UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)

þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 2008
     
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______________ to______________
Commission File Number: 000-51418
Equity Media Holdings Corporation
(Exact name of registrant as specified in its charter)

Delaware
20-2763411
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
One Shackleford Drive, Suite 400
Little Rock, Arkansas 72211
(Address of principal executive offices, including zip code)
(501) 219-2400
(Registrant’s telephone number, including area code)
     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. Yesþ No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filero Accelerated filerþ Non-accelerated filero
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ
     As of May 19, 2008, 40,278,642 shares of the Company’s common stock, $0.0001 par value per share, were outstanding.
 

EQUITY MEDIA HOLDINGS CORPORATION
INDEX
 
 
Page
PART I—FINANCIAL INFORMATION
         
Item 1. Financial Statements
         
Condensed Consolidated Balance Sheets — As of March 31, 2008 (unaudited) and As of December 31, 2007
    3
Condensed Consolidated Statements of Operations (unaudited) — Three Months Ended March 31, 2008 and March 31, 2007
    5
Condensed Consolidated Statements of Cash Flows (unaudited) — Three Months Ended March 31, 2008 and March 31, 2007
    6
Notes to Unaudited Condensed Consolidated Financial Statements
    7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
    15
Item 3. Quantitative and Qualitative Disclosures About Market Risk
    22
Item 4 . Controls and Procedures
    22
PART II—OTHER INFORMATION
         
Item 3. Defaults Upon Senior Securities
 24
Item 6. Exhibits
    24
Signatures
    25
Exhibit Index
26
   
 EX-31.1 Section 302 Certification of COO
  
   
 EX-31.2 Section 302 Certification of CFO
  
   
 EX-32.1 Section 906 Certification of COO
  
   
 EX-32.2 Section 906 Certification of CFO
  
   
    EX-10.37 Second Amendment to Third Amended
       and Restated Credit Agreement and Forbearance Agreement
       dated April 28, 2008 and related schedules
  
     

2

PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
 
EQUITY MEDIA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

 
  
March 31, 2008
  
 
  
 
  
(Unaudited)
  
December 31, 2007
  
ASSETS
    
   
 
Current assets
    
   
 
Cash and cash equivalents
  
$
1,193,880
  
$
634,314
  
Restricted cash
    
202
    
4,162,567
  
Certificate of deposit
    
112,107
    
112,107
  
Trade accounts receivable, net of allowance for uncollectible accounts
    
3,414,300
    
3, 514,635
  
Program broadcast rights
    
6,449,330
    
6,921,465
  
Assets held for sale
    
9,526,922
    
9,520,849
  
Other current assets
    
221,827
    
321,434
  
 Prepaid expenses - related party
    
—
    
100,000
  
Total current assets
    
20,918,568
    
25,287,371
  
               
Property and equipment
              
Land and improvements
    
2,017,698
    
2,017,698
  
Buildings
    
3,989,424
    
3,956,229
  
Broadcast equipment
    
29,237,513
    
29,174,079
  
Transportation equipment
    
283,151
    
283,151
  
Furniture and fixtures
    
4,417,428
    
4,422,527
  
Construction in progress
    
102,889
    
163,716
  
 
    
40,048,103
    
40,017,400
  
Accumulated depreciation
    
(17,369,146
)
  
(16,350,882
)
Net property and equipment
    
22,678,957
    
23,666,518
  
               
Intangible assets
              
Indefinite-lived assets, net
              
Broadcast licenses
    
67,018,665
    
66,498,347
  
Goodwill
    
1,940,282
    
1,940,282
  
Total indefinite-lived assets, net
    
68,958,947
    
68,438,629
  
           
 
Other assets
          
 
Broadcasting construction permits
    
399,302
    
885,665
  
Program broadcast rights
    
4,228,549
    
4,001,625
  
Investment in joint ventures
    
435,706
    
435,860
  
Deposits and other assets
    
101,121
    
98,705
  
Broadcasting station acquisition rights pursuant to assignment agreements
    
440,000
    
440,000
  
Total other assets
    
5,604,678
    
5,861,855
  
 
              
Total assets
  
$
118,161,150
  
$
123,254,373
  

3

   
March 31, 2008
       
   
(Unaudited)
  
 December 31, 2007
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
   
 
Current liabilities
    
   
 
Trade accounts payable
  
$
5,264,044
  
$
3,644,475
  
Due to affiliates and related parties
    
3,318,579
    
2,509,480
  
Lines of credit
    
998,322
    
994,495
  
Accrued expenses and other liabilities
    
2,188,549
    
1,777,240
  
Deposits held for sales of broadcast licenses
    
1,024,601
    
1,024,601
  
Deferred revenue
    
242,314
    
271,728
  
Current portion of program broadcast rights obligations
    
2,038,691
    
2,094,741
  
Current portion of deferred barter revenue
    
4,139,385
    
4,393,637
  
Note payable to Univision
    
15,000,000
    
15,000,000
  
Current portion of notes payable
    
54,477,112
   
52,233,322
  
Current portion of capital lease obligations
    
39,191
    
44,546
  
Total current liabilities
    
88,730,788
    
83,988,265
  
 
              
Non-current liabilities
          
 
Notes payable, net of current portion
    
8,870,532
    
8,996,705
  
Capital lease obligations, net of current portion
    
136,721
    
141,491
  
Program broadcast rights obligations, net of current portion
    
1,337,607
    
1,140,641
  
Deferred barter revenue, net of current portion
    
2,608,670
    
2,618,143
  
Due to affiliates and related parties
    
32,656
    
6,262
  
Security and other deposits
    
213,500
    
213,500
  
Other liabilities
    
740,376
    
556,795
  
Total non-current liabilities
    
13,940,062
    
13,673,537
  
 
              
Commitments and Contingencies
    
—
    
—
  
           
 
Mandatorily redeemable preferred stock — $.0001 par value;
25,000,000 shares authorized; 2,050,519 issued and outstanding
    
10,519,162
    
10,519,162
  
 
              
STOCKHOLDERS’ EQUITY
              
Common stock — $.0001 par value; 100,000,000 shares authorized; 40,278,642 issued and outstanding at March 31, 2008 and December 31, 2007
    
4,028
    
4,028
  
Additional paid-in-capital
    
136,570,040
    
136,217,425
  
Accumulated deficit
    
(131,601,578
)
  
(121,146,692
)
 
    
4,972,490
    
15,074,761
  
Treasury stock, at cost
    
(1,352
)
  
(1,352
)
Total stockholders’ equity
    
4,971,138
    
15,073,409
  
 
              
Total liabilities and stockholders’ equity
  
$
118,161,150
  
$
123,254,373
  
 
See Notes to Unaudited Condensed Consolidated Financial Statements

4

EQUITY MEDIA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
  
Three Months Ended
  
 
  
March 31, 2008
  
March 31, 2007
  
Broadcast Revenue
  
$
7,322,112
  
$
6,774,075
  
Operating Expenses
          
 
Program, production & promotion
    
4,810,556
    
3,420,928
  
Selling, general & administrative
    
7,513,477
    
5,750,069
  
Selling, general & administrative – related party
    
249,681
    
186,566
  
Management agreement settlement
    
—
    
8,000,000
  
Management fees – related party
    
375,000
    
347,749
  
Depreciation & amortization
    
1,018,264
    
944,057
  
Rent
    
676,140
    
605,031
  
Total operating expenses
    
14,643,118
    
19,254,400
  
Loss from operations
    
(7,321,006
)
  
(12,480,325
)
Other income (expense)
          
 
Interest income
    
21,483
    
3,875
  
Interest expense
    
(2,792,851
)
  
(2,120,674
)
Interest expense – related party
    
(262,500
)
  
—
  
Gain on sale of assets
    
—
    
453,753
  
Other income, net
    
83,728
    
160,399
  
Losses from affiliates and joint ventures
    
(159
)
  
(30,261
)
Total other expense, net
    
(2,950,299
)
  
(1,532,908
)
Loss before provision for income taxes
    
(10,271,305
)
  
(14,013,233
)
Provision for income taxes
    
—
    
—
  
Net loss
    
(10,271,305
)
  
(14,013,233
)
Preferred dividend
    
(183,581
)
  
(12,134,943
)
Net loss available to common shareholders
  
$
(10,454,886
)
$
(26,148,176
)
 
          
 
Weighted average number of common shares outstanding:
          
 
Basic and diluted
    
40,278,642
    
25,668,789
  
Net loss available to common shareholders per share:
          
 
Basic amd Diluted
  
$
(0.26
)
$
(1.02
)

See Notes to Unaudited Condensed Consolidated Financial Statements.

5

EQUITY MEDIA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

   
Three Months Ended
 
 
 
March 31, 2008
 
March 31, 2007
  
Cash flows from operating activities:
          
Net loss
  
$
(10,271,305
)
$
(14,013,233
)
Adjustments to reconcile net loss to net cash used by operating activities:
            
Provision for bad debt
    
94,446
    
432,335
  
Depreciation
    
1,018,264
    
913,871
  
Amortization of intangibles
    
—
    
30,186
  
Amortization of program broadcast rights
    
2,871,648
    
1,706,926
  
Amortization of discounts on interest-free debt
    
—
    
14,634
  
Equity in losses of subsidiaries and joint ventures
    
155
    
30,261
  
(Gain) on sale of equipment
    
—
    
(453,753
)
Management agreement settlement
    
—
    
4,800,000
  
Shared based compensation
    
352,615
    
—
  
Changes in operating assets and liabilities:
            
Trade accounts receivable
    
5,889
    
(456,865
)
Deposits and other assets
    
197,191
    
(409,806
)
Restricted cash
    
4,162,365
    
—
  
Accounts payable and accrued expenses
    
2,030,876
    
1,308,084
  
Program broadcast rights
    
(2,626,438
)
  
(1,843,102
)
Program broadcast obligations
    
140,917
    
955,479
  
Deferred barter revenue
    
(263,725
)
  
—
  
Security deposits
    
—
    
(5,513
)
Deferred income
    
(29,414
)
  
(780,125
)
Net cash used by operating activities
    
(2,316,516
)
  
(7,770,621
)
               
Cash flows from investing activities:
            
Purchases of property and equipment
    
(36,777
)
  
(1,126,822
)
Proceeds from sale of property and equipment
    
—
    
621,462
  
Acquisition of broadcast assets
    
—
    
(1,225,000
)
Purchase of certificate of deposit
    
—
    
(1,220
)
Net advances from (to) affiliates
    
801,538
    
(227,011
)
Net cash used in investing activities
    
764,761
    
(1,958,591
)
Cash flows from financing activities:
            
Proceeds from notes payable
    
53,378,802
    
4,750,980
  
Payments of notes payable
    
(51,257,357
)
  
(706,081
)
Payments of capital lease obligations
    
(10,124
)
  
(7,556
)
Recapitalization through merger
    
—
    
52,906,853
  
Purchase of preferred stock
    
—
    
(25,000,000
)
Net cash provided by financing activities
    
2,111,321
    
31,944,196
  
Net increase (decrease) in cash and cash equivalents
    
559,566
    
22,214,984
  
Cash and cash equivalents — beginning of period
    
634,314
    
1,630,973
  
 
            
Cash and cash equivalents — end of period
  
$
1,193,880
  
$
23,845,957
  
Supplemental cash flow information:
            
Cash paid during the period for interest
  
$
3,384,724
  
$
1,859,178
  
Supplemental non-cash activities:
            
Issuance of note payable to redeem preferred stock
  
$
—
  
$
15,000,000
  
Settlement with dissenting shareholders
  
$
—
  
$
10,899,882
  
Issuance of mandatory redeemable preferred stock to pay accrued preferred dividends
  
$
—
  
$
10,519,162
  
Issuance of common stock to pay preferred dividends
  
$
—
  
$
1,615,781
  
Acquisition of real property through assumption of debt
  
$
—
  
$
205,347
  
Charge to stockholders’ equity for prepaid merger costs
  
$
—
  
$
750,006
  
Assumption of net liabilities of Coconut Palm Acquisition Corporation
  
$
—
  
$
(2,267,340
)
Accretion of preferred dividends
  
$
183,581
  
$
—
  
 
See Notes to Unaudited Condensed Consolidated Financial Statements.

6

EQUITY MEDIA HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION

     The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all significant inter-company balances and transactions have been eliminated. The accounting policies followed by the Company and other pertinent information are set forth in the notes to the Company’s financial statements for the fiscal year ended December 31, 2007 included in the Form 10-K/A filed with the Securities and Exchange Commission on April 1, 2008 (the “Form 10-K/A”). The accompanying condensed consolidated balance sheet as of December 31, 2007, which has been derived from audited consolidated financial statements, and the unaudited condensed consolidated financial statements for the three months ended March 31, 2008 and 2007 included herein have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended, and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain only normal recurring adjustments necessary to present fairly the Company’s financial position as of March 31, 2008 and the results of its operations for the three months ended March 31, 2008 and 2007 and cash flows for the three months ended March 31, 2008 and 2007. The results of operations for the three months ended March 31, 2008 and 2007 are unaudited and are not necessarily indicative of the results to be expected for the full year. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the Company’s consolidated financial statements and related footnotes included in the Annual Report on our Form 10-K/A for the year ended December 31, 2007.

Certain changes in classifications have been made to the prior period financial statements to conform to the current financial statement presentation.

NOTE 2— LIQUIDITY AND CAPITAL RESOURCES
 
The Company currently has a working capital deficit of approximately $67.8 million and has experienced losses from operations since inception. During the year ended December 31, 2007, the Company had a net loss of approximately $40.8 million and experienced cash outflows from operations during the same period of approximately $30.8 million. For the three months ended March 31, 2008, the Company had a net loss of approximately $10.3 million and experienced cash outflows from operations of approximately $2.3 million. In the past, the Company has relied on equity and debt financing and the sale of assets to provide the necessary liquidity for the business to operate and will need to have access to substantial funds over the next twelve months in order to fund its operations. As of March 31, 2008, the Company has approximately $1.2 million of unrestricted cash on hand.
 
In February 2008, we refinanced our previous credit facility with our existing lender group. The amended $53.0 million credit facility, comprised of an $8.0 million revolving credit line and term loans of $45.0 million, maturing on February 13, 2011, was used to refinance the existing indebtedness senior credit facility. Outstanding principal balance under the credit facility bears interest at LIBOR or the alternate base rate, plus the applicable margin. The applicable margin is 9.5% for the LIBOR loans and 8.5% on the alternate base rate loan. The minimum LIBOR is 4.5%. The alternate base rate is (i) the greatest of (A) the Prime Rate, (B) the Federal Funds Rate in effect on such day plus fifty (50) basis points (0.50%), and (C) seven and one-half percent (7.50%) per annum. We are required to pay an unused line fee of .5% on the unused portion of the credit facility. The credit facility is secured by the majority of the assets of the company. We are subject to new financial and operating covenants and restrictions based on trailing monthly and twelve month information. We have borrowed $50,512,500 under the new facility as of March 11, 2008. Due to certain restrictions based on the value of the loan collateral, the Company does not have access to the remaining $2,487,500 at this time.

On March 19, 2008, the Company entered into an amendment (“Amendment”) to its Third Amended and Restated Credit Agreement (“Credit Agreement”) with Silver Point Finance, LLC and Wells Fargo Foothill, Inc. Under the terms of the Amendment, the lender group has agreed to forbear from exercising certain of their rights and remedies with respect to designated defaults under the Credit Agreement through the earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to enter into agreements with respect to the sale of certain of its assets and the Company’s failure to secure approvals for, and meet other criteria with respect to, financing alternatives necessary to meet the Company’s immediate capital requirements. Additionally, the applicable margins on LIBOR loans and base rate loans were increased to 10.0% and 9.0% respectively. Pursuant to the Amendment the Lenders may exercise any and all remedies available under the Credit Agreement, including making the loan immediately due and payable.

On April 28, 2008, the Company entered into a second amendment (“Second Amendment”) to its Credit Agreement which had been previously amended on March 19, 2008 as noted above. Under the terms of the Second Amendment, the lender group has agreed to forbear from exercising certain of its rights and remedies with respect to existing defaults and any other defaults or events of default under the Credit Agreement other than any specified defaults described in the Second Amendment (which include, but are not limited to, breaches of certain affirmative and negative covenants, among others) through the earlier of (a) May 5, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to consummate a proposed financing with certain investors. The Second Amendment also provides for the lender group to make additional loans to the Company in an amount not to exceed $5,495,541 (which includes additional loans funded pursuant to the First Amendment) and increases the applicable margins on LIBOR loans and base rate loans to 12.0% and 110% respectively.

7

Even with the refinanced Credit Facility, the additional funds provided by the Amended Credit Facility are not sufficient to meet all of the anticipated liquidity needs to continue operations of the Company for the next twelve months. Accordingly, the Company will have to raise additional capital or increase its debt immediately to continue operations. If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to liquidate available assets, restructure the company or in the extreme event, cease operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLOCIES
 
Adoption of New Accounting Standards

Effective January 1, 2008, the Company adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS 157") for its financial assets and liabilities. In February 2008, the FASB issued FASB Staff Position ("FSP") No. FAS 157-2, "Effective Date of FASB Statement No. 157", which delays the effective date of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. SFAS 157 establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurement. The adoption of SFAS 157 on January 1, 2008 did not have a material effect on the Company's Unaudited Condensed Consolidated Financial Statements. See Note ___ for additional information.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS 159") effective as of the beginning of the first fiscal year that begins after November 15, 2007. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value with changes in fair value recognized in earnings for each reporting period. The adoption of SFAS 159 on January 1, 2008 did not have any effect on the Company's Unaudited Condensed Consolidated Financial Statements as the Company did not elect any eligible items for fair value measurement.
 
Recent Accounting Pronouncements
 
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 will become effective beginning in the first quarter of 2009. The Company is currently evaluating the impact of adopting SFAS 161 on the financial statements.
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business Combinations” (“FASB No. 141(R)”). FASB No. 141(R) retains the fundamental requirements of the original pronouncement requiring that the purchase method be used for all business combinations. FASB No. 141(R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination, establishes the acquisition date as the date that the acquirer achieves control and requires the acquirer to recognize the assets acquired, liabilities assumed and any non-controlling interest at their fair values as of the acquisition date. FASB No. 141(R) also requires that acquisition-related costs be recognized separately from the acquisition. FASB No. 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact of adopting SFAS No. 141(R) will be dependent on the future business combinations that the Company may pursue after its effective date, if any.

In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“FASB No. 160”) .” The objective of FASB No. 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement applies to all entities that prepare consolidated financial statements, except not-for-profit organizations. FASB No. 160 amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of FASB No. 141 (R). This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The effective date of this Statement is the same as that of the related Statement 141(R). This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented.

NOTE 4 — ASSET PURCHASE AGREEMENT
 
Purchase from Renard Communications Corp.

The Company entered into an asset purchase agreement (“Agreement”) with Renard Communications Corp. (“Seller”) for the purchase of certain licenses, construction permits and other instruments of authorization (collectively “Licenses,” described below) issued by the Federal Communications Commission (“FCC”) and certain other assets (together with the Licenses, “Assets”). The Agreement became effective on August 15, 2007 upon approval by the Company’s board of directors and the lender.

8

The Assets include Licenses for Class A television station WMBQ-CA, Channel 46, Manhattan, New York with a corresponding digital authorization for Channel 10 (WMBQ-LD) and WBQM-LP, Channel 3, Brooklyn, New York (collectively, the “Stations”), and related items as specified in the Agreement.
 
The Company will pay an aggregate of $8,000,000 for the Assets, which constitute all the assets used in connection with operating the Stations. In connection with the transaction, the Company deposited $400,000 (“Deposit”), which will be held in escrow pending closing. At the closing, the Company will pay $6,000,000 in immediately available funds, which amount will include the Deposit, and will deliver a secured promissory note (“Note”) for the remaining $2,000,000. The Note will have a three-year term and will accrue interest at 6% per year, requiring monthly interest payments only until the expiration of the term, at which time the principal amount will become due and payable. The Seller will have a security interest, documented by a Security Agreement executed simultaneously with the closing, in the Brooklyn station only. The payment will be increased or decreased such that Seller is entitled to all revenue and is liable for all expenses allocable to the period prior to the closing and the Company is entitled to all revenue and is liable for all expenses allocable to the period following the closing. Seller will assign and the Company will assume certain listed contracts.
 
The closing of the Agreement is subject to conditions, including FCC consent to the assignment of the Licenses. Seller and the Company agree to promptly prepare an application for assignment of the Licenses and to fully prosecute the application, but neither party is required to engage in a trial-type hearing. Each party will bear its own costs, and the filing fees shall be split evenly. The closing will occur between five business days after the FCC grants consent and ten business days after the grant becomes a final order.
 
The Agreement may be terminated by either party if the closing has not occurred by June 1, 2008; the conditions of the other party have not been met as of the closing date; or the other party is in breach.

The FCC granted its consent to the assignment by Public Notice dated February 7, 2008.  By letter dated May 2, 2008, counsel for Seller alleged the Company is in breach of the Agreement by failing to set a Closing Date.  However, the Stations are only operating pursuant to six month special temporary authorizations from a replacement tower site.  Seller has not yet filed at the FCC for permanent authority to operate from this tower site. The Company believes that under the Agreement it is a condition to closing that Seller have permanent licenses issued for the two New York stations, and that until those are issued by the FCC, closing cannot occur. 

Sale to Luken Communications, LLC

On April 3, 2008, EBC Southwest Florida, Inc. (“Seller”), a subsidiary of the Company entered into an asset purchase agreement (“Purchase Agreement”) with Luken Communications, LLC (“Buyer”) and Henry G. Luken III, individually (“Luken”), for the sale of all of the assets used in the business and operations of five low power and Class A television stations in Naples and Fort Myers, Florida (“Stations”), including licenses, construction permits and other instruments of authorization (“Licenses”) issued by the Federal Communications Commission (“FCC”) and certain other assets (together with the Licenses, the “Assets”). The Buyer is owned by Henry Luken, a shareholder of the Company and the former Chairman of the Board, Chief Executive Officer and President of the Company and Thomas M. Arnost, the President and Chief Executive Officer of the Company’s Broadcasting Station Group. Seller entered into the Purchase Agreement in order for the Company to satisfy its obligations under the terms of an amendment, dated as of March 19, 2008, to its Third Amended and Restated Credit Agreement (“Credit Agreement”) with Silver Point Finance, LLC and Wells Fargo Foothill, Inc., pursuant to which the lender group agreed to forbear from exercising certain of their rights and remedies with respect to designated defaults under the Credit Agreement through the earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to enter into agreements with respect to the sale of certain of its assets and the Company’s failure to secure approvals for, and meet other criteria with respect to, financing alternatives necessary to meet its immediate capital requirements.

Buyer has agreed to pay an aggregate of $8,000,000 for the Assets (“Purchase Price”) in immediately available funds at the closing (“Closing”). Luken has agreed to personally guarantee the Buyer’s obligation to pay the Purchase Price. In addition to the Purchase Price, if within the 12-month period following the Closing, Buyer enters into an agreement to sell the Stations, collectively or individually, to an unaffiliated third party, then 50% of the purchase price from that transaction that are of an amount greater than the Purchase Price will be paid to Seller. If, within the second 12-month period following the Closing, Buyer enters into an agreement to sell the Stations, collectively or individually, to an unaffiliated third party, then 25% of the purchase price from that transaction that are of an amount greater than the Purchase Price will be paid to Seller.

The Closing is subject to certain conditions, including FCC consent to the assignment of the Licenses (“FCC Consent”). Seller and Buyer have agreed to promptly prepare an application for assignment of the Licenses and to fully prosecute the application. Each party will bear its own costs, and the filing fees will be split evenly. The Closing will occur within ten business days after the grant of FCC Consent becomes a final order or, upon waiver of such condition by Buyer, within ten business days following the publication of the grant of FCC Consent.

9

The Purchase Agreement may be terminated under the following circumstances:

 
·
by Seller for any reason prior to the Closing with ten days’ written notice to Buyer if Seller is not otherwise in breach of its obligations under the Purchase Agreement, provided that the Seller will reimburse Buyer for expenses incurred in entering into the Purchase Agreement. Seller has agreed to exercise this termination right if it refinances or retires a significant portion of its debt with its current lender. Therefore, the Company continues to account for the related assets as held for use.

 
·
by Buyer if the Closing has not occurred within 12 months from the date the application for FCC Consent is accepted for filing by the FCC; upon Seller’s failure to perform environmental remediation on issues set forth in an environmental audit to be performed that exceed $25,000; or if regular broadcast transmission is interrupted for a continuous period of 72 hours or more prior to the Closing solely as a result of the actions of Seller.
 
 
·
by either party if the conditions of the other party have not been met as of the Closing; the other party becomes or is declared insolvent; or the other party is in breach.

NOTE 5 — NOTES PAYABLE

Long-Term Debt

Long-term debt as of March 31, 2008 and December 31, 2007 consisted of the following:

   
 March 31, 2008
 
December 31, 2007
  
   
 (In thousands)  
  
Senior Credit Facility
  
$
52,562
  
$
50,317
  
Merger Related Party - Univision
    
15,000
    
15,000
  
Installment Notes and other debt
    
10,786
    
10,913
  
Line of Credit
    
998
    
994
  
Capital Lease Obligations
    
176
    
186
  
 
          
 
Total Debt
  
$
79,522
  
$
77,410
  
Less: Current maturities
    
(70,515
)
  
(68,272
)
 
          
 
Long-term debt
  
$
9,007
  
$
9,138
  
 
Senior Credit Facility

On February 13, 2008, the Company and its lenders entered into the Third Amended and Restated Credit Agreement (“Credit Agreement”) in which the Company refinanced its previous credit facility. The amended $53.0 million credit facility, comprised of an $8.0 million revolving credit line and term loans of $45.0 million, matures on February 13, 2011, was used to refinance the existing indebtedness senior credit facility. Outstanding principal balance under the credit facility bears interest at LIBOR or the alternate base rate, plus the applicable margin. The applicable margin is 9.5% for the LIBOR loans and 8.5% on the alternate base rate loan. The minimum LIBOR is 4.5%. The alternate base rate is (i) the greatest of (A) the Prime Rate, (B) the Federal Funds Rate in effect on such day plus fifty (50) basis points (0.50%), and (C) seven and one-half percent (7.50%) per annum. We are required to pay an unused line fee of .5% on the unused portion of the credit facility. The credit facility is secured by the majority of the assets of the company. We are subject to new financial and operating covenants and restrictions based on trailing monthly and twelve month information. The Company borrowed $50,512,500 under the new facility. Due to certain restrictions based on the value of the loan collateral, the Company does not have access to the remaining $2,487,500 at this time.
 
On March 19, 2008, the Company entered into an amendment (“First Amendment”) to its Credit Agreement. Under the terms of the First Amendment, the lender group has agreed to forbear from exercising certain of their rights and remedies with respect to designated defaults under the Credit Agreement through the earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to enter into agreements with respect to the sale of certain of its assets and the Company’s failure to secure approvals for, and meet other criteria with respect to, financing alternatives necessary to meet the Company’s immediate capital requirements. Additionally, the applicable margins on LIBOR loans and base rate loans were increased to 10.0% and 9.0% respectively. Pursuant to the First Amendment the Lenders may exercise any and all remedies available under the Credit Agreement, including making the loan immediately due and payable.

10

On April 28, 2008, the Company entered into a second amendment (“Second Amendment”) to its Credit Agreement which had been previously amended on March 19, 2008 as noted above. Under the terms of the Second Amendment, the lender group has agreed to forbear from exercising certain of its rights and remedies with respect to existing defaults and any other defaults or events of default under the Credit Agreement other than any specified defaults described in the Second Amendment (which include, but are not limited to, breaches of certain affirmative and negative covenants, among others) through the earlier of (a) May 5, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to consummate a proposed financing with certain investors. The Second Amendment also provides for the lender group to make additional loans to the Company in an amount not to exceed $5,495,541 (which includes additional loans funded pursuant to the First Amendment) and increases the applicable margins on LIBOR loans and base rate loans to 12.0% and 11.0% respectively.

The Company is currently in default under its existing loan agreements with Silver Point and Wells Fargo. Existing events of default include, but are not limited to, the Company’s failure to pay interest when due, lateness on certain payments due under the Company’s satellite and programming agreements and failure to achieve certain performance metrics, including minimum monthly revenue and EBITDA benchmarks.

As noted above, on April 28, 2008, the Company entered into a Second Amendment to its Third Amended and Restated Credit Agreement with Silver Point and Wells Fargo. The credit agreement had been previously amended on March 19, 2008. Under the terms of the two amendments, the lenders agreed to forbear from exercising certain of their rights and remedies with respect to the Company’s existing defaults through the earlier of May 5, 2008 and the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to consummate a proposed financing with certain investors.

As of the date of this report, the above-described forbearance period has ended. If the Company is unable to secure an extension of such forbearance or the lenders otherwise elect to declare a default under the credit agreement, the lenders would have all rights and remedies available to them under the terms of the Credit Agreement. The Company and the lenders continue to discuss all options acceptable to both parties.
 
Merger Related - Univision
 
Pursuant to the March 2007 Merger Transaction, the Company issued a promissory note to Univision Television Group, Inc. as partial consideration for the exchange of their shares of EBC Series A preferred stock. This promissory note in the amount of $15.0 million was payable March 30, 2008 with interest accruing at an annual rate of 7.0%.

The promissory note is secured by two television stations, originally sought to be transferred under an asset purchase agreement entered into for the same purpose. The Company has the option to transfer the two television stations securing the obligation in lieu of a cash payment for the debt principal. Both the Company and Univision have applied with the FCC for transfer of those licenses, which, as of the date of this report, has yet to act on those requests. Until such time as the requests are granted, interest continues to accrue at an annual rate of 7% and the note remains unpaid.
 
Line of Credit

At March 31, 2008, the Company had a $1.0 million line of credit with an Arkansas bank, with interest payable monthly at 7.75%, due April 23, 2008 and secured by various broadcast assets and Company guarantees. The outstanding balance at March 31, 2008 was $998,322. On May 7, 2008, the line of credit was extended until October 31, 2008, with interest payable monthly at 7.5% and secured by the same assets and guarantees.

NOTE 6 — STOCK OPTION PLANS
 
Stock-based compensation expense for each of the three months ended March 31, 2008 and 2007 was $0.35 million and $0 respectively.  The total deferred tax benefit related thereto was $0 for the three months ended March 31, 2008 compared to $0 during the same period in 2007. As of March 31, 2008, there was $3.4 million of total unrecognized compensation cost related to unvested share-based compensation awards granted under the Incentive Plan, which does not include the effect of future grants of equity compensation, if any. Of the total $3.4 million, we expect to recognize approximately 30.6% during the remainder of in 2008 and the balance in 2009 through 2012. The weighted average period over which the $3.4 million is to be recognized is 2.67 years.

NOTE 7 — CONTINGENCIES

Stock options to underwriters
 
In connection with the initial public offering (“Offering”), the Company sold to the representatives of the underwriters in the offering (“Representatives”) an option, for $100, to purchase up to a total of 1,000,000 units at $7.50 per Unit. The Company accounted for the fair value of the option, inclusive of the receipt of the $100 cash payment, as an expense of the Offering resulting in an increase and a charge directly to stockholders’ equity. The option has been valued at the date of issuance at $780,000 based upon a Black-Scholes valuation model, using an expected life of five years, volatility of 15.90% and a risk-free interest rate of 3.980%. The volatility calculation is based on the 180-day volatility of the Russell 2000 Index. An expected life of five years was taken into account for purposes of assigning a fair value to the option. The option may be exercised for cash, or on a “cashless” basis, at the holder’s option, such that the holder may receive a net amount of shares equal to the appreciated value of the option. The Units issuable upon exercise of this option are identical to the Units in the Offering, except that the Warrants included in the option have an exercise price of $6.00. Although the purchase option and its underlying securities have been registered under the Offering, the option grants to holders demand and “piggy back” registration rights for periods of five and seven years, respectively, from the date of the Offering with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses relating to the registration of the securities, other than underwriting commissions which will be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of common stock at a price below its exercise price.

11

Litigation
 
In connection with the merger between the Company and Equity Broadcasting Corporation ("EBC") in March, 2007, EBC and each member of EBC’s board of directors was named in a lawsuit filed by an EBC shareholder in the circuit court of Pulaski County, Arkansas on June 14, 2006. As a result of the merger between EBC and the Company, pursuant to which EBC merged into the Company, the Company, which was renamed Equity Media Holdings Corporation, is a party to the lawsuit. The lawsuit contains both a class action component and derivative claims. The class action claims allege various deficiencies in EBC’s proxy used to inform its shareholders of the special meeting to consider the merger. These allegations include: (i) the failure to provide sufficient information regarding the fair value of EBC’s assets and the resulting fair value of EBC’s Class A common stock; (ii) that the interests of holders of EBC’s Class A common stock are improperly diluted as a result of the merger to the benefit of the holders of EBC’s Class B common stock; (iii) failure to sufficiently describe the further dilution that would occur post-merger upon exercise of the Company’s outstanding warrants; (iv) failure to provide pro-forma financial information; (v) failure to disclose alleged related party transactions; (vi) failure to provide access to audited consolidated financial statements during previous years; (vii) failure to provide shareholders with adequate time to review a fairness opinion obtained by EBC’s board of directors in connection with the merger; and (viii) alleged sale of EBC below appraised market value of its assets. The derivative components of the lawsuit allege instances of improper self-dealing, including through a management agreement between EBC and Arkansas Media.
 
In addition to requesting unspecified compensatory damages, the plaintiff also requested injunctive relief to enjoin EBC’s annual shareholder meeting and the vote on the merger. An injunction hearing was not held before EBC’s annual meeting regarding the merger so the meeting and shareholder vote proceeded as planned and EBC’s shareholders approved the merger. On August 9, 2006, EBC’s motion to dismiss the lawsuit was denied. On February 21, 2007, the plaintiff filed a “Motion to Enforce Settlement Agreement” with the court alleging the parties reached an oral agreement to settle the lawsuit. The plaintiff subsequently filed a motion to withdraw the motion to settle and filed a “Third Amended Complaint” on April 10, 2007. This motion added two additional plaintiffs and expanded on the issues recited in the previous complaints. On July 31, 2007, the plaintiff filed a “Fourth Amended Complaint”. This pleading added three new plaintiffs and three new defendants to the proceedings. The three additional defendants bear a fiduciary relationship to three previously named defendants. On July 31, 2007, the plaintiffs filed a “Motion for Class Certification.” Although the motion has been fully briefed by the parties, the plaintiffs have not yet sought a hearing date on the class certification issue. Currently, the parties continue to engage in discovery. No court date has been set for this case.
 
Management believes that this lawsuit has no merit and asserts that the Company has negotiated in good faith to attempt to settle the lawsuit. Regardless of the outcome management does not expect this proceeding to have a material impact of its financial condition or results of operations in 2008 or any future period.
 
Although the Company is a party to certain other pending legal proceedings in the normal course of business, management believes the ultimate outcome of these matters will not be material to the financial condition and future operations of the Company. The Company maintains liability insurance against risks arising out of the normal course of its business.
 
EBC Dissenting Shareholders
 
In connection with the March, 2007 Merger Transaction shareholders of EBC representing 66,500 shares of EBC Class A common stock elected to convert their shares to cash in accordance with Arkansas law. The Company recorded a liability in the amount of $368,410 to convert the shares plus $9,970 of accrued interest based on a conversion rate of $5.54 per share plus interest accruing from the date of the Merger Transaction at the rate of 9.78% per annum. On July 10, 2007, the dissenting shareholders were paid $378,380 in cash for the value of their shares including all interest accrued to date. Pursuant to Arkansas Code, the dissenting shareholders exercised their right to contest the Company’s valuation and have demanded payment of an additional $17.78 per share plus accrued interest at 9.78% per annum. In accordance with Arkansas Code, the Company has petitioned the court for a determination of the fair value of the shares and believes its valuation will prevail. A court date of December 8, 2008, has been set.

FCC Inquiry

In 2007, the FCC’s Enforcement Bureau commenced an inquiry into whether Montana License Sub, Inc. (a wholly owned subsidiary of the Company), violated the multiple ownership rules in connection with its operation of KLMN(TV), Great Falls, Montana and its relationship with other television stations in the market.  A competitor in the market subsequently filed a petition to deny the license renewal application for KLMN(TV), Great Falls, Montana.  The Company filed appropriate responses in each proceeding.   The FCC staff has informed the Company that the pendency of this complaint has resulted in a tolling on processing other assignment and modification applications involving the Company.  In an attempt to resolve the KLMN dispute, the Company is exploring the opportunity to enter into a Consent Decree, whereby the Company will pay an agreed-upon forfeiture to the FCC, and in exchange, subject to certain reporting conditions, will have the two pending complaints dismissed. 

12

NOTE 8 — RELATED PARTY TRANSACTIONS
 
Amounts due (to) from affiliates and related parties at March 31, 2008 and December 31, 2007 consist of the following:
 
 
  
March 31,
2008
  
December 31,
2007
  
Univision Communications, Inc.
  
$
(2,808,103
)
$
(2,295,837
)
Arkansas Media, LLC and affiliates
    
13,559
    
19,581
  
Royal Palm Capital Management, LLP
    
(500,000
)
  
(225,000
)
Little Rock TV 14, LLC
    
(78,626
)
  
(78,626
)
Retro Television Network, Inc
    
(24,035
)
  
(8,224
)
Other
    
45,970
    
72,364
  
 
          
 
Due (to) from affiliates and related parties
    
(3,351,235
)
  
(2,515,742
)
Less current portion
    
(3,318,579
)
  
(2,509,480
)
 
          
 
Non – current portion
  
$
(32,656
)
$
(6,262
)
 

NOTE 9 - FAIR VALUE MEASUREMENTS

The Company adopted SFAS No. 157 effective January 1, 2008 for financial assets and financial liabilities measured on a recurring basis. SFAS No. 157 applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. There was no impact for adoption of SFAS No. 157 to the Unaudited Condensed Consolidated Financial Statements as it relates to financial assets and financial liabilities. SFAS No. 157 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurement be classified and disclosed in one of the following three categories:
 
 

13

NOTE 10 - SEGMENT DATA

The Company operates its business in three primary reporting segments; the Television Group, Retro Television Network (RTN), and Uplink Services. Operations of the Television Group consist of the sale of air time for advertising, the production and broadcasting of news, and the broadcasting of entertainment and other programming through the Company’s television stations. Operations of RTN consist primarily of the combination of popular entertainment programs of past decades with local sports, weather and news to provide a customized digital feed to its affiliate television stations. Uplink Services operations include the provision of programming, traffic, accounting and billing services to Company-owned television stations and third party broadcasters through the Company’s centralized facility in Little Rock, Arkansas. The Company does not allocate corporate overhead or the eliminations of intercompany transactions to the primary reporting segments.

   
 Three months ended March 31,
 
 
 
 2008
 
2007
 
 
 
 (in thousands)
  
Broadcast Revenue
              
Television
  
$
6,857
  
$
6,693
  
Retro Television Network
    
428
    
70
  
Uplink Services
    
218
    
174
  
Corporate and eliminations
    
(181
)
  
(162
)
 
  
$
7,322
  
$
6,775
  
 
              
Depreciation and amortization
              
Television
  
$
492
  
$
563
  
Retro Television Network
    
8
    
-
  
Uplink Services
    
369
    
258
  
Corporate and eliminations
    
149
    
123
  
 
  
$
1,018
  
$
944
  
 
              
Segment operating income (loss)
              
Television
  
$
(2,514
)
$
(2,165
)
Retro Television Network
    
(1,228
)
  
(216
)
Uplink Services
    
(269
)
  
(334
)
Corporate and eliminations
    
(3,310
)
  
(9,765
)
 
              
Consolidated
  
$
(7,321
)
$
(12,480
)
 
              
Impairment charge
    
-
    
-
  
 
              
Operating income (loss)
  
$
(7,321
)
$
(12,480
)
 
NOTE 11— SUBSEQUENT EVENTS

Asset Purchase Agreement 

On April 3, 2008, EBC Southwest Florida, Inc. (“Seller”), a subsidiary of the Company entered into an asset purchase agreement (“Purchase Agreement”) with Luken Communications, LLC (“Buyer”) and Henry G. Luken III, individually (“Luken”), for the sale of all of the assets used in the business and operations of five low power and Class A television stations in Naples and Fort Myers, Florida (“Stations”), including licenses, construction permits and other instruments of authorization (“Licenses”) issued by the Federal Communications Commission (“FCC”) and certain other assets (together with the Licenses, the “Assets”). The Buyer is owned by Henry Luken, the former Chairman of the Board, Chief Executive Officer and President of the Company and Thomas M. Arnost, the President and Chief Executive Officer of the Company’s Broadcasting Station Group. See Note 4 for further details.

New Retro Television Network (“RTN”) affiliates and contracts

The following table shows stations that have been launched as RTN affiliates since March 31, 2008:

DMA Ranking
  
Station
  
DMA
  
Launched
11
  
WXYZ-DT2
  
Detroit
  
4/1/08
55
  
KAIL-DT
  
Fresno – Visalia
  
4/1/08
69
  
KGPT-LP
  
Wichita – Hutchinson
  
4/1/08
87
  
KWWL-DT3
  
Cedar Rapids – Waterloo
  
4/1/08
41
  
WHTM-DT
  
Harrisburg – Lancaster
  
5/12/08
144
  
KDPX
  
Palm Springs
  
5/12/08

Amendment to Senior Credit Facility

On April 28, 2008, the Company entered into a second amendment (“Second Amendment”) to its Credit Agreement which had been previously amended on March 19, 2008 as noted above in Note 5. Under the terms of the Second Amendment, the lender group has agreed to forbear from exercising certain of its rights and remedies with respect to existing defaults and any other defaults or events of default under the Credit Agreement other than any specified defaults described in the Second Amendment (which include, but are not limited to, breaches of certain affirmative and negative covenants, among others) through the earlier of (a) May 5, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to consummate a proposed financing with certain investors. The Second Amendment also provides for the lender group to make additional loans to the Company in an amount not to exceed $5,495,541 (which includes additional loans funded pursuant to the First Amendment).
As of the date of this report, the above-described forbearance period has ended. If the Company is unable to secure an extension of such forbearance or the lenders otherwise elect to declare a default under the credit agreement, the lenders would have all rights and remedies available to them under the terms of the Credit Agreement. The Company and the lenders continue to discuss all options acceptable to both parties.

NASDAQ

On May 14, 2008 NASDAQ notified the Company of non-compliance with Marketplace Rule 4310(c)(4) due to failure of the Company’s common stock to close above the required $1 minimum bid price for 30 consecutive business days. The Company will now have 180 days until November 10, 2008 to regain compliance. Compliance can be achieved if the bid price of the common stock closes above $1 for a minimum of 10 consecutive business days. The Company will also issue an 8K and a press release relating to this notification in accordance with Marketplace rule 4803(a).  

Changes to the Board of Directors

On May 15, 2008, the Company announced that Henry Luken resigned from the Company’s Board of Directors and as CEO and President. The Board of Directors has engaged Richard Rochon as a member of the Board to fill an existing vacancy. John Oxendine, an existing board member, was named Vice Chairman on an interim basis. The Board of Directors has commenced a search for a new CEO and President.
 
 
14
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the Company’s financial condition and results of operations comparing the interim quarters ended March 31, 2008 and March 31, 2007. You should read this section together with the Company’s consolidated financial statements including the notes to those financial statements, as applicable, for the years and periods mentioned above.

Overview
Equity Media Holdings Corporation (the “Company”) was incorporated in Delaware on April 29, 2005 as Coconut Palm Acquisition Corp. (“Coconut Palm”) to serve as a vehicle for the acquisition of an operating business through a merger, capital stock exchange, asset acquisition and/or other similar transaction. On March 30, 2007, Coconut Palm merged with Equity Broadcasting Corporation (“EBC”), with Coconut Palm remaining as the legal surviving corporation; however, the financial statements and continued operations are those of EBC as the accounting acquirer. Immediately following the merger, Coconut Palm changed its name to Equity Media Holdings Corporation.

As of March 31, 2008, the Company has built and aggregated a total of 120 full and low power permits, licenses and applications that it owns or has contracts to acquire. The Company’s FCC license asset portfolio includes 23 full power stations, 38 Class A stations and 59 low power stations, including two metropolitan New York City low power stations that the Company is currently under contract to purchase. The Company’s English and Spanish-language stations are in 41 markets that represent more than 32% of the U.S. population.
 
While the Company originally targeted small to medium-sized markets for development, it has been able to leverage its original properties into stations in larger metropolitan markets, including Denver, Detroit, Salt Lake City, Minneapolis and Oklahoma City. The Company’s stations are affiliated with broadcast networks as follows:, 19 are affiliated with Univision, 12 are affiliated with the Company’s Retro Television Network (“RTN”), five are affiliated with MyNetworkTV, four are affiliated with FOX, three are affiliated with TeleFutura, and one is affiliated with ABC.

The Company is the second-largest affiliate group of the top-ranked Univision and TeleFutura networks with 19 affiliates, 13 of which are in the nation’s top-65 Hispanic television markets. The Company believes that it has growth opportunity in these Hispanic properties because each station has a 15-year affiliation agreement with either Univision or TeleFutura, respectively.

RTN was developed to fulfill a need in the broadcasting industry that is occurring now and will continue to occur as broadcast stations switch over to digital programming pursuant to a Federal Communications Commission mandate with a February 19, 2009 deadline.

Digital Television (“DTV”), will allow broadcasters to offer television content with movie-quality picture and CD-quality sound. DTV is a much more efficient technology, allowing broadcasters to provide a “high definition” (“HDTV”), program and multiple “standard definition” DTV programs simultaneously. Providing several programs streams on one broadcast channel is called “multicasting.” The challenge facing many broadcasters is how to effectively program and monetize the value created by DTV.

RTN is the first network designed for the digital arena. RTN takes some of the most popular and entertaining programs from the 60s, 70s, 80s, and 90s, all ratings proven and digitally re-mastered, and provides them to their RTN affiliates. RTN affiliates enjoy a scalable, cost efficient content solution for their digital channels. A major differentiator between RTN and other potential digital solutions is RTN’s ability to deliver local news, sports, and weather updates to the local RTN affiliate, in addition to the quality RTN programming. This enables the local affiliate to sell local advertising spots to generate revenue.

The ability to deliver localized programs to the RTN affiliate is accomplished through utilization of the Company’s proprietary digital satellite technology system known as “C.A.S.H.” The Central Automated Satellite Hub (“CASH”), system provides the means of delivering a fully automated, 24 hour a day custom feed for each local affiliate. The Company has the capability to launch localized network feeds in all 210 U.S. TV markets and internationally as well.
 
The Company has historically focused on aggregating stations and developing delivery systems. Over the past eight years, the Company financed itself largely by acquiring television construction permits and stations at attractive valuations. After acquiring the stations, the Company would construct and/or upgrade the facilities and, on a selective market basis, sell the station at an increased valuation to fund operations and acquisitions and to service debt.
 
Following the March 2007 merger, the Company’s business focus shifted from primarily aggregating stations to increasing RTN affiliate penetration and maximizing revenue and profit for each station. The Company intends to achieve revenue growth and profitability through various entity and station-level initiatives. These initiatives, which the Company has recently begun to implement, include:

 
·
continued growth of the RTN affiliate base in key U.S. television markets;

 
·
focusing on growing national business;

15

 
·
addition of experienced managers in select local markets;

 
·
upgrading / increasing sales staffs in select local markets;

 
·
establishing market appropriate rate cards;

 
·
upgrading local news (where available) and expanding local programming in select markets;

 
·
upgrading syndicated programming; and

 
·
enhancing cable and satellite distribution
 
Generally, it takes a few years for the Company’s newly acquired or built stations to generate operating cash flow. In addition, it requires time to gain viewer awareness of new station programming and to attract advertisers. Accordingly, the Company has incurred, and expects to continue to incur, with newly acquired or built stations, losses at a station in the first few years after it acquires or builds the station. Occasionally unforeseen expenses and delays increase the estimated initial start-up expenses. This requires the Company’s established stations to generate revenues and cash flow sufficient to meet its business plan including the significant expenses related to our newly acquired or built stations.
 
The Company is one of the largest holders of broadcast spectrum in the United States. Each Company station is 6MHz and is located in the 480-680 MHz band. This spectrum adjoins the 700 MHz band and offers similar propagation characteristics. The Company anticipates that it will supplement its revenues by monetizing its significant spectrum portfolio through joint-ventures, leasing or sub-licensing to telecoms and new media companies.
 
The Company also launched a new corporate and investor relations website (www.EMDAholdings.com) in August 2007. The website features new and expanded content about the Company’s operating businesses, senior management, news and public filings. All key information on the website is available in an up-to-date, interactive format.
 
Acquisition and Expansion Activity

The Company’s classic television network, RTN, currently has a total of 73 affiliations announced. Top DMA markets include San Francisco, Atlanta, Washington, DC, Detroit, Phoenix, Seattle, Tacoma, Denver, Orlando, St. Louis, Pittsburgh, and Charlotte.

RESULTS OF OPERATIONS — THREE MONTHS ENDED MARCH 31, 2008 COMPARED TO THREE MONTHS ENDED MARCH 31, 2007

Revenue
The following table sets forth the principal types of broadcast revenue earned by the Company and its stations for the periods indicated and the change from one period to the next both in dollars and percent:

 
  
For the Three Months Ended March 31,  
  
 
  
 
  
 
  
 
  
%
  
 
  
2008  
  
2007  
  
Change  
  
Change  
  
 
  
(In thousands, except percentages)  
  
Broadcast Revenues
                  
Local
  
$
2,244
  
$
2,405
  
$
(161
)
  
(6.7
)%
National
    
2,072
   
1,987
   
85
    
4.3
  
Other
    
461
   
247
   
214
    
86.6
  
Trade & Barter Revenue
    
2,545
   
2,136
   
409
    
19.1
 
Total Broadcast Revenue
  
$
7,322
  
$
6,775
  
$
547
    
8.1
%
 
As noted in the Overview, the operating revenue of the Company’s stations is derived primarily from advertising revenue. The above table segregates revenue received from local sources compared to national sources, together with gross trade and barter revenues, which is non-cash. Other broadcast revenue is a combination of production, uplink services, news services, and other non-spot broadcast revenue.
 
Total Broadcast Revenue increased $0.5 million, or 8.1%, to $7.3 million. The increase in revenues is driven by an increase of $400,000 in trade and barter and $200,000 in other revenue. The increase in trade and barter includes an increase of $152,000 in trade programming and $200,000 in film barter income. This increase is due primarily to the continued growth in the Company’s investment in syndicated programming as it continues its commitment to reduce the amount of shopping and long-form commercials and increase traditional programming. Trade advertising revenue increased $58,000. The increase in other income is led by political sales of $115,000, uplink share services revenue of $77,000 and Joint Service Agreement’s revenue of $20,000.

16

Local advertising revenue decreased $161,000 as result of lower direct and regional sales which was offset by higher revenues derived from advertising agencies. National sales increased $85,000 primarily due to higher billings to agencies which were offset by lower paid programming. With the Company’s shift to traditional programming, sales of available time shifts to spots advertisers. Total local and national revenue from the Company’s Spanish-language stations decreased by $.1 million or 6% when compared to the same period in 2007, while local and national revenue from the Company’s English-language stations decreased by $.1 million or 4%.

Results of Operations
The following table sets forth the Company’s operating results for the three month period ended March 31, 2008, as compared to the three month period ended March 31, 2007:

 
  
For the Three Months Ended March 31,
  
 
 
 
 
 
 
 
 
%
  
 
  
2008
  
2007
  
Change
  
Change
  
 
  
(In thousands, except percentages, net income per share and weighted average shares)
  
Broadcast Revenue
  
$
7,322
  
$
6,774
  
$
548
    
8.0
  
Program, production & promotion
    
4,811
   
3,421
   
1,390
   
40.6
  
Selling, general & administrative
    
8,138
   
6,284
   
1,854
   
29.5
  
Management agreement settlement
    
—
   
8,000
   
(8,000
)
  
(100.0
)
Depreciation expense
    
1,018
   
944
   
74
   
7.8
  
Rent
    
676
   
605
   
71
   
11.7
  
Operating (loss)
    
(7,321
)
  
(12,480
)
  
5,159
   
41.3
  
 
                  
Interest income
    
21
   
4
   
17
   
425.0
  
Interest Expense, net
    
(3,055
)
  
(2,121
)
  
(934
)
  
(44.0
)
Gain on sale of assets
    
—
   
454
   
(454
)
  
(100.0
)
Other income, net
    
84
   
130
   
(46
)
  
(35.4
)
 
    
(2,950
)
  
(1,533
)
  
(1,417
)
  
(42.4
)
(Loss) before income taxes
    
(10,271
)
  
(14,013
)
  
3,742
   
26.7
  
Income taxes
    
—
   
—
   
—
   
—
  
Net (loss)
    
(10,271
)
  
(14,013
)
  
3,742
   
26.7
  
Preferred dividend
    
(184
)
  
(12,135
)
  
11,951
   
98.5
  
Net loss available to common shareholders
  
$
(10,455
)
$
(26,148
)
$
15, 693
    
60.0
  
Basic net (loss) per common share
  
$
(0.26
)
$
(1.02
)
        
Basic shares used in earnings per share calculation
    
40,278,642
   
25,668,789
           
 
Program, production and promotion expenses
Program, production and promotion expense was $4.8 million in the three month period ended March 31, 2008, as compared to $3.4 million in the three month period ended March 31, 2007, an increase of $1.4 million, or 40.6%. The increase was due primarily to an increase in Syndicated Programming expense, barter/film expense and license fees.
 
Selling, general and administrative
Selling, general and administrative expense was $8.1 million in the three month period ended March 31, 2008, as compared to $6.3 million in the three month period ended March 31, 2007, an increase of $1.8 million, or 29.5%. Contributing to this increase were increases in personnel costs, including benefits and share based compensation. This increase in personnel cost is attributed to hiring of management personnel following the March 2007 Merger Transaction to address the new strategic direction of the Company as well as demands of a publicly traded company, together with staff increases related to TV broadcast and RTN operations
 
Depreciation and Amortization
Depreciation and amortization was $1 million in the three month period ended March 31, 2008, as compared to $1 million in the three month period ended March 31, 2007. Of those expense amounts, amortization expense was $0.0 for the three month period ended March 31, 2008 compared to $30,186 for the three month period ended March 31, 2007, a decrease of $30,186.
 
Rent
Rent expense was $0.7 million in the three month period ended March 31, 2008, as compared to $0.6 million in the three month period ended March 31, 2007, an increase of $0.1 million, or 11.7%. An increase in tower rent expense was the primary factor.

17
 
Interest Expense, net
Interest expense, net of interest income, was $3.0 million in the three month period ended March 31, 2008, as compared to $2.1 million in the three month period ended March 31, 2007, an increase of $0.9 million, or 44.0%. This increase is primarily attributable to higher average outstanding debt ($20 million) and higher interest rates charged by lenders.. The combined average interest rates on the Company’s senior credit facility were 14.0% and 13.1% for the three months ended March 31, 2008 and 2007, respectively.
 
Gain on sale of assets
The gain on sale of assets was $0.0 million in the three month period ended March 31, 2008, as compared $0.5 million in the three month period ended March 31, 2007, a decrease of $0.5 million. The gain on sale in 2007 included the sale of a broadcast tower located in central Arkansas.
 
Other income, net
Other income, net was $84,000 for the three months ended March 31, 2008 as compared to $130,000 for the three months ended March 31, 2007, a decrease of $46,000.
 
Preferred dividend
Preferred dividend was $0.2 million in 2008 compared to $12.1 million in 2007. The decrease of $11.9 million is due to the payment of $12.1 million to the former preferred shareholders of EBC in connection with the March 2007 Merger Transaction. Current preferred shares accrete dividends quarterly.
 
Liquidity and Capital Resources
 
General
The following table and discussion presents data the Company believes is helpful in evaluating it liquidity and capital resources:

 
  
As of  
  
 
  
March 31, 
2008  
  
December 31, 
2007  
  
 
  
(In thousands)  
  
Cash and cash equivalents
  
$
1,194
  
$
634
  
Long term debt including current portion and lines of credit
  
$
79,522
  
$
77,411
  
Available credit under senior credit agreement
  
$
-0-
  
$
─0─
  
 
The Company’s existing capital resources are not sufficient to fund its operations. If the Company is unable to obtain adequate additional sources of capital in the near term it will need to cease all or a portion of its operations, seek protection under U.S. bankruptcy laws and regulations, engage in a restructuring or undertake a combination of these and other actions. Additional sources of capital, if obtained, would likely come from sales by the Company of debt and/or equity and/or the sale of material assets of the Company. The Company is currently negotiating potential transactions that would supply it with capital necessary to meet its current requirements. However, these negotiations may not result in successful consummation of any transaction. If the Company is able to successfully consummate a transaction, such transaction may result in substantial dilution to the Company’s existing security holders and/or the incurrence of substantial indebtedness on relatively expensive terms. The terms of any such transaction would also likely involve covenants that serve to substantially restrict the operations of the Company and its management and could result in a change of control of the Company.
 
On February 13, 2008, the Company and its lenders entered into the Third Amended and Restated Credit Agreement to refinance the credit facility. The amended $53.0 million credit facility, comprised of an $8.0 million revolving credit line and term loans of $45.0 million, matures on February 13, 2011, was used to refinance the existing indebtedness senior credit facility. Outstanding principal balance under the credit facility bears interest at LIBOR or the alternate base rate, plus the applicable margin. The applicable margin is 9.5% for the LIBOR loans and 8.5% on the alternate base rate loan. The minimum LIBOR is 4.5%. The alternate base rate is (i) the greatest of (A) the Prime Rate, (B) the Federal Funds Rate in effect on such day plus fifty (50) basis points (0.50%), and (C) seven and one-half percent (7.50%) per annum. We are required to pay an unused line fee of .5% on the unused portion of the credit facility. The credit facility is secured by the majority of the assets of the company. We are subject to new financial and operating covenants and restrictions based on trailing monthly and twelve month information. We have borrowed $52,561,593 under the new facility as of March 31, 2008. Due to certain restrictions based on the value of the loan collateral, the Company does not have access to the remaining $2,487,500 at this time.

On March 19, 2008, the Company entered into an amendment to its Third Amended and Restated Credit Agreement (“Credit Agreement”) with Silver Point Finance, LLC and Wells Fargo Foothill, Inc. Under the terms of the Amendment, the lender group has agreed to forbear from exercising certain of their rights and remedies with respect to designated defaults under the Credit Agreement through the earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to enter into agreements with respect to the sale of certain of its assets and the Company’s failure to secure approvals for, and meet other criteria with respect to, financing alternatives necessary to meet the Company’s immediate capital requirements. Additionally, the applicable margins on LIBOR loans and base rate loans were increased to 10.0% and 9.0% respectively. If the Company is unable to meet all criteria under the forbearance agreement, the lender group will have all remedies available to them under the Credit Agreement, including making the loan immediately due and payable.

18
 
On April 28, 2008, the Company entered into a second amendment (“Second Amendment”) to its Credit Agreement which had been previously amended on March 19, 2008 as noted above in Note 5. Under the terms of the Second Amendment, the lender group has agreed to forbear from exercising certain of its rights and remedies with respect to existing defaults and any other defaults or events of default under the Credit Agreement other than any specified defaults described in the Second Amendment (which include, but are not limited to, breaches of certain affirmative and negative covenants, among others) through the earlier of (a) May 5, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to consummate a proposed financing with certain investors. The Second Amendment also provides for the lender group to make additional loans to the Company in an amount not to exceed $5,495,541 (which includes additional loans funded pursuant to the First Amendment) and increases the applicable margins on LIBOR loans and base rate loans to 12.0% and 11.0% respectively.

As of the date of this report, the above-described forbearance period has ended. If the Company is unable to secure an extension of such forbearance or the lenders otherwise elect to declare a default under the credit agreement, the lenders would have all rights and remedies available to them under the terms of the Credit Agreement. The Company and the lenders continue to discuss all options acceptable to both parties.

The principal ongoing uses of cash that affect the Company’s liquidity position include the following: the acquisition of and payments under syndicated programming contracts, capital and operational expenditures and interest payments on the Company’s debt. It should be noted that no principal is due on the existing senior credit facility (as refinanced in February 2008 - see below) until February 2011, except for mandatory principal payments from proceeds generated from the sale of any collateral assets through that period.
 
The Company currently has a working capital deficit of approximately $67.8 million.
  
Even with the refinanced Credit Facility, the additional funds provided by the Amended Credit Facility are not sufficient to meet all of the anticipated liquidity needs to continue operations of the Company for the next twelve months. Accordingly, the Company will have to raise additional capital or increase its debt immediately to continue operations. If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to liquidate available assets, restructure the Company or in the extreme event, cease operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Sources and Uses of Cash

 
  
For the Three Months  
  
 
  
Ended March 31,  
  
 
  
2008  
  
2007  
  
 
  
(In thousands)  
  
Net cash used by operating activities
  
$
(2,317
)
$
(7,771
)
Net cash provided (used) by investing activities
    
765
   
(1,959
)
Net cash provided by financing activities
    
2,111
   
31,944
 
Net increase in cash and cash equivalents
  
$
559
  
$
22,214
  
 
Operating Activities

Net cash used in operating activities for the three month periods ending March 31, 2008 and 2007 was $2.3 million and $7.8 million, respectively. The decrease in net cash used by operating activities of $5.5 million was due primarily to an decrease in the net loss of $3.8 million and a decrease in Management Agreement Settlement of $4.8 million, a non-cash operating expense.
 
Investing Activities
 
Net cash provided by investing activities was $0.8 million in the three month period ended March 31, 2008, a variance of $2.7 million compared to the three month period ended March 31, 2007, when $1.9 million was used by investing activities. The variance was largely due to the acquisition of three low power television stations located in Oklahoma and Arkansas, including KLRA, the Univision affiliate in Little Rock, Arkansas in 2007 combined with cash received from affiliates in repaymnet of advances.
 
Financing Activities
 
Net cash provided by financing activities was $2.1 million in the three month period ended March 31, 2008, compared to $31.9 million in the three month period ended March 31, 2007, a decrease of $29.8 million. During the three month period ended March 31, 2007, the Company completed its merger with Coconut Palm. As part of the Merger Transaction, the Company acquired the existing assets and liabilities of Coconut Palm, including operating cash of $22.8 million and $10.9 million of funds held in trust for the retirement of the stock held by Coconut Palm shareholders who elected not to participate in the merger. The funds held in trust are restricted and not available for any use by the Company. The Company’s net increase in debt was $2.1 million for the three months ended March 31, 2008 as compared to $4.0 million for the three months ended March 31, 2007.

19

Debt Instruments and Related Covenants

The Company’s Credit Facility is collateralized by substantially all of the assets, including real estate, of the Company and its subsidiaries. The Credit Facility contains certain restrictive provisions which include, but are not limited to, requiring the Company to achieve certain revenue and earnings goals, limiting the amount of annual capital investments, incur additional indebtedness, make certain acquisitions and investments, sell assets or make other restricted payments, including dividends (all are as defined in the loan agreement and subsequent amendments.) As of December 31, 2007, the Company was not in compliance with all covenants as required by the credit facility before its amendment and restatement on February 13, 2008. In connection with and as part of the amendment and restatement of the credit facility, the lenders waived and eliminated the covenant requirements as of December 31, 2007. The Company is subject to amended covenants as per the new credit agreement.
 
On February 13, 2008, the Company and its lenders entered into the Third Amended and Restated Credit Agreement to refinance the credit facility. The amended $53.0 million credit facility, comprised of an $8.0 million revolving credit line and term loans of $45.0 million, matures on February 13, 2011, was used to refinance the existing indebtedness senior credit facility. Outstanding principal balance under the credit facility bears interest at LIBOR or the alternate base rate, plus the applicable margin. The applicable margin is 9.5% for the LIBOR loans and 8.5% on the alternate base rate loan. The minimum LIBOR is 4.5%. The alternate base rate is (i) the greatest of (A) the Prime Rate, (B) the Federal Funds Rate in effect on such day plus fifty (50) basis points (0.50%), and (C) seven and one-half percent (7.50%) per annum. We are required to pay an unused line fee of .5% on the unused portion of the credit facility. The credit facility is secured by the majority of the assets of the company. We are subject to new financial and operating covenants and restrictions based on trailing monthly and twelve month information. We have borrowed $52,561,593 under the new facility as of March 31, 2008. Due to certain restrictions based on the value of the loan collateral, the Company does not have access to the remaining $2,487,500 at this time.

On March 19, 2008, the Company entered into an amendment to its Third Amended and Restated Credit Agreement (“Credit Agreement”) with Silver Point Finance, LLC and Wells Fargo Foothill, Inc. Under the terms of the Amendment, the lender group has agreed to forbear from exercising certain of their rights and remedies with respect to designated defaults under the Credit Agreement through the earlier of (a) April 18, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to enter into agreements with respect to the sale of certain of its assets and the Company’s failure to secure approvals for, and meet other criteria with respect to, financing alternatives necessary to meet the Company’s immediate capital requirements.  Additionally, the applicable margins on LIBOR loans and base rate loans were increased to 10.0% and 9.05 respectively. If the Company is unable to meet all criteria under the forbearance agreement, the lender group will have all remedies available to them under the Credit Agreement, including making the loan immediately due and payable.
 
On April 28, 2008, Equity Media Holdings Corporation (“Company”) entered into a second amendment (“Second Amendment”) to its third amended and restated credit agreement (“Credit Agreement”) with Silver Point Finance, LLC and Wells Fargo Foothill, Inc which had been previously amended on March 19, 2008 (“First Amendment Under the terms of the Second Amendment, the lender group has agreed to forbear from exercising certain of its rights and remedies with respect to existing defaults and any other defaults or events of default under the Credit Agreement other than any specified defaults described in the Second Amendment (which include, but are not limited to, breaches of certain affirmative and negative covenants, among others) through the earlier of (a) May 5, 2008 and (b) the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to consummate a proposed financing with certain investors. The Second Amendment also provides for the lender group to make additional loans to the Company in an amount not to exceed $5,495,541 (which includes additional loans funded pursuant to the First Amendment) and increases the applicable margins on LIBOR loans and base rate loans to 12.0% and 11.0% respectively.
 
As of March 31, 2008, the applicable margins for base rate advances and LIBOR advances under the revolver component of the Credit Facility were 9.0% and 10.0%, respectively. The amount outstanding under the Credit Facility as of March 31, 2008 was $52.6 million and is allocated as follows: term loan facility of $12.0 million, term loans B of $35.1 million and a fully drawn revolving loan of $5.5 million. At March 31, 2008, approximately $1 million was available to borrow under the term loan B component of the Credit Facility.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.
 
Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires the appropriate application of certain accounting policies, many of which require the Company to make estimates and assumptions about future events and their impact on amounts reported in the Company’s consolidated financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results may differ from the Company’s estimates. Such differences may be material to the consolidated financial statements.

20

The Company believes its application of accounting policies, and the estimates inherently required therein, are reasonable.

These accounting policies and estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, the Company has found its application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

The Securities and Exchange Commission has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operation, and which require the company to make its most difficult and subjective judgments, often as the result of the need to make estimates of matters that are inherently uncertain. Our critical accounting policies and estimates include the estimates used to determine the recoverability of indefinite-lived assets, including goodwill, the recoverability of long-lived tangible assets, the value of television broadcast rights, the amount of allowance of doubtful accounts, the existence and accounting for variable interest entities and the amount of stock-based compensation. For a detailed discussion of our critical accounting policies and estimates, please refer to our 2007 audited financial statements as reported in our Form 10-K/A filed on April 1, 2008 with the Securities and Exchange Commission. There have been no material changes in the application of our critical accounting policies and estimates subsequent to that report.
 
Recent Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 will become effective beginning in the first quarter of 2009. The Company is currently evaluating the impact of adopting SFAS 161 on the financial statements.
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business Combinations” (“FASB No. 141(R)”). FASB No. 141(R) retains the fundamental requirements of the original pronouncement requiring that the purchase method be used for all business combinations. FASB No. 141(R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination, establishes the acquisition date as the date that the acquirer achieves control and requires the acquirer to recognize the assets acquired, liabilities assumed and any non-controlling interest at their fair values as of the acquisition date. FASB No. 141(R) also requires that acquisition-related costs be recognized separately from the acquisition. FASB No. 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The impact of adopting SFAS No. 141(R) will be dependent on the future business combinations that the Company may pursue after its effective date, if any.

In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“FASB No. 160”) .” The objective of FASB No. 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement applies to all entities that prepare consolidated financial statements, except not-for-profit organizations. FASB No. 160 amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of FASB No. 141 (R). This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The effective date of this Statement is the same as that of the related Statement 141(R). This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented.

21

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. The Company undertakes no obligation to update such forward-looking statements to reflect subsequent events or circumstances, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

The Company is exposed to market risk from changes in domestic and international interest rates (i.e. prime and LIBOR). This market risk represents the risk of loss that may impact the financial position, results of operations and/or cash flows of the Company due to adverse changes in interest rates. This exposure is directly related to our normal funding activities. The Company does not use financial instruments for trading and, as of March 31, 2008, was not a party to any interest-rate derivative agreements.

Interest Rates

At March 31, 2008, the entire outstanding balance under our credit agreement, approximately 66% of the Company’s total outstanding debt (credit agreement, lines of credit, asset purchase loans, real estate mortgage, etc.) bears interest at variable rates. The fair value of the Company’s fixed rate debt is estimated based on current rates offered to the Company for debt of similar terms and maturities and is not estimated to vary materially from its carrying value.

Based on amounts outstanding at March 31, 2008, if the interest rate on the Company’s variable debt were to increase by 1.0%, its annual interest expense would be higher by approximately $.6 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation and Disclosure of Controls and Procedures

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control system is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (U.S. GAAP).

The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with the authorization of its management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on its consolidated financial statements.

The Company’s management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of December 31, 2007. Based on this evaluation Management identified and reported in the December 31, 2007 10-K/A, filed April 1, 2008 a material weakness in the Company's internal control over financial reporting as of December 31, 2007 relating to effective internal controls over the preparation, review, and approval surrounding certain account reconciliations, journal entries and accruals; including and related to analysis and evidence of management review. As result of this material weakness, management concluded that the disclosure controls and procedures were not effective as of December 31, 2007.

During 2008, the Company has taken and will continue to take actions to remediate the material weakness discussed above and it is continuing to assess additional controls that may be required to substantially reduce the risk of similar material weakness occurring in the future. The Company is in the process of establishing more robust reconciliation and review procedures and has required its accounting managers and supervisors to adequately review all reconciliations, journal entries and accruals and to provide evidence of such review and analysis.

22

As part of its fiscal 2008 assessment of internal control over financial reporting, management will conduct sufficient testing and evaluation of the controls being implemented as part of this remediation plan to ascertain that they operate effectively. While the Company has taken measures to remediate the material weakness and strengthen its internal control over financial reporting, these steps may not be adequate to fully remediate the material weakness, and additional measures may be required. The effectiveness of this remediation measures will not be fully known until the Company completes its annual evaluation of the effectiveness of its internal control over financial reporting for the year ending December 31, 2008. Therefore, management has concluded that it can not assert that the control deficiencies related to the reported material weakness have been effectively remediated.

Procedures were undertaken so that management could conclude that reasonable assurance exists regarding the reliability of financial reporting and the preparation of the condensed consolidated financial statements contained in this filing.

Changes in Internal Control Over Financial Reporting

During the first quarter of 2008, other than discussed above, there has been no changes in the Company’s internal control over financial reporting that materially affect or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

23

PART II—OTHER INFORMATION

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company is currently in default under its existing loan agreements with Silver Point and Wells Fargo. Existing events of default include, but are not limited to, the Company’s failure to pay interest when due, lateness on certain payments due under the Company’s satellite and programming agreements and failure to achieve certain performance metrics, including minimum monthly revenue and EBITDA benchmarks.

On April 28, 2008, the Company entered into a Second Amendment to its Third Amended and Restated Credit Agreement with Silver Point and Wells Fargo. The credit agreement had been previously amended on March 19, 2008. Under the terms of the two amendments, the lenders agreed to forbear from exercising certain of their rights and remedies with respect to the Company’s existing defaults through the earlier of May 5, 2008 and the date of occurrence of certain events or by which certain events have failed to occur, including the Company’s failure to consummate a proposed financing with certain investors.

As of the date of this report, the above-described forbearance period has ended. If the Company is unable to secure an extension of such forbearance or the lenders otherwise elect to declare a default under the credit agreement, the lenders would have all rights and remedies available to them under the terms of the credit agreement. The Company and the Lender continue to discuss all options acceptable to both parties.

ITEM 6. EXHIBITS

Exhibits
    
 
 
 
31.1
 
Certification of Chief Operating Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
31.2
 
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.1
 
Certification of Chief Operating Officer Pursuant to Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.2
 
Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
10.37  
Second Amendment to Third Amended and Restated Credit Agreement and Forbearance Agreement dated April 28, 2008 and Related Schedules.

24

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
EQUITY MEDIA HOLDINGS CORPORATION  
     
Date: May 19, 2008
By:
/s/ Gregory Fess
 
 
Chief Operating Officer
 
 
(principal executive officer) 
     
     
Date: May 19, 2008
By:
/s/ Patrick Doran
 
 
Chief Financial Officer
 
 
(principal financial and accounting officer) 

25

EXHIBIT INDEX

31.1
 
Certification of Chief Operating Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
31.2
 
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.1
 
Certification of Chief Operating Officer Pursuant to Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.2
 
Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
10.37  
Second Amendment to Third Amended and Restated Credit Agreement and Forbearance Agreement dated April 28, 2008 and Related Schedules.

26
 

Exhibit 31.1
 
CERTIFICATION

Certification of Chief Operating Officer

I, Gregory Fess, certify that:

1.
 
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 of Equity Media Holdings Corporation (the “registrant”);
 
 
 
2.
 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
 
4.
 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
 
 
a.
 
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
 
 
 
b.
  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
       
 
c.
 
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
 
 
 
d.
 
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
 
 
 
5.
 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
 
 
a.
 
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
 
 
 
b.
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 19 2008
Signature:
/s/ Gregory Fess
 
 
Chief Operating Officer
 
 
(principal executive officer) 

 

Exhibit 31.2
 
CERTIFICATION

Certification of Chief Financial Officer

I, Patrick Doran, certify that:

1.
 
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 of Equity Media Holdings Corporation (the “registrant”);
 
 
 
2.
 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
 
4.
 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
 
 
a.
 
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
 
 
 
b.
  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
       
 
c.
 
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
 
 
 
d.
 
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
 
 
 
5.
 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
 
 
a.
 
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
 
 
 
b.
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 19 2008
Signature:
/s/ Patrick Doran
 
 
Chief Financial Officer
 
 
(principal financial and accounting officer) 

Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Equity Media Holdings Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory Fess, Chief Operating Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1)
 
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
 
(2)
 
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Gregory Fess
Chief Operating Officer
(principal executive officer)
May 19, 2008 

 
 
 
 

Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Equity Media Holdings Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick Doran, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
(1)
 
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
 
(2)
 
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Patrick Doran
Chief Financial Officer
(principal financial and accounting officer)
May 19 2008 

 
 
 
 

 
SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT AND FORBEARANCE AGREEMENT

THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT AND FORBEARANCE AGREEMENT (this "Agreement") is made as of the 28th day of April, 2008, by and among

EQUITY MEDIA HOLDINGS CORPORATION, a Delaware corporation (successor-by-merger to Equity Broadcasting Corporation, an Arkansas corporation) ("EMHC"), ARKANSAS 49, INC., an Arkansas corporation, BORGER BROADCASTING, INC., a Nevada corporation, DENVER BROADCASTING, INC., an Arkansas corporation, EBC HARRISON, INC., an Arkansas corporation, EBC PANAMA CITY, INC., an Arkansas corporation, EBC SCOTTSBLUFF, INC., an Arkansas corporation, FORT SMITH 46, INC., a Nevada corporation ("Fort Smith 46"), EQUITY NEWS SERVICES, INC. (formerly known as Hispanic News Network, Inc.), an Arkansas corporation, LOGAN 12, INC., an Arkansas corporation ("Logan 12"), MARQUETTE BROADCASTING, INC., a Nevada corporation, NEVADA CHANNEL 3, INC., an Arkansas corporation, NEWMONT BROADCASTING CORPORATION, an Arkansas corporation, PRICE BROADCASTING, INC., a Nevada corporation, PULLMAN BROADCASTING INC., an Arkansas corporation ("PBI"), REP PLUS, INC., an Arkansas corporation, RIVER CITY BROADCASTING, INC., an Arkansas corporation ("River City"), ROSEBURG BROADCASTING, INC., a Nevada corporation, TV 34, INC., an Arkansas corporation, VERNAL BROADCASTING, INC., a Nevada corporation, WOODWARD BROADCASTING, INC., a Nevada corporation, EBC MINNEAPOLIS, INC., an Arkansas corporation, EBC DETROIT, INC., an Arkansas corporation, EBC BUFFALO, INC., an Arkansas corporation, EBC WATERLOO, INC., an Arkansas corporation, EBC ATLANTA, INC., an Arkansas corporation, EBC SEATTLE, INC., an Arkansas corporation, EBC KANSAS CITY, INC., an Arkansas corporation, EBC SYRACUSE, INC., an Arkansas corporation, NEVADA CHANNEL 6, INC., an Arkansas corporation, EBC PROVO, INC., an Arkansas corporation, EBC SOUTHWEST FLORIDA, INC., an Arkansas corporation, EBC LOS ANGELES, INC., an Arkansas corporation, C.A.S.H. SERVICES, INC. (formerly known as Skyport Services, Inc.), an Arkansas corporation, EBC NASHVILLE, INC., an Arkansas corporation, and EBC JACKSONVILLE, INC., an Arkansas corporation (together, the "Borrowers" and individually, a "Borrower").
 
SPCP GROUP, LLC, a Delaware limited liability company ("SPCP"), SPF CDO I, LTD., a Cayman Islands limited liability company ("SPF"), FIELD POINT III, LTD., a Cayman Islands limited liability company ("FPIII"), FIELD POINT IV, LTD., a Cayman Islands limited liability company ("FPIV"), WELLS FARGO FOOTHILL, INC., a California corporation ("WFF"), and the other financial institutions which are now, or in accordance with Article XII hereafter become, parties hereto and "Lenders" hereunder (collectively, "Lenders" and each individually, a "Lender");

 
SILVER POINT FINANCE, LLC, a Delaware limited liability company, as Administrative Agent for Lenders (in such capacity, together with its successors and assigns in such capacity, "Administrative Agent"), and as Documentation Agent for Lenders (in such capacity, together with its successors and assigns in such capacity, "Documentation Agent");
 
WELLS FARGO FOOTHILL, INC., a California corporation, as Collateral Agent (in such capacity, together with its successors and assigns in such capacity, "Collateral Agent").
 
WITNESSETH THAT
 
WHEREAS, Borrowers are indebted to the Lenders pursuant to a certain Third Amended and Restated Credit Agreement dated as of February 13, 2008, as amended and supplemented by a certain First Amendment to Third Amended and Restated Revolving Credit Agreement and Forbearance Agreement dated as of March 19, 2008 (as so amended and supplemented, and as the same may be further amended, restated, supplemented and otherwise modified from time to time, the "Credit Agreement"); and
 
WHEREAS, Borrowers are in default under the Credit Agreement as described in Exhibit A attached hereto and made a part hereof (the "Existing Defaults"); and
 
WHEREAS, Borrowers have requested that Lenders, Administrative Agent and Collateral Agent (collectively, "Lender Group") forbear from exercising their rights and remedies under the Credit Agreement, and the related Security Documents as a result of such Existing Defaults and any other Defaults or Events of Default other than any Specified Defaults (as defined herein) until May 5, 2008; and
 
WHEREAS, Borrowers have requested that certain Term Loan B Lenders provide additional financing to Borrowers as hereinafter provided; and
 
WHEREAS, Lender Group is willing to agree to forbear from exercising its rights and remedies with respect to the Existing Defaults and any other Defaults or Events of Default other than any Specified Defaults for the Forbearance Period specified herein and on the terms and conditions specified herein and certain Lenders are willing to extend such additional financing on the terms and conditions specified herein and in the Credit Agreement, as amended hereby; and
 
WHEREAS, the parties hereto desire to amend the Credit Agreement as hereinafter provided;
 
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:
 
1.Definitions.
 
Unless otherwise defined herein, all capitalized terms used herein shall have the identical meanings assigned to them in the Credit Agreement, as amended hereby.

- 2 -
 
2.Forbearance.
 
(a) Acknowledgment of Indebtedness. Borrowers hereby acknowledge, confirm and agree that as of the date hereof and prior to taking into account any Additional Term Loans B (as hereinafter defined), Borrowers are indebted to Lenders in respect of: (i) the Revolving Credit Loan in the aggregate outstanding principal amount of $5,512,500.00 plus accrued and unpaid interest; (ii) the Term Loans A in the aggregate outstanding principal amount of $12,000,000.00, plus accrued and unpaid interest; (iii) the Term Loans B (including, without limitation, certain Additional Term Loans B made prior to the date hereof) in the aggregate outstanding principal amount of $36,040,981, plus accrued and unpaid interest and (iv) all legal and other fees in connection with this Agreement, the Credit Agreement and/or any other Loan Document, including, without limitation, all reasonable fees and expenses of Edwards Angell Palmer & Dodge LLP, special counsel to Administrative Agent, and Paul Hastings, special counsel to Collateral Agent, in each case accrued to the date hereof. The Revolving Credit Loan, the Term Loans A and the Term Loans B, together with interest accrued and accruing thereon, and fees, costs, expenses and other charges now or hereafter payable by Borrowers to Lender, are unconditionally owing by Borrowers, without offset, defense or counterclaim of any kind, nature or description whatsoever.
 
(b) Acknowledgement of Security Interests. Borrowers hereby acknowledge, confirm and agree that Lender Group has and shall continue to have valid, enforceable and perfected first-priority liens upon, and security interests in, the Collateral heretofore granted to Collateral Agent for the benefit of Lenders pursuant to the Loan Documents or otherwise granted to or held by Lender Group, subject to permitted encumbrances, if any.
 
(c) Acknowledgement Concerning Loans.
 
Borrowers hereby acknowledge, confirm and agree that no Borrower is entitled to request any further Loans, advances or financial accommodations under the Credit Agreement, and that Lender Group is under no obligation to make any further Loans, advances or financial accommodations to any Borrower. Notwithstanding the foregoing, on the date of closing of this Agreement (the "Second Amendment Closing Date"), the Term Loan B Lenders identified on Exhibit C attached hereto (collectively, the "Additional Term Loan B Lenders"), provided no Termination Event (as hereinafter defined) has occurred, shall make Additional Term Loans B to Borrowers upon request by Borrowers in accordance with and subject to the Credit Agreement, as amended hereby. Such Additional Term Loans B shall be deemed to be Term Loans B as defined in, and subject to the terms of, the Credit Agreement (including, without limitation, provisions as to the accrual and payment of interest and principal) and secured under related Security Documents, as amended.

3.Forbearance in Respect of Events of Default.
 
(a) Acknowledgement of Defaults. Borrowers hereby acknowledge and agree that the Existing Defaults have occurred as of the date hereof and will be continuing, which Existing Defaults constitute Events of Default. The Borrowers hereby acknowledge and agree that Lender Group has the present right to exercise all remedies available under the Loan Documents and applicable law, and that Borrowers' Obligations to Lender Group are immediately due and payable without notice or demand.

- 3 -
 
(b) Forbearance.
 
(i) In reliance upon the representations, warranties and covenants of Borrowers contained in this Agreement, and subject to the terms and conditions of this Agreement and any documents or instruments executed in connection herewith, Lender Group agrees to forbear from exercising, or causing the exercise of, its rights and remedies under the Loan Documents or applicable law in respect of or arising out of (i) the Existing Defaults, (ii) a Default or Event of Default arising pursuant to Section 2.18 of the Credit Agreement, or (iii) any other Default or Event of Default (other than any of the ones described in Exhibit D attached hereto and made a part hereof (each such excluded Default or Event of Default, individually, a "Specified Default," and collectively, the "Specified Defaults")) subject to the conditions contained herein for the period (the "Forbearance Period") commencing on the date hereof and ending on the earliest to occur of: (i) May 5, 2008, or (ii) the occurrence of a Termination Event (as hereinafter defined).
 
(ii) Upon the termination of the Forbearance Period, the agreement of Lender Group to forbear shall automatically and without further action terminate and be of no force and effect; it being expressly agreed that the effect of such termination will be to permit Lender Group to exercise, or cause the exercise of, any rights and remedies available to it, if any, immediately, without any further notice, passage of time or forbearance of any kind.
 
(iii) For the purpose of this Agreement, "Termination Event" shall have the meaning given to such term in that certain Side Letter Agreement dated as of February 13, 2008, as amended by a certain First Amendment to Side Letter Agreement dated as of March 19, 2008, and a certain Second Amendment to Side Letter Agreement of even date herewith by and among Borrowers, Agents and Lenders (as so amended, the "Side Letter Agreement").
 
(c) No Waivers; Reservation of Rights.
 
(i) Lender Group has not waived, and is not waiving, by the execution of this Agreement, the funding of Additional Term Loans B, or the acceptance of any payments hereunder or under the Credit Agreement, the Existing Defaults, or any Default, Event of Default or Termination Event which has occurred or may hereafter occur (whether the same or similar to the Existing Defaults, the Specified Defaults or otherwise), and Lender Group has not agreed to forbear with respect to any of its rights or remedies concerning any Default or Event of Default (other than, during the Forbearance Period, the Existing Defaults and any other Default or Event of Default (other than any Specified Defaults) to the extent expressly set forth herein), which may have occurred or is continuing as of the date hereof or which may occur after the date hereof.

- 4 -

(ii) Subject to Section 3(b) above (solely with respect to the Existing Defaults and any other Default or Event of Default other than any Specified Defaults), Lender Group and each Agent reserves the right, in its discretion, to exercise, or cause the exercise of, any or all of their rights and remedies under the Credit Agreement, the other Loan Documents and applicable law as a result of the Existing Defaults, or any other Default or Event of Default (other than any Specified Defaults) which has occurred or may hereafter occur.
 
(iii) Without limiting the generality of the foregoing, Borrowers will not claim that any prior action or course of conduct by Lender Group or any Agent constitutes an agreement or obligation to continue such action or course of conduct in the future. Each of Borrowers acknowledges that Lender Group or any Agent has made no commitment as to: (i) future funding of the Revolving Credit Loan or Additional Term Loans B, and (ii) how or whether the Existing Defaults or any other Default or Event of Default will be resolved upon termination or expiration of the Forbearance Period.
 
(iv) Except as expressly provided herein, nothing in this Agreement shall be construed as an amendment to the Credit Agreement, or any other Loan Document. The Credit Agreement and the other Loan Documents are in full force and effect, and shall remain in full force and effect unless and until an agreement modifying the Credit Agreement or such other Loan Document is executed and delivered by the applicable parties, and then only to the extent such agreement actually modifies such documents. The parties hereto further acknowledge and agree that this Agreement shall constitute a Loan Document for all purposes.
 
4. Additional Definitions. The following new definitions are hereby added to Section 1.01 of the Credit Agreement:
 
"Additional Amount: from May 6, 2008 through June 5, 2008, an amount equal to one-half of one percent (0.5%), such Additional Amount to increase thereafter by an additional one-half of one percent (0.5%) on each monthly anniversary of May 6, 2008."
 
"Second Amendment: that certain Second Amendment to Third Amended and Restated Credit Agreement and Forbearance Agreement dated as of April 24, 2008, among Borrowers, Lenders and Agents."
 
5. Additional Term Loans B. (i) Subject to the terms and conditions contained in the Credit Agreement, as amended by this Agreement, the Additional Term Loan B Lenders agree severally to make one or more loans pursuant to this Section 5 (collectively, the "Additional Term Loans B") to Borrowers during the Forbearance Period, provided, however, that the aggregate principal amount of all Additional Term Loans B (including Additional Term Loans B made prior to the date hereof pursuant to the First Amendment) shall not exceed the Additional Term Loans B Amount. The Additional Term Loans B shall constitute Term Loans B for all purposes of the Credit Agreement, as amended hereby. The Additional Term Loan B Lenders' respective agreements to make Additional Term Loans B (including Additional Term Loans B made prior to the date hereof pursuant to the First Amendment) shall not exceed their respective limits set forth in Exhibit C hereto.
 
- 5 -
 
(ii) Borrowers may request Additional Term Loans B during the Forbearance Period within the limits of the Additional Term Loans B Amount; provided, however, that Borrowers shall not have the right to re-borrow principal amounts repaid or prepaid in respect to the Additional Term Loans B. All Additional Term Loans B used for the purposes described in clause (C) below shall be made by the Additional Term Loans B Lenders on the second (2nd) Business Day of each week provided Borrowers maintain a minimum cumulative net cash flow equal to the sum of the "Net Change" for each week (with such calculation beginning with the week of April 14, 2008) provided by Borrowers to Administrative Agent on the first (1st) Business Day of such week pursuant to Section IV of the Side Letter Agreement. The amount of the Additional Term Loans B made in any week shall be equal to the amount of (a) the cash need shown for such week in the "Net Change" line of the cash forecast minus (b) the aggregate amount of any cash or cash equivalents of the Borrowers and their respective Subsidiaries on the immediately preceding Business Day in excess of $100,000. The proceeds of Additional Term Loan B shall be used solely (A) first, on the date hereof, to fund accrued and unpaid interest on the Loans that was due and payable on April 17, 2008, (B) second, on the date hereof, to fund payment of all fees and expenses referred to in the Second New Fee Letters (as defined in Exhibit B hereto), and all fees and expenses of the Agents in closing the transactions contemplated by this Agreement, and (C) on and after the date hereof and in compliance with the terms of this Agreement, the Credit Agreement and the Side Letter Agreement, the balance for Borrowers' customary working capital requirements.
 
(iii) Borrowers' right to request or receive Additional Term Loans B shall terminate upon termination or expiration of the Forbearance Period.
 
6.Article I Amendments.
 
(a) The following definitions in Section 1.01 of the Credit Agreement are hereby amended to read in their entirety as follows:
 
"Additional Term Loans B Amount: $5,495,541.00"
 
"Base Rate: the per annum interest rate calculated from time to time as being the sum of (i) the greatest of (A) the Prime Rate, (B) the Federal Funds Rate in effect on such day plus fifty (50) basis points (0.50%), and (C) seven and one-half percent (7.50%) per annum plus (ii) eleven percent (11.00%)."
 
(b) This Agreement, the Second Amendment to Side Letter Agreement and the Second New Fee Letter shall be included within the definition of "Loan Documents" for the purposes of the Credit Agreement.

- 6 -
 
7.Article II Amendments.
 
(a) Section 2.02(b) of the Credit Agreement is hereby amended to read in its entirety as follows:
 
"(b) Determination of Interest Rate for Loans. Except as hereinafter provided, the interest rate charged by the Lenders in respect to the Loans shall be either (1) the applicable LIBOR Rate pursuant to a Notice of Conversion or Continuation effective on the first day of the Interest Period, plus twelve percent (12.00%), or, (2) if such LIBOR Rate is not available or published, or at Borrowers' option, the Base Rate."
 
(b) Section 2.02(d) of the Credit Agreement is hereby amended to read in its entirety as follows:
 
"(d) Interest Payment Dates. Interest on the Revolving Credit Loans, Term Loans A and Letter of Credit Fees shall accrue as of and after the date hereof and shall be payable by Borrowers, jointly and severally, in arrears, without setoff, deduction or counterclaim on the first day of each month, commencing March 1, 2008, and on the Maturity Date, whether by reason of acceleration, prepayment, payment or otherwise. Interest on the Term Loans B shall accrue as of and after the date hereof and be due and shall be payable by Borrowers, jointly and severally, in arrears, without setoff deduction or counterclaim on the first Business Day of each month, commencing March 1, 2008, and on the Maturity Date, whether by reason of acceleration, prepayment, payment or otherwise; provided, however, Borrowers may, upon notice to the Additional Term Loan B Lenders, defer payment in cash of that portion of the total interest accruing on the unpaid principal balance of the Additional Term Loans B, equal to the amount of interest accruing at the rate of two percent (2.00%) per annum (the portion of the total interest accrual so deferred being herein called the "Additional Term Loan B PIK Interest"), as follows:
 
(y) The Additional Term Loan B PIK Interest on each Monthly Payment Date shall be paid by adding the amount of such Additional Term Loan B PIK Interest to the principal balance of the respective Term Loans B on the corresponding Monthly Payment Date. Once added to the principal balance of such Term Loans B , such Additional Term Loan B PIK Interest shall thereafter accrue interest in accordance with the terms of this Agreement applicable to Term Loans B.
 
(z) Subject to Sections 2.05(c)(iv) and 2.05(d), but notwithstanding any other provision contained herein to the contrary, the aggregate accrued and unpaid amount of all Term Loan B PIK Interest shall be paid by Borrowers on the Maturity Date and on any date which a payment is made in accordance with Section 2.05."
 
(c) Section 2.05(d) of the Credit Agreement is hereby amended to read in its entirety as follows:

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"(d) Early Termination Fees. In the event of any prepayment or repayment of a Loan made pursuant to Sections 2.05(b)(ii), (iii) or (iv) prior to the date which is thirty-four (34) months after the Closing Date, Borrowers shall pay to Billing Agent for the ratable benefit of Lender or Lenders entitled to such Early Termination Fee a fee (the "Early Termination Fee") calculated as the lesser of (i) (a) the sum of four and one-half percent (4.50%) plus the Additional Amount times (b) the principal amount so paid or prepaid to such Lenders; and (ii) the Make Whole Amount.
 
Any prepayment or repayment made on or after that date which is thirty-four (34) months after the Closing Date shall be payable at par. In the event the Lenders waive any mandatory prepayment under Section 2.05(b) in connection with any mandatory prepayment event described in Section 2.05(b), any voluntary prepayment of such sums by Borrowers (exclusive, however, of voluntary prepayments of the Revolving Credit Loans and temporary prepayments of the Revolving Credit Loans pending Borrowers' election to reinvest proceeds as permitted by this Agreement) shall be subject to the payment of the Early Termination Fee."
 
8.Representations and Warranties of the Borrowers.
 
Borrowers hereby represent and warrant to Lender Group that:
 
(a) Borrowers have the power and authority to enter into this Agreement and all other agreements contemplated hereby, and to do all acts and things as are required or contemplated hereunder to be done, observed and performed by the Borrowers;
 
(b) Each of this Agreement and all other agreements to be executed by Borrowers and contemplated hereby has been duly authorized (by all necessary corporate or limited liability company action and otherwise), validly executed and delivered by Borrowers and constitutes the legal, valid and binding obligation of Borrowers enforceable against them in accordance with its terms; and
 
(c) The execution and delivery of this Agreement and all other agreements to be executed by Borrowers and contemplated hereby and Borrowers' performance hereunder and thereunder do not and will not require the consent or approval of any governmental authority, nor be in contravention of or in conflict with Borrowers' respective Articles of Incorporation or similar document, or the provisions of any statute, or any judgment, order, or indenture, instrument, agreement, or undertaking, to which each Borrower is a party or by which each Borrower or its assets or properties are or may become bound.
 
9.Conditions to Agreement.
 
As a condition precedent to the effectiveness of this Agreement, Borrowers shall have delivered to Lender the agreements and documents described in Exhibit B attached hereto and made a part hereof, each in form and substance acceptable to Agents.
 
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10.Cooperation.
 
The Lender Group hereby acknowledges that it shall cooperate with Borrowers and The Yucaipa Companies LLC and/or its affiliates ("Yucaipa") and assist in Yucaipa's efforts to consummate its investment in Borrowers through convertible debt securities, warrants and/or other securities of Borrowers solely by executing and delivering, at Borrowers' sole expense, UCC termination statements, lien releases, mortgage releases, re-assignments of trademarks, discharges of security interests, and other similar discharge or release documents as required by Section 9.03 of the Credit Agreement upon the full and final discharge of all of the Obligations and the irrevocable termination of all of the Commitments.
 
11. Release. (a) In consideration of the agreements of Lender Group contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Borrower, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges each Agent and each Lender and their respective successors and assigns, and its affiliates, subsidiaries, predecessors, directors, officers, attorneys, employees, agents and other representatives (each Lender, each Agent and all such other Persons being hereinafter referred to collectively as the "Releasees," and individually as a "Releasee"), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a "Claim," and collectively, "Claims") of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any Borrower or any of its successors, assigns, or other legal representatives, may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Agreement for or on account of, or in relation to, or in any way in connection with any of the Credit Agreement, as amended hereby, the other Loan Documents or this Agreement or transactions thereunder or related thereto.
 
(b) Each Borrower understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
 
(c) Each Borrower agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.
 
(d) Each Borrower, on behalf of itself and its respective successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by the Borrower pursuant to Section 10(a) of this Agreement. If any Borrower, or its respective successors, assigns, or other legal representatives violates the foregoing covenant, each Borrower, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys' fees and costs incurred by any Releasee as a result of such violation.

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(e) As to each and every claim released hereunder, each Borrower hereby represents that it has received the advice of legal counsel with regard to the releases contained herein, and having been so advised, specifically waives the benefit of the provisions of Section 1542 of the Civil Code of California which provides as follows:
 
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

As to each and every claim released hereunder, each Borrower also waives the benefit of each other similar provision of applicable federal or state law, if any, pertaining to general releases after having been advised by its legal counsel with respect thereto.

12. Corrective Amendment. All references in the Loan Documents to "SPF CDO I, LLC, a Delaware limited liability company" are hereby amended to read and refer to "SPF CDO I, LTD., a Cayman Islands limited liability company."
 
13. Acknowledgment of Obligations. The Revolving Credit Loan and the Term Loans, together with interest accrued and accruing thereon, the reimbursement obligations with respect to each letter of credit for the account of Borrowers or any affiliate, and fees, costs, expenses and other charges now or hereafter payable by Borrowers to Lender Group, are unconditionally owing by Borrowers, without offset, defense or counterclaim of any kind, nature or description whatsoever. Each Borrower warrants and represents that it has no defenses, setoffs, claims, counterclaims or causes of action of any kind or nature whatsoever with respect to the Obligations.
 
14. No Further Amendments.
 
Except for the amendments set forth herein or otherwise set forth in any agreement signed by Lender Group and dated the date hereof, the text of the Credit Agreement shall remain unchanged and in full force and effect. No waiver by Lender Group under the Credit Agreement is granted or intended and Lender Group expressly reserves the right to require strict compliance with the terms of the Credit Agreement. The waivers and amendments agreed to herein shall not constitute or evidence a course of dealing at variance with the Credit Agreement such as to require further notice by Lender Group to require strict compliance with the terms of the Credit Agreement in the future.
 
15. Security Documents.
 
All obligations of Borrowers under the Credit Agreement, as amended hereby, shall be secured by a first priority security interest and Lien (subject only to Permitted Liens) and be entitled to the benefits of the Security Documents. All Security Documents heretofore executed by the Borrowers shall remain in full force and effect to secure the Obligations, and such Security Documents, as amended hereby, are hereby ratified and affirmed.

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16. Counterparts.
 
This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement
 
17. Applicable Law.
 
THIS AGREEMENT SHALL BE DEEMED TO BE MADE PURSUANT TO THE LAWS OF THE STATE OF CALIFORNIA WITH RESPECT TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY IN THE STATE OF CALIFORNIA AND SHALL BE CONSTRUED, INTERPRETED, PERFORMED AND ENFORCED IN ACCORDANCE THEREWITH.
 
18. Captions.
 
The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof.
 
19. Legal Fees.
 
Borrowers shall pay all reasonable expenses incurred by Lender Group in the drafting, negotiation and closing of the documents and transactions contemplated hereby, including the reasonable fees and disbursements of the Administrative Agent's special counsel and the Collateral Agent's special counsel.
 
20. Reaffirmation.
 
Except as amended hereby, the Credit Agreement, the Notes and all Security Documents shall remain in full force and effect and are in all respects hereby ratified and affirmed.
 
(The next page is the first signature page)

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IN WITNESS WHEREOF, Administrative Agent, Collateral Agent, Billing Agent, Lenders and Borrowers have caused this Agreement to be duly executed by their respective duly authorized representatives, as a sealed instrument, all as of the day and year first above written.
 
BORROWERS:
 
EQUITY MEDIA HOLDINGS CORPORATION
ARKANSAS 49, INC.
BORGER BROADCASTING, INC.
DENVER BROADCASTING, INC.
EBC HARRISON, INC.
EBC PANAMA CITY, INC.
EBC SCOTTSBLUFF, INC.
EQUITY NEWS SERVICES, INC., f/k/a Hispanic News Network, Inc.
FORT SMITH 46, INC.
LOGAN 12, INC.
MARQUETTE BROADCASTING, INC.
NEVADA CHANNEL 3, INC.
NEWMONT BROADCASTING CORPORATION
PRICE BROADCASTING, INC.
PULLMAN BROADCASTING INC.
REP PLUS, INC.
RIVER CITY BROADCASTING, INC.
ROSEBURG BROADCASTING, INC.
TV 34, INC.
VERNAL BROADCASTING, INC.
WOODWARD BROADCASTING, INC.
EBC MINNEAPOLIS, INC.
EBC DETROIT, INC.
EBC BUFFALO, INC.
EBC WATERLOO, INC.
EBC ATLANTA, INC.
EBC SEATTLE, INC.
EBC KANSAS CITY, INC.
EBC SYRACUSE, INC.
NEVADA CHANNEL 6, INC.
EBC PROVO, INC.
EBC SOUTHWEST FLORIDA, INC.
EBC LOS ANGELES, INC.
C.A.S.H. SERVICES, INC. f/k/a Skyport Services, Inc.


EBC NASHVILLE, INC
EBC JACKSONVILLE, INC.
   
By:
  
Name:
James H. Hearnsberger
Title:
Vice President of each


[Second Amendment to Third Amended and Restated
Credit Agreement and Forbearance Agreement]
 

ADMINISTRATIVE AGENT,
DOCUMENTATION AGENT AND BILLING
AGENT:
 
SILVER POINT FINANCE, LLC, as
Administrative Agent, Documentation Agent
and Billing Agent
   
By:
   
 
Name:
 
Title:

Address for Notices to Silver Point Finance, LLC
Two Greenwich Plaza
Greenwich, Connecticut 06830
Attention: Zubin Jariwala
Telecopy No.: (203) 542-4312


[Second Amendment to Third Amended and Restated
Credit Agreement and Forbearance Agreement]


COLLATERAL AGENT AND BILLING AGENT:
 
WELLS FARGO FOOTHILL, INC.,
as Collateral Agent and Billing Agent
   
By:
   
 
Dena Seki, Vice President

2450 Colorado Avenue, Suite 3000 West
Santa Monica, California 90404
Telecopy No.: (310) 453-7442


[Second Amendment to Third Amended and Restated
Credit Agreement and Forbearance Agreement]

 

 
LENDER:
   
 
SPCP GROUP, LLC
   
 
By:
      
   
Name:
   
Title:
   
 
Address for Notices to SPCP Group, LLC:
   
 
Two Greenwich Plaza
 
Greenwich, CT 06830
 
Attention: Zubin Jariwala
 
Telecopy No.: (203) 542-4312
 
 
[Second Amendment to Third Amended and Restated
Credit Agreement and Forbearance Agreement]
 
 
 
LENDER:
   
 
SPF CDO I, LTD.
   
 
By:
     
   
Name:
   
Title:
     
 
Address for Notices to SPF CDO I, LTD.:
   
 
Two Greenwich Plaza
 
Greenwich, CT 06830
 
Attention: Zubin Jariwala
 
Telecopy No.: (203) 542-4312
 
 
[Second Amendment to Third Amended and Restated
Credit Agreement and Forbearance Agreement]
 
 
 
LENDER:
   
 
FIELD POINT III, LTD.
   
 
By:
      
   
Name:
   
Title:
     
 
Address for Notices to FIELD POINT III, LTD:
   
 
Two Greenwich Plaza
 
Greenwich, CT 06830
 
Attention: Zubin Jariwala
 
Telecopy No.: (203) 542-4312

 
[Second Amendment to Third Amended and Restated
Credit Agreement and Forbearance Agreement]
 

 
LENDER:
   
 
FIELD POINT IV, LLC
   
 
By:
      
   
Name:
   
Title:
   
 
Address for Notices to FIELD POINT IV, LTD:
   
 
Two Greenwich Plaza
 
Greenwich, CT 06830
 
Attention: Zubin Jariwala
 
Telecopy No.: (203) 542-4312

 
[Second Amendment to Third Amended and Restated
Credit Agreement and Forbearance Agreement]
 

 
LENDER:
   
 
WELLS FARGO FOOTHILL, INC.
   
 
By:
                 
   
Dena Seki, Vice President
     
 
Address for Notice to Wells Fargo Foothill, Inc.
 
2450 Colorado Avenue, Suite 3000 West
 
Santa Monica, California 90404
 
Attention: Group Credit Manager – Specialty Finance Group
 
Telecopy No.: (310) 453-7442
 

[Second Amendment to Third Amended and Restated
Credit Agreement and Forbearance Agreement]
 

EXHIBIT A

EXISTING EVENTS OF DEFAULTS

1. Borrowers' Default in paying interest under the Credit Agreement when due and payable on March 1, 2008.

2. The occurrence of an Event of Default caused by the funding of the Additional Term Loans B which results in the aggregate amount of all Loans and Letter of Credit Usage exceeding the limits set forth in Sections 2.01(a)(i)(2) and 2.01(c)(i)(B) of the Credit Agreement

3. A Default or Event of Default occurring as a result of an inability of the Borrowers to repeat certain warranties and representations as of the date hereof by reason of the following:

a. Section 4.01: To the extent that the Borrowers' have been tardy in their delivery to the Agents in a timely manner prior to the date hereof of all financial statements required by the Credit Agreement.

b. Section 4.06(a): To the extent that the Borrowers are at present late on payment under satellite agreement, programming agreement or other material agreement.

c. Section 4.11 (b): To the extent that the Borrowers have need for additional funding as evidenced by the Additional Term Loans B.

d. Section 4.11(e): To the extent that the Side Letter Agreement requires Borrowers to engage in sale of Stations which may constitute a plan to liquidate properties for the purposes of this Section.

e. Section 4.24 To the extent that Borrowers' requirements for additional funding hereunder and failure to pay certain expenses disclosed to Agents would be deemed to cause a Material Adverse Effect.

f. Section 4.25 To the extent that Borrowers failed to make required payments to Agents under the Credit Agreement prior to date hereof.

4.  Default under Section 5.06 by reason of Borrowers' failure to achieve Minimum EBITDA and Revenues required thereby for January 2008, February 2008 and March 2008.

5. Default under Section 6.05 (e) for Borrowers' failure to deliver Budget required thereby.

6. Defaults under Sections Section 7.04(a)(iv) and 7.13(a) which may occur during the Forbearance period to the extent caused by Borrowers' entering into agreements with the New Equity Investors consistent with the timeline and requirements set forth in the Side Letter Agreement.
 
 
EXHIBIT B

CONDITIONS TO CLOSING SECOND AMENDMENT

1.
Fee Letter between Borrowers and Administrative Agent and Fee Letter between Borrowers and Collateral Agent (collectively, the "Second New Fee Letters")

2.
Secured Promissory Notes evidencing Additional Term Loans B

3.
Certificate of Chief Financial Officer or Chief Executive Officer certifying as to the absence of any Specified Defaults as of the date hereof

4.
Certificate of Secretary of Borrowers certifying as to authority and incumbency of officer executing agreements

 
5.
Payment of closing/amendment fees to each of the Agents.
 
 
EXHIBIT C

ALLOCATION OF ADDITIONAL TERM LOANS B (INCLUDING ADDITIONAL TERM LOANS B FUNDED PURSUANT TO FIRST AMENDMENT)

 
Maximum Amount of Additional Term Loans B
  
       
SPCP GROUP, LLC
  
$
2,432,784.80
  
         
SPF CDO I, LLC
  
$
1,099,108.20
  
         
FIELD POINT III, LTD.
  
$
1,963,648.00
  
 

EXHIBIT D
SPECIFIED DEFAULTS

1. A Default by Borrowers by reason of a breach of any of the following provisions of the Credit Agreement:

 
a)
Section 6.01, 6.09, 7.01 (solely as a result of Excluded Incurrences (as defined below)) or 7.09, but only if any such Default when aggregated with all other Defaults under Sections 6.01, 6.09, 7.01 (solely as a result of Excluded Incurrences), 7.05, 7.09 and 7.13 and all Events of Default under paragraphs (a), (g), (o), (p), (q) and (r) of Article VIII adversely affects or adversely relates to Collateral with a value equal to or exceeding $3,750,000 in the aggregate (all such Defaults and Events of Defaults, collectively, the "Listed Defaults");

 
b)
Sections 6.02 (a) and (g), only in the event that the insurance coverage maintained by the Borrowers is less than the level of insurance in effect and maintained by the Borrowers as of the date of this Second Amendment;

 
c)
Section 6.12;

 
d)
Section 7.01, but only if such Indebtedness is in excess of $250,000 in the aggregate (other than any incurrence of Indebtedness which would be permitted pursuant to Section 7.01(g) except that the amount thereof exceeds the dollar limit contained in Section 7.01(g)) (any such incurrence, an "Excluded Incurrence", and all such incurrences, the "Excluded Incurrences");

 
e)
Section 7.02, but only if the Lien or Liens incurred or arising in violation of Section 7.02 (i) are not junior to all Liens granted in favor of Collateral Agent for the benefit of the Agents and the Lenders (except for Liens which arise by operation of law and have priority over the time of recordation), or (ii) are the subject of any exercise of remedies by any creditor holding such Lien to obtain title to the property subject to such Lien (any such property, a "Subject Property");

 
f)
Section 7.03, 7.05 or 7.06, but only if any such Default when aggregated with any other Defaults under Sections 7.03, 7.05 and 7.06 relates to assets or investments with an aggregate fair market value in excess of $250,000 over the term of the Forbearance Period;

 
g)
Section 7.08, but only in the event that the Accounts Receivable is sold by the Borrowers at a discount or Agents fail to receive the proceeds from such sale;

 
h)
Section 7.13, but only if the agreement entered into by a Borrower prohibits (i) such Borrower from amending or otherwise modifying the Loan Agreement or any other Loan Document, or (ii) the creation or assumption of any Lien in favor of the Collateral Agent for the benefit of the Agents and Lenders upon the properties, revenues or assets of, or the extension of any guaranty by, a Borrower, whether now owned or hereafter acquired, such that the prohibition or creation of such Lien when aggregated with all the Listed Defaults adversely affects or adversely relates to Collateral with a value equal to or exceeding $3,750,000 in the aggregate; and
 

 
i)
Section 7.15, but only if such Default relates to assets with an aggregate fair market value in accounts of $100,000 in any single transaction over the term of the Forbearance Period.

2.  The occurrence of an Event of Default under any of the following paragraphs of Article VIII:

 
a)
Paragraph (a), (g), (o), (p), (q), and (r), but only if such Event of Default when aggregated with all the Listed Defaults adversely affects or adversely relates to Collateral with a value equal to or exceeding $3,750,000 in the aggregate;

 
b)
Paragraphs (b), (c), (i), (j), (m) and (u); and

 
c)
Paragraphs (d) and (e), but only to the extent that such Event of Default occurs by reason of: (1) a Borrower's failure to observe, perform or comply with a covenant, condition or agreement contained in the Side Letter Agreement, or (2) the occurrence of a Default or Event of Default which constitutes a Termination Event by reason of the provisions or paragraphs set forth and in accordance with the terms of this Exhibit D.

provided, however, that the forbearance of any Default under the terms of this Exhibit D shall not prevent Administrative Agent, Collateral Agent and Lenders from exercising any of their rights with respect to any Subject Property in the event any judgment creditor commences proceedings to exercise any such remedies on such Subject Property against any Borrower.
 
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