-----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, HvngseIxqdsS2yYH6pOVWPI9EzfqzGKK8HB9p/3PhAD28tk0+MfB0/nhod4KNC43 AMXmWZRpkCvjS7rhGjYRyA== 0000950130-97-002294.txt : 19970513 0000950130-97-002294.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950130-97-002294 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRANITE BROADCASTING CORP CENTRAL INDEX KEY: 0000839621 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 133458782 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19728 FILM NUMBER: 97600813 BUSINESS ADDRESS: STREET 1: 767 THIRD AVE 34TH FL CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128262530 MAIL ADDRESS: STREET 1: 767 THIRD AVE 34TH FL CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 FORM 10-Q (QUARTERLY REPORT) - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File Number 0-19728 GRANITE BROADCASTING CORPORATION (exact name of registrant as specified in its charter) DELAWARE 13-3458782 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 767 Third Avenue 34th Floor New York, New York 10017 Telephone number: (212) 826-2530 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ _______ ------ (APPLICABLE ONLY TO CORPORATE ISSUERS:) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Voting Common Stock, par value $.01 per share - 178,500 shares outstanding at March 31, 1997; Common Stock (Nonvoting), par value $.01 per share - 8,582,091 shares outstanding at March 31, 1997. PART I. FINANCIAL INFORMATION GRANITE BROADCASTING CORPORATION CONSOLIDATED BALANCE SHEET
March 31, December 31, ASSETS 1997 1996 ------ ------------- ------------- (Unaudited) Current assets: Cash and cash equivalents $ 1,379,969 $ 555,753 Accounts receivable, net 27,716,377 27,057,451 Film contract rights 7,411,219 6,276,660 Other assets 4,952,653 9,784,966 ------------ ------------ Total current assets 41,460,218 43,674,830 Property and equipment, net 34,644,844 33,562,019 Film contract rights and other noncurrent assets 3,956,218 4,284,578 Deferred financing fees, net 13,239,423 14,181,662 Intangible assets, net 530,850,164 356,860,115 ------------ ------------ $624,150,867 $452,563,204 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- Current liabilities: Accounts payable $ 3,228,490 $ 4,016,964 Accrued interest 10,545,686 6,071,378 Other accrued liabilities 5,440,423 4,497,534 Film contract rights and other current liabilities 15,448,384 9,578,365 ------------ ------------ Total current liabilities 34,662,983 24,164,241 Long-term debt 373,745,995 351,560,900 Film contract rights payable 4,180,786 3,383,428 Deferred tax and other noncurrent liabilities 30,837,953 31,102,272 Commitments Redeemable preferred stock 193,140,326 45,487,500 Stockholders' deficit: Common Stock: 41,000,000 shares authorized consisting of 1,000,000 shares of Voting Common Stock, $.01 par value, and 40,000,000 shares of Common Stock (Nonvoting), $.01 par value; 178,500 shares of Voting Common Stock and 8,582,091 shares of Common Stock (Nonvoting) (8,499,716 shares at December 31,1996) issued and outstanding 87,605 86,782 Additional paid-in capital 41,349,518 45,547,145 Accumulated deficit (50,653,486) (45,375,910) Less: Unearned compensation (2,313,938) (2,506,279) Note receivable from officer (886,875) (886,875) ------------ ------------ Total stockholders' deficit (12,417,176) (3,135,137) ------------ ------------ $624,150,867 $452,563,204 ============ ============
See accompanying notes. -1- GRANITE BROADCASTING CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31, ---------------------------- 1997 1996 ----------- ----------- (Unaudited) Net revenue $32,297,811 $28,629,635 Station operating expenses 19,796,761 17,517,927 Depreciation expense 1,375,476 1,473,380 Amortization expense 3,746,291 2,951,278 Corporate expense 1,473,754 990,014 Non-cash compensation expense 192,336 114,537 ----------- ----------- Operating income 5,713,193 5,582,499 Other expenses: Equity in net loss of investee 400,000 --- Interest expense, net 9,928,119 8,849,730 Other 191,696 125,633 ----------- ----------- Loss before income taxes and extraordinary item (4,806,622) (3,392,864) Provision for income taxes 150,150 61,089 ----------- ----------- Loss before extraordinary item (4,956,772) (3,453,953) Extraordinary loss on early extinguishment of debt (320,804) (3,510,152) ----------- ----------- Net loss $(5,277,576) $(6,964,105) =========== =========== Net loss attributable to common stockholders $(9,474,380) $(7,845,424) =========== =========== Per common share: Loss before extraordinary item $(1.05) $ (0.51) Extraordinary loss on early extinguishment of debt (0.04) (0.42) ----------- ----------- Net loss $(1.09) $ (0.93) =========== =========== Weighted average common shares outstanding 8,735,879 8,464,012
See accompanying notes. -2- GRANITE BROADCASTING CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT Three Months Ended March 31, 1997 (Unaudited)
Class A Common Additional Total Common Stock Paid-in Accumulated Unearned Note Receivable Stockholders' Stock (Nonvoting) Capital Deficit Compensation from Officer Deficit ---------- ----------- ----------- ------------- ------------- -------------- -------------- Balance at December 31, 1996 $1,785 $84,997 $45,547,145 $(45,375,910) $(2,506,279) $(886,875) $(3,135,137) Dividend on redeemable preferred stock (4,121,945) (4,121,945) Accretion of offering costs related to Cumulative Exchangeable Preferred Stock (74,859) (74,859) Issuance of Common Stock (Nonvoting) 823 (823) - Stock expense related to Management Stock Plan 192,341 192,341 Net loss (5,277,576) (5,277,576) ------- ------- ----------- ------------- ------------ ---------- ------------- Balance at March 31, 1997 $1,785 $85,820 $41,349,518 $(50,653,486) $(2,313,938) $(886,875) $(12,417,176) ======= ======= =========== ============= ============ ========== =============
See accompanying notes. -3- GRANITE BROADCASTING CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31, ------------------------------------ 1997 1996 ------------- ------------- (Unaudited) Cash flows from operating activities: Net loss $ (5,277,576) $ (6,964,105) Adjustments to reconcile net loss to net cash provided by operating activities: Amortization of intangible assets and deferred financing fees 3,746,291 2,951,278 Depreciation 1,375,476 1,473,380 Non-cash compensation expense 192,336 114,537 Extraordinary loss 320,804 3,510,152 Equity in net loss of investee 400,000 --- Change in assets and liabilities net of effects from acquisitions of stations: (Increase) decrease in accounts receivable (658,886) 3,553,454 Increase in accounts payable and accrued liabilities 4,497,915 1,073,716 Decrease in film contract rights and other noncurrent assets 1,848,637 740,983 Increase in film contract rights payable and other liabilities 3,311,182 734,423 Increase in other assets (1,058,641) (823,238) ------------- ------------- Net cash provided by operating activities 8,697,538 6,364,580 Cash flows from investing activities: Payment for acquisitions of stations, net of cash acquired (172,713,906) --- Investment in Datacast (250,000) --- Capital expenditures (657,289) (1,443,898) ------------- ------------- Net cash used in investing activities (173,621,195) (1,443,898) Cash flows from financing activities: Proceeds from bank financing 41,500,000 1,000,000 Proceeds from senior subordinated notes --- 109,450,000 Repayment of bank debt --- (107,000,000) Retirement of senior subordinated notes (19,405,000) --- Dividends paid (881,320) (881,319) Payment of deferred financing fees (208,307) (3,230,056) Proceeds from issuance of preferred stock 144,742,500 --- ------------- ------------- Net cash provided by (used in) financing activities 165,747,873 (661,375) ------------- ------------- Net increase in cash and cash equivalents 824,216 4,259,307 Cash and cash equivalents, beginning of period 555,753 95,123 ------------- ------------- Cash and cash equivalents, end of period $ 1,379,969 $ 4,354,430 ============= ============= Supplemental information: Cash paid for interest $ 5,444,816 $ 5,967,996 Income taxes paid 166,594 12,500 Non-cash capital expenditures 208,307 101,993 Non-cash dividends paid 3,240,625 ---
See accompanying notes. -4- GRANITE BROADCASTING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of presentation - -------------------------------- The accompanying unaudited consolidated financial statements include the accounts of Granite Broadcasting Corporation and its subsidiaries (the "Company"), have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three month period ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the Company's consolidated financial statements and notes thereto for the year ended December 31, 1996 which were included in the Company's Form 10-K dated March 21, 1997. All significant intercompany accounts and transactions have been eliminated. Data at and for the year ended December 31, 1996 are derived from the Company's audited consolidated financial statements. In the opinion of management, all adjustments of a normal recurring nature which are necessary for a fair presentation of the results for the interim periods have been made. Note 2 - Acquisitions - --------------------- On January 31, 1997, the Company acquired substantially all of the assets of WXON-TV, the WB affiliate serving Detroit, Michigan, for $175,000,000 and the assumption of certain liabilities. The Company financed the acquisition by borrowing approximately $27,500,000 under its credit agreement and issuing 150,000 shares of its 12-3/4% Cumulative Exchangeable Preferred Stock, par value $0.01 per share (the "New Preferred Stock"), at $1,000 per share. Dividends on the New Preferred Stock are payable semi-annually on April 1 and October 1 and may be paid, at the Company's option, either in cash or by the issuance of additional shares of New Preferred Stock. Note 3 - Long term debt - ----------------------- In March 1997, the Company purchased $19,405,000 face amount of its 9-3/8% Senior Subordinated Notes due December 1, 2005 (the "9-3/8% Notes") at a discount. As a result, the Company recognized an extraordinary loss, after the write-off of a portion of related deferred financing fees, of $320,804. Note 4 - Net loss per common share - ----------------------------------- Net loss per common share for the three months ended March 31, 1997 and 1996 is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. The inclusion of additional shares assuming the exercise of outstanding stock options and the conversion of certain preferred stock into Common Stock (Nonvoting) would have been antidilutive for both periods presented. In February 1997, the Financial Accounting Standards Board issued Statement No. 128 "Earnings Per Share" (FAS 128),which establishes new standards for computing and presenting earnings per share. FAS 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Management does not believe that the implementation of FAS 128 will have a material impact on the Company's per share amounts. -5- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction - ------------ The consolidated financial statements of the Company reflect increases between the three month periods ended March 31, 1997 and 1996 in substantially all line items. The principal reasons for such increases are the acquisition of WXON-TV on January 31, 1997 and the operation of WLAJ-TV under a time brokerage agreement which commenced in October 1996. It is anticipated that the Company's consolidated financial statements for the year ended December 31, 1997 will reflect significant increases in substantially all line items compared to the prior year due to the acquisition of WXON-TV and the operation of WLAJ-TV. The Company's revenues are derived principally from local and national advertising and, to a lesser extent, from network compensation for the broadcast of programming and revenues from studio rental and commercial production activities. The primary operating expenses involved in owning and operating television stations are employee salaries, depreciation and amortization, programming and advertising and promotion expenses. Numbers referred to in the following discussion have been rounded to the nearest thousand. The following table sets forth certain operating data for the three months ended March 31, 1997 and 1996:
Three months ended March 31, ---------------------------- 1997 1996 ------------- ------------- Operating income $ 5,713,000 $ 5,582,000 Add: Depreciation and amortization 5,122,000 4,425,000 Corporate expense 1,474,000 990,000 Non-cash compensation 192,000 115,000 ----------- ----------- Broadcast cash flow $12,501,000 $11,112,000 =========== ===========
"Broadcast cash flow" means operating income plus depreciation, amortization, corporate expense and non-cash compensation. The Company has included broadcast cash flow data because such data are commonly used as a measure of performance for broadcast companies and are also used by investors to measure a company's ability to service debt. Broadcast cash flow is not, and should not be used as, an indicator or alternative to operating income, net income or cash flow as reflected in the consolidated financial statements, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Three months ended March 31, 1997 and 1996 - ------------------------------------------ Net revenue for the three months ended March 31, 1997 totaled $32,298,000, an increase of $3,668,000 or 13 percent compared to $28,630,000 for the three months ended March 31, 1996. Of this increase, $3,581,000 was due to the inclusion of two months of operations of WXON-TV and three months of operations of WLAJ-TV. The remaining increase was primarily due to increased local and national advertising revenue and incremental revenue from the Company's various internet ventures, partially offset by lower political advertising revenue in a non-election year. -6- Station operating expenses totaled $19,797,000, an increase of $2,279,000 or 13 percent compared to $17,518,000 for the three months ended March 31, 1996. Of this increase, $1,367,000 was due to the inclusion of two months of operations of WXON-TV and three months of operations of WLAJ-TV. The remaining increase was primarily due to increased news and administrative expenses, partially offset by lower promotion expenses. Depreciation and amortization increased $697,000, or 16% during the three months ended March 31, 1997 compared to the same period a year earlier primarily due to the inclusion of two months of operations of WXON-TV. Corporate expense increased $484,000 or 49% during the three months ended March 31, 1997 compared to the same period a year earlier, primarily due to higher administrative costs associated with the expansion of the Company's corporate office to manage its expanded station group. Non-cash compensation expense increased $77,000 or 67% during the three months ended March 31, 1997 compared to the same period a year earlier due to the granting of additional awards payable in Common Stock (Nonvoting) to certain executive employees of the Company under the Management Stock Plan. The equity in net loss of investee of $400,000 for the three months ended March 31, 1997 resulted from the Company recognizing its pro rata share of the net loss of Datacast, LLC under the equity method of accounting. Net interest expense was $9,928,000 compared to $8,850,000 a year earlier, an increase of 12 percent, primarily due to the fact that the Company's 9-3/8% Notes, which were issued on February 22, 1996, were outstanding for a full quarter. Loss before extraordinary item for the three months ended March 31, 1997 totaled $4,957,000 compared to a loss before extraordinary item of $3,454,000 for the same period a year earlier, an increase of $1,503,000. The increase was primarily due to the changes in the line items discussed above. During the three months ended March 31, 1997, the Company purchased $19,405,000 face amount of its 9-3/8% Notes at a discount and replaced it with borrowings under its credit agreement which bear interest at a lower rate, thereby reducing its cost of borrowing. In conjunction with the repurchase of this debt, the Company recognized an extraordinary loss, after the write-off of a portion of related deferred financing fees, of $321,000. During the three months ended March 31, 1996, the Company repaid all then outstanding term loan and revolving credit borrowings under its then existing bank credit agreement using the proceeds from the sales of its 9-3/8% Notes. In connection with the repayment of the term loan, the Company incurred an extraordinary loss on the early extinguishment of debt of $3,510,000 related to the write-off of deferred financing fees. Liquidity and Capital Resources - ------------------------------- In October 1996, the Company entered into agreements with the owner of WLAJ-TV, the ABC affiliate serving Lansing, Michigan, including a time brokerage agreement pursuant to which the Company operates WLAJ-TV and an agreement to acquire substantially all the assets used in the operation of WLAJ-TV for approximately $19.4 million in cash and the assumption of certain liabilities. The Company anticipates financing the acquisition of WLAJ-TV with borrowings under its credit agreement's revolving working capital facility. In connection with these agreements, the Company agreed to provide a loan guarantee of up to $12,000,000 in favor of the owner of WLAJ-TV. On January 31, 1997, the Company acquired substantially all of the assets of WXON-TV for $175,000,000 and the assumption of certain liabilities. The Company financed the acquisition through the sale of 150,000 shares of its New Preferred Stock at $1,000 per share and borrowings of $27,500,000 under its credit agreement. -7- The Company's existing credit agreement allows for revolving credit borrowings of $200,000,000 and permits borrowings of up to $300,000,000 in the aggregate. The revolving credit facility can be used to fund future acquisitions of broadcast stations and for general corporate purposes. As of May 10, 1997, subject to compliance with financial covenants, the Company had $137,000,000 of the revolving credit facility borrowings available under the credit agreement available for acquisitions and working capital purposes. Cash flows provided by operating activities were $8,698,000 during the three months ended March 31, 1997 compared to cash flows provided by operating activities of $6,365,000 during the three months ended March 31, 1996, an increase of $2,333,000 or 37 percent. The increase was primarily due to higher broadcast cash flow and a decrease in net operating assets offset, in part, by higher cash interest expense. Cash flows used in investing activities were $173,621,000 during the three months ended March 31, 1997 compared to $1,444,000 during the three months ended March 31, 1996. Cash flows used in investing activities during the three months ended March 31, 1997 related primarily to the acquisition of WXON-TV while cash flows used in investing activities during the three months ended March 31, 1996 were related entirely to capital expenditures. Cash flows provided by financing activities were $165,748,000 during the three months ended March 31, 1997 compared to cash flows used in financing activities of $661,000 during the three months ended March 31, 1996. The increase resulted primarily from the issuance of the 12-3/4% Cumulative Exchangeable Preferred Stock, an increase in net borrowings and a decrease in payments for deferred financing fees. The Company believes that internally generated funds from operations and borrowings under its credit agreement's revolving working capital facility, if necessary, will be sufficient to satisfy the Company's cash requirements for its existing operations for the next twelve months and for the foreseeable future thereafter. -8- PART II ------- OTHER INFORMATION ----------------- ITEM 1. Legal Proceedings ----------------- Not applicable ITEM 2. Changes in Securities --------------------- Not applicable ITEM 3. Defaults upon Senior Securities ------------------------------- Not applicable ITEM 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- Not applicable ITEM 5. Other Information ----------------- Not applicable ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- a. Exhibits -------- 10.1 Granite Broadcasting Corporation Stock Option Plan, as amended through April 29, 1997. 10.31 Non-Employee Directors' Stock Plan of Granite Broadcasting Corporation dated April 29, 1997. 11. Statement of Computation of Per Share Earnings 27. Financial Data Schedule b. Reports on Form 8-K ------------------- 1. Current Report on Form 8-K filed January 15, 1997, reporting the announcement by Granite Broadcasting Corporation of its intention to commence a private offering of securities to raise funds to consummate the acquisition of WXON-TV. No financial statements were filed at such time. 2. Current Report on Form 8-K filed February 7, 1997, announcing the completion of the acquisition by Granite Broadcasting Corporation of substantially all of the assets used in the operation of WXON-TV. Pro Forma Condensed Consolidated Financial Statements (unaudited) were filed on such date. 3. Current Report on Form 8-K/A filed April 14, 1997, amending that certain Current Report on Form 8-K filed February 7, 1997. Audited financial statements related to WXON-TV were filed on such date. -9- SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed by an officer and the principal accounting officer on its behalf by the undersigned thereunto duly authorized. GRANITE BROADCASTING CORPORATION Registrant Date May 12, 1997 /s/ W. DON CORNWELL ------------ ------------------------------------- (W. Don Cornwell) Chief Executive Officer Date May 12, 1997 /s/ LAWRENCE I. WILLS ------------ ------------------------------------- (Lawrence I. Wills) Vice President, Finance and Controller (Principal Accounting Officer) EX-10.1 2 STOCK OPTION PLAN EXHIBIT 10.1 GRANITE BROADCASTING CORPORATION STOCK OPTION PLAN -------------------------------- AS AMENDED THROUGH APRIL 29, 1997 1. PURPOSE. The purpose of this Stock Option Plan (the "Plan"), ------- adopted by the Board of Directors of Granite Broadcasting Corporation (the "Company") on April 17, 1990 and amended on May 10, 1990, November 8, 1990, September 20, 1991, April 27, 1993, July 25, 1995 and July 24, 1996, is to provide a means by which certain employees and officers of the Company and its Affiliates (as defined below) may be given an opportunity to purchase non-voting common stock of the Company. Options that may be granted under this Plan include (a) Incentive Stock Options as such term is defined in Section 422A of the Internal Revenue Code of 1986, as amended (hereinafter the "Code"), and (b) Nonqualified Stock Options, which would not constitute Incentive Stock Options. The Plan is intended to advance the interests of the Company by encouraging stock ownership on the part of certain employees and officers, by enabling the Company (and its Affiliates) to secure and retain the services of highly qualified persons, and by providing employees and officers with an additional incentive to advance the success of the Company (and its Affiliates). For purposes of this Plan, Affiliate shall mean any parent or subsidiary corporation of the Company. The term "parent corporation" shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, on the date of grant of the option in question, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. The term "subsidiary corporation" shall mean any corporation in an unbroken chain of corporations beginning with the Company if, on the date of grant of the option in question, each of the corporations other than the last corporation in the chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Affiliation shall refer to a group of Affiliates. 2. STOCK SUBJECT TO OPTION. Subject to adjustment as provided in ----------------------- Sections 4(i) and (j) hereof, options may be granted by the Company from time to time to purchase up to an aggregate of 3,000,000 shares of the Company's authorized but unissued Class B Nonvoting Common Stock, par value $0.01 per share (the "Common Stock"). Shares that by reason of the expiration of an option or otherwise are no longer subject to purchase pursuant to an option granted under the Plan may be again available for issuance pursuant to options under the Plan. 3. PARTICIPANTS. Persons eligible to be granted Incentive Stock ------------ Options or Nonqualified Stock Options under the Plan shall be limited to key employees of the Company (or its Affiliates) (including employees who are also officers or directors, but not including directors who are not also employees) who have substantial responsibility in the direction and management of the Company or an Affiliate, as indicated by the action of the Stock Option Committee or the Compensation Committee (as such terms are defined in Section 5) in granting an option to such employee. 4. TERMS AND CONDITIONS OF OPTIONS. The Stock Option Committee may ------------------------------- grant options from time to time pursuant to the Plan. Such options shall be evidenced by written stock option agreements signed by the Optionee and by the President of the Company or by any member of the Stock Option Committee (the "Stock Option Agreements"). The Stock Option Agreements shall be subject to the terms and conditions of the Plan, shall specify whether the options are Incentive Stock Options or Nonqualified Stock Options and shall contain such other provisions as the Stock Option Committee in its discretion shall deem appropriate. Shares of Common Stock that may be purchased under an option granted pursuant to this Plan shall sometimes hereinafter be referred to as "Option Shares," and an employee of the Company to whom options are granted shall sometimes hereinafter be referred to as an "Optionee." (a) OPTION PRICE. The option price for each Incentive Stock Option ------------ share shall not be less than the fair market value of a share of the Common Stock on the date the option is granted. The option price for each Nonqualified Stock Option share shall be specified by the Stock Option Committee at the time such option is granted, and may be less than, equal to or greater than the fair market value of the shares of Common Stock on the date such option is granted. The option price may include amounts that are required to be paid by the Optionee, as a down payment of the option price, prior to his or her exercise of the option. In its sole discretion, the Stock Option Committee may provide that the price at which shares may be so purchased shall be more than such fair market value on the date of grant. However, notwithstanding the foregoing, the option price for Incentive Stock Options granted to any employee owning stock (including any attribution of stock ownership under Section 425(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Affiliates on the date such option is granted (hereinafter a "10% Shareholder"), shall be at least 110% of the fair market value of the Common Stock on the date the option is granted. The Stock Option Committee shall, in good faith, determine the fair market value of the Common Stock on the date the option is granted, and the fair market value may be more or less than the book value of the Common Stock. -2- (b) TERM OF OPTION. Unless otherwise specifically provided in an -------------- Optionee's Stock Option Agreement, each option granted under this Plan shall expire no later than ten years after the date the option is granted except under the circumstances described in Sections 4(g), 4(j)(2), 4(j)(3) and 4(k), options may expire and terminate at an earlier date than provided in this paragraph. If an Incentive Stock Option is granted to an employee who is a 10% Shareholder, then, for purposes of such Incentive Stock Option the word "five" shall be substituted for the word "ten" in the immediately preceding sentence. The term of Nonqualified Stock Options granted hereunder shall be determined by the Stock Option Committee in its discretion. (c) EXERCISE OF OPTION. Except as otherwise specifically provided in ------------------ this Plan, each option will be exercisable according to the provisions of an Optionee's Stock Option Agreement. All options (whenever granted) of an Optionee shall become immediately exercisable upon the (i) death or disability (as defined in Section 4(g)(2) below) of such Optionee; and (ii) the occurrence of a "Change of Control"; for purposes hereof, a "Change of Control" shall occur on the date on which W. Don Cornwell no longer owns, beneficially, in excess of 50% of the issued and outstanding Class A Common Stock of the Company. (d) MANNER OF EXERCISE. Shares of Common Stock purchased upon ------------------ exercise of options shall at the time of purchase be paid for in full. To the extent that an option is exercisable, options may be exercised from time to time by written notice to the Company stating the full number of shares with respect to which the option is being exercised, accompanied by full payment (or the balance due) of the exercise price, for the shares being purchased, by certified or official bank check or the equivalent thereof acceptable to the Company. When and if shares of the Company's Common Stock are traded on either the New York or American Stock Exchanges or in the NASDAQ/National Market System, the payment of the exercise price may be in the form of Common Stock, the value of which shall be deemed to be the closing price on the last trading date prior to date on which the shares are tendered for payment of the exercise price. The notice required by this paragraph shall be delivered in person to the President of the Company, or shall be sent by registered or certified mail, return receipt requested, to the President of the Company, in which case delivery shall be deemed made on the date such notice is deposited in the mail. The Company shall, without charge of any transfer or issue tax to the Optionee (or other person entitled to exercise the option), deliver to the Optionee (or to such other person) at the principal office of the Company, or such other place as shall be mutually agreed upon, a certificate or certificates for the shares -3- being purchased; provided, however, that the time of delivery may be -------- ------- postponed by the Company for such period as may be required for it with reasonable diligence to comply with any requirements of law. Pursuant to Section 6 hereof, the Company may require that, at the time of exercise, each Optionee: (i) deliver an investment representation in form acceptable to the Company and its counsel that the shares are being acquired for investment and not with a view to their distribution, and (ii) enter into any applicable stockholders' agreement with the Company and other stockholders of the Company, as deemed necessary by the Stock Option Committee. (e) LIMITATION ON AMOUNT. No employee shall be granted Incentive -------------------- Stock Options which, when first exercisable during any calendar year (combined with all other incentive stock option plans of the Company and its Affiliates), will permit such employee to purchase stock that has an aggregate fair market value (determined as of the time the option is granted) of more than $100,000. (f) NON-ASSIGNABILITY OF OPTION RIGHTS. Options under the Plan will ---------------------------------- not be transferable by an Optionee except by will or the laws of descent and distribution. During the lifetime of the Optionee, the Option is exercisable only by the Optionee or, in the event of the Optionee's incapacity, by his duly authorized legal representative. Notwithstanding the foregoing, the Committee may, in its discretion, authorize all or a portion of the Option (other than Incentive Stock Options) granted to a Optionee to be on terms which permit transfer by such Optionee to (i) the spouse, children or grandchildren of such Optionee ("Immediate Family Members"), (ii) a trust or trusts for exclusive benefit of such Immediate Family Members, or (iii) a partnership or limited liability company in which such Immediate Family Members are the only partners or members, as applicable; provided, that (x) there may be no consideration for any such -------- ---- transfer, (y) the Option agreement pursuant to which such Options are granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (z) subsequent transfers of transferred Options shall be prohibited except those occurring by laws of descent and distribution. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer; provided, that -------- ---- for purposes of the Plan, the term Optionee shall be deemed to refer to the transferee; provided, however, that, the Option shall continue to be -------- ------- ---- exercisable and shall terminate in accordance with its terms as if the transferor (Non-Employee Director) remained the holder of the Option. Options under the Plan may not be pledged, mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the claims of creditors. -4- (g) TERMINATION OF EMPLOYMENT. ------------------------- (1) In the event that Optionee's employment by the Company and its Affiliates shall terminate for any reason, with or without cause, and the provisions of Sections 4(g)(2), 4(g)(3), 4(j) and 4(k) do not apply, (i) the option for those shares for which such option was exercisable pursuant to this plan immediately prior to such termination of employment shall terminate thirty (30) days following such termination of employment, unless specifically provided otherwise in such Optionee's Stock Option Agreement, and (ii) the option for those shares for which the option was not exercisable immediately prior to such termination of employment shall terminate on the date of termination of employment. In the event that an option terminates pursuant to the preceding sentence, any amounts paid as a down payment on the exercise of such option (as provided in Section 4(a)) shall be returned to the Optionee with respect to shares for which the option was not exercisable on the date of termination of employment and shall not be returned to the Optionee with respect to shares for which the option was exercisable on the date of termination. For purposes of this Section, whether an authorized leave of absence or absence on military or government service shall constitute severance of the employment relationship between the Company (or an Affiliate) and the Optionee shall be determined by the Stock Option Committee in its sole discretion at the time thereof. (2) In the event that Optionee shall die while in the employment of the Company (or an Affiliate) or if Optionee's employment by the Company (or an Affiliate) is terminated because Optionee has become disabled within the meaning of Section 22(e)(3) of the Code, the Optionee, his personal representative, estate or beneficiary shall have the right at any time within twelve months after such date of death or termination due to disability to exercise such Optionee's options. Notwithstanding the foregoing, the provisions of this Section 4(g)(2) shall be subject to the provisions of Sections 4(b), 4(j)(3) and 4(k), which may terminate the option earlier. (3) In the event that any termination of employment by an Optionee is due to retirement with the consent of his employer, the Optionee shall have the right to exercise his option at any time within three months after such retirement to the extent the option was exercisable immediately prior to retirement. Notwithstanding the foregoing, the provisions of this Section 4(g)(3) shall be subject to the provisions of Sections 4(b), 4(j)(3) and 4(k), which may terminate the option earlier. -5- (h) CHANGES TO CAPITAL STRUCTURE; NEED FOR ADJUSTMENT. The existence ------------------------------------------------- of outstanding options shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. Except as otherwise expressly provided in Sections 4(i) and 4(j), the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect or necessitate any adjustment to the number, class or price of shares of stock then subject to outstanding options. (i) ADJUSTMENT OF OPTIONS ON RECAPITALIZATION. The aggregate number ----------------------------------------- of shares of Common Stock for which options may be granted to persons participating under the Plan, the number of shares covered by each outstanding option, and the exercise price per share for each such option shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock of the Company resulting from the subdivision or consolidation of shares, or the payment of a stock dividend after the effective date of this Plan, or other increase (excluding any increase due to conversion of any other outstanding securities of the Company) or decrease in such shares effected without receipt of consideration by the Company, such that each Optionee remains entitled upon exercise of his option(s) to the same total number and class of shares as he would have received for the same aggregate consideration had he exercised his options in full immediately prior to the event requiring the adjustment; provided, however, that any options to purchase fractional -------- ------- shares resulting from any such adjustment shall be eliminated; and provided, further, that any such adjustment shall be made in a manner so as -------- ------- not to constitute a "modification" as defined in Section 425(h)(3) of the Code. (j) ADJUSTMENT OF OPTIONS UPON REORGANIZATION. ----------------------------------------- (1) If the Company shall at any time merge or consolidate with or into another corporation and (A) the Company is not the surviving entity, or (B) the Company is the -6- surviving entity and the shareholders of Company Common Stock are required to exchange their shares for property and/or securities, the holder of each option will thereafter receive, upon the exercise thereof, the securities and/or property to which a holder of the number of shares of Common Stock then deliverable upon the exercise of such option would have been entitled upon such merger or consolidation, and the Company shall take such steps in connection with such merger or consolidation as may be necessary to assure that the provisions of this Plan shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or property thereafter deliverable upon the exercise of such option; provided, however, that, -------- ------- ---- except as provided in the following sentence, no option exercise date shall be accelerated in contemplation of such action. In the event of an Optionee's termination of employment without cause within twelve (12) months after the date of a merger or consolidation described in this paragraph, the Optionee shall have the right to exercise all his then outstanding options, whether or not then otherwise exercisable, within the thirty (30) day period following his termination of employment. For purposes of this paragraph, termination without cause shall mean (a) termination other than for (i) the Optionee's material failure to observe or perform any of the requirements of his position with the Company, or it Affiliate (or successor by merger or consolidation), or (ii) the Optionee's grossly negligent or willful and continued misconduct or action on the part of the Optionee that is damaging or detrimental to the operations of the Company or its Affiliate (or successor by merger or consolidation), or (b) resignation by the Optionee within thirty (30) days after a material diminution in duties or compensation of the Optionee. A sale of all or substantially all of the assets of the Company for a consideration (apart from the assumption of obligations) consisting primarily of securities shall be deemed a merger or consolidation for the foregoing purposes. Notwithstanding the foregoing, the provisions of this Section 4(j)(1) shall be subject to Section 4(b). (2) The resulting Affiliation following any reorganization may at any time, in its sole discretion, tender substitute options as it may deem appropriate. However, in no event may the substitute options entitle an Optionee under the Plan to any fewer shares (or at any greater aggregate price) or any less other property than the Optionee would be entitled to under the immediately preceding paragraph upon an exercise of the options held prior to the substitution of the new option. Any substitution made under this Section 4(j)(2) shall be made in a manner so as not to constitute a "modification" as defined in Section 425(h)(3) of the Code. -7- (3) With respect to options to acquire stock of an Affiliate of Optionee's then present employer, if Optionee's then present employer ceases to be affiliated with the other member(s) of the Affiliation, then the Affiliation shall give the Optionee written notice of such fact within thirty (30) days after the date on which Optionee's employer ceases to be an Affiliate and the option shall expire and terminate thirty (30) days after the receipt of such notice by Optionee. Notwithstanding the foregoing, the provisions of this Section 4(j)(3) shall be subject to Section 4(b) and shall be subject to Section 4(k) if the Optionee receives notice under Section 4(k) at a time earlier than the notice provided for herein. (k) DISSOLUTION OF ISSUER OF OPTION STOCK. In the event of the ------------------------------------- proposed dissolution or liquidation of the Company, the options granted hereunder shall terminate as of a date to be fixed by the Stock Option Committee; provided, that, not less than thirty (30) days' prior written -------- ---- notice of the date so fixed shall be given to the Optionee, and the Optionee shall have the right, during the period of thirty (30) days preceding such termination, to exercise his option. Notwithstanding the foregoing, the provisions of this Section shall be subject to Section 4(b) and shall be subject to Section 4(j)(3) if the Optionee receives notice under Section 4(j)(3) at a time earlier than the notice provided for herein. (l) SUBSTITUTION OPTIONS. Options may be granted under this Plan from -------------------- time to time in substitution for stock options held by employees of other corporations who become employees of the Company or an Affiliate as a result of a merger or consolidation of the employing corporation with the Company or an Affiliate, or the acquisition by the Company or an Affiliate of the assets of the employing corporation, or the acquisition by the Company or an Affiliate of at least 50% of the issued and outstanding stock of the employing corporation as the result of which it becomes an Affiliate of the Company. The terms and conditions of the substitute options so granted may vary from the terms and conditions set forth in this Plan to such extent as the Stock Option Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the stock options in substitution for which they are granted, but with respect to stock options which are Incentive Stock Options, no such variation shall be such as to affect the status of any such substitute option as an "incentive stock option" under Section 422A of the Code. (m) RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a ----------------------- shareholder with respect to any shares of Common Stock of the Company held under option until the date of exercise of the option with respect to such shares. Except as provided in Section 4(h), no adjustment shall be made for -8- dividends or other rights for which the record date is prior to the date of exercise. (n) TIME OF GRANTING OPTIONS. The grant of an option shall occur only ------------------------ when a written option agreement shall have been duly executed and delivered by or on behalf of the Company and the employee to whom such option shall be granted. (o) STOCK LEGEND. Certificates evidencing shares of the Company's ------------ Common Stock purchased upon the exercise of Incentive Stock Options issued under the Plan shall be endorsed with a legend in substantially the following form: The shares evidenced by this certificate may not be sold or transferred prior to _______________, 19___, in the absence of a written statement from Granite Broadcasting Corporation (the "Company") to the effect that the Company is aware of the fact of such sale or transfer. The blank contained in such legend shall be filled in with the date that is the later of: (1) one year and one day after the date of exercise of such Incentive Stock Option or (2) two years and one day after the date of grant of such Incentive Stock Option. Upon delivery to the Company, at its principal executive office, of a written statement to the effect that such shares have been sold or transferred prior to such date, the Company does hereby agree to promptly deliver to the transfer agent for such shares a written statement to the effect that the Company is aware of the fact of such sale or transfer. The Company may also require the inclusion of any additional legend which may be necessary or appropriate. 5. ADMINISTRATION. -------------- (a) Subject to Section 5(f) hereof, the Plan shall be administered by a Stock Option Committee (the "Stock Option Committee") consisting of not less than three (3) members of the Board of Directors, to be appointed by the Board of Directors of the Company. The Board of Directors may, from time to time, remove members from or add members to the Stock Option Committee. Vacancies in the Stock Option Committee, however caused, shall be filled by the Board of Directors. The Stock Option Committee shall select one of its members as chairman who shall preside at all of its meetings, and shall designate a secretary (who may or may not be a Stock Option Committee Member) to keep the minutes of the proceedings and all records, documents, and data pertaining to the administration of the Plan. The Stock Option Committee shall hold meetings at such times and places as it may determine. Subject to the provisions of the Plan and to policies -9- determined by the Board of Directors, the Stock Option Committee may make such rules and regulations for the conduct of its business as it shall deem advisable. A majority of the Stock Option Committee shall constitute a quorum. All actions of the Stock Option Committee shall be taken by a majority of the members present at such meeting. Any action may be taken by a written instrument signed by a majority of the members, and action so taken shall be fully as effective as if it had been taken by a vote of the majority of the members at a meeting duly called and held. The Stock Option Committee and Compensation Committee (as defined below) members shall be eligible to be granted options; provided, that, a Stock Option -------- ---- Committee member shall abstain from voting with respect to the grant of any option to such Stock Option Committee member. (b) Subject to the express terms and conditions of the Plan, including Section 5(f) hereof, the Stock Option Committee shall have full power to grant options under the Plan, to construe or interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations necessary or advisable for its administration. Any such determinations by a majority of the whole Stock Option Committee shall be final and binding. (c) Subject to the provisions of Sections 3, 4 and 5(f) hereof, the Stock Option Committee may, from time to time, determine which employees of the Company or its Affiliates shall be granted options under the Plan, the type of option granted, the number of option shares subject to each option, the time or times at which options shall be granted and be exercisable, the exercise price thereof, and the timing of payment of the exercise price, and the Stock Option Committee may grant such options under the Plan. (d) The Stock Option Committee or the Compensation Committee, as the case may be, shall report to the Board of Directors the names of employees granted options, the number of option shares subject to, and the terms and conditions of, each option. (e) No member of the Board of Directors, the Stock Option Committee or the Compensation Committee shall be liable for any action, determination or omission of any other member of the Stock Option Committee or for any action, determination, or omission on his own part, including but not limited to the exercise of any power or discretion given to him under the Plan, except those resulting from his gross negligence or willful misconduct. For this purpose, no action taken in good faith shall constitute gross negligence or willful misconduct. -10- (f) Notwithstanding anything herein to the contrary, with respect to any participants in the Plan who, by virtue of such person's relationship to the Company, are subject to Section 16(a) and 16(b) of the Securities Exchange Act of 1934, as amended, in lieu of the Stock Option Committee, the Compensation Committee of the Board of Directors (the "Compensation Committee") shall govern all decisions as to such person's rights to participate, the number of and terms of options granted to them, and all respects of the administration of the Plan with respect to them and shall have and exercise all such authority with respect to such persons as is otherwise granted to the Stock Option Committee hereunder. 6. REQUIREMENTS OF LAW. The Company shall not be required to sell or ------------------- issue any shares under any option if the issuance of such shares shall constitute a violation by the Optionee or the Company of any provision of any law, statute, or regulation of any governmental authority whether it be Federal or State. Unless a registration statement is in effect under the Securities Act of 1933, as amended (the "Act") with respect to the shares of Common Stock covered by an option, the Company shall not be required to issue shares upon exercise of any option (i) unless the Stock Option Committee has received evidence satisfactory to it to the effect that the holder of such option is acquiring such shares for investment and not with a view to the distribution thereof or (ii) unless an opinion of counsel to the Company has been received by the Company, in a form and substance which is deemed acceptable by the Stock Option Committee, to the effect that a registration statement is not required. Any determination in this connection by the Stock Option Committee shall be final, binding and conclusive. In the event the shares issuable on exercise of an option are not registered under the Act, the Company may imprint the following legend or any other legend which counsel for the Company considers necessary or advisable to comply with the Act: "The shares of stock represented by this certificate have not been registered under the Securities Act of 1933 or under the securities laws of any State and may not be sold or transferred except pursuant to an effective registration statement or upon receipt by the Corporation of any opinion of counsel satisfactory to the Corporation, in form and substance satisfactory to the Corporation, that registration is not required for such sale or transfer." The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Act and, in the event any shares are so registered, the Company may remove any legend on certificates representing such shares. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an option or the issuance of shares pursuant -11- thereto to comply with any law or regulation of any governmental authority. 7. INTENTION OF PLAN. Incentive Stock Options granted pursuant to this ----------------- Plan are intended to qualify as Incentive Stock Options within the meaning of Section 422A of the Code, and the terms of this Plan and options granted hereunder shall be so construed; provided, however, that nothing in this Plan -------- ------- ---- shall be interpreted as a representation, guarantee or other undertaking on the part of the Company that any options granted pursuant to this Plan are, or will be, determined to be incentive stock options, within the meaning of the Code. 8. USE OF PROCEEDS. The proceeds from the sale of Common Stock pursuant --------------- to the exercise of options, including any down payments provided in Section 4(a), will be used for the Company's general corporate purposes. 9. INDEMNIFICATION. Each member of the Stock Option Committee, the --------------- Compensation Committee and the Board of Directors shall be indemnified and held harmless by the Company for all loss, liabilities, costs and expenses (including the amount of judgments and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by him in connection with or arising out of any action, suit, or proceeding regarding administration of the Plan in which he may be involved by reason of his being or having been a member of such committee or the Board of Directors, whether or not he continues to be a member of such committee or the Board of Directors at the time of incurring such loss, liabilities, costs and expenses. Notwithstanding any of the foregoing, no member of such committee or the Board of Directors shall be entitled to such indemnification from the Company for any loss, liabilities, costs and expenses incurred by him (a) in respect of matters as to which he shall be finally adjudged in any such action, suit or proceeding to have been guilty of gross negligence or willful misconduct in the performance of his duty as a member of such committee or the Board of Directors, or (b) in respect of any matter in which any settlement is effected, to an amount in excess of the amount approved by the Company on the advice of its legal counsel. Moreover, no right of indemnification under the provisions set forth herein shall be available to or enforceable against the Company by any member of such committee and the Board of Directors unless, within sixty (60) days after institution of any such action, suit or proceeding, he shall have offered the Company, in writing, the opportunity to handle and defend the same at its own expense. The foregoing right of indemnification shall inure to the benefit of the heirs, executors or administrators of each such member of such committee and the Board of Directors and shall be in addition to all other rights to which the member of such committee and the Board of Directors may be entitled as a matter of law, contract or otherwise. -12- 10. WITHHOLDING. The Company's obligation to deliver shares upon the ----------- exercise of any option hereunder shall be subject to applicable federal, state and local tax withholding requirements. 11. NO OBLIGATION OF EMPLOYMENT. Nothing in this Plan or contained in an --------------------------- option granted hereunder or in any Stock Option Agreement shall govern the employment rights and duties between the Optionee and the Company or Affiliate. Neither this Plan, nor any grant or exercise pursuant thereto, shall constitute an employment agreement among such parties. The granting of any option hereunder shall not impose upon the Company or an Affiliate any obligation to employ or continue to employ any Optionee. The right of the Company to terminate the employment of any officer or other employee shall not be diminished or affected by reason of a grant or the existence of an option hereunder. 12. EFFECTIVE DATE AND TERMINATION. ------------------------------ (a) The effective date of the Plan is April 1, 1990; provided, that, -------- ---- within one year of that date, the Plan shall have been approved by a majority of the holders of the outstanding voting stock of the Company. (b) The Plan shall terminate ten years after the effective date of the Plan and no options shall be granted pursuant to the Plan thereafter. The Board of Directors may terminate the Plan at any time prior to ten years after the effective date of the Plan. Termination of the Plan shall not alter or impair, without the consent of the Optionee, any of the rights or obligations and any option theretofore granted under the Plan. 13. AMENDMENTS. The Board of Directors of the Company may, from time to ---------- time, alter, amend, suspend, or discontinue the Plan, or alter or amend any and all option agreements granted thereunder; provided, however, that no such action -------- ------- ---- of the Board of Directors, without the approval of a majority of the holders of shares of the Company then entitled to vote, may alter the provisions of the Plan so as to: (a) Decrease the minimum option price for Incentive Stock Options; (b) Extend the term of the Plan beyond ten years or the maximum term of the options granted beyond ten years; (c) Withdraw the administration of the Plan from the Stock Option Committee; (d) Change the class of eligible employees, officers and directors; or -13- (e) Increase the aggregate number of shares which may be issued pursuant to the provisions of the Plan; Notwithstanding the foregoing, (i) the Board of Directors may amend the Plan in any respect in order to qualify the Incentive Stock Options granted pursuant hereto as Incentive Stock Options as defined in Section 422A of the Code, (ii) no amendment may be made to an outstanding option agreement to the detriment of the Optionee without the Optionee's consent, and (iii) no amendment may be made to this Plan (or any option granted hereunder without the consent of the Optionee) which would constitute a modification of any Incentive Stock Option outstanding under Section 425(h) of the Code or which would adversely affect an outstanding Incentive Stock Option's status as an Incentive Stock Option under Section 422A of the Code. -14- EX-10.31 3 NON EMPLOYEE DIRECTORS STOCK PLAN EXHIBIT 10.31 NON EMPLOYEE DIRECTORS STOCK PLAN OF GRANITE BROADCASTING CORPORATION APRIL 29, 1997 1. PURPOSE. The purpose of this Non-Employee Directors' Stock Plan (the ------- "Plan") of Granite Broadcasting Corporation (the "Company"), is to advance the interests of the Company and its stockholders by providing a means to attract and retain highly qualified persons to serve as non-employee directors of the Company and to enable such persons to acquire or increase a proprietary interest in the Company, thereby promoting a closer identity of interests between such persons and the Company's stockholders. 2. DEFINITIONS. In addition to terms defined elsewhere in the Plan, the ----------- following are defined terms under the Plan: (a) "Code" means the Internal Revenue Code of 1986, as amended from ---- time to time. References to any provision of the Code shall be deemed to include regulations thereunder and successor provisions and regulations thereto. (b) "Disability" means a permanent physical or mental incapacity ---------- which, in the reasonable determination of the Board, renders the Participant unable to perform his duties as a director of the Company. (c) "Fair Market Value" of a Share on a given date shall mean the ----------------- closing price reported on the Nasdaq National Market or the principal securities exchange on which the Common Stock (Nonvoting) may then be traded, as the case may be, or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported. (d) "Participant" means a person who, as a non-employee director of ----------- the Company, has been granted Shares under the Plan. (e) "Share" means a share of Common Stock (Nonvoting), $.01 par value, ----- of the Company and such other securities as may be substituted for such Share or such other securities pursuant to Section 8. 3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in ------------------------------- Section 8, as of any date, the total number of Shares issuable under the Plan shall be 100,000. Such Shares may be authorized but unissued Shares, treasury Shares, or Shares acquired in the market for the account of the Participant. 4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the -------------------------- Board of Directors of the Company (the "Board"). 5. ELIGIBILITY. Only directors of the Company who are not employees of ----------- the Company or any subsidiary of the Company shall participate in the Plan. 6. GRANT OF SHARES. On April 29, 1997 and on the date of the second --------------- quarterly meeting of the Board of each calendar year during the term of the Plan, each Participant shall receive a number of Shares equal to $20,000 divided by the Fair Market Value per Share on the date of grant. 7. DEFERRAL OF SHARES. Each director of the Company may elect to defer ------------------ the payment of Shares by submitting an election form to the Board, in accordance with this Section 7. (a) ELECTIONS. Each director who elects to defer the payment of --------- Shares for a given calendar year must file an irrevocable written election with the Secretary of the Company no later than December 31 of the year preceding such calendar year; provided, that, any newly elected or appointed director may -------- ---- file an election for any year not later than 30 days after the date such person first became a director, and a director may file an election for the year in which the Plan became effective not later than 30 days after the date of effectiveness of the Plan. An election by a director shall be deemed to be continuing and therefore applicable to subsequent Plan years unless the director revokes or changes such election by filing a new election form by the due date for such form specified in this Section 7(a). The election must specify the following: (i) A percentage or number of Shares to be deferred under the Plan; and (ii) The date on which the commencement of payments of Shares should begin, which date shall not be later than 10 years from the date the Shares originally were payable; provided, however, that, notwithstanding an election pursuant to this Section - -------- ------- ---- 7(a), all Shares of a Participant for which payment has not otherwise occurred, shall be paid upon death, Disability or termination of directorship of the Participant. (b) DEFERRAL OF SHARES. The Company will establish a deferral account ------------------ for each Participant who elects to defer Shares under this Section 7. At any date Shares are payable to a Participant who has elected to defer Shares, the Company will credit such Participant's deferral account with a the number of Shares so deferred. -2- (c) CREDITING OF DIVIDEND EQUIVALENTS. Whenever dividends are paid or --------------------------------- distributions made with respect to Shares, a Participant to whom Shares are then credited in a deferral account shall be entitled, on the dividend payment date, as dividend equivalents, to an amount equal in value to the amount of the dividend paid or property distributed on a single Share multiplied by the number of Shares credited to his or her deferral account as of the record date for such dividend or distribution. Such dividend equivalents shall be credited to the Participant's deferral account by payment to such account of a number of Shares determined by dividing the aggregate value of such dividend equivalents by the Fair Market Value of a Share at the payment date of the dividend or distribution. (d) SETTLEMENT OF DEFERRED SHARES. The Company will settle the ----------------------------- Participant's deferral account by delivering to the Participant (or his or her beneficiary) a number of Shares equal to the number of whole Shares then credited to his or her deferral account (or a specified portion in the event of any partial settlement), together with cash in lieu of any fractional Share remaining at a time that less than one whole Share is credited to such deferral account. Such settlement shall be made at the time or times specified in the Participant's election filed in accordance with Section 7(a); provided, however, -------- ------- that a Participant may further defer settlement of Shares if counsel to the Company determines that such further deferral likely would be effective under applicable federal income tax laws and regulations. (e) NONFORFEITABILITY. The interest of each Participant in any Shares ----------------- (and any deferral account relating thereto) at all times will be nonforfeitable. 8. ADJUSTMENT PROVISIONS. In the event any dividend or other --------------------- distribution (whether in the form of cash, Shares or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, exchange of Shares or other securities of the Company, extraordinary dividend (whether in the form of cash, Shares, or other property), liquidation, dissolution, or other similar corporate transaction or event affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of each Participant's rights under the Plan, then an adjustment shall be made, in a manner that is proportionate to the change to the Shares and otherwise equitable, in (i) the number and kind of Shares remaining reserved and available for issuance under Section 3, and (ii) the number and kind of Shares to be issued upon settlement of deferred Shares under Section 7. In addition, the Board is authorized to make such adjustments in recognition of unusual or non-recurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any subsidiary or the financial statements of the Company or any subsidiary, or in response to changes in applicable laws, -3- regulations or accounting principles. The foregoing notwithstanding, no adjustment may be made hereunder except as will be necessary to maintain the proportionate interest of the Participant under the Plan and to preserve, without exceeding, the value of outstanding deferred Shares. 9. CHANGES TO THE PLAN. The Board may amend, alter, suspend, ------------------- discontinue, or terminate the Plan or authority to grant Shares under the Plan without the consent of stockholders or Participants, except that any amendment or alteration will be subject to the approval of the Company's stockholders at or before the next annual meeting of stockholders for which the record date is after the date of such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system as then in effect, and the Board may otherwise determine to submit other such amendments or alterations to stockholders for approval; provided, however, that, without the consent of an affected -------- ------- ---- Participant, no such action may materially impair the rights of such Participant with respect to any previously granted Shares. 10. GENERAL PROVISIONS. ------------------ (a) AGREEMENTS. Any right or obligation under the Plan may be ---------- evidenced by agreements or other documents executed by the Company and the Participant incorporating the terms and conditions set forth in the Plan, together with such other terms and conditions not inconsistent with the Plan, as the Board may from time to time approve. (b) COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company will not be ------------------------------------ obligated to issue or deliver Shares in a transaction subject to the registration requirements of the Securities Act of 1933, as amended, or any other federal or state securities law, any requirement under any listing agreement between the Company and any stock exchange or automated quotation system, or any other law, regulation, or contractual obligation of the Company, until the Company is satisfied that such laws, regulations, and other obligations of the Company have been complied with in full. Certificates representing Shares issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations, and other obligations of the Company, including any requirement that a legend or legends be placed thereon. (c) LIMITATIONS ON TRANSFERABILITY. Deferred Shares under the Plan ------------------------------ will not be transferable by a Participant except by will or the laws of descent and distribution or to a beneficiary in the event of the Participant's death. Deferred Shares may not be pledged, mortgaged, hypothecated or otherwise encumbered, and shall not be subject to the claims of creditors. -4- (d) NO RIGHT TO CONTINUE AS A DIRECTOR. Nothing contained in the Plan ---------------------------------- or any agreement hereunder will confer upon any Participant any right to continue to serve as a director of the Company. (e) NO STOCKHOLDER RIGHTS CONFERRED. Nothing contained in the Plan or ------------------------------- any agreement hereunder will confer upon any Participant (or any person or entity claiming rights by or through a Participant) any rights of a stockholder of the Company unless and until Shares are in fact issued to such Participant (or person). (f) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by -------------------------- the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other compensatory arrangements for directors as it may deem desirable. (g) GOVERNING LAW. The validity, construction, and effect of the Plan ------------- and any agreement hereunder will be determined in accordance with the laws of the State of New York, without giving effect to principles of conflicts of laws, and applicable federal law. 11. STOCKHOLDER APPROVAL, EFFECTIVE DATE, AND PLAN TERMINATION. The Plan ---------------------------------------------------------- will be effective as of the date of its adoption by the Board, subject to stockholder approval if necessary or appropriate, and, unless earlier terminated by action of the Board, shall terminate at such time as no Shares remain available for issuance under the Plan and the Company and Participants have no further rights or obligations under the Plan. -5- EX-11 4 STATEMENT OF COMPUTATION EXHIBIT 11 GRANITE BROADCASTING CORPORATION STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
Three Months Ended March 31, ------------------------------ 1997 1996 -------------- -------------- (Unaudited) Primary: Average shares of common stock outstanding 8,735,879 8,464,012 =========== =========== Loss before extraordinary item $(4,956,772) $(3,453,953) Extraordinary loss on early extinguishment of debt (320,804) (3,510,152) ----------- ----------- Net loss $(5,277,576) $(6,964,105) =========== =========== Net loss attributable to common stockholders $(9,474,380) $(7,845,424) =========== =========== Per common share: Loss before extraordinary item $ (1.05) $ (0.51) Extraordinary loss on early extinguishment of debt (0.04) (0.42) ----------- ----------- Net loss $ (1.09) $ (0.93) =========== =========== Fully Diluted: Average shares of common stock outstanding 8,735,879 8,464,012 =========== =========== Loss before extraordinary item $(4,956,772) $(3,453,953) Extraordinary loss on early extinguishment of debt (320,804) (3,510,152) ----------- ----------- Net loss $(5,277,576) $(6,964,105) =========== =========== Net loss attributable to common stockholders $(9,474,380) $(7,845,424) =========== =========== Per common share: Loss before extraordinary item $ (1.05) $ (0.51) Extraordinary loss on early extinguishment of debt (0.04) (0.42) ----------- ----------- Net loss $ (1.09) $ (0.93) =========== ===========
EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GRANITE BROADCASTING CORPORATION'S 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 JAN-01-1997 MAR-31-1997 1,379,969 0 27,716,377 0 0 41,460,218 34,644,844 0 624,150,867 34,662,983 373,745,995 193,140,326 0 87,605 12,504,781 624,150,867 32,297,811 32,297,811 0 26,584,618 537,106 0 9,982,709 (4,806,622) 150,150 (4,956,772) 0 (320,804) 0 (5,277,576) (1.09) (1.09)
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