction to foreclose this instrument as a realty mortgage or enforce any of the terms hereof. (i) Remedies Cumulative, Concurrent and Nonexclusive: Beneficiary shall have all rights, remedies and recourses granted in the Loan Documents and available at law or equity (including specifically those granted by the UCC in effect and applicable to the Mortgaged Property) and, except as limited by applicable Legal Requirements, the same (a) shall be cumulative and concurrent; (b) may be pursued separately, successively or concurrently against Grantor or against all or any portion of the Mortgaged Property, at the sole discretion of Beneficiary; (c) may be exercised as often as occasion therefor shall arise, it being agreed by Grantor that the exercise or failure to exercise any of same shall in no event be construed as a waiver or release thereof or of any other right, remedy or recourse; and (d) are intended to be, and shall be nonexclusive. (j) Collection of Costs and Expenses: The Beneficiary shall be entitled to receive all costs and expenses of the sale or repossession of the Mortgaged Property actually incurred, including the reasonable attorneys' fees or receivers reasonable fee or commission, if any, title and abstracting charges, reasonable attorneys' fees and a reasonable auctioneer's fees, and all other costs and expenses incurred in exercising its remedies hereunder. 6.2 NO CONDITIONS PRECEDENT TO EXERCISE OF REMEDIES: The Grantor shall not be relieved of any obligation it has under the Loan Documents by reason of (i) the release, regardless of consideration, of any of the Mortgaged Property or any other collateral held pursuant to the Loan Documents or the addition of any other property to the Mortgaged Property or any other such collateral; (ii) any agreement or stipulation between any subsequent owner of all or any portion of the Mortgaged Property and Beneficiary extending, renewing, rearranging or in any other way modifying the terms of the Loan Documents without first having obtained the consent of, given notice to or paid any consideration to the Grantor, and in such event the Grantor shall continue to be liable to make payment according to the terms of any such extension or modification agreement unless expressly released and discharged in writing by Beneficiary; or (iii) any other acts or occurrence, save and except the full payment and performance of all of the 29 Obligations, and the termination of the Commitments of the Lenders under the Credit Agreement and the cancellation and return to the L/C Issuer of all Letters of Credit issued under the Credit Agreement and the occurrence of the Facility Termination Date. 6.3 RELEASE OF AND RESORT TO COLLATERAL: To the fullest extent permitted by law, Beneficiary may release, regardless of consideration, any part of the Mortgaged Property without, as to the remainder, in any way impairing, affecting, subordinating or releasing the lien or security interest created in or evidenced by the Loan Documents or their stature as a first and prior lien and security interest in and to the Mortgaged Property. For payment of the Obligations, to the fullest extent permitted by applicable Legal Requirements, Beneficiary may resort to any other security therefor held by Beneficiary in such order and manner as Beneficiary may elect, and such resort may be taken concurrently or successively and in one or several consolidated or independent judicial actions or lawfully taken non-judicial proceedings, or both. 6.4 WAIVERS: To the fullest extent permitted by applicable Legal Requirements, Grantor hereby irrevocably and unconditionally WAIVES and RELEASES (a) all benefits that might accrue to Grantor by virtue of any present or future law exempting the Mortgaged Property from attachment, levy or sale on execution or providing for any appraisement, valuation, homestead exemption, stay of execution, exemption from civil process, redemption or extension of time for payment; (b) except as otherwise provided in the Loan Documents, all notices of any demand, presentment, Event of Default, intent to accelerate or acceleration or the election by Beneficiary to exercise or the actual exercise of any right, remedy or recourse provided for under the Loan Documents; (c) any right to a marshalling of assets or a sale in inverse order of alienation; and (d) any restrictions or conditions upon the exercise by the Beneficiary of the remedies set forth in Section 6.1. 6.5 DISCONTINUANCE OF PROCEEDINGS: To the extent permitted by applicable Legal Requirements, in case Beneficiary shall have proceeded to invoke any right, remedy or recourse permitted under the Loan Documents and shall thereafter elect to discontinue or abandon same for any reason, Beneficiary shall have the unqualified right so to do and, in such an event, the Grantor and Beneficiary shall be restored to their former positions with respect to the Loan Documents, the Mortgaged Property and otherwise, and the rights, remedies, recourses and powers of Beneficiary shall continue as if same had never been invoked. 6.6 APPLICATION OF PROCEEDS: (a) To the extent permitted by applicable Legal Requirements, all proceeds received from the sale or other dispositions of the Mortgaged Property, including but not limited to, the Rents and other income generated by the holding, leasing, operating or other use of the Mortgaged Property, pursuant to Article 6 of this Mortgage shall be applied by the Beneficiary (or the receiver, if one is appointed), as applicable, to the extent that funds are so available therefrom, in accordance with the following priorities: First: to the costs and expenses of the sale or possession of the Mortgaged Property actually incurred, including the receiver's reasonable fee or commission, if any, title and abstracting charges, reasonable attorneys' fees and a reasonable auctioneer's fee if such expense has been incurred; 30 Second: to the satisfaction of the Obligations; Third: to the payment to whomsoever shall be entitled thereto under applicable Legal Requirements, if the person who made the sale knows who is entitled thereto. Otherwise, the surplus shall be paid to the clerk of the superior, district or circuit court (or other court having jurisdiction) of the county where the sale was had. (b) If the Beneficiary shall be ordered, in connection with any bankruptcy, insolvency or reorganization of the Grantor to restore or repay to or for the account of the Grantor or any of their creditors any amount theretofore received under this Section 6.6, the amount for such restoration or repayment shall be deemed to be an Obligation so as to place the Beneficiary in the position they would have been in had such amount never been received by any party hereto. 6.7 COOPERATION: If an Event of Default shall occur, Grantor will use its best efforts to cooperate with Beneficiary and promptly do all things reasonably required of it toward obtaining all necessary authority and permission from any governmental authority or otherwise to accomplish any disposition, abandonment or change in use of the Mortgaged Property (or any portion thereof) as Beneficiary may request in connection with the exercise of its rights and powers hereunder and under the other Loan Documents. ARTICLE VII CONDEMNATION 7.1 GENERAL: Promptly following the date on which an executive officer of Grantor obtains knowledge of the institution or the threatened institution of any proceeding for the condemnation of all or any portion of the Mortgaged Property, Grantor shall notify Beneficiary of such fact. Grantor shall then, unless Beneficiary waives this requirement, file or defend its claim in respect of such proceeding and prosecute same with due diligence to its final disposition. Grantor may be the nominal party in such proceeding but Beneficiary shall be entitled to participate in same and to be represented therein by counsel of its own choice, and Grantor will deliver or cause to be delivered to Beneficiary such instruments as may be reasonably requested by it from time to time to permit such participation. All proceeds received from any such condemnation proceeding shall be paid to Beneficiary and applied to reduce the outstanding balance of the Obligations. 7.2 REBUILDING, RESTORATION AND REPAIR: In the event (a) no Default or Event of Default shall have occurred and be continuing, (b) only a portion of the Mortgaged Property is taken, (c) Grantor elects to rebuild, restore or repair the remaining portion of the Mortgaged Property, (d) there are sufficient proceeds or other amounts available to Grantor to fully pay for the rebuilding, restoration or repair of the Mortgaged Property, (e) neither the Grantor nor Lessor has elected to terminate the Encumbered Lease, if any, and confirmation of the same has been delivered to Beneficiary, (f) the Grantor presents sufficient evidence to the Beneficiary that the Mortgaged Property will be restored to an architectural whole prior to the earliest to occur of the Revolving Credit Maturity Date, the Term Loan A Maturity Date, the Term Loan B Maturity Date or the Term Loan C Maturity Date and (g) the Beneficiary will not incur any liability to any 31 other person as a result of such use or release of proceeds, then Grantor will so certify to Beneficiary, and will certify that it will and shall continue diligently to completion to restore, repair, replace and rebuild such Mortgaged Property as nearly as possible to its value, condition and character immediately prior to such condemnation with such alterations, modifications and/or betterments reasonably deemed necessary or desirable by Grantor in its business judgment. Grantor shall thereafter commence the rebuilding, restoration or repair within sixty (60) days after the date of the disbursement of the award or settlement, and complete same to the satisfaction of the Beneficiary within a reasonable time thereafter. Upon completion of such rebuilding, restoration and repair in accordance with the preceding provisions, Grantor may apply such amount or settlement to the costs of such rebuilding, restoration or repair. If (i) there is a total condemnation of the Mortgaged Property, or (ii) if Grantor elects not to rebuild, restore or repair as specified above, or (iii) the requirements set forth above for rebuilding, restoration or repair after a partial condemnation are not met to Beneficiary's satisfaction, then Grantor shall pay to Beneficiary such award or settlement to be applied to reduce the outstanding balance of the Obligations or if such award or settlement constituted proceeds of casualty insurance, in accordance with Section 2.06(d) of the Credit Agreement. At all times during which an Event of Default shall have occurred and be continuing, Beneficiary shall be entitled to receive direct and immediate payment of the proceeds of such condemnation and Grantor shall take all action as the Beneficiary may reasonably request to accomplish such payment, and in the event Grantor shall receive any such proceeds during the occurrence and continuance of an Event of Default, Grantor shall immediately deliver the proceeds to Beneficiary for the benefit of the Secured Creditors and pending such delivery shall hold such proceeds in trust for the benefit of the Secured Creditors and keep the same segregated from its other funds. ARTICLE VIII SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS 8.1 ASSIGNMENT: Subject to the terms and conditions hereinafter set forth, Grantor as debtor does hereby irrevocably transfer, assign and deliver unto Beneficiary as secured party for its benefit and the ratable benefit of the Secured Creditors, as security for the payment and performance of the Obligations, and grant a security interest in, all of the right, title and interest of Grantor in and to all of the following (collectively, the "Collateral"): (a) The Encumbered Leases and the Election; (b) The Leases; (c) The Rents; (d) The Fixtures; and (e) The Personalty. This assignment of rentals and any other assignments required by the provisions hereof shall terminate and become null and void upon release of this Mortgage. The Grantor shall execute and deliver to Beneficiary, in form and substance satisfactory to Beneficiary, such financing statements and such further assurances as required by applicable law or as Beneficiary may, from time to time, consider reasonably necessary to create, perfect and preserve Beneficiary's security interest herein granted, and Grantor will (or Beneficiary at its 32 option may) cause such statements and assurances to be recorded and filed at such times and places as may be required or permitted by law to so create, perfect and preserve such security interest. Grantor authorizes Beneficiary to file one or more financing statements, without the signature of Grantor, covering the Collateral. Beneficiary shall have, and Grantor grants to Beneficiary, all the rights, remedies and recourses with respect to the Personalty, Fixtures, Leases and Rents afforded a secured party by the aforesaid UCC in addition to, and not in limitation of, the other rights, remedies and recourses afforded by the Loan Documents and at law. This Mortgage shall be effective as a Financing Statement filed as a fixture filing from the date of its filing for record covering the Fixtures and Personalty and is to be filed for record in the real estate records of each county where any part of the Mortgaged Property (including Fixtures) is situated. The record owner of the real property described in Exhibit A is Grantor. The addresses of Grantor, as Debtor, and Beneficiary, as Secured Party, are as set forth herein. The above described goods are or are to become fixtures related to the Land and Improvements of which the Grantor is record title owner or lessee. This Mortgage shall also be effective as a financing statement covering the Collateral and may be filed in any other appropriate filing or recording office. This instrument covers goods that are or are to become fixtures on the Land described herein. This instrument shall be deemed to be a fixture filing and financing statement and for such purpose the following information is set forth: (1) Name and Address of Debtor: as set forth on page 2 hereof. (2) Name and Address of Secured Party: as set forth on page 2 hereof. (3) The mailing address of the Grantor/Debtor is the address of Grantor set forth on page 2 hereof. (4) The address of the Beneficiary/Secured Party from which information concerning the security interest hereunder is set forth on page 2 hereof. (5) Description of the types (or items) of property covered by this financing statement: as set forth in Section 1.1 and this Section 8.1. (6) Description of real estate to which collateral is attached or upon which it is located: as set forth on Exhibit "A". (7) A carbon, photographic or other reproduction of this Mortgage or of any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to herein. Grantor is an organization that is a corporation organized under the laws of the State of Ohio. Grantor's organization identification number is 3817. 8.2 COLLECTION OF RENTS: Grantor absolutely and irrevocably assigns to Beneficiary, with or without taking possession of the Land or the Buildings, the Rents, and hereby authorizes 33 and empowers Beneficiary to collect the Rents as the same shall become due, and does hereby irrevocably direct each and all of the lessees, sublessees, licensees, or other occupants of the Mortgaged Property to pay to Beneficiary, upon demand by Beneficiary, the Rents. The foregoing assignment shall not impose upon Beneficiary any duty to produce Rents from the Mortgaged Property, and shall not cause Beneficiary to be a "mortgagee-in-possession" for any purpose. 8.3 BENEFICIARY'S POWERS OF ATTORNEY: Grantor does hereby irrevocably constitute and appoint Beneficiary, while this Mortgage remains in force and effect, its true and lawful attorney-in-fact, coupled with an interest and with full power of substitution, delegation and revocation, for Grantor and in its name, place and stead, to enter and take possession of the Mortgaged Property after an Event of Default by actual physical possession without the commencement of any action to foreclose this Mortgage or to exercise any power of sale Beneficiary may have hereunder and to do and perform any or all of the following actions, as fully as Grantor could do if personally present, hereby ratifying and confirming all that Beneficiary, as attorney or its substitute, shall lawfully do or cause to be done by virtue hereof: (a) to enter into subordination and non-disturbance agreements with respect to any Leases or with any of the tenants or lessees under any of the Leases; (b) to demand, collect, sue for, attach, levy, recover, receive, compromise and adjust, and make, execute and deliver receipts, releases, discharges or other instruments for all Rents, issues, and other amounts that may hereafter become due, owing or payable with respect to the Mortgaged Property or any part thereof from any present or future tenants, lessees, sublessees, licensees or other occupants thereof; (c) to institute, prosecute to completion, or compromise and settle, all summary proceedings, actions for rent or for removing any and all tenants, lessees, sublessees, licensees or other occupants of the Mortgaged Property or any part or parts thereof; (d) to enforce or enjoin or restrain the violation of any of the terms, provisions and conditions of any of the Leases; (e) to pay, from and out of any Rents and issues collected in respect of the Mortgaged Property or any part thereof, or from or out of any other funds, any taxes, assessments, water rates, sewer rates, or other government charges levied, assessed, or imposed against the Mortgaged Property, or any portion thereof, and also any and all other charges, costs and expenses which it may be reasonably necessary or advisable for Beneficiary to pay in the management or operation of the Mortgaged Property, including commissions for renting the Mortgaged Property or any portion thereof, management and consulting fees, and legal expenses incurred in enforcing claims, drafting and negotiating documents or for any other services that may be required; (f) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Personalty; 34 (g) to receive, indorse, and collect any drafts or other instruments, documents and chattel paper, in connection with subsection (f) above; (h) to file any claims or take any action or institute any proceedings which the Beneficiary may deem necessary or desirable for the collection of any of the Personalty or otherwise to enforce the rights of the Beneficiary with respect to any of the Personalty, including without limitation the execution, delivery and filing of financing statements, continuation statements, affidavits or other security instruments and agreements necessary to perfect, confirm and continue in effect the lien of this Mortgage with respect to the Leases, the Rents, the Fixtures and the Personalty; and (i) to generally do, execute, and perform any other act, deed, matter or thing whatsoever that ought to be done, executed and performed in and about or with respect to the Mortgaged Property, the Leases and the Personalty, as fully as Grantor might do; provided, however, that this Assignment shall not operate to place upon Beneficiary any responsibility or obligation to take any of the above actions or any action whatsoever with respect to the operation, control, care, management or repair of the Mortgaged Property, and that any action taken or failure or refusal to act by Beneficiary under this Mortgage shall be at Beneficiary's election and without any liability on its part. 8.4 GRANTOR REMAINS LIABLE: Anything herein to the contrary notwithstanding: (a) Grantor shall remain liable under the Leases to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Mortgage had not been executed; (b) the exercise by the Beneficiary of any of the rights hereunder shall not release the Grantor from any of its duties or obligations under any of the Leases; and (c) the Beneficiary shall not have any obligation or liability under any of the Leases to any person or entity under this Mortgage nor shall the Beneficiary be obligated to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claims thereunder. 8.5 GRANTOR'S REPRESENTATIONS AND WARRANTIES: Grantor represents and warrants that: (a) No Rents, nor any part thereof becoming due subsequent to the date hereof, have been collected with respect to the Leases (excepting an amount not exceeding one month's installment under the Leases), nor has payment of any of the same been anticipated, waived, released, discounted or otherwise discharged or compromised; (b) This Mortgage creates a valid security interest in the Personalty as security for the payment and performance of the Obligations. Upon the filing of financing statements (the "Financing Statement") under the UCC naming the Grantor as debtor and the Beneficiary as secured party and covering the Personalty, such security interests shall be perfected under the UCC and such security interests are not subject to any prior lien, 35 or to any agreement purporting to grant to any Person, other than the Beneficiary, a security interest in any of the Personalty, in each case other than with respect to the Permitted Encumbrances. No further filings, recordings or other actions are necessary to perfect or maintain the priority of such security interests other than the filing of UCC continuation statements on or prior to the date required by applicable Legal Requirements. The Financing Statements are in appropriate form and have been duly filed pursuant to the UCC; (c) The chief place of business and chief executive office of the Grantor are located at the address first specified above for the Grantor; (d) Each of the Leases, as amended to the date of execution and delivery hereof has been duly authorized, executed and delivered by Grantor (and to Grantor's knowledge all other parties thereto) and is in full force and effect and binding upon and enforceable against Grantor and, to Grantor's knowledge, against the other parties thereto, in accordance with its terms. No event has occurred and is continuing, or will occur as a result of the performance of this Mortgage, that constitutes or would constitute any material event of default under any of the Leases or would constitute such an event of default but for the requirement that notice be given or time lapse or both. 8.6 GRANTOR'S COVENANTS: Grantor covenants and agrees with respect to the Leases that: (a) It will perform and observe each of its material obligations under the terms of the Leases now or hereafter in effect (except when the amount or validity of such obligations is being contested in good faith) and use commercially reasonable efforts to cause the other parties thereto to comply with their obligations thereunder; (b) It will, upon the reasonable written request by Beneficiary, while this Assignment remains in force and effect, serve written notices of this Assignment upon any lessor or lessee, sublessee, licensee, or other occupant of any portion of the Mortgaged Property or include among the written provisions of any instrument hereafter creating any such lease, sublease, license, or right of occupancy specific reference to this Assignment, and make, execute and deliver all such powers of attorney or instrument of pledge or assignment, and such other instrument or documents as Beneficiary may reasonably request at any time for the purpose of securing its rights hereunder; (c) It will furnish to Beneficiary, promptly following demand, true copies of all Leases hereafter executed and true copies of each agreement or letter effecting the renewal, amendment or modification of any Lease; and in each case after request by the Beneficiary, furnish to the Beneficiary promptly following receipt thereof copies of all notices, requests and other documents received by the Grantor under or pursuant to the Leases during the term of each of the Leases and from time to time (A) furnish to Beneficiary such information and reports regarding the Leases as the Beneficiary may reasonably request, and (B) promptly following request of the Beneficiary make such demands and requests for information or action upon such person, firm, corporation, or other entity as the Grantor is entitled to make under the Leases; 36 (d) It will cause the security interest in the Personalty to remain a continuously perfected, first priority security interest free and clear of any liens (other than the Beneficiary's lien hereunder and the Permitted Encumbrances), and from time to time, at its own expense, the Grantor will promptly execute and deliver all further instruments and documents and take all further action, that may be necessary or desirable, or that the Beneficiary may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Beneficiary to otherwise enforce its rights and remedies hereunder with respect to the Personalty. Without limiting the generality of the foregoing or of Section 4.3 hereof, the Grantor will: (i) at the request of the Beneficiary, mark conspicuously any item of chattel paper relating to or evidencing the Personalty with a legend, in form and substance satisfactory to the Beneficiary, indicating that the Personalty is subject to the security interest granted hereby, (ii) execute and file such financing or continuation statements, or amendments thereto, and such other collateral assignments, security agreements, instruments or notices, as may be necessary or desirable, or as the Beneficiary may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby, and (iii) defend the title to the Personalty and the Beneficiary's lien thereon and security interest therein against the claim of any person, firm, corporation, or other entity claiming against or through Grantor and will maintain and preserve such lien and security interest so long as this Mortgage shall remain in effect; (e) It authorizes the Beneficiary to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Personalty without the signature of the Grantor where permitted by law; and (f) It will furnish to the Beneficiary from time to time statements and schedules further identifying and describing the Personalty and such other reports in connection with the Personalty as the Beneficiary may reasonably request, all in reasonable detail. 8.7 EFFECT OF RELEASE OF MORTGAGED PROPERTY: The Grantor hereby consents to, and hereby agrees that the rights of the Beneficiary and the security interests hereunder, and the obligations of the Grantor hereunder, to the fullest extent permitted by applicable Legal Requirements, shall not be affected by any and all releases of any of the Mortgaged Property from the liens or security interests created by this Mortgage or otherwise, whether for purposes of sales or other dispositions of assets or for some other purpose, except to the extent expressly provided herein, by any agreement extending the time or otherwise altering the terms of payment of all or any part of the indebtedness secured hereby, or subordinating, modifying or waiving any obligation, or subordinating, modifying or otherwise dealing with the lien or charge hereof, each such agreement to be in writing to be binding and effective, by exercising or refraining from exercising or waiving any right Beneficiary may have hereunder, or by accepting additional security of any kind or additional parties to the Obligations secured hereby or instruments creating or evidencing such. 8.8 HOLD HARMLESS: WITHOUT LIMITATION OF THE INDEMNITY SET FORTH IN SECTION 10.15, GRANTOR HEREBY AGREES TO INDEMNIFY AND HOLD THE BENEFICIARY AND THE SECURED CREDITORS HARMLESS (A) 37 AGAINST AND FROM ANY AND ALL LIABILITY, LOSS, DAMAGE AND EXPENSE, INCLUDING REASONABLE ATTORNEYS' FEES, WHICH IT MAY OR SHALL INCUR UNDER OR IN CONNECTION WITH THE EXERCISE BY BENEFICIARY OF ITS RIGHTS HEREUNDER IN RESPECT OF ANY OF THE LEASES, OR BY REASON OF ANY ACTION TAKEN OR EXPENSES PAID OR INCURRED BY BENEFICIARY UNDER AND IN ACCORDANCE WITH THE TERMS OF THIS MORTGAGE, AND (B) AGAINST AND FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER WHICH MAY BE ASSERTED AGAINST GRANTOR BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKING ON ITS PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS AND CONDITIONS CONTAINED IN ANY OF THE LEASES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PARTY, BE AVAILABLE TO THE EXTENT THAT SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED PRIMARILY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. SHOULD BENEFICIARY PAY OR INCUR ANY SUCH LIABILITY, LOSS, DAMAGE OR EXPENSE, THE AMOUNT THEREOF, TOGETHER WITH INTEREST THEREON FROM THE DATE OF SUCH PAYMENT AT THE DEFAULT RATE, SHALL BE PAYABLE BY GRANTOR TO BENEFICIARY IMMEDIATELY UPON DEMAND THEREFOR; AND UNTIL SO PAID BY GRANTOR, ALL SUMS SO EXPENDED BY BENEFICIARY, AND INTEREST THEREON, SHALL BE ADDED TO THE OBLIGATIONS AND SECURED BY THE LIEN AND LEGAL OPERATION AND EFFECT OF THIS MORTGAGE. AT ITS OPTION, BENEFICIARY MAY REIMBURSE ITSELF THEREFOR OUT OF ANY RENTS WHICH IT HAS COLLECTED OR MAY COLLECT. ARTICLE IX INDIVIDUAL BENEFICIARY 9.1 INDIVIDUAL BENEFICIARY: (a) Individual Beneficiary has been designated as co-Beneficiary hereunder so that if the State is a state in which, under any present or future law, Beneficiary may be deemed to be incompetent or unqualified to enforce its rights for itself and as agent for the Secured Creditors because it is deemed to be acting as trustee for the Secured Creditors under State law, then all the acts required to be performed in such jurisdiction, in the enforcement of Beneficiary's rights hereunder, shall and will be performed by Individual Beneficiary, acting alone. Therefore, notwithstanding any other term or provision hereof or in any Loan Document to the contrary, Beneficiary alone shall have and exercise the rights and powers granted herein and in each of the Loan Documents and shall be charged with the performance of the duties herein and therein declared on the part of Beneficiary to be had and exercised or to be performed; provided, however, that if Beneficiary deems it necessary or desirable for Individual Beneficiary to act in a State, Individual Beneficiary shall have and exercise the rights and powers granted herein and 38 therein and shall be charged with the performance of the duties herein and therein declared on the part of Beneficiary to be had and exercised or to be performed, but only in such particular jurisdiction. The foregoing shall not relieve Beneficiary from any liability or obligation of Beneficiary to any party under the Loan Documents. (b) Individual Beneficiary may execute and deliver, on behalf of Beneficiary, any writing, document or instrument which Beneficiary directs Individual Beneficiary to execute and deliver, including, without limitation, any writing, document or instrument of a purely ministerial nature. (c) No action taken under this Section shall release Beneficiary from its obligations hereunder or under the Loan Documents. (d) The authority granted Individual Beneficiary hereby shall not give Individual Beneficiary any rights under any of the Loan Documents, except as expressly set forth in this Section 9.1. ARTICLE X MISCELLANEOUS 10.1 PERFORMANCE AT GRANTOR'S EXPENSE: The cost and expense of performing or complying with any and all of the Obligations shall be borne solely by Grantor, and no portion of such cost and expense shall be, in any way or to any extent, credited against any installment on or portion of the Secured Indebtedness which may be payable by Grantor pursuant to the Loan Documents. 10.2 SURVIVAL OF OBLIGATIONS: Each and all of the Obligations shall survive the execution and delivery of the Loan Documents and the consummation of the loans called for therein and shall continue in full force and effect with respect to Grantor until the Obligations shall have been paid, performed and satisfied in full, and all of the Commitments have been terminated and all of the Letters of Credit shall have been canceled and returned to the L/C Issuer and the Facility Termination Date shall have occurred. 10.3 FURTHER ASSURANCES: Grantor, upon the request of Beneficiary, will execute, acknowledge, and record and/or file such further instruments and do such further acts as may be reasonably necessary, desirable or proper to carry out more effectively the purpose of the Loan Documents and to subject to the liens and security interests thereof any property intended by the terms thereof to be covered thereby, including specifically but without limitation, any renewals, additions, substitutions, replacements, betterments or appurtenances to the then Mortgaged Property. 10.4 RECORDING AND FILING: Grantor will cause this Mortgage and all amendments and supplements thereto and supplements therefor to be recorded, filed, re-recorded and refiled in such manner and in such places as required by applicable law or as Beneficiary shall reasonably request, and will pay all such recording, filing, re-recording and refiling taxes, fees and other charges. 39 10.5 NOTICES: Any notice shall be conclusively deemed to have been received by any party hereto and be effective (i) on the day delivered by hand or by commercial courier service to such party (against receipt therefor) (provided that if such day is not a Business Day, such date of delivery or receipt shall be deemed to be the next following Business Day), (ii) on the day of receipt (provided that if such day is not a Business Day, such date of delivery or receipt shall be deemed to be the next following Business Day) by telefacsimile (where the receipt of such message is verified by telephone), or (iii) on the fifth Business Day after the day on which mailed, if sent prepaid by certified or registered mail, return receipt requested, in each case delivered, transmitted or mailed, as the case may be, to the address or telefacsimile number, as appropriate, set forth below or such other address or number as such party shall specify by notice hereunder: (a) if to the Grantor: Block Communications, Inc. 541 N. Superior Street Toledo, Ohio 43660 Attention: Gary Blair Telephone: (419)-724-6256 Telefacsimile: (419)-723-6167 with a copy to: Fritz Byers, Esq. 824 Spitzer Building Toledo, Ohio 43604 Telephone: (419) 241-8013 Telefacsimile: (419) 241-4215 (b) if to the Beneficiary: Bank of America, N.A. 901 Main Street, 14th Floor TX1-492-14-11 Dallas, Texas 75202 Attention: Agency Management Telephone: (214) 209-4128 Telefacsimile: (214) 290-9544 40 with a copy to: Bank of America, N.A. 901 Main Street, 14th Floor TX1-492-14-12 Dallas, Texas 75202 Attention: Michelle Diggs Telephone: 214-209-1219 Telefacsimile: 214-209-8365 and to: Helms Mulliss & Wicker, PLLC 201 North Tryon Street Charlotte, North Carolina 28202 Attention: Kent Walker, Esq. Telephone: (704) 343-2000 Telefacsimile: (704) 334-8467 10.6 NO WAIVER; REMEDIES: The Beneficiary's failure, at any time or times hereafter, to require strict performance by the Grantor of any provision of this Mortgage shall not waive, affect or diminish any right of the Beneficiary thereafter to demand strict compliance and performance therewith, and the Beneficiary's single or partial exercise of any right, remedy, power or privilege hereunder shall not preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege. The rights, remedies, powers or privileges herein provided are cumulative and not exclusive of any rights, remedies, powers or privileges provided by applicable Legal Requirements. Any suspension or waiver by the Beneficiary of a default by the Grantor under this Mortgage or under any of the other Loan Documents shall not suspend, waive or affect any other default thereunder, whether the same is prior or subsequent thereto and whether of the same or of a different kind of character. None of the undertakings, agreements, warranties, covenants and representations of the Grantor contained in this Mortgage and no default by the Grantor under this Mortgage shall be deemed to have been suspended or waived unless such suspension or waiver is in writing signed by an officer of the Beneficiary, and directed to the Grantor specifying such suspension or waiver. 10.7 BENEFICIARY'S AND SECURED CREDITORS' RIGHT TO PERFORM THE OBLIGATIONS: (a) If Grantor shall fail, refuse or neglect to make any payment or perform any act required of it by this Mortgage (including the Grantor's obligation under Section 4.3 hereof to defend the first lien status of this Mortgage), then at any time thereafter, upon reasonable notice to Grantor and without waiving or releasing any other right, remedy or recourse Beneficiary may have because of same, Beneficiary may (but shall not be obligated to) make such payment or perform such act for the account of and at the expense of Grantor, and shall have the right to enter upon or in the Land and Buildings for such purpose and to take all such action thereon and with respect to the Mortgaged Property as it may deem reasonably necessary or appropriate. In its exercise of its rights under this Section 10.7, if Beneficiary shall elect to pay any Imposition or other sums due 41 with reference to the Mortgaged Property, Beneficiary may do so in reasonable reliance on any bill, statement or assessment procured from the appropriate governmental authority or other issuer thereof without inquiring into the accuracy or validity thereof subject to any other applicable terms and provisions set forth herein. Similarly, in making any payments to protect the security intended to be created by the Loan Documents, Beneficiary shall not be bound to inquire into the validity of any apparent or threatened adverse title, lien, encumbrance, claim or charge before making an advance for the purpose of preventing or removing the same subject to any other applicable terms and provisions set forth herein. GRANTOR SHALL INDEMNIFY BENEFICIARY FOR ALL LOSSES, EXPENSES, DAMAGE, CLAIMS AND CAUSES OF ACTION, INCLUDING REASONABLE ATTORNEY'S FEES, INCURRED OR ACCRUING BY REASON OF ANY ACTS PERFORMED BY BENEFICIARY PURSUANT TO THE PROVISIONS OF THIS SECTION 10.7; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PARTY, BE AVAILABLE TO THE EXTENT THAT SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED PRIMARILY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. ALL SUMS PAID BY BENEFICIARY PURSUANT TO THIS SECTION 10.7 AND ALL OTHER SUMS EXPENDED BY BENEFICIARY TO WHICH IT SHALL BE ENTITLED TO BE INDEMNIFIED, TOGETHER WITH INTEREST THEREON AT THE DEFAULT RATE FROM THE DATE OF SUCH PAYMENT OR EXPENDITURE, SHALL CONSTITUTE ADDITIONS TO THE OBLIGATIONS, AND SHALL BE SECURED BY THE LOAN DOCUMENTS AND GRANTOR COVENANTS AND AGREES TO PAY THEM TO THE ORDER OF BENEFICIARY UPON DEMAND. (b) Any reference in this Mortgage to amounts advanced by or owed to Beneficiary shall be deemed to refer equally to amounts advanced by or owed to the Secured Creditors, and wherever Beneficiary is required or permitted to advance funds, such funds may be advanced by the Secured Creditors with the same effect as if advanced by Beneficiary. 10.8 COVENANTS RUNNING WITH THE LAND: All Obligations are intended by the parties to be, and shall be construed as, covenants running with the Mortgaged Property until such Mortgaged Property has been released from the lien of this Mortgage. 10.9 SUCCESSORS AND ASSIGNS: All of the terms of this Mortgage shall apply to, be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 10.10 SEVERABILITY: This Mortgage is intended to be performed in accordance with, and only to the extent permitted by, applicable Legal Requirements. If any provision of this Mortgage or the application thereof to any person or circumstance shall, for any reasons and to any extent, be invalid or unenforceable, then neither the remainder of this Mortgage nor the 42 application of such provision to other persons or circumstances nor the other instruments referred to above shall be affected thereby, but rather shall be enforced to the greatest extent permitted by applicable law. 10.11 ENTIRE AGREEMENT AND MODIFICATION: The Loan Documents contain the entire agreement between the parties relating to the subject matter hereof and thereof and all prior agreements relative thereto which are not contained herein or therein are terminated. This Mortgage may not be amended, revised, waived, discharged, released or terminated orally but only by a written instrument or instruments executed by the party against which enforcement of the amendment, revision, waiver, discharge, release or termination is asserted. Any alleged amendment, revision, waiver, discharge, release or termination which is not so documented shall not be effective as to any party. In the event of a conflict between the covenants contained herein and the covenants contained in the Credit Agreement, the more specific covenants contained herein shall govern with respect to the Mortgaged Property. 10.12 APPLICABLE LAW: THE PARTIES TO THIS MORTGAGE AGREE THAT THEIR RIGHTS AND OBLIGATIONS UNDER THIS MORTGAGE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS-OF LAW RULES AND PRINCIPLES THEREOF. THE PARTIES FURTHER AGREE THAT NEW YORK HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTIONS SECURED BY THIS MORTGAGE. NOTWITHSTANDING THE FOREGOING, THE PARTIES AGREE THAT: (A) THE PROCEDURES GOVERNING THE ENFORCEMENT BY BENEFICIARY OF THE PROVISIONAL REMEDIES AGAINST GRANTOR, INCLUDING BY WAY OF ILLUSTRATION BUT NOT LIMITATION, ACTIONS FOR REPLEVIN, FOR CLAIM AND DELIVERY OF PROPERTY, FOR INJUNCTIVE RELIEF OR FOR THE APPOINTMENT OF A RECEIVER AND THE REQUIREMENTS NECESSARY TO CREATE OR GRANT, PERFECT OR FORECLOSE ON, OR DETERMINE THE PRIORITY OF, THE LIEN AND SECURITY INTEREST OF THIS MORTGAGE, SHALL BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE MORTGAGED PROPERTY IS LOCATED; (B) OTHER THAN AS SET FORTH IN SUBSECTION (A) ABOVE, BENEFICIARY SHALL COMPLY WITH THE APPLICABLE LAW OF THE STATE, TO THE EXTENT REQUIRED IN CONNECTION WITH THE POWER OF SALE OR THE FORECLOSURE OF THE SECURITY INTERESTS AND LIENS CREATED HEREBY PROVIDED, HOWEVER, THAT THIS SUBSECTION SHALL IN NO EVENT BE CONSTRUED TO PROVIDE THAT THE SUBSTANTIVE LAW OF SUCH STATE SHALL APPLY TO THE OBLIGATIONS SECURED BY THIS MORTGAGE WHICH ARE AND SHALL CONTINUE TO BE GOVERNED BY THE SUBSTANTIVE LAW OF NEW YORK. THE PARTIES FURTHER AGREE THAT BENEFICIARY MAY ENFORCE ITS RIGHTS UNDER THIS MORTGAGE AND THE LOAN DOCUMENTS, INCLUDING BUT NOT LIMITED TO, ITS RIGHT TO SUE GRANTOR, TO COLLECT ANY OUTSTANDING INDEBTEDNESS OR TO OBTAIN A JUDGMENT FOR ANY DEFICIENCY FOLLOWING FORECLOSURE, 43 IN ACCORDANCE WITH THE LAWS OF NEW YORK. NOTHING IN THE FOREGOING SHALL BE CONSTRUED TO PROVIDE THAT THE SUBSTANTIVE LAW OF THE STATE SHALL APPLY TO THE OBLIGATIONS SECURED BY OR EVIDENCED BY THIS MORTGAGE AND THE LOAN DOCUMENTS; (C) GRANTOR HEREBY ACKNOWLEDGES, WARRANTS AND REPRESENTS THAT IT IS SOPHISTICATED, KNOWLEDGEABLE AND EXPERIENCED IN COMMERCIAL TRANSACTIONS SIMILAR TO THE TRANSACTION EMBODIED IN THIS MORTGAGE AND THE LOAN DOCUMENTS; IT HAS BEEN FULLY, COMPLETELY AND ADEQUATELY REPRESENTED AND ADVISED BY COMPETENT COUNSEL AND OTHER CONSULTANTS RETAINED FOR SUCH PURPOSES IN CONNECTION WITH ALL ASPECTS (INCLUDING BUSINESS AND LEGAL) OF THE TRANSACTIONS UNDER THIS MORTGAGE AND THE LOAN DOCUMENTS; ALL PARTIES TO SUCH TRANSACTION HAVE EQUAL BARGAINING STRENGTH; AND, BASED ON THE FOREGOING, THE PARTIES HAVE SELECTED THE LAW OF THE STATE OF NEW YORK TO GOVERN THIS MORTGAGE AND THE LOAN DOCUMENTS AS HEREIN SPECIFIED; AND (D) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE TERMS AND CONDITIONS IMPLIED IN MORTGAGES BY VIRTUE OF ANY PRESENT OR FUTURE STATUTE IN FORCE IN NEW YORK SHALL FOR THE PURPOSES OF THIS MORTGAGE BE NEGATED OR VARIED ONLY SO FAR AS THEY ARE INCONSISTENT WITH THE TERMS AND CONDITIONS HEREOF AND ARE OTHERWISE HEREBY VARIED SO AS TO BECOME CONSISTENT WITH THIS MORTGAGE. 10.13 NO PARTNERSHIP; CONTROL IN GRANTOR: Except to the extent occurring as a matter of law (a) nothing contained in this Mortgage is intended to, or shall be construed as, creating to any extent and in any manner whatsoever, any partnership, joint venture, or association between Grantor and Beneficiary, or in any way make Beneficiary co-principals with Grantor with reference to all or any portion of the Mortgaged Property, and any inferences to the contrary are hereby expressly negated; (b) notwithstanding anything contained herein which may be to the contrary, this Mortgage, the Loan Documents, any agreement, deed of trust or other document referred to herein by reference, whether specifically or generally, and the transactions contemplated hereby do not and will not constitute or create indirect, actual or practical ownership of the Mortgaged Property or Grantor by Beneficiary, or control, affirmative or negative, direct or indirect, by Beneficiary over the programming, management, or any other aspect of the day-to-day operation of the Mortgaged Property or Grantor, which control remains in Grantor, its shareholders and board of directors; and (c) Beneficiary's activities in connection with this Mortgage and the Loan Documents shall not be "outside the scope of the activities of a lender of money" within the meaning of any applicable statutes, as amended or recodified from time to time, and Beneficiary does not intend to ever assume any responsibility to any person for the quality, suitability, safety or condition of the Mortgaged Property. Beneficiary shall not be directly or indirectly liable or responsible for any loss, claim, cause of action, liability, indebtedness, damage or injury of any kind or character to any person or property arising from any construction, or occupancy or use of, any of the Mortgaged Property, whether caused by or 44 arising from: (i) any defect in any building, structure, grading, fill, landscaping or other improvements-thereon or in any on-site or off-site improvement or other facility therein or thereon; (ii) any act or omission of Grantor or any of its agents, employees, independent contractors, licensees or invitees; (iii) any accident in or on any of the Mortgaged Property or any fire, flood or other casualty or hazard thereon; (iv) the failure of Grantor, any of its licensees, employees, invitees, agents, independent contractors or other representatives to maintain the Mortgaged Property in a safe condition; and (v) any nuisance made or suffered on any part of the Mortgaged Property. 10.14 HEADINGS: The Article, Section and Subsection titles hereof are inserted for convenience of reference only and shall in no way alter, modify or define, or be used in construing, the text of such Articles, Sections or Subsections. 10.15 HOLD HARMLESS: NEITHER BENEFICIARY NOR SECURED CREDITORS SHALL BE OBLIGATED TO PERFORM OR DISCHARGE, NOR DO ANY OF THEM HEREBY UNDERTAKE TO PERFORM OR DISCHARGE, ANY OBLIGATION, DUTY OR LIABILITY WITH RESPECT TO THE MORTGAGED PROPERTY UNDER OR BY REASON OF THIS MORTGAGE OR ANY OF THE LOAN DOCUMENTS, AND GRANTOR SHALL AND DOES HEREBY AGREE TO INDEMNIFY BENEFICIARY AND EACH SECURED CREDITOR FOR AND TO HOLD BENEFICIARY AND EACH SECURED CREDITOR HARMLESS FROM ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH THEY MAY OR MIGHT INCUR WITH RESPECT TO THE MORTGAGED PROPERTY OR UNDER OR BY REASON OF THIS MORTGAGE OR ANY OF THE LOAN DOCUMENTS AND FROM ANY AND ALL CLAIMS AND DEMANDS WHATSOEVER WHICH MAY BE ASSERTED AGAINST THEM BY REASON OF ANY ALLEGED OBLIGATIONS OR UNDERTAKINGS ON THEIR PART TO PERFORM OR DISCHARGE ANY OF THE TERMS, COVENANTS, OR AGREEMENTS RELATING TO THE MORTGAGED PROPERTY; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PARTY, BE AVAILABLE TO THE EXTENT THAT SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED PRIMARILY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. SHOULD BENEFICIARY OR ANY SECURED CREDITOR INCUR ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT THEREOF, INCLUDING ALL REASONABLE ATTORNEYS' FEES AND COSTS AND EXPENSES ASSOCIATED WITH ACTIONS TAKEN BY BENEFICIARY OR ANY SUCH SECURED CREDITOR IN DEFENSE THEREOF, OR OTHERWISE IN PROTECTING THEIR INTERESTS HEREUNDER, SHALL BE SECURED HEREBY, AND GRANTOR COVENANTS AND AGREES TO REIMBURSE BENEFICIARY OR ANY SUCH SECURED CREDITOR THEREFOR IMMEDIATELY UPON DEMAND. 10.16 PRONOUNS AND PLURALS: All pronouns used herein shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the context may require, and the singular form of nouns, pronouns and verbs shall include the plural, and vice versa, whichever the context may require. 45 10.17 WAIVER OF TRIAL BY JURY: TO THE EXTENT PERMITTED UNDER THE LAWS OF THE STATE IN WHICH THE APPLICABLE PORTION OF THE MORTGAGED PROPERTY IS SITUATED, GRANTOR AND THE BENEFICIARY EACH HEREBY WAIVES AND SHALL WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS MORTGAGE. 10.18 ASSIGNMENT: Beneficiary may assign or transfer all or any portion of its rights under this Mortgage. 10.19 NO MERGER: So long as this Mortgage is an encumbrance upon the Mortgaged Property, there shall be no merger of the interest of any lessor or any lessee under any Lease or sublease. 10.20 ENFORCEABILITY OF LIEN: In the event that any part of the Obligations cannot be lawfully secured by this Mortgage, or the lien or security interest hereof cannot be lawfully enforced to pay any part of the Obligations, then and in either such event, at the option of Beneficiary, all payments on the Obligations shall be deemed to have been first applied against the unsecured part of the Obligations. 10.21 KNOWLEDGE: Whenever referenced in this Mortgage, the "knowledge" or "best knowledge" of Grantor shall include the knowledge of its parent corporations, if any, and its Subsidiaries, if any. 10.22 BEST EFFORTS: Whenever referenced in this Mortgage, the term "best efforts" shall not be interpreted as requiring the commencement of litigation or the expenditure of unreasonable sums of money, in view of the objectives sought. 10.23 USURY SAVINGS CLAUSE: Nothing contained herein or in the Loan Documents shall be deemed to require the payment of interest or other charges by Grantor in excess of the amount Beneficiary and the Secured Creditors may lawfully charge under the applicable usury laws (the "Highest Lawful Rate"). In the event Beneficiary shall collect monies which are deemed to constitute interest which would increase the effective interest rate to a rate in excess of that permitted to be charged by applicable law, all such sums deemed to constitute interest in excess of the legal rate shall, upon such determination, at the option of Beneficiary, be returned to the Grantor or credited against the principal balance of any Obligation secured hereby then outstanding. 10.24 PAYMENT OF PRIOR ENCUMBRANCES: If any or all of the proceeds of the Obligations (including, without limitation the Secured Indebtedness) have been used to extinguish, extend or renew any indebtedness heretofore existing against the Mortgaged Property or to satisfy any indebtedness or obligation secured by a lien or encumbrance of any kind (including liens securing the payment of any Impositions), such proceeds have been advanced by Beneficiary at Grantor's request, and, to the extent of such funds so used, the Obligations (including without limitation the Secured Indebtedness) in this Mortgage shall be subrogated to and extend to all of the rights, claims, liens, titles and interests heretofore existing against the Mortgaged Property to secure the indebtedness or obligation so extinguished, paid, extended or 46 renewed, and the former rights, claims, liens, title and interests, if any, shall not be waived but rather shall be continued in full force and effect and in favor of the Beneficiary and shall be merged with the lien and security for the repayment of and satisfaction of the Obligations (including without limitation the repayment of all Secured Indebtedness). 10.25 INDUSTRIAL PLANT MORTGAGE: This Mortgage is an industrial plant mortgage within the broadest interpretation of the industrial plant mortgage doctrine under the laws of Commonwealth of Pennsylvania. 10.26 RELEASE: Upon the Disposition (as defined in the Credit Agreement) of any of the Mortgaged Property, so long as such Disposition is permitted under Section 7.05 of the Credit Agreement and all conditions to such Disposition contained therein have been satisfied: (a) the lien and security interest of the Mortgage in such disposed Mortgaged Property shall, subject to the provision at the end of subsection (a), be deemed to be released without any further action on the part of Beneficiary or Grantor, provided that in the event Grantor shall thereafter acquire any interest in (or the power to transfer rights in) any asset that constituted Mortgaged Property hereunder prior to its Disposition and release from the lien and security interests hereunder, the lien and security interest granted hereunder shall be deemed to automatically apply and attach to such asset and it shall from such time forward continue to constitute Mortgaged Property hereunder notwithstanding any prior release; and (b) the Beneficiary will, at the Grantor's expense, execute and deliver to Grantor such documents as Grantor shall reasonably request on reasonable advanced notice to evidence the release or reconveyance of any of such Mortgaged Property; provided Grantor shall have delivered to Beneficiary a written request for such release or reconveyance describing the Mortgaged Property to be released or reconveyed, and the terms of the Disposition thereof in reasonable detail, including the price thereof and any expenses in connection therewith. 47 SIGNATURE PAGE - MORTGAGE Block Communications, Inc. Grantor hereby acknowledges that it has received a copy of this Mortgage free of charge. WITNESS THE EXECUTION OF THIS MORTGAGE, OPEN-END MORTGAGE, LEASEHOLD MORTGAGE, OPEN-END LEASEHOLD MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING, ASSIGNMENT OF LEASES AND RENTS AND FINANCING STATEMENT as of the date first above written. SIGNED, SEALED AND DELIVERED BLOCK COMMUNICATIONS, INC., IN THE PRESENCE OF: an Ohio corporation By: (SEAL) ---------------------------- Name: - -------------------------------- -------------------------------- Print Name: Title: --------------------- ------------------------------- Attest: (SEAL) ------------------------ Name: - -------------------------------- -------------------------------- Print Name: Title: --------------------- ------------------------------- (CORPORATE SEAL) This Instrument prepared by and when recorded mail to: - -------------------------------- Elizabeth W. Goode, Esq. Helms Mulliss & Wicker, PLLC 201 North Tryon Street Charlotte, North Carolina 28202 Certificate of Residence of Beneficiary/Mortgagee Bank of America, N.A., as Agent, the Beneficiary/Mortgagee herein named hereby certifies that its precise mailing address is Bank of America, N.A., 901 Main Street, 14th Floor, TX1-492-14-11, Dallas, Texas 75202, Attention: Agency Management. BANK OF AMERICA, N.A., AS AGENT By: --------------------------------- Title: ------------------------------ STATE OF __________________ ) ) COUNTY OF _________________ ) Before me, a notary public, in and for said county, personally appeared ______________ and _______________________, known to me to be the persons who as ___________________ and _______________________, respectively, of the corporation which executed the foregoing instrument, signed the same and acknowledged to me that they did so sign said instrument in the name and upon behalf of said corporation as such officers, respectively, that the same is their free act and deed as such officers, respectively, and the free and corporate act and deed of said corporation, that they were duly authorized thereunder by its Board of Directors and that the seal affixed to said instrument is the corporate seal of said corporation. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my official seal at _____________________ this ____________ day of May, 2002. ______________________________ Notary Public SEAL My commission expires: ______________________________ EX-10.8 20 j9521601exv10w8.txt EXHIBIT 10.8 Exhibit 10.8 BLADE COMMUNICATIONS, INC. PHANTOM STOCK PLAN Blade Communications, Inc., an Ohio corporation with is principal place of business at 541 N. Superior Street, Toledo, Ohio 43660 (the "Company"), through its Executive Committee, establishes this Blade Communications, Inc. Phantom Stock Plan (the "Plan"). The effective date of the Plan is December 13, 1999. SECTION 1. PURPOSE AND CONSTRUCTION 1.1. PURPOSE. The Executive Committee of the Company (the "Executive Committee"), under authority delegated to it by the Close Corporation Operating Agreement, has determined that the best interests of the Company, including its ability to attract and retain key management employees, will be served by adopting a plan under which certain designated executives within the Company who make substantial, direct contributions to the growth and success of the Company may receive significant economic benefits reflecting and acknowledging those contributions. 1.2. CONSTRUCTION. The Plan is an unfounded plan, maintained primarily for the purpose of providing deferred compensation for a select group of management or highly-compensated employees and shall be interpreted in a manner to exempt it from the provisions of Parts 2, 3, and 4 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan also is intended to be unhanded for income tax purposes and will be administered and construed consistent with that intent. SECTION 2. ELIGIBILITY AND PARTICIPATION. 2.1. PARTICIPATION. The Executive Committee shall have the exclusive authority to determine in its sole, unreviewable discretion which employees of the Company and its subsidiaries shall be eligible to participate in this Plan ("Eligible Employees") and the extent to which those employees will actually participate in this Plan. Employees designated to be Eligible Employees must be, among other things, management or highly-compensated employees within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). 2.2. DURATION OF PARTICIPATION. An Eligible Employee who has been granted an award under the Plan is a "Participant." A .Participant in the Plan continues to be such until he or she is paid the entire amount due to him or her under the Plan (if any). 2.3. PARTICIPANT OBLIGATIONS. Each Participant is bound by all of the terms and conditions of the Plan, all of the terms and conditions of his or her written award agreement, all rules and regulations established from time to time by the Plan Administrator designated pursuant to Section 5.1 hereof, and all decisions made by the Plan Administrator in accordance with the Plan. Each Participant must furnish to the Plan Administrator all pertinent information and execute all forms, agreements, and other instruments requested by the Plan Administrator. SECTION 3. AWARD AND ALLOCATION OF UNITS 3.1. DETERMINATION OF AWARD. The Executive Committee, or the Plan Administrator by express delegation from the Executive Committee, shall determine in its sole, unreviewable discretion the amount (if any) of "Phantom Stock Units" to be awarded to an Eligible Employee and allocated to his or her "Account." No Eligible Employee shall be deemed to have received an award of Phantom Stock Units until such time as the Eligible Employee is given a written award agreement setting forth the terms and conditions of such award. The written award agreement shall specify the number of Phantom Stock Units awarded, the division or subsidiary of the Company to which the Phantom Stock Units relate, the effective date of such award, and the other terms and conditions of the award. 3.2. VALUE OF PHANTOM STOCK UNIT. Each Phantom Stock Unit shall represent One One Thousandth of One Percent (0.001%) of the "Fair Market Value" of the division or subsidiary of the Company to which the award relates. 3.3. MAXIMUM ANNUAL AWARD LIMIT. With respect to each "Plan Year," the Executive Committee (or, by delegation, the Plan Administrator) may award to an Eligible Employee up to One Hundred (100) Phantom Stock Units, that is, Phantom Stock Units which do not represent in excess of One-Tenth of One Percent (0.1%) of the total value of the division or subsidiary of the Company to which the Units relate. This annual limit applies separately to each division or subsidiary for which an Eligible Employee receives Phantom Stock Units, so that an Eligible Employee may receive up to the annual limit in more than one division or subsidiary in a given Plan Year. But this annual limit may be suspended by the unanimous vote of the Executive Committee for the purpose of making an award to a Participant during the first -2- year of an Eligible Employee's participation in the Plan, or for such other reason as the Executive Committee may, in its discretion, determine. 3.4. MAXIMUM LIFETIME AWARD LIMIT. An Eligible Employee may not, during the life of the Plan, acquire Phantom Stock Units representing more than Eight-Tenths of One Percent (0.8%) of the value of any individual division or subsidiary of the Company to which those Units relate. This lifetime limit applies without regard to whether the Participant previously has redeemed some or all of the Restricted Stock Units allocated to him or her under the Plan. This lifetime limit applies separately to each division or subsidiary for which an Eligible Employee receives Phantom Stock Units, so that an Eligible Employee may receive up to the lifetime limit in more than one division or subsidiary. 3.5. FAIR MARKET VALUE. The Fair Market Value of the Phantom Stock Unit and of the division or subsidiary of the Company to which a Phantom Stock Unit award relates shall be determined by the Executive Committee (or, by delegation, the Plan Administrator), based upon a reasonable valuation method for the prior twelve (12) month period or based upon the appraisal of such division or subsidiary by one or more independent qualified appraisal firms selected by the Executive Committee (or by delegation, the Plan Administrator) in its sole discretion. The Fair Market Value of a Phantom Stock Unit shall reflect the fair market value of the applicable division or subsidiary, less capital expenditures and operating losses, plus any operating profits, in the division or subsidiary, from inception through the date of valuation. A Participant is entitled to review the valuation by the Executive Committee and to raise in good faith questions regarding its accuracy. However, the Executive Committee shall have the final authority to resolve all disputes regarding the valuation. The Company shall pay all of the costs related to the determination of the Fair Market Value of the Phantom Stock Units. 3.6. TIME OF VALUATION. Unless the Executive Committee determines otherwise, Phantom Stock Units shall be valued solely as of December 31 of any Plan Year. The valuation process is triggered by an Eligible Employee's request to redeem Phantom Stock Units in accordance with Section 4 of this Plan: But nothing in this Plan limits the authority of Plan Administrator, or any other Officer of the Company, to commission a valuation of the Company, or a division or subsidiary, for any purpose, whether or not such valuation is for a .reason related to the Phantom Stock Units. 3.7. PLAN YEAR. The Plan Year is the calendar year. The first Plan Year is 2000. -3- SECTION 4. PARTICIPANT ACCOUNTS AND THE PAYMENT OF BENEFITS 4.1. PARTICIPANT ACCOUNTS. For each Eligible Employee, the Plan Administrator shall establish and maintain an "Account" for the purpose of determining the benefit due to the Eligible Employee. A Participant's Account shall reflect the total number of Phantom Stock Units awarded to that Participant with respect to any division or subsidiary of the Company, the effective date of each such award and the Participant's vested interest in each Phantom Stock Unit award. 4.2. VESTING IN PHANTOM STOCK UNITS. Unless otherwise stated in a Participant's written Phantom Stock Unit award agreement, a Participant shall earn a vested right to the number of Phantom Stock Units in each award by his or her continued employment with the Company following the effective date of such award, in accordance to the following vesting schedule:
Number of Complete "Years of Employment" After the Award Percentage Vesting Interest Less than One 0% One 25% Two 50% Three 75% Four or More 100%
A "Year of Employment" with the Company for purposes of the preceding vesting schedule shall mean twelve months of continuous employment with the Company or a subsidiary of the Company commencing January 1 and ending December 31. An Eligible Employee's continuous employment with the Company or a subsidiary shall not be considered to have interrupted by absences for sickness, vacation or leaves of absence approved by the Plan Administrator. An Eligible Employee who is not employed on December 31 of any calendar year shall not receive credit for a Year of Employment for that calendar year. But, notwithstanding this provision, all units awarded to an Eligible Employee are deemed immediately vested in the event of a Change of Control of the Company. "Change of Control" is the lawful acquisition, by any means, of a majority of the voting stock of the Company by any person or entity other than members of the Block family, including direct descendants of William Block and Paul Block, Jr., and current spouses of those direct descendants. 4.3. TERMINATION OF EMPLOYMENT. -4- A. DEATH OR DISABILITY. If a Participant's employment with the Company and its subsidiaries terminates by reason of (i) the death of the Participant, or (ii) the Disability of the Participant, or (iii) the Company's termination, without cause, of Participant's employment, then he or she shall be deemed to be One Hundred Percent (100%) vested in his or her Phantom Stock Units as of the last day of employment. For purposes of the preceding sentence, a Participant shall be deemed to have terminated employment because of a Disability if, at the time he or she terminates employment or within six months thereof, he or she is eligible to begin receiving full long-term disability benefits either under the long-term disability insurance plan sponsored or maintained by the Company, or in the absence of such a plan, under Social Security. A Participant may designate in writing on a form provided by or acceptable to the Plan Administrator a beneficiary to be paid any benefits which are payable under the Plan following the Participant's death. In the absence of any written designation of a beneficiary, any benefits payable under the Plan following the Participant's death shall be payable to his or her surviving spouse, or if none, to his or her estate. B. CAUSE. If a Participant's employment with the Company and its subsidiaries terminates, by reason of Cause; then the Participant shall forfeit all of his or-her Phantom Stock Units. For purposes of the, preceding sentence, a Participant shall be deemed to have terminated employment for Cause if the Executive Committee reasonably determines that the Participant (i) has been convicted of (including a plea of guilty or nolo contendere) of a felony; (ii) engaged in willful misconduct that has been materially injurious to the Company or any subsidiary, (iii) repeatedly failed to undertake communicated reasonable directives from the Executive Committee on material business matters despite written instruction to do so, or (iv) violated any restrictive covenant with the Company or any subsidiary. Notwithstanding the foregoing, a Participant shall not be deemed to have been terminated for Cause unless (x) the Participant was given no less than ten (10) days prior written notice of the Company's or subsidiary's intent to terminate the Participant's employment for Cause and the reasons therefor, (y) the Participant is offered an opportunity to meet with the Executive Committee and present written comments of his or her counsel to the Executive Committee, and (z) the Executive Committee delivers a written notice to the Participant stating its opinion that the Participant has -5- been terminated for Cause and specifying the clause(s) in the definition thereof which the Participant has violated. C. OTHER TERMINATIONS. If the Participant's employment with the Company and its subsidiaries terminates for any reason other than that described in clauses A and B of this Section 4.3, the Participant's vested interest in the Phantom Stock Units in his or her Account shall be determined as of the last day of employment. 4.4. REDEMPTION OF PHANTOM STOCK UNITS. A. BY THE PARTICIPANT. A Participant may elect to redeem all or any part of the vested Phantom Stock Units in the Participant's Account at any time following the Participant's eighth (8th) year of participation in the Plan. The Participant's election to redeem such Phantom Stock Units shall be made on a form provided by or acceptable to the Plan Administrator and shall be filed with the Plan Administrator no later than the seventh (7th) anniversary of the Participant's participation in the Plan. B. BY THE COMPANY. The Company may elect to redeem all (but not less than all) of the vested Phantom Stock Units in the Participant's Account at any time following the Participant's eighth (8th) year of participation in the Plan by giving written notice to the Participant of its intent to redeem such Phantom Stock Units. If a Participant's employment with the Company and its subsidiaries is terminated for any reason prior to the eighth (8th) anniversary of the Participant's participation in the Plan, the Company may in its sole, unreviewable discretion elect to redeem all (but not less than all) of the vested Phantom Stock Units in the Participant's Account at any time thereafter or within a reasonable time thereafter or as of the eighth (8th) anniversary of the Participant's participation in the Plan. C. DEFERRED PAYMENT. If neither the Participant nor the Company elects to redeem a Participant's Phantom Stock Units after the eighth (8th) year of the Participant's participation in the Plan, the Phantom Stock Units shall continue to be credited to the Participant's Account, but the Fair Market Value of those Units shall be frozen as of the end of the Participant's eighth (8th) anniversary of participation in the Plan and shall not be recalculated to reflect future increases (or decreases) in the value of the division or subsidiary of the Company to which it relates. If Phantom Stock Units are not redeemed after the eighth (8th) year of the Participant's participation in the Plan, then the Fair Market Value of such Phantom Stock Units shall thereafter be increased (through the time of payment) by an interest factor equal to the compounded annual interest rate then-prevailing on five-year U.S. Treasury notes. -6- 4.5. PAYMENT OF VALUES. Within a reasonable period of time (of not less than ninety (90) days) following either the Participant's or the Company's election to redeem the Phantom Stock Units, the Company shall determine the Fair Market Value of such Phantom Stock Units and shall inform the Participant in writing as to such Fair Market Value. If the Participant has not objected to such Fair Market Value determination within thirty (30) days of having been notified thereof, the Participant shall have waived any further rights to raise in good faith any questions of its accuracy, and the Company shall promptly thereafter pay to the Participant (or beneficiary if applicable), in a lump sum cash payment, the Fair Market Value of the Phantom Stock Units. If the Phantom Stock Units are redeemed between January 1 and June 30 of any calendar year, the Fair Market Value of the Phantom Stock Units shall be determined as of the immediately preceding December 31. If the Phantom Stock Units are redeemed between July 1 and December 31 of any calendar year, then the Fair Market Value of the Phantom Stock Units shall be determined, as of the December 31 coincident with or immediately following, such redemption, provided that (i) within a reasonable period of time (of not less than ninety (90) days), the Company shall determine the Fair Market Value of the Phantom Stock Units as of the immediately preceding December 31, (ii) within thirty (30) days of having determined such Fair Market Value the Company shall pay to the Participant (or beneficiary if applicable), in a lump sum cash payment, the Fair Market Value of the Phantom Stock Units based upon such valuation, (iii) within a reasonable period of time (of not less than ninety (90) days) following the close of the calendar year in which the Phantom Stock Units were redeemed, the Company shall determine the Fair Market Value of the Phantom Stock Units as of such December 31, (iv) if the Participant has not objected to such Fair Market Value determination within thirty (30) days of having been notified thereof, the Participant shall have waived any further rights to raise in good faith any questions of its accuracy; and (v) promptly thereafter either (A) the Company shall pay to the Participant (or beneficiary if applicable), in a lump sum cash payment, the amount by which the Fair Market Value of the Phantom Stock Units exceeds the estimated payment made to the Participant, or (B) the Participant (or beneficiary if applicable) shall pay to the Company, in a lump sum cash payment, the amount by which the estimated payment exceeded the Fair Market Value of the Phantom Stock Units. (An example of the award, valuation, and payment process provided for by this Plan is attached as an Exhibit. This example is intended solely to illustrate the processes, and does not alter, amend, modify, or supersede the actual textual provisions of this Plan.) The Company may, in its sole discretion, elect to defer or divide the payment due under this Section to the extent necessary to ensure compliance with then-current loan covenants and other binding financial restrictions. In the event the Company elects such deferral or division, the amounts due to the Plan Participant bear -7- interest, compounded annually, at a rate equal to the compounded annual interest rate then-prevailing on five-year U.S. Treasury notes. 4.6. LIMIT ON PAYMENT. Notwithstanding any other provision in this Plan to the contrary, the total amount paid to a Participant for all of the Phantom Stock Units awarded to him or her under this Plan, exclusive of any interest accumulated under Section 4.4C, may not exceed $10,000,000. 4.7. CONDITIONS TO PAYMENT. As a condition precedent to the payment of any benefits under this Plan, the Company reserves the right to require a Participant or beneficiary to sign a general release of liability, in favor or the Company, its subsidiaries and their affiliates and agents, regarding payment of benefits under the Plan and under any laws, including but not limited to laws relating to employment, discrimination, or taxes. 4.8. UNSECURED OBLIGATIONS. Payments due under this Plan are unsecured obligations of the Company, and no claim for a benefit under this Plan shall be superior to any unsecured claim of a general creditor of the Company. Accounts are maintained for record-keeping purposes only. The Executive Committee may in its sole, unreviewable discretion create a grantor trust, substantially in the form of the model trust described in IRS Revenue Procedure 92-64 or any successor ruling, in order to reserve funds for the payment of benefits hereunder. 4.9. WITHHOLDING OF TAXES. Amounts payable under this Plan will be subject to the deduction of any federal, state, or local income, payroll or other taxes or amounts required to be withheld from such payments. 4.10. PAYMENT IN THE EVENT OF INCAPACITY. If any individual entitled to receive a payment under the Plan is determined by the Plan Administrator in its sole, unreviewable discretion to be physically, mentally, or legally incapable of receiving or acknowledging receipt of such payment, and no legal representative has been appointed for the individual, the Plan Administrator may (but is not required to) direct payment to any one or more of the following chosen by the Plan Administrator: the Participant's beneficiary; the institution maintaining the individual; the custodian of an individual under the Uniform Transfers to Minors Act of any State; or the individual's spouse, children, parents, or other relatives by blood or marriage. The Plan Administrator is not required to see to the proper application of such payments, and the payment to such individual completely discharges all claims which the Participant (and his or her heirs and successors) have under the Plan to the extent of the payment. -8- SECTION 5. PLAN ADMINISTRATION 5.1. DELEGATION. The Plan is administered under the authority of the Executive Committee, which may appoint a Plan Administrator to administer the Plan. The Plan Administrator may be an individual, or a committee of-two .or more individuals, The Plan Administrator, or any individual of the Plan Administrator, if there be more-. than one; may be removed at any time, for any reason or no reason, by action of the Executive Committee. The Plan, Administrator may delegate to any persons) the authority to perform any of the Plan Administrator's duties under the Plan. Any such delegation of authority with respect to a non-ministerial duty must be in writing and must be furnished to the person to whom the authority is delegated. A delegation of authority may be revoked, by the Plan Administrator or by the person to whom the authority was delegated, only in writing. Any such revocation will be effective when it is delivered, and the responsibility of the person to whom the duty was delegated will terminate with such revocation. 5.2. POWERS OF THE ADMINISTRATOR. The Plan Administrator has discretionary authority to (i) construe, interpret apply and enforce the terms of the Plan, including, without limitation, the discretionary power and authority to remedy ambiguities, inconsistencies, omissions, and erroneous calculations, (ii) make any rules and regulations the Plan Administrator determines are consistent with the terms of, and necessary or advisable in connection with. the administration of, the Plan, (iii) modify or rescind such rules or regulations, and (iv) make such other determinations and take such action as the Plan Administrator deems necessary or advisable. The actions of the Plan Administrator [may be reviewed solely by the Executive Committee, whose decision] shall be final and binding on all persons and parties concerned and shall be unreviewable. 5.3. SPECIALIST'S ASSISTANCE. The Plan Administrator may retain any actuarial, accounting, legal, clerical and other services reasonably required by it in the administration of the Plan. The Plan Administrator may agree to pay reasonable compensation for such services, and the Company shall pay all of the reasonable expenses of the administration of the Plan. 5.4. INDEMNIFICATION. The Company indemnifies, to the extent permitted by law, each director, officer, and employee of the Company and its subsidiaries against any and all liabilities, losses, costs, and expenses (including reasonable legal fees) of every kind and nature that may be imposed on, incurred by, or asserted against such person at any time by reason of the person's services in connection with the Plan, whether as a member of the Executive Committee, the Plan Administrator or as a delegatee of authority of the Executive Committee or Plan -9- Administrator. The preceding sentence applies only if the individual did not act dishonestly or in bad faith or in willful violation of the. law or regulations under which such liability, loss, cost, or expense arises. The Company has the right, but not the obligation, to select counsel and to control the defense of and settlement of any action for which a director, officer, or employee may be entitled to indemnification under this provision. 5.5. CLAIM PROCEDURE. The Plan Administrator will establish a process for Participants and beneficiaries to submit claims and to make decisions on claims under this Plan. Any claim for benefits under this Plan is solely an obligation of the Company. SECTION 6. AMENDMENT The Company reserves the right to amend the Plan at any time to any extent it deems advisable. To be effective, any amendment to the Plan must be stated in a written instrument executed by the Executive Committee. An amendment to the Plan adopted under this section is binding on all interested parties as of the effective date of the amendment. No amendment to the Plan may have any retroactive effect that deprives any Participant, or the beneficiary of a deceased Participant, of any material benefit, right, or feature to which the Participant is entitled under the terms of the Plan immediately before the effective date of the amendment. SECTION 7. TERMINATION 7.1. TERMINATION OF PLAN. The Company reserves the right to terminate the Plan at any time by action of the Executive Committee. The Plan will terminate as of the date designated by the Executive Committee. 7.2. EFFECT OF TERMINATION ON PARTICIPANT ACCOUNTS. Upon termination of the Plan, the Executive Committee may in its sole; unreviewable discretion elect to (a) cause all Accounts to continue to vest and be paid in accordance with the terms of the Plan, (b) cause all unvested Phantom Stock Units to become One Hundred Percent (100%) vested on a specified date, and/or (iii) cause all vested Phantom Stock Units to become payable on a specified date. Upon termination of the Plan, no additional Phantom Stock Units will be awarded to Eligible Employees. SECTION 8. GENERAL AND MISCELLANEOUS PROVISIONS. -10- 8.1. NO GUARANTEE OF EMPLOYMENT. Participation in this Plan does not constitute a guarantee or contract of employment with the Company. Participation will in no way interfere with any rights the Company would have in the absence of such participation to determine the duration of the Participant's employment with the Company. 8.2. NOT A SHAREHOLDER. Nothing in this Plan or any individual award agreement shall be construed as giving a Participant any rights as a shareholder of the Company or any division or subsidiary to which a Phantom Stock Unit award relates. 8.3. WAIVER OF BREACH. If either party fails to require the other to perform any term of this Agreement, that failure does not prevent the party from later enforcing that term. If either party waives the other's breach of a term, that waiver is not treated as waiving a later breach of the term. This Plan and any individual award agreement constitutes the entire agreement of the parties with respect to the Phantom Stock Units, and a Participant may not rely on any promises, representations or undertakings other than those expressly set forth in the Plan or individual award agreement. 8.4. SEVERABILITY. If any part of this Agreement is for any reason found to be invalid or unenforceable, it shall not affect the other provisions, and this Plan shall remain in effect as though the invalid or unenforceable provisions were omitted. Upon a determination that any term or other provision is invalid or unenforceable, the Executive Committee shall in good faith amend the Plan and any outstanding award agreements so as to give effect to the original intent of the Company as closely as possible. 8.5. NON-ASSIGNABILITY. Neither a Participant nor any beneficiary has the. right to sell, transfer, encumber or otherwise convey or assign any right to receive any payment, or any other benefit, under this Plan. No part of amounts payable under the Plan will be subject to seizure or sequestration to pay any debts or judgments owned by a Participant or a beneficiary to any person or entity other than the Company or its subsidiaries. 8.6. OTHER BENEFITS. Amounts paid under the Plan shall not be considered salary or compensation for the purpose of computing benefits under any other benefit plan, practice, policy or procedure of the Company, unless otherwise expressly provided for. 8.7. TAX TREATMENT. The Company-makes no warranties to any person regarding tax treatment of participation in the Plan and makes no warranties for any action or omission of the Company or Participant in connection with such tax treatment. Each Participant will hold harmless the Plan Administrator, the Company, its subsidiaries and each of their -11- respective officers, directors, employees, agents, and advisors providing services with respect to the Plan, from and against any and all liabilities, losses, costs, and expenses (including reasonable legal fees) of every kind and nature that may be imposed on, incurred by, or asserted against such person or entity at any time resulting from any income or payroll tax position taken by such person or entity in good faith in connection with the Plan. 8.8. SUCCESSORS. Unless otherwise stated in the Plan, all obligations of the Company under the Plan are binding on all successors to the Company. If an unrelated party acquires some or all of the assets of the Company it will be deemed a successor to the Company only to the extent so provided in the written agreement between the Company and such third party. 8.9. GOVERNING LAW. Except the extent that federal law supersedes state-law provisions, this Plan is governed by the substantive laws of the State of Ohio, without giving effect to its choice-of-law provisions. Captions herein are for convenience of reference only and shall not be considered in construing the terms of the Plan. Except as otherwise indicated by the context, references herein to the masculine gender shall include the feminine and neuter genders and vice-versa. 8.10. CONFIDENTIALITY. Except as required by law or government regulation, a Participant shall not disclose the existence or terms of this Plan or his or her individual award agreement, except to his immediate family and his or her legal and financial advisors, and then only to the extent that such person agrees not to disclose the existence or terms of this Plan or the individual award agreement. -12- EX-10.9 21 j9521601exv10w9.txt EXHIBIT 10.9 Exhibit 10.9 BLADE COMMUNICATIONS, INC. Incentive Compensation Plan Revised January 1, 1991 Article I Definitions "BCI" means Blade Communications, Inc., an Ohio Corporation. "Plan" means this Incentive Compensation Plan and as it may be amended from time to time. "Plan Committee" means the Incentive Compensation Committee appointed by the voting shareholders of BCI. "Participant" means an employee of BCI, or of a subsidiary (one of which BCI owns directly or indirectly at least 80% of its common stock), designated by the Plan Committee for participation in the benefits of the Plan, or a person who was such at the time of his retirement, death, disability or resignation and who retains, or whose beneficiaries obtain, benefits under the Plan in accordance with its terms. "Pool" means the amount of operating income designated by the Plan Committee as available for distribution as incentive compensation. "Salary" shall mean the base salary paid to a Participant in the Plan or other usual compensation. "Disability" means mental or physical disability of at least six months which prevents a Participant from engaging in the principal duties of his employment. "Fiscal year" or "year" (unless otherwise specified) means BCI's fiscal year as now constituted or as it may be changed hereafter from time to time. "Retirement" means retirement at or after attaining age 65 or such other age as permitted by BCI's pension plan. "Additional Incentive Compensation" means the amount of any award granted to a Participant by the Plan Committee. "Operating income" means the difference between net revenues and direct expenses as customarily calculated in the budgeting process. Article II The Plan Committee and Its Power and Authority Section 2.01. The Plan Committee shall be the Executive Committee under the Close Corporation Operating Agreement of December 12, 1988, unless the Executive Committee delegates this responsibility to a separate Plan Committee. None of the members of the Plan Committee shall be eligible to participate in the Plan. Section 2.02. Full power and authority to construe, interpret and administer the plan shall be lodged in the Plan Committee. All decisions and actions of the Plan Committee shall be final, conclusive and binding on all persons for all purposes. Section 2.03. No member of the Plan Committee shall be liable to any person for any action or decision taken or omitted in connection with the construction, interpretation and administration of the Plan unless attributable to his own fraud or deliberate disregard of any provisions of this Plan and BCI shall not be liable to any person for any such action unless attributable to the fraud or deliberate disregard of any provisions of this Plan on the part of a director, officer or employee of BCI. Article III Participants and Determination of Incentive Compensation Pools and Awards Section 3.01. Eligibility for participation in the Plan shall be limited to key executives of BCI or its subsidiaries who are not voting shareholders of BCI. Section 3.02. (a) The Plan Committee shall meet at least once in each fiscal year and specify those employees of BCI who shall be entitled to participate in the Plan for the subsequent fiscal year. (b) Each Participant shall be notified by the Plan Committee of his selections as a Participant in this Plan for the subsequent fiscal year. Upon receipt of such notification each -2- Participant shall file, no later than January 15 of the coming year, with the Committee a written designation of a beneficiary or beneficiaries. Section 3.03. Determination of the Incentive Compensation Pools. As promptly as possible, after the end of each fiscal year, Incentive Compensation Pools (the Pools) shall be determined by the Plan Committee for each of BCI's operating divisions or profit centers and for BCI on a consolidated basis. The Pools shall be determined by the Plan Committee, provided, however: 1. The Pools shall not exceed 40% of the amount the operating income for such participating profit center or division exceeds planned operating income, before taxes, for such profit center or division. 2. In addition, the separate Pool for BCI, on a consolidated basis, shall not exceed 40% of the amount by which the participating profit centers or divisions, in combination, exceed planned operating income before taxes. 3. The Plan Committee may, in its sole discretion, exclude or include extraordinary items in determining operating income or planned operating income. The discretionary determination of the Pools by the Plan Committee shall be final and binding on all parties in interest. No Participant will have access to the books and records of BCI in connection therewith. Adjustments to the pools due to including or excluding extraordinary items shall be at the sole discretion of the Plan Committee. Section 3.04. Determination of Individual Awards. The Plan Committee shall have the sole uncontrolled discretion to determine individual awards to each Participant. The P1an.Committee will be guided by the following principles: 1. The maximum award that may be paid in any year to any Participant shall be an amount equal to 40% of the Participant's salary while he or she is in the Plan. 2. Awards to individual participants shall be determined in accordance with the following procedure: a. At the beginning of each fiscal year after adoption of the Plan each Participant will develop, with his immediate superior, a set of specific goals and objectives, not to exceed a total of eight, that -3- will relate to his or her ability to influence the operating income performance of the profit center or division in which the Participant works. The award will be based on the level of attainment of the goals and objectives established for the year in question. A formal appraisal will be prepared and point values assigned leading to the percent of the award to be granted. 3. Elements of service such as discharge, resignation or any other applicable factor will be a part of the Plan Committee's final determination of an individual award. Section 3.05. Distribution of additional incentive compensation shall be made as soon as administratively possible in the first quarter of the year for which the award was made. Section 3.06. Each Participant shall have the right to designate a beneficiary, or beneficiaries, to receive any award remaining unpaid, in whole or in part, at the death of a Participant. In the event of the death of a Participant during the year for which awards may be made, the Plan Committee shall determine what amount, if any, shall be paid to the designated beneficiary; or beneficiaries, as a post-mortem benefit and its determination shall be final. Should the employment of the Participant terminate for any other reason prior to the final determination of an individual award, the rights of such Participant under the Plan shall terminate except as the Plan Committee, may, in its discretion, determine otherwise. Article IV Administration of the Plan and Assignability of the Interests Therein Section 4.01. The books and records to be maintained for the purpose of the Plan shall be maintained by the officers and employees of BCI at its expense and subject to the supervision and control of the Plan Committee. All other expenses of administering the Plan shall also be paid by BCI. Section 4.02. To the extent permitted by law, the right of any Participant or any beneficiary in any benefit or to any payment hereunder shall not be subject in any manner or attachment or other legal process for the debts of such Participant or beneficiary; and any such benefit or payment shall not be subject to anticipation, alienation, sale, transfer, assignment or encumbrance by any Participant except by will or the laws of the descent and distribution. -4- Section 4.03. Nothing contained herein shall be construed as conferring upon a Participant the right to continue in the employ of BCI in any capacity nor shall it be construed as an agreement to employ a Participant for any fixed period of time. Section 4.04. The Plan Committee shall have complete discretion with respect to the determination of each additional Incentive Compensation Award to each Participant. Recommendations for such awards shall be made to the Plan Committee for its consideration by the President of BCI under such procedures as may be prescribed by the Plan Committee except that the President shall not make recommendations with respect to himself. Article V Amendment of the Plan Section 5.01. While it is contemplated that additional incentive compensation will be awarded annually if justified by performance, the Plan. Committee shall have the right from time to time to modify, amend or suspend the Plan, provided, however, that no modification, or amendment of the Plan by the Plan Committee without approval of the voting shareholders shall increase the maximum amount which may be credited to or charged against the Pools as hereinabove provided or make any member of the Plan Committee eligible for participation herein. Section 5.02. Notice of every such modification or amendment shall be given in writing to each Participant. -5- EX-10.10 22 j9521601exv10w10.txt EXHIBIT 10.10 Exhibit 10.10 AMENDMENT TO AND RESTATEMENT OF STOCK REDEMPTION AGREEMENT MADE this day of 1991, by and between WILLIAM BLOCK and FIFTH THIRD BANK, N.A., Executors of the Estate of Paul Block, Jr., deceased, ALLAN J. BLOCK, JOHN ROBINSON BLOCK and CYRUS P. BLOCK, individually, and WILLIAM BLOCK, FIFTH THIRD BANK, N.A., JOHN ROBINSON BLOCK, ALLAN J. BLOCK, and CYRUS P. BLOCK, Co-Trustees under Trust Agreement of PAUL BLOCK, JR. dated December 18, 1974, and WILLIAM BLOCK, ALLAN J. BLOCK, JOHN ROBINSON BLOCK, Trustees under Agreement dated November 1, 1977, parties of the first part, and WILLIAM BLOCK, WILLIAM BLOCK, JR., individually and as Trustee for LAURA A. BLOCK, and as Trustee of the MAXINE H. BLOCK MARITAL TRUST NO. 1 and of the MAXINE H. BLOCK MARITAL TRUST NO. 2, and as Custodian for each of DIANA E. BLOCK, NANCY E. BLOCK, and KATHERINE Z. BLOCK; CAROL Z. BLOCK, BARBARA B. BURNEY, individually and as Custodian for ERIN C. SMITH, MICHAEL H. BURNEY, KAREN B. AYARS, KAREN B. AYARS, Custodian for EMILY E. AYARS, and BRIAN M. AYARS, and DONALD G. BLOCK, individually and as Trustee for each of KATHERINE Z. BLOCK, NANCY E. BLOCK, BENJAMIN W. BURNEY, DIANA E. BLOCK, ERIN C. SMITH, BRIAN M. AYARS, and EMILY E. AYARS, parties of the second part, and MARY G. BLOCK, party of the third part, and BLADE COMMUNICATIONS, INC., an Ohio corporation, formerly known as the TOLEDO BLADE COMPANY, party of the fourth part. WHEREAS, on December 18, 1974 the Toledo Blade Company and Paul Block, Jr. and William Block entered into an Agreement providing, inter alia, for the redemption of certain shares of stock of the Toledo Blade Company upon the death of either or both of Paul Block, Jr. and William Block; WHEREAS, Paul Block, Jr. died on March 15, 1987 and William Block and First National Bank of Toledo (now known as Fifth Third Bank of Toledo, N.A.) were appointed as Executors of his Estate; WHEREAS, there are presently outstanding 29,400 shares of voting common stock of BCI, and 588,000 shares of nonvoting common stock of BCI all of which are owned by the parties of the first,, second, third and fourth parts with the party of the fourth part holding 101,863 shares of nonvoting common as Treasury Shares; WHEREAS, at the time of his death Paul Block, Jr. held 14,700 shares of voting and 284,786 shares of nonvoting common stock which for federal estate tax purposes were returned at $191.76 and $187.93 per share, respectively; WHEREAS, the Executors of the Estate of Paul Block, Jr., at the request of BCI have elected in accordance with Section 6166 of the Code to defer payment of federal taxes due; WHEREAS, there is an ambiguity under the 1974 Agreement, and differences of opinion exist among the parties, as to whether BCI has an unconditional obligation to cause the federal and state taxes to be paid at one time or is only obligated to provide funds periodically as are required to make payments in accordance with a deferral of such taxes; WHEREAS, it is in the best interest of BCI to provide for the harmonious continuity of its management and ownership, and to that end, BCI desires that the payment of Death Taxes in the Estate of Paul Block, Jr. and the estates of certain other shareholders, as hereinafter defined, be deferred in accordance with the applicable provisions of the Code and of the state inheritance and estate taxes of the residence of each such shareholder; -2- WHEREAS, it is vital to the financial viability of BCI that it have the right to make periodic payments to redeem shares to pay Death Taxes and Administration Expenses over the maximum available period of time, to have the necessary flexibility in planning its financial affairs, and to be able to anticipate future cash demands caused by the death of Paul Block, Jr. and certain other shareholders, as hereinafter defined; WHEREAS, BCI has redeemed 101,863 shares of Stock from the Estate of Paul Block, Jr. at $187.93 per share, of which 86,695 acres-were redeemed within nine months of his death; WHEREAS, BCI in consideration of the election of the Executors of the Estate of Paul Block, Jr. to defer the payment of Death Taxes and to be made prospectively by the Executors of the estates of certain other shareholders, is willing to grant to each such estate an option at a nominal value to purchase a number of shares of Stock to compensate such entities for the cost of such deferral in terms of excess shares of Stock redeemed; and WHEREAS, the parties hereto desire to further amend and restate the 1974 Agreement; NOW, THEREFORE, the parties hereto, each intending to be legally bound and in consideration of the mutual promises and covenants given to the other, do hereby agree as follows: Section 1.01. Definitions. The following terms as used herein shall, unless the context shall clearly indicate otherwise, have the following respective meanings: (A) "Administration Expenses" shall mean those expenses allowable as a deduction under Section 2053 of the Code, including annual costs of filing amended returns. (B) "BCI" shall mean Blade Communications, Inc., an Ohio corporation, and any successor thereto. (C) "Close Corporation Operating Agreement" shall mean that contract dated December 12, 1988 between Blade Communications, Inc. and all of its stockholders. (D) "Capital Gains Taxes" shall mean those taxes imposed by the United States or any state thereof upon the capital gains recognized (offset by capital losses recognized, if any relating to the sale of Stock) as a result of the sale of any shares of Stock in accordance with a redemption pursuant to Section 303 of the Code. -3- (E) References at any particular time to sections and chapters of the "Code" shall mean the specified sections and chapters of the Internal Revenue Code of 1986, as amended, or the corresponding provision of any future United States internal revenue law. (F) "Death Taxes" shall mean all federal estate and generation-skipping transfer taxes and all local, state and foreign estate, inheritance, transfer, legacy, succession and similar taxes which by reason of the death of a Principal Shareholder are properly imposed upon, applicable to or payable with respect to any property or interest in property which is included as part of the estate of such Principal Shareholder for the purposes of such taxes (or, with respect to the federal generation-skipping transfer tax, is deemed to be included in the gross estate of such Principal Shareholder within the meaning of Section 303(d) of the Code) or any one or more of them, and any interest thereon. (G) "Election" shall mean the act taken by the Executor to elect to defer the payment of Death Taxes as provided under Section 6166 of the Code and any applicable state inheritance or estate tax, if any. (H) "Executor" shall mean the personal representative of the estate of a Principal Shareholder, whether such person is an executor or administrator, as well as any other fiduciary holding property derived from, or for the benefit of, a Principal Shareholder which property is subject to Death Taxes at the death of such Principal Shareholder. (J) "Option Shares" shall mean the number of shares of Stock redeemed without unfavorable dividend treatment under Section 303 of the Code by an Executor to pay (i) Death Taxes pursuant to an Election and (ii) Administration Expenses, reduced by the maximum number of shares of Stock that would have been redeemed without unfavorable dividend treatment under Section 303 of the Code had an Election not been made and all Death Taxes and Administration Expenses (excluding expenses which would have been incurred only if an Election had been made) had been paid on the initial return date; provided, however, that in no event may the "Option Shares" be less than zero. (K) "Principal Shareholder" shall mean such a decedent whose gross estate for federal estate tax purposes includes Stock (either outright or in trust), the redemption of which by BCI will qualify under the provisions of Section 303 of the Code. In determining whether a decedent is a "Principal Shareholder" the provisions of Section 303(d) of the Code shall apply. "Principal Shareholder" shall include the late Paul Block, Jr. -4- (L) The "Initial Redemption Price" for the Stock shall be the price per share at which such Stock is reported for purposes of Death Taxes in the estate of such Principal Shareholder which price shall remain in effect with respect to shares of Stock redeemed within three years following the death of such Principal Shareholder; provided, however, that if the returned value of the Stock is increased as a result of an audit of the federal estate tax return of such Principal Shareholder, the Initial Redemption Price shall be the price as finally determined for federal estate tax purposes. For each year thereafter the Redemption Price shall be the Initial Redemption Price, as adjusted by audit and further adjusted annually based upon that percentage of book value of BCI at the close of its last preceding fiscal year that the Initial Redemption Price bears to the book value of the Stock as determined for the fiscal year of BCI used for computing the Initial Redemption Price for such Principal Shareholder, but the Redemption Price shall not be less than the value of the Stock determined for federal estate tax purposes in the estate of such Principal Shareholder. As an illustration for the Estate of Paul Block, Jr., the book value of the Stock per share was $85.87 on December 31, 1986 and the Initial Redemption Price per share was $187.93. Assuming no adjustment at the audit of the federal estate tax return, the Redemption Price for redemption of Stock from March 15, 1990 until December 31, 1990 shall be 2.1885 times the book value on December 31, 1989 and for the year 1991 shall be 2.1885 times the book value on December 31, 1990. All subsequent years shall be treated in the same fashion. Notwithstanding the foregoing, the Executor of such Principal Shareholder may elect at its expense to employ Management Planning Inc., of Princeton, New Jersey, to value the Stock for purposes of determining any Redemption Price subsequent to the Initial Redemption Price. In such event the Redemption Price for the year as to which such appraisal was made shall be the mean between the formula price as herein set forth and the price as determined by Management Planning in such appraisal. (M) "Stock" shall mean the nonvoting common shares of BCI. Section 1.02. Election by Executor of Principal Shareholder; Forfeiture. The Executor of each Principal Shareholder shall make the Election for the deferral of Death Taxes. If such Election is permitted and the Election is not made by such Executor, the estate of such Principal Stockholder shall forfeit all rights under this Agreement. Section 1.03. Redemption by BCI. (A) Upper Limit. BCI will redeem in cash and at the Redemption Price per share determined at the date of tender each share of Stock tendered by the Executor of a Principal Shareholder to BCI for redemption; provided, however, that the aggregate number of shares of Stock to be redeemed by BCI shall not exceed the number of shares of Stock redeemable under Section 303 of the Code without unfavorable dividend tax -5- consequences. The initial redemption of shares of Stock for each Principal Shareholder shall be the greatest of (i) the minimum number of shares of Stock that must be redeemed in payment of Death Taxes due at the time the returns for Death Taxes are due and all Administration Expenses incurred to such time, (ii) the maximum number of shares of Stock that could be redeemed equal in aggregate value to the proceeds of life insurance on such Principal Shareholder received by BCI within nine months of the death of such Principal Shareholder, or, (iii) in the cases of the Estates of William and Maxine Block the value of the Stock determined by multiplying the liability for Death Taxes and Administration Expenses as initially determined in the Estate of William Block or Maxine Block, as the case may be, by a fraction, the numerator of which is the aggregate value of the shares initially redeemed in the Estate of Paul Block, Jr. and the denominator of which is the aggregate liability of Death Taxes and Administration Expenses as initially determined in the Estate of Paul Block, Jr. (B) Lower Limit. In the case of the Estate of a Principal Shareholder, such Estate will tender for redemption and BCI will redeem that number of shares of Stock as shall equal that percentage of shares of Stock actually redeemed by the Estate of Paul Block, Jr. compared to the maximum number of shares that said Estate could have redeemed under subparagraph (A) of this Section 1.03. Section 1.04. Overpayments/Underpayments. In the case of any underpayment by BCI to an Executor for the redemption of Stock arising from the final determination of the value of the Stock for federal estate tax purposes, BCI will pay to the Executor, in cash, within sixty days of the receipt of the final value, the difference between the Initial Redemption Price and the Redemption Price as finally determined, plus interest thereon per annum at the rate assessed such Executor from time to time by the internal Revenue Service from the date of such initial payment to the date of such subsequent payment. In the case of an over valuation of the Stock, the Executor will pay the amount of the overpayment, together with per annum interest at such rate to BCI, determined as above in the case of underpayment. Section 1.05. Option Shares; Capital Gains Taxes. (A) Upon the earlier of (i) the date of the final and complete redemption of the Stock from the Executor by BCI for final and complete satisfaction of Death Taxes and Administration Expenses, (ii) the date of an agreement between an Executor and another for the sale of all Stock owned by such Executor, or (iii) the date of determination by BCI adopting a plan of complete liquidation and distribution of the assets of BCI there shall be granted to the Executor an option to acquire the Option Shares at a price of one dollar per share, such option to be exercised by written notice to BCI signed by such Executor and accompanied by a certified check in the amount of the aggregate option price for -6- all Option Shares as to which the option is exercised. Such option may be exercised in whole or in part and from time to time but must be exercised within 366 days of the date of the grant of the option. As to any Option Shares as to which the option has not been timely exercised, such option shall lapse. (B) The value of the Option Shares in excess of the option price will be deemed to be compensation paid by BCI for the benefits it derived from the provisions of this Agreement. (C) As additional compensation for such benefits, BCI agrees to pay cash compensation to the Executor in an amount sufficient to pay all applicable income tax obligations arising from the receipt of or right to the Option Shares. BCI shall make payment in cash within sixty days of receipt from such Executor of a certificate setting forth the amount of income taxes due by reason of the exercise of each option for the Option Shares and for the income taxes due by reason of BCI's payment of all applicable income tax obligations. (D) In addition to the foregoing, if at any time Capital Gains Taxes are incurred by a Principal Shareholder, BCI shall pay to such Principal Shareholder an amount equal to the Capital Gains Taxes incurred upon satisfactory proof of payment of such taxes and shall pay all applicable taxes arising from the Principal Shareholder's receipt of payment from BCI for payment of such Capital Gains Taxes upon satisfactory proof of payment of such taxes. Such amount will be deemed to be compensation paid by BCI for the benefits it derived from the provisions of this Agreement. Section 1.06. Negotiations with Service. BCI acknowledges that the Executor possesses the sole and exclusive responsibility to negotiate with the Internal Revenue Service and any state taxing authority and to enter into a closing agreement with respect to the determination of the value of the Stock for such Death Tax purposes and BCI shall be bound by the final determination thereof for purposes of this Agreement; provided, however, that the Executor and his/her or its representatives shall consult with BCI and give consideration to BCI's advice. Each Executor will, however, exercise his/her or its best judgment and incur such reasonable and necessary expenses as such Executor may deem necessary to establish the most proper value of the Stock for Death Tax purposes. The Executor shall furnish BCI for its confidential use in the application of the terms of this Agreement a copy of the federal estate tax and state death tax returns as filed and a copy of all other documents filed by such Executor or received from the Internal Revenue Service in connection with the determination of Death Taxes in the estate of such Principal Stockholder. -7- Section 1.07. Lien. The Stock of a Principal Shareholder may be subject to a lien in favor of the United States of America for payment of federal estate taxes pursuant to the Election made by such Executor. Upon receipt of payments in redemption of the Stock from BCI, the Executor agrees to obtain a release of the lien on the Stock to the extent of the Stock redeemed by BCI as provided hereinabove. At the time of each such release of lien, the Executor will deliver to BCI the certificate for the Stock held by the Executor duly endorsed for transfer to BCI and BCI will issue a new certificate registered in the name of the Executor for the number of shares not released from the lien. Section 1.08. Warranty of Title. In tendering to BCI, each Executor shall represent and warrant in writing that such Executor has marketable title to the Stock, that the Stock will be delivered to BCI, free and clear of all liens, except as provided in Section 1.07, that the Executor has power to transfer the Stock to BCI and such Executor has the requisite power and authority to bind the estate of such deceased Principal Shareholder to the applicable terms and provisions of this Agreement. Section 1.09. Amendment. This Agreement can be amended only in writing, which amendment shall have the consent (i) of each of ALLAN J. BLOCK, JOHN ROBINSON BLOCK, WILLIAM BLOCK and WILLIAM BLOCK, JR., and the successors of each as determined under the Close Corporation Operating Agreement and (ii) of each then living Principal Shareholder whose rights may be adversely affected by such amendment. Section 1.10. Binding Agreement. This Agreement shall be binding upon each party hereto, his/her or its successors and assigns, heirs and personal representatives and BCI its successors and assigns, and shall be governed in all respects by the laws of the state of Ohio, but will only become operative after the Internal Revenue Service has ruled that this Agreement does not conflict with the representations made to the Service dated November 6 and 25, 1987 and December 17, 1987 and the representations made in the requests for rulings on September 27, 1987 and November 4, 1987. BCI represents and warrants that the execution and delivery of this Agreement by it has been duly authorized by proper corporate action and constitutes a valid, binding and enforceable obligation of BCI. Section 1.11. Arbitration. Any dispute or controversy arising out of or in connection with this Agreement or the asserted breach thereof shall be determined and settled by arbitration in Toledo, Ohio in accordance with the rules of the American Arbitration Association. The parties of the first part shall have the authority to appoint one arbitrator; the parties of the second part shall have the authority to appoint one arbitrator; and the party of the third part shall -8- have the power to appoint one arbitrator but only if the rights of such party will be materially affected by the outcome of the arbitration. The party of the fourth part shall not have the power or authority to appoint an arbitrator. The arbitrators so appointed shall select an additional arbitrator or arbitrators, not more than two in number, as may be required to make the aggregate number of arbitrators an odd number. In the event that additional arbitrators are not appointed within forty-five days from the demand for arbitration, the additional arbitrator or arbitrators shall be appointed by the Chief Justice of the Court of Common Pleas of Lucas County, Ohio. Any award entered herein shall be final and binding on the parties hereto and judgment may be entered thereon in any court of competent jurisdiction. Section 1.12. Litigation. Any and all litigation concerning this Agreement initiated by any of the parties hereto must be adjudicated in the Court of Common Pleas of Lucas County, Ohio or in the United States District Court for the Northern District of Ohio, Western Division sitting at Toledo, Ohio. The provisions of this Section are in addition to and not in contravention of the provisions of Section 1.11. Section 1.13. Entire Agreement. This Agreement contains the entire understanding between the parties hereto and any prior agreements, documents, understandings, redemption schedules or other computations shall not be deemed to be part of this Agreement. Section 1.14. Counterparts. This Agreement will be executed in several counterparts, each of which shall be deemed to be an original. This Agreement shall be binding upon the parties hereto when it is signed by each party, even though such party has not signed such other counterpart hereof. PARTIES OF THE FIRST PART: A. EXECUTORS OF THE ESTATE OF PAUL BLOCK, JR. WITNESS: - --------------------------- --------------------------- WILLIAM BLOCK ATTEST: FIFTH THIRD BANK, N.A. By: - --------------------------- --------------------------- Corporate Seal EXECUTORS OF THE ESTATE OF PAUL BLOCK, JR. -9- B. INDIVIDUAL SIGNATORIES - --------------------------- --------------------------- ALLAN J. BLOCK - --------------------------- --------------------------- JOHN ROBINSON BLOCK - --------------------------- --------------------------- CYRUS P. BLOCK C. CO-TRUSTEES UNDER TRUST AGREEMENT OF PAUL BLOCK, JR. DATED DECEMBER 18, 1974 - --------------------------- --------------------------- WILLIAM BLOCK ATTEST: FIFTH THIRD BANK, N.A. By: - --------------------------- --------------------------- Corporate Seal - --------------------------- --------------------------- JOHN ROBINSON BLOCK - --------------------------- --------------------------- ALLAN J. BLOCK - --------------------------- --------------------------- CYRUS P. BLOCK D. WILLIAM BLOCK AND CYRUS P. BLOCK, TRUSTEES - --------------------------- --------------------------- WILLIAM BLOCK - --------------------------- --------------------------- CYRUS P. BLOCK E. CO-TRUSTEES UNDER AGREEMENT DATED NOVEMBER 1, 1977 -10- - --------------------------- --------------------------- WILLIAM BLOCK - --------------------------- --------------------------- ALLAN J. BLOCK - --------------------------- --------------------------- JOHN ROBINSON BLOCK PARTIES OF THE SECOND PART: - --------------------------- --------------------------- WILLIAM BLOCK - --------------------------- --------------------------- WILLIAM BLOCK, JR. - --------------------------- --------------------------- WILLIAM BLOCK, JR. TRUSTEE FOR LAURA A. BLOCK - --------------------------- --------------------------- WILLIAM BLOCK, JR., TRUSTEE OF MAXINE H. BLOCK MARITAL TRUST NO. 2 - --------------------------- --------------------------- DIANA E. BLOCK - --------------------------- --------------------------- WILLIAM BLOCK, JR., CUSTODIAN FOR NANCY E. BLOCK - --------------------------- --------------------------- WILLIAM BLOCK, JR., CUSTODIAN FOR KATHERINE Z. BLOCK - --------------------------- --------------------------- CAROL Z. BLOCK -11- - --------------------------- --------------------------- BARBARA B. BURNEY - --------------------------- --------------------------- BARBARA B. BURNEY, CUSTODIAN FOR ERIN C. SMITH - --------------------------- --------------------------- MICHAEL H. BURNEY - --------------------------- --------------------------- KAREN B. AYARS - --------------------------- --------------------------- KAREN B. AYERS, CUSTODIAN FOR EMILY E. AYARS - --------------------------- --------------------------- KAREN B. AYERS, CUSTODIAN FOR BRIAN M. AYARS - --------------------------- --------------------------- DONALD G. BLOCK - --------------------------- --------------------------- DONALD G. BLOCK, AS TRUSTEE FOR KATHERINE Z. BLOCK - --------------------------- --------------------------- DONALD G. BLOCK, AS TRUSTEE FOR NANCY E. BLOCK - --------------------------- --------------------------- DONALD G. BLOCK, AS TRUSTEE FOR BENJAMIN W. BURNEY - --------------------------- --------------------------- DONALD G. BLOCK, AS TRUSTEE FOR DIANA E. BLOCK -12- - --------------------------- --------------------------- DONALD G. BLOCK, AS TRUSTEE FOR ERIN C. SMITH - --------------------------- --------------------------- DONALD G. BLOCK, AS TRUSTEE FOR BRIAN M. AYARS - --------------------------- --------------------------- DONALD G. BLOCK, AS TRUSTEE FOR EMILY E. AYARS PARTY OF THE THIRD PART: - --------------------------- --------------------------- MARY G. BLOCK PART OF THE FOURTH PART: ATTEST BLADE COMMUNICATIONS, INC. By: - --------------------------- --------------------------- -13- EX-10.11 23 j9521601exv10w11.txt EXHIBIT 10.11 Exhibit 10.11 SHAREHOLDERS' AGREEMENT In the interest of achieving relative equality in ownership of the non-voting common stock of Blade Communications, Inc. on the two sides of the Block family - the William Block side and the Paul Block, Jr. side - after the estates of William Block and Maxine Block are completely settled, the shareholders agree as follows: 1. Within three years after the estates of William Block and Maxine Block are finally closed, including payment of all taxes, no greater than a 52 1/2 - 47 1/2 split in the ownership of non-voting common stock will be achieved (if it is closer to 50-50, nothing needs to be done), at the option of the side with fewer shares. 2. Stockholders will not be required to give up stock without compensation. 3. The desired split will be achieved through a combination of stock redemption and issuance of stock, (such issuance to be at least one-half of the combination), provided that redemption will be capped at a. total of $12 million spent to achieve relative equality during the three year period. Any adverse tax consequences to a shareholder will be promptly made good by BCI. 4. In addition, should BCI be sold at any time after the date of this Agreement, the proceeds will be split 50-50, and appropriate actions to bring this about would be taken before the sale. 5. All disputes under this Agreement that cannot be resolved by the Block family will be arbitrated before the American Arbitration Association in Toledo, Ohio using the 3-arbitrator approach. 6. This Agreement may not be amended, changed or modified except by a writing executed by all of the parties hereto. 7. This Agreement shall be governed by, and interpreted in accordance with, the laws of Ohio with respect to agreements fully negotiated, fully executed and to be fully performed therein. 8. This Agreement contains the entire agreement of the parties on the subject matter herein. 9. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and each of their respective heirs, successors, legal representatives, and valid assigns. 10. This Agreement shall be binding and become effective when executed by all of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement. BLADE COMMUNICATIONS, INC. By: --------------------------------------- Its President Attest: ----------------------------------- SHAREHOLDERS: -2- EX-12.1 24 j9521601exv12w1.txt EXHIBIT 12.1 EXHIBIT 12.1 BLOCK COMMUNICATIONS, INC. Computation of Ratio of Earnings to Fixed Charges (Dollar amounts in thousands) (Unaudited)
Three Months Ended Year ended December 31 March 31 ---------------------------------------------------------- --------------------- 1997 1998 1999 2000 2001 2001 2002 ---------------------------------------------------------- --------------------- Net Income $ 9,107 $ 7,820 $ 5,341 $ 12,781 $(17,857) $ (6,532) $ 12,953 Provision (credit) for income taxes 7,495 6,240 4,556 9,176 (7,132) (2,602) 6,793 Minority Interest -- -- -- 427 (235) (54) 7 ---------------------------------------------------------- --------------------- Earnings before provision for income taxes and minority interest 16,602 14,060 9,897 22,384 (25,224) (9,188) 19,753 Fixed Charges: Interest expense 10,512 10,628 11,243 14,175 19,486 4,676 4,748 Interest capitalized -- -- 945 1,490 985 -- -- Amortization of debt issuance costs 106 335 273 272 267 67 144 One-third of rentals 1,014 1,334 1,091 1,176 1,355 339 313 ---------------------------------------------------------- --------------------- Total fixed charges 11,632 12,297 13,552 17,113 22,093 5,082 5,205 Less interest capitalized, net of amortization -- -- (886) (1,279) (619) 91 107 ---------------------------------------------------------- --------------------- Earnings before provision for income taxes and minority interest, plus fixed charges $ 28,234 $ 26,357 $ 22,563 $ 38,218 $ (3,750) $ (4,015) $ 25,065 ========================================================== ===================== Ratio of earnings to fixed charges (1) 2.4 2.1 1.7 2.2 -- -- 4.8 ========================================================== =====================
(1) In 2001 and for the three months ended March 31, 2001, our earnings were insufficient to cover fixed charges by $25.8 million and $9.1 million, respectively. EX-21.1 25 j9521601exv21w1.txt EXHIBIT 21.1 Exhibit 21.1 SUBSIDIARIES OF BLOCK COMMUNICATIONS, INC. Jurisdiction of Incorporation Percentage Name or Organization of Ownership - ---- ---------------- ------------ Access Toledo, Ltd. ..............................Ohio 100% Buckeye Cablevision, Inc. ........................Ohio 100% Buckeye Telesystem, Inc. .........................Ohio 100% CARS Holding, Inc. ...............................Ohio 100% Community Communication Services, Inc. ...........Ohio 100% Corporate Protection Services, Inc. ..............Ohio 100% Erie County Cablevision, Inc. ....................Ohio 100% Idaho Independent Television, Inc. ...............Idaho 100% Independence Television Company ..................Pennsylvania 100% Lima Communications Corporation ..................Ohio 100% Metro Fiber & Cable Construction Company .........Ohio 100% Monroe Cablevision, Inc. .........................Michigan 100% PG Publishing Company ............................Pennsylvania 100% Toledo Area Communications Services, Inc. ........Ohio 100% WAND (TV) Partnership ............................Illinois 66 2/3% WLFI-TV, Inc. ....................................Indiana 100% EX-23.1 26 j9521601exv23w1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our reports dated February 22, 2002, in the Registration Statement on Form S-4 and the related Prospectus of Block Communications, Inc. for the offering of up to $175,000,000 of 9 1/4% Senior Subordinated Notes due 2009. /s/ Ernst & Young LLP July 15, 2002 Toledo, Ohio EX-25.1 27 j9521601exv25w1.txt EXHIBIT 25.1 Exhibit 25.1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ----------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2) WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) A U.S. NATIONAL BANKING ASSOCIATION 41-1592157 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national Identification No.) bank) SIXTH STREET AND MARQUETTE AVENUE Minneapolis, Minnesota 55479 (Address of principal executive offices) (Zip code) Stanley S. Stroup, General Counsel WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (612) 667-1234 (Agent for Service) ----------------------------- BLOCK COMMUNICATIONS, INC. (Exact name of obligor as specified in its charter) OHIO 34-4374555 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 541 N. SUPERIOR STREET TOLEDO, OHIO 43660 (Address of principal executive offices) (Zip code) ----------------------------- 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 (Title of the indenture securities) ================================================================================ Item 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Treasury Department Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. The Board of Governors of the Federal Reserve System Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 15. FOREIGN TRUSTEE. Not applicable. Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this Statement of Eligibility. Wells Fargo Bank incorporates by reference into this Form T-1 the exhibits attached hereto. Exhibit 1. a. A copy of the Articles of Association of the trustee now in effect.*** Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.* b. A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of The Northwestern National Bank of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the surviving entity being titled Northwestern National Bank and Trust Company of Minneapolis.* c. A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.* d. A copy of the letter dated May 12, 1983 from the Regional Counsel, Comptroller of the Currency, acknowledging receipt of notice of name change effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest Bank Minneapolis, National Association.* e. A copy of the letter dated January 4, 1988 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis, National Association with various other banks under the title of "Norwest Bank Minnesota, National Association."* f. A copy of the letter dated July 10, 2000 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation effective July 8, 2000 of Norwest Bank Minnesota, National Association with various other banks under the title of "Wells Fargo Bank Minnesota, National Association."**** Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust powers issued January 2, 1934, by the Federal Reserve Board.* Exhibit 4. Copy of By-laws of the trustee as now in effect.*** Exhibit 5. Not applicable. Exhibit 6. The consent of the trustee required by Section 321(b) of the Act. Exhibit 7. Consolidated Reports of Condition and Income.***** Exhibit 8. Not applicable. Exhibit 9. Not applicable. * Incorporated by reference to exhibit number 25 filed with registration statement number 33-66026. *** Incorporated by reference to exhibit T3G filed with registration statement number 022-22473. **** Incorporated by reference to exhibit number 25.1 filed with registration statement number 001-15891. ***** Incorporated by reference to filing reference number 333-91096. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 1st day of July, 2002. WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION By: /s/ Joseph P. O'Donnell ----------------------- Joseph P.O'Donnell Corporate Trust Officer EXHIBIT 6 July 1, 2002 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION By: /s/ Joseph P. O'Donnell ----------------------- Joseph P. O'Donnell Corporate Trust Officer EX-99.1 28 j9521601exv99w1.txt LETTER OF TRANSMITTAL Exhibit 99.1 LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 OF BLOCK COMMUNICATIONS, INC. PURSUANT TO THE PROSPECTUS DATED _____________, 2002 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______, 2002, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. - -------------------------------------------------------------------------------- THE EXCHANGE AGENT IS: WELLS FARGO BANK MINNESOTA, N.A. BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY: Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A. 213 Court Street, Suite 703 213 Court Street, Suite 703 Middletown, Connecticut 06457 Middletown, Connecticut 06457 Attention: Corporate Trust Services Attention: Corporate Trust Services Telephone: (860) 704-6216 Telephone: (860) 704-6216 Facsimile: (860) 704-6219 Facsimile: (860) 704-6219 BY OVERNIGHT DELIVERY: BY FACSIMILE: Wells Fargo Bank Minnesota, N.A. (860) 704-6219 213 Court Street, Suite 703 Attn: Corporate Trust Services Middletown, Connecticut 06457 CONFIRM BY TELEPHONE: Attention: Corporate Trust Services (860) 704-6216 Telephone: (860) 704-6216 Facsimile: (860) 704-6219 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated , 2002 (the "Prospectus"), of Block Communications, Inc., an Ohio corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together with the Prospectus constitutes the Company's offer (the "Exchange Offer") to exchange up to $175,000,000 principal amount of its 9 1/4% Senior Subordinated Notes due 2009, which are registered under the Securities Act of 1933 (the "Exchange Notes") for any and all of its unregistered outstanding 9 1/4% Senior Subordinated Notes due 2009 (the "Old Notes"). Recipients of the Prospectus should read the requirements described in such Prospectus with respect to eligibility to participate in the Exchange Offer. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. The undersigned hereby tenders the Old Notes described in the box entitled "Description of Old Notes" below pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered holder of all the Old Notes, a beneficial owner which has a properly completed bond power from the registered holder, or a Depository Trust Company ("DTC") participant listed on the DTC securities position listing with respect to the old notes (the "Holder") and the undersigned represents that it has received from each beneficial owner of Old Notes (the "Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder from Beneficial Owner" accompanying this Letter of Transmittal, instructing the undersigned to take the action described in this Letter of Transmittal. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX BELOW. This Letter of Transmittal is to be used by a Holder if (i) certificates representing Old Notes are to be forwarded herewith or (ii) a tender is made pursuant to the guaranteed delivery procedures in the section of the Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." Holders that are tendering by book-entry transfer to the Exchange Agent's account at DTC can execute the tender through ATOP, for which the Exchange Offer will be eligible. DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC which will verify the acceptance and execute a book-entry delivery to the Exchange Agent's account at DTC. DTC will then send an agent's message forming part of a book-entry transfer in which the participant agrees to be bound by the terms of this Letter of Transmittal (an "Agent's Message") to the Exchange Agent for its acceptance. Transmission of an Agent's Message will constitute an acknowledgement from the tendering DTC participant that the representations contained in this Letter of Transmittal are true and correct. Transmission of the Agent's Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agent's Message. Any Beneficial Owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such Holder promptly and instruct such Holder to tender on behalf of the Beneficial Owner. If such Beneficial Owner wishes to tender on its own behalf, such Beneficial Owner must, prior to completing and executing this Letter of Transmittal and delivering its Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such Beneficial Owner's name or obtain a properly completed bond power from the Holder. The transfer of record ownership may take considerable time. In order to properly complete this Letter of Transmittal, a Holder must (i) complete the box entitled "Description of Old Notes," (ii) if appropriate, check and complete the boxes relating to book-entry transfer, guaranteed delivery, Special Issuance Instructions and Special Delivery Instructions, (iii) sign the Letter of Transmittal by completing the box entitled "Sign Here To Tender Your Old Notes" and (iv) complete the Substitute Form W-9. Each Holder should carefully read the detailed instructions below prior to completing the Letter of Transmittal. Holders of Old Notes who desire to tender their Old Notes for exchange and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date, must tender the Old Notes pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2. Holders of Old Notes who wish to tender their Old Notes for exchange must complete columns (1) through (3) in the box below entitled "Description of Old Notes," and sign the box below entitled "Sign Here To Tender Your Old Notes." If only those columns are completed, such Holder will have tendered for exchange all Old Notes listed in column (3) below. If the Holder wishes to tender for exchange less than all of such Old Notes, column (4) must be completed in full. In such case, such Holder should refer to Instruction 5. The Exchange Offer may be extended, terminated or amended, as provided in the Prospectus. During any such extension of the Exchange Offer, all Old Notes previously tendered and not withdrawn pursuant to the Exchange Offer will remain subject to the Exchange Offer. -2- The undersigned hereby tenders for exchange the Old Notes described in the box entitled "Description of Old Notes" below pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. _______________________________________________________________________________ DESCRIPTION OF OLD NOTES ________________________________________________________________________________
(1) (2) (3) (4) NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE NUMBER(S) AGGREGATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT TENDERED HOLDER(S) (PLEASE FILL IN, IF BLANK) REPRESENTED BY CERTIFICATE(S) FOR EXCHANGE (A) (B) _____________________ ____________________________ __________________________ _____________________ ____________________________ __________________________ _____________________ ____________________________ __________________________ _____________________ ____________________________ __________________________ _____________________ ____________________________ __________________________ _____________________ ____________________________ __________________________ _____________________ ____________________________ __________________________ TOTAL PRINCIPAL AMOUNT TENDERED:___________________________________________________
(A) Unless indicated in this column, any tendering Holder will be deemed to have tendered the entire aggregate principal amount represented by the Old Notes indicated in the column labeled "Aggregate Principal Amount Represented by Certificate(s)." See Instruction 5. (B) The minimum permitted tender is $1,000 in principal amount of Old Notes. All other tenders must be in integral multiples of $1,000. -3- / / CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH. / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED THROUGH DTC TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution:________________________________________ DTC Book-Entry Account:_______________________________________________ Transaction Code No.:__________________________________________________ / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY): Name(s) of Registered Holder(s):______________________________________ Date of Execution of Notice of Guaranteed Delivery:____________________ Window Ticket Number (if any):________________________________________ Name of Tendering Institution that Guaranteed Delivery:_______________ Transaction Code No.:_________________________________________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:_________________________________________________________________ Address:______________________________________________________________ Only Holders are entitled to tender their Old Notes for exchange in the Exchange Offer. Any financial institution that is a participant in DTC's system and whose name appears on a security position listing as the record owner of the Old Notes and who wishes to make book-entry delivery of Old Notes as described above must complete and execute a participant's letter (which will be distributed to participants by DTC) instructing DTC's nominee to tender such Old Notes for exchange. Persons who are Beneficial Owners of Old Notes but are not Holders and who seek to tender Old Notes should (i) contact the Holder and instruct such Holder to tender on his or her behalf, (ii) obtain and include with this Letter of Transmittal, Old Notes properly endorsed for transfer by the Holder or accompanied by a properly completed bond power from the Holder, with signatures on the endorsement or bond power guaranteed by a firm that is an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, including a firm that is a member of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., a commercial bank or trading company having an office in the United States or certain other eligible guarantors (each, an "Eligible Institution"), or (iii) effect a record transfer of such Old Notes from the Holder to such Beneficial Owner and comply with the -4- requirements applicable to Holders for tendering Old Notes prior to the Expiration Date. See the section of the Prospectus entitled "The Exchange Offer--Procedures for Tendering Old Notes." SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY (i) if the Exchange Notes issued in exchange for the Old Notes, certificates for Old Notes in a principal amount not exchanged for Exchange Notes, or Old Notes (if any) not tendered for exchange, are to be issued in the name of someone other than the undersigned or (ii) if Old Notes tendered by book-entry transfer which are not exchanged are to be returned by credit to an account maintained at DTC. Issue to: Name:__________________________________________________________________________ (PLEASE TYPE OR PRINT) Address:_______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (INCLUDE ZIP CODE) _______________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) Credit Old Notes not exchanged and delivered by book-entry transfer to DTC account set forth below: _______________________________________________________________________________ (ACCOUNT NUMBER) _______________________________________________________________________________ -5- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 6, 7 AND 8) To be completed ONLY if the Exchange Notes issued in exchange for Old Notes, certificates for Old Notes in a principal amount not exchanged for Exchange Notes, or Old Notes (if any) not tendered for exchange, are to be mailed or delivered (i) to someone other than the undersigned or (ii) to the undersigned at an address other than the address shown below the undersigned's signature. Mail or deliver to: Name:__________________________________________________________________________ (PLEASE TYPE OR PRINT) _______________________________________________________________________________ _______________________________________________________________________________ Address:_______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (INCLUDE ZIP CODE) _______________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) -6- Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company for exchange the Old Notes indicated above. Subject to, and effective upon, acceptance for exchange of the Old Notes tendered for exchange herewith, the undersigned will have irrevocably sold, assigned, transferred and exchanged, to the Company, all right, title and interest in, to and under all of the Old Notes tendered for exchange hereby, and hereby will have appointed the Exchange Agent as the true and lawful agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as agent of the Company) of such Holder with respect to such Old Notes, with full power of substitution to (i) deliver certificates representing such Old Notes, or transfer ownership of such Old Notes on the account books maintained by DTC (together, in any such case, with all accompanying evidences of transfer and authenticity), to the Company, (ii) present and deliver such Old Notes for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights and incidents of beneficial ownership with respect to such Old Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed to be irrevocable and coupled with an interest. The undersigned hereby represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Old Notes; and that when such Old Notes are accepted for exchange by the Company, the Company will acquire good and marketable title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned further warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of the Old Notes tendered for exchange hereby. The undersigned further agrees that acceptance of any and all validly tendered Old Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement. By tendering, the undersigned hereby further represents to the Company that (i) the Exchange Notes to be acquired by the undersigned and any Beneficial Owner(s) of the Old Notes tendered hereby in connection with the Exchange Offer will be acquired by the undersigned and such Beneficial Owner(s) in the ordinary course of their respective businesses, (ii) the undersigned and any such Beneficial Owner is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes, (iii) neither the undersigned nor any such Beneficial Owner has an arrangement or understanding with any person to participate in the distribution of Exchange Notes issued in the Exchange Offer, and (iv) neither the undersigned nor any such Beneficial Owner is an "affiliate," as defined under Rule 405 under the Securities Act, of the Company. If the undersigned or any such Beneficial Owner is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of Section 10 of the Securities Act in connection with any resale of such Exchange Notes. A broker-dealer may not participate in the Exchange offer with respect to the Old Notes acquired other than as a result of market-making activities or other trading activities. By its acceptance of the exchange offer, any broker-dealer that receives Exchange Notes pursuant to the Exchange Offer agrees to notify us in writing before using the Prospectus in connection with the resale or transfer of Exchange Notes. The broker-dealer further acknowledges and agrees that, upon receipt of notice from us of the happening of any event which makes any statement in the Prospectus untrue in any material respect or which requires the making of any changes in the Prospectus to make the statements in the Prospectus not misleading or which may impose upon us disclosure obligations that may have a material adverse effect on us, which notice we agree to deliver promptly to the broker-dealer, the broker-dealer will suspend use of the Prospectus until we have notified the undersigned that delivery of the Prospectus may resume and have furnished to the broker-dealer copies of any amendment or supplement to the Prospectus. We have agreed in the registration rights agreement that for a period of 180 days after the effective date of the registration statement of which the Prospectus is a part we will make the Prospectus, as amended or supplemented, available to any broker-dealer who requests it in writing for use in connection with any such resale. For purposes of the Exchange Offer, the Company will be deemed to have accepted for exchange, and to have exchanged, validly tendered Old Notes, if, as and when the Company gives oral or written notice thereof to the -7- Exchange Agent. Tenders of Old Notes for exchange may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders" in the Prospectus. Any Old Notes tendered by the undersigned and not accepted for exchange will be returned to the undersigned at the address set forth above (unless otherwise indicated in the box above entitled "Special Delivery Instructions") as promptly as practicable after the Expiration Date. The undersigned acknowledges that the Company's acceptance of Old Notes validly tendered for exchange pursuant to any one of the procedures described in the section of the Prospectus entitled "The Exchange Offer" and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated in the box entitled "Special Issuance Instructions," please return any Old Notes not tendered for exchange in the name(s) of the undersigned. Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail any certificates for Old Notes not tendered or exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Old Notes accepted for exchange in the name(s) of, and return any Old Notes not tendered for exchange or not exchanged to, the person(s) so indicated. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Old Notes from the name of the Holder(s) thereof if the Company does not accept for exchange any of the Old Notes so tendered for exchange or if such transfer would not be in compliance with any transfer restrictions applicable to such Old Note(s). EXCEPT FOR HOLDERS TENDERING OLD NOTES THROUGH ATOP, IN ORDER TO VALIDLY TENDER OLD NOTES FOR EXCHANGE, HOLDERS MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL. All authority herein conferred or agreed to be conferred shall survive the death, incapacity or dissolution of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as otherwise stated in the Prospectus, this tender for exchange of Old Notes is irrevocable. _______________________________________________________________________________ SIGN HERE TO TENDER YOUR OLD NOTES X______________________________________________________________________________ X______________________________________________________________________________ SIGNATURE(S) OF OWNER(S) Dated:__________________________, 2002 Must be signed by the Holder(s) exactly as name(s) appear(s) on certificate(s) representing the Old Notes or on a security position listing or by person(s) authorized to become registered Old Note Holder(s) by certificates and documents transmitted herewith. -8- Name(s)________________________________________________________________________ _______________________________________________________________________________ (PLEASE TYPE OR PRINT) If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. (See Instruction 6.) Capacity (full title):_________________________________________________________ _______________________________________________________________________________ Address:_______________________________________________________________________ ______________________________________________________________________________ (INCLUDE ZIP CODE) Principal place of business (if different from address listed above): _______________________________________________________________________________ Area Code and Telephone No.: ( ): _______________________________________ Tax Identification or Social Security Nos.: ___________________________________ IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN THIS LETTER OF TRANSMITTAL. -9- GUARANTEE OF SIGNATURE(S) (SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 1) Authorized Signature:_________________________________________________________ Name and Title:_______________________________________________________________ ______________________________________________________________________________ (PLEASE TYPE OR PRINT) Name of Firm:_________________________________________________________________ Address:______________________________________________________________________ Area Code and Telephone No.:__________________________________________________ Dated:________________________________________________________________________ ______________________________________________________________________________ -10- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by an institution which is (1) a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., (2) a commercial bank or trust company having an office or correspondent in the United States, or (3) an Eligible Institution that is a member of one of the following recognized Signature Guarantee Programs: (a) The Securities Transfer Agents Medallion Program (STAMP); (b) The New York Stock Exchange Medallion Signature Program (MSP); or (c) The Stock Exchange Medallion Program (SEMP). Signatures on this Letter of Transmittal need not be guaranteed (i) if this Letter of Transmittal is signed by the Holder(s) of the Old Notes tendered herewith and such Holder(s) have not completed the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (ii) if such Old Notes are tendered for the account of an Eligible Institution. In all other cases, all signatures must be guaranteed by an Eligible Institution. 2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by Holders if certificates representing Old Notes are to be forwarded herewith. All physically delivered Old Notes, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) and any other required documents, must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date or the tendering holder must comply with the guaranteed delivery procedures set forth in the Prospectus. Delivery of the documents to DTC does not constitute delivery to the Exchange Agent. The method of delivery of Old Notes, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the Holder. Except as otherwise provided below, the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service, properly insured. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent before the Expiration Date. Neither this Letter of Transmittal nor any Old Notes should be sent to the Company. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the above transactions for such Holders. Holders of Old Notes who elect to tender Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver the Old Notes, this Letter of Transmittal or other required documents to the Exchange Agent prior the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. Holders may have such tender effected if: (a) such tender is made through an Eligible Institution; (b) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent has received from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, setting forth the name and address of the Holder, the certificate number(s) (if applicable) of such Old Notes and the principal amount of Old Notes tendered for exchange, stating that tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing such Old Notes (or a Book-Entry Confirmation), in proper form for transfer, and any other documents required by this Letter of Transmittal, will be deposited by such Eligible Institution with the Exchange Agent; and -11- (c) a properly executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) for all tendered Old Notes in proper form for transfer or a Book-Entry Confirmation, together with any other documents required by this Letter of Transmittal, are received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date. No alternative, conditional or contingent tenders will be accepted. All tendering Holders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive notice of the acceptance of their Old Notes for exchange. 3. INADEQUATE SPACE. If the space provided in the box entitled "Description of Old Notes" above is inadequate, the certificate numbers and principal amounts of the Old Notes being tendered should be listed on a separate signed schedule affixed hereto. 4. WITHDRAWALS. A tender of Old Notes may be withdrawn at any time prior to the Expiration Date by delivery of written notice of withdrawal (or facsimile thereof) to the Exchange Agent at the address set forth on the cover of this Letter of Transmittal or, if Old Notes have been tendered through ATOP, by following the ATOP withdrawal procedures. To be effective, a notice of withdrawal of Old Notes must (i) specify the name of the person who tendered the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number(s) and aggregate principal amount of such Old Notes), and (iii) be signed by the Holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees). All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, which determination shall be final and binding on all parties. Any Old Notes so withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer, and no Exchange Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered by following one of the procedures described in the section of the Prospectus entitled "The Exchange Offer--Procedures for Tendering Old Notes" at any time prior to the Expiration Date. 5. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral multiples of $1,000 principal amount. If a tender for exchange is to be made with respect to less than the entire principal amount of any Old Notes, fill in the principal amount of Old Notes which are tendered for exchange in column (4) of the box entitled "Description of Old Notes," as more fully described in the footnotes thereto. In the case of a partial tender for exchange, a new certificate, in fully registered form, for the remainder of the principal amount of the Old Notes, will be sent to the Holders (unless otherwise indicated in the appropriate box on this Letter of Transmittal) as promptly as practicable after the expiration or termination of the Exchange Offer. 6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, POWERS OF ATTORNEY AND ENDORSEMENTS. (a) The signature(s) of the Holder on this Letter of Transmittal must correspond with the name(s) as written on the face of the Old Notes without alternation, enlargement or any change whatsoever. (b) If tendered Old Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. (c) If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal and any necessary or required documents as there are different registrations or certificates. (d) When this Letter of Transmittal is signed by the Holder listed and transmitted hereby, no endorsements of Old Notes or bond powers are required. If, however, Old Notes not tendered or not accepted, are to be issued or returned in the name of a person other than the Holder, then the Old Notes transmitted hereby must be endorsed or accompanied by a properly completed bond power, in a form satisfactory to the Company, in either case signed exactly as the name(s) of the Holder(s) appear(s) on the Old Notes. Signatures on such Old Notes or bond powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). See Instruction 1. -12- (e) If this Letter of Transmittal or Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal. (f) If this Letter of Transmittal is signed by a person other than the Holder listed, the Old Notes must be endorsed or accompanied by a properly completed bond power, in either case signed by such Holder exactly as the name(s) of the Holder appear(s) on the certificates. Signatures on such Old Notes or bond powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). 7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of such transfer taxes (whether imposed on the Holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemptions therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. 8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to be issued, or if any Old Notes not tendered for exchange are to be issued or sent to someone other than the Holder or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Holders of Old Notes tendering Old Notes by book-entry transfer may request that Old Notes not accepted be credited to such account maintained at DTC as such Holder may designate. 9. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), compliance with conditions, acceptance and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination shall be final and binding. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Although the Company intends to notify Holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, amend or modify certain of the specified conditions as described under "The Exchange Offer -- Conditions to the Exchange Offer" in the Prospectus in the case of any Old Notes tendered (except as otherwise provided in the Prospectus). 11. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder whose Old Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated herein for further instructions. 12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for information, questions related to the procedures for tendering or for additional copies of the Prospectus and this Letter of Transmittal may be directed to the Exchange Agent at the address or telephone number set forth on the cover of this Letter of Transmittal. IMPORTANT: EXCEPT FOR HOLDERS TENDERING OLD NOTES THROUGH ATOP, THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER -13- REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. IMPORTANT INFORMATION Under current federal income tax law, a Holder whose tendered Old Notes are accepted for exchange may be subject to backup withholding unless the Holder provides the Company (as payor), through the Exchange Agent, with either (i) such Holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) the Holder has not been notified by the Internal Revenue Service that he or she is subject to backup withholding as a result of a failure to report all interest or dividends or (B) the Internal Revenue Service has notified the Holder that he or she is no longer subject to backup withholding; or (ii) an adequate basis for exemption from backup withholding. If such Holder is an individual, the TIN is such Holder's social security number. If the Exchange Agent is not provided with the correct taxpayer identification number, the Holder may be subject to certain penalties imposed by the Internal Revenue Service. Certain Holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Exempt Holders should indicate their exempt status on Substitute Form W-9. A foreign individual may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8 (which the Exchange Agent will provide upon request) signed under penalty of perjury, attesting to the Holder's exempt status. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for additional instructions. If backup withholding applies, the Company is required to withhold 31% of any payment made to the Holder or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The Holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the record owner of the Old Notes. If the Old Notes are held in more than one name or are not held in the name of the actual owner, consult the enclosed Guidelines for additional guidance regarding which number to report. -14-
PAYOR'S NAME: WELLS FARGO BANK MINNESOTA, N.A. - ---------------------------------------------------- -------------------------------------- ----------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN Social Security Number FORM W-9 THE BOX AT RIGHT AND CERTIFY BY OR DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE SIGNING AND DATING BELOW Employer Identification Number - ---------------------------------------------------- -------------------------------------- ----------------------------------- PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER PART 2 -- Certification Under PART 3 -- (TIN) AND CERTIFICATION Penalties of Perjury, I certify that: Awaiting TIN / / (1) The number shown on this form is my current taxpayer identification number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. - ---------------------------------------------------- -------------------------------------------------------------------------- Certification instructions--You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding you receive another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). Signature_____________________________________________ Date__________________________________________________ Name__________________________________________________ Address_______________________________________________ City, State Zip Code_________________________________ - ---------------------------------------------------- --------------------------------------------------------------------------
- -------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- -15- PAYOR'S NAME: WELLS FARGO BANK MINNESOTA, N.A. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide such a number. Signature Date - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. -16- EX-99.2 29 j9521601exv99w2.txt NOTICE OF GUARANTEED DELIVERY Exhibit 99.2 NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO TENDER OF ANY AND ALL OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 IN EXCHANGE FOR 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 OF BLOCK COMMUNICATIONS, INC. PURSUANT TO THE PROSPECTUS DATED ____, 2002 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ____, 2002, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR THE EXPIRATION DATE. - -------------------------------------------------------------------------------- THE EXCHANGE AGENT IS: WELLS FARGO BANK MINNESOTA, N.A. BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY: Wells Fargo Bank Minnesota, N.A. Wells Fargo Bank Minnesota, N.A. 213 Court Street, Suite 703 213 Court Street, Suite 703 Middletown, Connecticut 06457 Middletown, Connecticut 06457 Attention: Corporate Trust Services Attention: Corporate Trust Services Telephone: (860) 704-6216 Telephone: (860) 704-6216 Facsimile: (860) 704-6219 Facsimile: (860) 704-6219 BY OVERNIGHT DELIVERY: BY FACSIMILE: Wells Fargo Bank Minnesota, N.A. (860) 704-6219 213 Court Street, Suite 703 Attn: Corporate Trust Services Middletown, Connecticut 06457 CONFIRM BY TELEPHONE: Attention: Corporate Trust Services (860) 704-6216 Telephone: (860) 704-6216 Facsimile: (860) 704-6219 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. As set forth in the prospectus (the "Prospectus") dated _____ , 2002 of Block Communications, Inc. (the "Company") and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), this form or one substantially equivalent thereto must be used to accept the Company's offer (the "Exchange Offer") to exchange new 9 1/4% Senior Subordinated Notes due 2009 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for all of its outstanding 9 1/4% Senior Subordinated Notes due 2009 (the "Old Notes") if the Letter of Transmittal or any other documents required thereby cannot be delivered to the Exchange Agent, or Old Notes cannot be delivered or if the procedures for book-entry transfer cannot be completed prior to the Expiration Date. This form may be delivered by an Eligible Institution (as defined in the Prospectus) by mail or hand delivery or transmitted via facsimile to the Exchange Agent as set forth above. Capitalized terms used but not defined herein shall have the meaning given to them in the Prospectus. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to the Company upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Old Notes specified below pursuant to the guaranteed delivery procedures set forth in the section of the Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." By so tendering, the undersigned does hereby make, at and as of the date hereof, the representations and warranties of a tendering Holder (as defined in the Letter of Transmittal) of Old Notes set forth in the Letter of Transmittal. The undersigned understands that tenders of Old Notes may be withdrawn if the Exchange Agent receives at one of its addresses specified on the cover of this Notice of Guaranteed Delivery, prior to the Expiration Date, a facsimile transmission or letter which specifies the name of the person who deposited the Old Notes to be withdrawn and the aggregate principal amount of Old Notes delivered for exchange, including the certificate number(s) (if any) of the Old Notes, and which is signed in the same manner as the original signature on the Letter of Transmittal by which the Old Notes were tendered, including any signature guarantees, all in accordance with the procedures set forth in the Prospectus. All authority herein conferred or agreed to be conferred shall survive the death, incapacity, or dissolution of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. The undersigned hereby tenders the Old Notes listed below: PLEASE SIGN AND COMPLETE - -------------------------------------------------------------------------------- CERTIFICATE NUMBER OF OLD NOTES PRINCIPAL AMOUNT OF OLD (IF AVAILABLE) NOTES TENDERED - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SIGNATURE (S) OF REGISTERED HOLDER(S) OR AUTHORIZED SIGNATORY Name(s)________________________________________________________________________ (PLEASE TYPE OR PRINT) Title:_________________________________________________________________________ Address: ______________________________________________________________________ Area Code and Telephone No.: __________________________________________________ Date: _________________________________________________________________________ If Old Notes will be tendered by book-entry transfer, check the trust company below: / / The Depository Trust Company Depository Account No.: _______________________________________________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a participant in a recognized Signature Guarantee Medallion Program, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Old Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Old Notes into the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus, and any other required documents, all by 5:00 p.m., New York City time, on the third New York Stock Exchange trading day following the Expiration Date (as defined in the Prospectus). SIGN HERE Name of Firm: _________________________________________________________________ Authorized Signature:___________________________________________________________ Name (please type or print):___________________________________________________ Address:_______________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ Area Code and Telephone No.:___________________________________________________ Date:__________________________________________________________________________ DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF CERTIFICATES FOR OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. INSTRUCTIONS 1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at one of its addresses set forth on the cover hereof prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and all other required documents to the Exchange Agent is at the election and risk of the Holder but, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent. Instead of delivery by mail, it is recommended that Holders use an overnight or hand delivery service, properly insured. If such delivery is by mail, it is recommended that the Holder use properly insured, registered mail with return receipt requested. For a full description of the guaranteed delivery procedures, see the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." In all cases, sufficient time should be allowed to assure timely delivery. No Notice of Guaranteed Delivery should be sent to the Company. 2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF SIGNATURES. If this Notice of Guaranteed Delivery is signed by the Holder(s) referred to herein, then the signature must correspond with the name(s) as written on the face of the Old Notes, or on the security position listing for Old Notes held at DTC, without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a person other than the Holder(s) listed, this Notice of Guaranteed Delivery must be accompanied by a properly completed bond power signed as the name of the Holder(s) appear(s) on the face of the Old Notes without alteration, enlargement or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Notice of Guaranteed Delivery. 3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the Exchange Offer or the procedure for consenting and tendering as well as requests for assistance or for additional copies of the Prospectus, the Letter of Transmittal and this Notice of Guaranteed Delivery, may be directed to the Exchange Agent at the address set forth on the cover hereof or to your broker, dealer, commercial bank or trust company. EX-99.3 30 j9521601exv99w3.txt LETTER TO DTC PARTICIPANTS Exhibit 99.3 BLOCK COMMUNICATIONS INC. EXCHANGE OFFER IN RESPECT OF UNREGISTERED 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 ($175,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING ISSUED APRIL 18, 2002) ----------------------- To Holders: We are enclosing herewith the material listed below relating to the offer (the "Exchange Offer") by Block Communications, Inc. ("Block") to exchange up to $175,000,000 aggregate principal amount of its 9 1/4% Senior Subordinated Notes due 2009 which have been registered under the Securities Act of 1933, as amended (the "Securities Act") (the "exchange notes"), for any and all of the $175,000,000 aggregate principal amount of its outstanding unregistered 9 1/4% Senior Subordinated Notes due 2009 (the "old notes"), upon the terms and subject to the conditions set forth in the Prospectus dated , 2002 (the "Prospectus") and the related Letter of Transmittal. Enclosed herewith are copies of the following documents: 1. Prospectus dated , 2002; 2. Letter of Transmittal, including Guidelines for Certification of Taxpayer Identification Number; and 3. Instruction to Registered Holder from Beneficial Owner. In addition, attached as Exhibit A hereto is a Letter to Clients which may be sent to your clients for whose account you hold old notes in your name or in the name of your nominee, which shall accompany the Instruction to Registered Holder from Beneficial Owner for obtaining such client's instruction with regard to the Exchange Offer. - ------------------------------------------------------------------------------- WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2002 UNLESS EXTENDED BY BLOCK IN ITS SOLE DISCRETION. - ------------------------------------------------------------------------------ The Exchange Offer is not conditioned upon any minimum number of old notes being tendered. Pursuant to the Letter of Transmittal, each Holder (as defined in the Letter of Transmittal) of old notes will represent to Block that: - - the exchange notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving the exchange notes, whether or not the person is the Holder; - - neither the Holder nor any other recipient of the exchange notes (if different than the Holder) is engaged in, intends to engage in, or has any arrangement or understanding with any person to participate in, the distribution of the old notes or exchange notes; - - neither the Holder nor any other recipient is an "affiliate" of Block within the meaning of Rule 405 promulgated under the Securities Act; - - if the signatory is a broker-dealer, it has not entered into any arrangement or understanding with Block or any "affiliate" of Block within the meaning of Rule 405 promulgated under the Securities Act to distribute the exchange notes; and - - if the signatory is a broker-dealer, the signatory further represents and warrants that it will receive exchange notes for its own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities, and the signatory will deliver a prospectus meeting the requirements of the Securities Act (for which purposes, the delivery of the Prospectus, as the same may be hereafter supplemented or amended, shall be sufficient) in connection with any resale of exchange notes received in the Exchange Offer. By acknowledging that you will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange notes, you will not be deemed to admit that you are an "underwriter" within the meaning of the Securities Act. By its acceptance of the Exchange Offer, any broker-dealer that receives Exchange Notes pursuant to the Exchange Offer agrees to notify us in writing before using the Prospectus in connection with the resale or transfer of Exchange Notes. Any such broker-dealer will be required to acknowledge and agree that, upon receipt of notice from us of the happening of any event which makes any statement in the Prospectus untrue in any material respect or which requires the making of any changes in the Prospectus to make the statements in the Prospectus not misleading or which may impose upon us disclosure obligations that may have a material adverse effect on us, which notice we agree to deliver promptly to any such broker-dealer, such broker-dealer will suspend use of the Prospectus until we have notified such broker-dealer that delivery of the Prospectus may resume and have furnished to such broker-dealer copies of any amendment or supplement to the Prospectus. We have agreed in the registration rights agreement that for a period of 180 days after the effective date of the registration statement of which the Prospectus is a part we will make the Prospectus, as amended or supplemented, available to any broker-dealer who requests it in writing for use in connection with any such resale. The enclosed Instruction to Registered Holders from Beneficial Owner contains an authorization by the beneficial owners of the old notes for you to make the foregoing representations. Block will not pay any fee or commission to any broker or dealer or to any other person other than the exchange agents for the Exchange Offer. Block will pay all transfer taxes, if any, applicable to the exchange of old notes pursuant to the Exchange Offer, except as otherwise provided in the Prospectus under the caption "The Exchange Offer-Transfer Taxes." Any inquiries you may have with respect to the Exchange Offer may be addressed to, and additional copies of the enclosed materials may be obtained from, the Exchange Agent, Wells Fargo Bank Minnesota, National Association, in the manner set forth below. -2- EXCHANGE AGENT: WELLS FARGO BANK MINNESOTA, NATIONAL BANK 213 COURT STREET, SUITE 902 MIDDLETOWN, CT 06457 ATTN: CORPORATE TRUST SERVICES TELEPHONE: 860-704-6216 FACSIMILE: 860-704-6219 VERY TRULY YOURS, BLOCK COMMUNICATIONS INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF BLOCK OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF BLOCK OR THE EXCHANGE AGENT IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED HEREIN. -3- EXHIBIT A BLOCK COMMUNICATIONS INC. EXCHANGE OFFER IN RESPECT OF UNREGISTERED 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 ($175,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING ISSUED APRIL 18, 2002) -------------------- To Our Clients: We are enclosing herewith a Prospectus dated _______, 2002 (the "Prospectus") of Block Communications, Inc. ("Block") and the related Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by Block to exchange up to $175,000,000 aggregate principal amount of its 9 1/4% Senior Subordinated Notes due 2009 which have been registered under the Securities Act of 1933, as amended (the "Securities Act") (the "exchange notes"), for any and all of the $175,000,000 aggregate principal amount of its outstanding unregistered 9 1/4% Senior Subordinated Notes due 2009 (the "old notes"), upon the terms and subject to the conditions set forth in the Exchange Offer. - ----------------------------------------------------------------------------- PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [__________], 2002 UNLESS EXTENDED BY BLOCK IN ITS SOLE DISCRETION. - ------------------------------------------------------------------------------ The Exchange Offer is not conditioned upon any minimum number of old notes being tendered. We are the holder of record of old notes held by us for your account. A tender of such old notes can be made only by us as the record holder and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender old notes held by us for your account. We request instructions as to whether you wish to tender any or all of the old notes held by us for your account pursuant to the terms and conditions of the Exchange Offer. We also request that you confirm that we may make the representations contained in the Letter of Transmittal on your behalf. Pursuant to the Letter of Transmittal, each Holder (as defined in the Letter of Transmittal) of old notes will represent to Block that: - - the exchange notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving the exchange notes, whether or not the person is the Holder; - - neither the Holder nor any other recipient of the exchange notes (if different than the Holder) is engaged in, intends to engage in, or has any arrangement or understanding with any person to participate in, the distribution of the old notes or exchange notes; - - neither the Holder nor any other recipient is an "affiliate" of Block within the meaning of Rule 405 promulgated under the Securities Act; - - if the signatory is a broker-dealer, it has not entered into any arrangement or understanding with Block or any "affiliate" of Block within the meaning of Rule 405 promulgated under the Securities Act to distribute the exchange notes; and - - if the signatory is a broker-dealer, the signatory further represents and warrants that it will receive exchange notes for its own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities, and the signatory will deliver a prospectus meeting the requirements of the Securities Act (for which purposes, the delivery of the Prospectus, as the same may be hereafter supplemented or amended, shall be sufficient) in connection with any resale of exchange notes received in the Exchange Offer. By acknowledging that you will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange notes, you will not be deemed to admit that you are an "underwriter" within the meaning of the Securities Act. By its acceptance of the Exchange Offer, any broker-dealer that receives Exchange Notes pursuant to the Exchange Offer agrees to notify Block in writing before using the Prospectus in connection with the resale or transfer of Exchange Notes. Any such broker-dealer will be required to acknowledge and agree that, upon receipt of notice from Block of the happening of any event which makes any statement in the Prospectus untrue in any material respect or which requires the making of any changes in the Prospectus to make the statements in the Prospectus not misleading or which may impose upon Block disclosure obligations that may have a material adverse effect on Block, which notice Block agrees to deliver promptly to any such broker-dealer, such broker-dealer will suspend use of the Prospectus until Block has notified such broker-dealer that delivery of the Prospectus may resume and has furnished to such broker-dealer copies of any amendment or supplement to the Prospectus. Block has agreed in the registration rights agreement that for a period of 180 days after the effective date of the registration statement of which the Prospectus is a part Block will make the Prospectus, as amended or supplemented, available to any broker-dealer who requests it in writing for use in connection with any such resale. Very truly yours, -5- EX-99.4 31 j9521601exv99w4.txt LETTER TO BENEFICIAL HOLDERS Exhibit 99.4 BLOCK COMMUNICATIONS INC. INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF UNREGISTERED 9 1/4% SENIOR SUBORDINATED NOTES DUE 2009 ($175,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING ISSUED APRIL 18, 2002) -------------------- To Registered Holder: The undersigned hereby acknowledges receipt of the Prospectus dated , 2002 (the "Prospectus") of Block Communications, Inc. ("Block") and the related Letter of Transmittal, that together constitute the offer of Block (the "Exchange Offer") to exchange up to $175,000,000 aggregate principal amount of its 9 1/4% Senior Subordinated Notes due 2009 which have been registered under the Securities Act of 1933, as amended (the "Securities Act") (the "exchange notes"), for any and all of the $175,000,000 aggregate principal amount of its outstanding unregistered 9 1/4% Senior Subordinated Notes due 2009 (the "old notes"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder, as to the action to be taken by you relating to the Exchange Offer with respect to the old notes held by you for the account of the undersigned. The aggregate face amount of the old notes held by you for the account of the undersigned is (fill in amount): / / $_______ of 9 1/4% Senior Subordinated Notes due 2009. With respect to the Exchange Offer, the undersigned hereby instructs you (check appropriate box): / / TO TENDER the following old notes held by you for the account of the undersigned (insert principal amount of old notes to be tendered (if any)): / / $_______ of 9 1/4% Senior Subordinated Notes due 2009. / / NOT to TENDER any old notes held by you for the account of the undersigned. If the undersigned instructs you to tender old notes held by you for the account of the undersigned, it is understood that you are authorized to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representations and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations, that: - - the exchange notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving the exchange notes, whether or not the person is the undersigned; - - neither the undersigned nor any other recipient of the exchange notes (if different than the undersigned) is engaged in, intends to engage in, or has any arrangement or understanding with any person to participate in, the distribution of the old notes or exchange notes; - - neither the undersigned nor any other recipient is an "affiliate" of Block within the meaning of Rule 405 promulgated under the Securities Act; - - if the undersigned is a broker-dealer, it has not entered into any arrangement or understanding with Block or any "affiliate" of Block within the meaning of Rule 405 promulgated under the Securities Act to distribute the exchange notes; - - if the undersigned is a broker-dealer, the undersigned further represents and warrants that the undersigned broker-dealer will receive exchange notes for its own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities, and the undersigned will deliver a prospectus meeting the requirements of the Securities Act (for which purposes, the delivery of the Prospectus, as the same may be hereafter supplemented or amended, shall be sufficient) in connection with any resale of exchange notes received in the Exchange Offer. By acknowledging that you will deliver and by delivering a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange notes, you will not be deemed to admit that you are an "underwriter" within the meaning of the Securities Act. By its acceptance of the Exchange Offer, any broker-dealer that receives Exchange Notes pursuant to the Exchange Offer agrees to notify Block in writing before using the Prospectus in connection with the resale or transfer of Exchange Notes. The broker-dealer further acknowledges and agrees that, upon receipt of notice from Block of the happening of any event which makes any statement in the Prospectus untrue in any material respect or which requires the making of any changes in the Prospectus to make the statements in the Prospectus not misleading or which may impose upon Block disclosure obligations that may have a material adverse effect on Block, which notice Block agrees to deliver promptly to the broker-dealer, the broker-dealer will suspend use of the Prospectus until Block has notified the undersigned that delivery of the Prospectus may resume and has furnished to the broker-dealer copies of any amendment or supplement to the Prospectus. Block has agreed in the registration rights agreement that for a period of 180 days after the effective date of the registration statement of which the Prospectus is a part Block will make the Prospectus, as amended or supplemented, available to any broker-dealer who requests it in writing for use in connection with any such resale. SIGN HERE Name of beneficial owner(s) (please print):____________________________________ Name of beneficial owner(s) (please print):_____________________________________ Signature(s)___________________________________________________________________ Address:_______________________________________________________________________ Telephone Number:______________________________________________________________ Taxpayer Identification or Social Security Number:_____________________________ Date: _________________________________________________________________________ -2- -----END PRIVACY-ENHANCED MESSAGE-----