SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-2999
CHRIS-CRAFT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1461226
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
767 FIFTH AVENUE, NEW YORK, NEW YORK 10153
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 421-0200
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which registered
------------------- -------------------
PRIOR PREFERRED STOCK NEW YORK STOCK EXCHANGE
$1.00 CUMULATIVE DIVIDEND PACIFIC EXCHANGE
CONVERTIBLE PREFERRED STOCK NEW YORK STOCK EXCHANGE
$1.40 CUMULATIVE DIVIDEND PACIFIC EXCHANGE
COMMON STOCK, $.50 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
CLASS B COMMON STOCK, $.50 PAR VALUE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of February 29, 2000, was approximately $1,905,000,000.
As of February 29, 2000, there were 25,856,532 shares of the registrant's
Common Stock and 7,965,734 shares of the registrant's Class B Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The documents incorporated by reference into this Form 10-K and the
Parts hereof into which such documents are incorporated are listed below:
DOCUMENT PART
Those portions of the registrant's annual I, II
report to stockholders for the fiscal year
ended December 31, 1999 (the "Annual Report")
that are specifically identified herein as
incorporated by reference into this Form 10-K.
Those portions of the registrant's proxy III
statement for the registrant's 2000
Annual Meeting (the "Proxy Statement")
that are specifically identified herein as
incorporated by reference into this Form 10-K.
<PAGE> 3
PART I
ITEM 1. BUSINESS.
GENERAL
Chris-Craft Industries, Inc. ("Chris-Craft"), the registrant, was
organized in Delaware in 1928 and adopted its present name in 1962.
Chris-Craft's principal business is television broadcasting, conducted through
its majority owned (80% at February 29, 2000) subsidiary, BHC Communications,
Inc. ("BHC"), which owns 100% of Chris-Craft Television, Inc. ("CCTV"), 100% of
Pinelands, Inc. ("Pinelands") and, as of February 29, 2000, 58% of United
Television, Inc. ("UTV").
At February 29, 2000, Chris-Craft (including UTV) had 1,254 full-time
employees and 135 part-time employees.
The information appearing in Note 10 of Notes to Consolidated Financial
Statements in the Annual Report, Industry Segment Information, is incorporated
herein by reference.
TELEVISION DIVISION
BHC operates six very high frequency ("VHF") television stations and
four ultra high frequency ("UHF") television stations, together constituting
Chris-Craft's Television Division. Commercial television broadcasting in the
United States is conducted on 68 channels numbered 2 through 69. Channels 2
through 13 are in the VHF band, and channels 14 through 69 are in the UHF band.
In general, UHF stations are at a disadvantage relative to VHF stations, because
UHF frequencies are more difficult for households to receive. This disadvantage
is eliminated when a viewer receives the UHF station through a cable system.
Commercial broadcast television stations may be affiliated with one of
the three major national networks (ABC, NBC and CBS); three more recently
established national networks (Fox Broadcasting Company ("Fox"), United
Paramount Network ("UPN"), and The WB Network ("WB")), which provide
substantially fewer hours of programming; or may be independent.
On March 20, 2000, BHC elected to sell its 50% interest in UPN for
$5,000,000 to Viacom Inc., UPN's other 50% owner, under the "buy-sell"
provisions of the UPN Joint Venture Agreement, which Viacom had triggered. On
March 16, 2000, a New York Supreme Court upheld Viacom's exercise of the
buy-sell in a lawsuit brought by BHC that sought to enjoin the Viacom-CBS merger
as a violation of the non-compete provision of the Joint Venture Agreement. The
sale is expected to close by March 31, 2000.
As a result of the sale, BHC will have no further ownership interest in
the network or obligation to fund UPN's operations. BHC's eight television
stations that are currently affiliated with UPN will remain affiliates after the
sale. BHC expects to record a loss of approximately $10,000,000 in connection
with the sale, to be reflected in results of operations for the three months
ended March 31, 2000.
The following table sets forth certain information with respect to BHC
stations and their respective markets:
<PAGE> 4
Total
Commercial
Network Af- DMA TV Stations DMA
Station and filiation/ House- DMA Operating in Cable TV
Location(1) Channel holds(2) Rank(2) Market(3) Penetration(4)
- ----------- ----------- ---------- -------- ------------ --------------
WWOR(5) UPN 9 6,874,990 1st 6VHF 74%
Secaucus 14UHF
KCOP UPN 13 5,234,690 2nd 7VHF 65%
Los Angeles 10UHF
KPTV UPN 12 1,004,140 23rd 4VHF 62%
Portland 2UHF
KMSP UPN 9 1,481,050 14th 4 VHF 54%
Minne- 3 UHF
apolis/
St. Paul
KTVX ABC 4 720,860 36th 4 VHF 53%
Salt 2 UHF
Lake City
KMOL NBC 4 684,730 37th 3 VHF 66%
San 3 UHF
Antonio
KBHK UPN 44 2,423,120 5th 4 VHF 72%
San 10 UHF
Francisco
KUTP UPN 45 1,390,750 17th 4 VHF 59%
Phoenix 4 UHF
WRBW UPN 65 1,101,920 22nd 3 VHF 76%
Orlando 9 UHF
WUTB UPN 24 999,200 24th 3 VHF 68%
Baltimore 3 UHF
- ------------
(1) KCOP and KPTV are owned by CCTV; WWOR is owned by Pinelands; the
remaining stations are owned by UTV.
(2) Designated Market Area ("DMA") is an exclusive geographic area
consisting of all counties in which the home-market commercial stations received
a preponderance of total viewing hours. The ranking shown is the nationwide
rank, in terms of television households in DMA, of the market served by the
station. Source: Nielsen Media Research television households universe
estimates.
(3) Additional channels have been allocated by the FCC for activation as
commercial television stations in certain of these markets. Also, additional
stations may be located within the respective DMAs of UTV stations but outside
the greater metropolitan television markets in which UTV stations operate.
(4) Cable penetration refers to the percentage of DMA television viewing
households receiving cable television service, as estimated by Nielsen Media
Research.
(5) WWOR UPN 9 broadcasts across a tri-state area including the entire
New York City metropolitan area.
<PAGE>
Television stations derive their revenues primarily from selling
advertising time. The television advertising sales market consists primarily of
national network advertising, national spot advertising and local spot
advertising. An advertiser wishing to reach a nationwide audience usually
purchases advertising time directly from the national networks, "superstations"
(i.e., broadcast stations carried by cable operators in areas outside their
broadcast coverage area), barter program syndicators, national basic cable
networks, or "unwired" networks (groups of otherwise unrelated stations whose
advertising time is combined for national sale). A national advertiser wishing
to reach a particular regional or local audience usually buys advertising time
from local stations through national advertising sales representative firms
having contractual arrangements with local stations to solicit such advertising.
Local businesses generally purchase advertising from the stations' local sales
staffs.
Television stations compete for television advertising revenue
primarily with other television stations and cable television channels serving
the same DMA. There are 210 DMAs in the United States. DMAs are ranked annually
by the estimated number of households owning a television set within the DMA.
Advertising rates that a television station can command vary in part with the
size, in terms of television households, of the DMA served by the station.
Within a DMA, the advertising rates charged by competing stations
depend primarily on four factors: the stations' program ratings, the time of day
the advertising will run, the demographic qualities of a program's viewers
(primarily age and sex), and the amount of each station's inventory. Ratings
data for television markets are measured by A.C. Nielsen Company ("Nielsen").
This rating service uses two terms to quantify a station's audience: rating
points and share points. A rating point represents one percent of all television
households in the entire DMA tuned to a particular station, and a share point
represents one percent of all television households within the DMA actually
using at least one television set at the time of measurement and tuned to the
station in question.
Because the major networks regularly provide first-run programming
during prime time viewing hours (in general, 8:00 P.M. to 11:00 P.M.
Eastern/Pacific time), their affiliates generally (but do not always) achieve
higher audience shares, but have substantially less advertising time
("inventory") to sell, during those hours than affiliates of the newer networks
or independent stations, since the major networks use almost all of their
affiliates' prime time inventory for network programming. Although the newer
networks generally use the same amount of their affiliates' inventory during
network broadcasts, the newer networks provide less programming; accordingly,
their affiliates, as well as non-affiliated stations, generally have
substantially more inventory for sale than the major-network affiliates. The
newer network affiliates' and independent stations' smaller audiences and
greater inventory during prime time hours generally result in lower advertising
rates charged and more advertising time sold during those hours, as compared
with major affiliates' larger audiences and limited inventory, which generally
allow the major-network affiliates to charge higher advertising rates for prime
time programming. By selling more advertising time, the new-network or
independent station typically achieves a share of advertising revenues in its
market greater than its audience ratings. On the other hand, total programming
costs for such a station, because it broadcasts more syndicated programming than
a major-network affiliate, are generally higher than those of a major-network
affiliate in the same market. These differences have been reduced by the growth
of the Fox network, which currently provides 15 weekly hours of programming
during prime time and additional programming in other periods, and are being
reduced further as the other newer networks provide expanded schedules of
programming.
Programming
BHC's UPN stations depend heavily on independent third parties for
programming, as do KTVX and KMOL for their non-network broadcasts. Recognizing
the need to have a more direct influence on the quality of programming available
to its stations, and desiring to participate in potential profits through
national syndication of programming, BHC invests directly in the development of
original programming. The aggregate amount invested in original programming
through December 31, 1999 was not significant to Chris-Craft's financial
position. BHC television stations also produce programming directed to meet the
needs and interests of the area served, such as local news and events, public
affairs programming, children's programming and sports.
Programs obtained from independent sources consist principally of
syndicated television shows, many of which have been shown previously on a major
network, and syndicated feature films, which were either made for network
television or have been exhibited previously in motion picture theaters (most of
which films have been
<PAGE> 6
shown previously on network or cable television).
Syndicated programs are sold to individual stations to be broadcast one or more
times. Television stations not affiliated with a major network generally have
large numbers of syndication contracts; each contract is a license for a
particular series or program that usually prohibits licensing the same
programming to other television stations in the same market. A single
syndication source may provide a number of different series or programs.
Licenses for syndicated programs are often offered for cash sale (i.e.,
without any barter element) to stations; however, some are offered on a barter
or cash plus barter basis. In the case of a cash sale, the station purchases the
right to broadcast the program, or a series of programs, and sells advertising
time during the broadcast. The cash price of such programming varies, depending
on the perceived desirability of the program and whether it comes with
commercials that must be broadcast (i.e., on a cash plus barter basis). Barter
programming is offered to stations for no cash consideration, but comes with a
greater number of commercials that must be broadcast and, therefore, with less
inventory.
Barter and cash plus barter programming reduce both the amount of cash
required for program purchases and the amount of time available for sale.
Although the direct impact on broadcasters' operating income generally is
believed to be neutral, program distributors that acquire barter air time
compete with television stations and broadcasting networks for sales of air
time. Chris-Craft believes that the effect of barter on BHC television stations
is not significantly different from its impact on the industry as a whole.
BHC television stations are frequently required to make substantial
financial commitments to obtain syndicated programming while such programming is
still being broadcast by another network and before it is available for
broadcast by BHC stations, or even before it has been produced. Generally,
syndication contracts require the station to acquire an entire program series,
before the number of episodes of original showings that will be produced has
been determined. While analyses of network audiences are used in estimating the
value and potential profitability of such programming, there is no assurance
that a successful network program will continue to be successful or profitable
when broadcast after initial network airing.
Pursuant to generally accepted accounting principles, commitments for
programming not available for broadcast are not recorded as liabilities until
the programming becomes available for broadcast, at which time the related
contract right is also recorded as an asset. BHC television stations had
unamortized film contract rights for programming available for telecasting and
deposits on film contracts for programming not available for telecasting
aggregating $151,369,000 as of December 31, 1999. The stations were committed
for film and sports rights contracts aggregating $278,000,000 for programming
not available for broadcasting as of that date. License periods for particular
programs or films generally run from one to five years. Long-term contracts for
the broadcast of syndicated television series generally provide for an initial
telecast and subsequent reruns for a period of years, with full payment to be
made by the station over a period of time shorter than the rerun period. See
Notes 1(C) and 9 of Notes to Consolidated Financial Statements.
KTVX and KMOL are primary affiliates of their respective networks. Most
networks have begun to enter into affiliation agreements for terms as long as
ten years. UTV has entered into 10-year affiliation agreements for KTVX and
KMOL. Current FCC rules do not limit the duration of affiliation agreements.
An affiliation agreement gives the affiliate the right to broadcast all
programs transmitted by the network. Network programs are produced either by the
networks themselves or by independent production companies and are transmitted
by the networks to their affiliated stations for broadcast. The affiliate must
run in its entirety, together with all network commercials, any network
programming the affiliate elects or is required to broadcast, and is allowed to
broadcast a limited number of commercials it has sold.
Subject to certain limitations contained in the affiliation agreement,
an affiliate may accept or reject a program offered by the network and instead
broadcast programming from another source. Rejection of a program may give the
network the right to offer that program to another station in the area.
For each hour of programming broadcast by the affiliate, the major
networks generally have paid their affiliates a fee, specified in the agreement
(although subject to change by the network), which varies in amount depending on
the time of day during which the program is broadcast and other factors. Prime
time programming
<PAGE> 7
generally earns the highest fee. A network may, and sometimes
does, designate certain programs to be broadcast with no compensation to the
station.
Sources of Revenue
The principal source of revenues for BHC stations is the sale of
advertising time to national and local advertisers. Such time sales are
represented by spot announcements purchased to run between programs and program
segments and by program sponsorship. Most advertising contracts are short-term.
The relative contributions of national and local advertising to BHC's gross cash
advertising revenues vary from time to time.
BHC's television business is seasonal, like that of the television
broadcasting business generally. In terms of revenues, generally the fourth
quarter is strongest, followed by the second, third and first.
Advertising is generally placed with BHC stations through advertising
agencies, which are allowed a commission generally equal to 15% of the price of
advertising placed. National advertising time is usually sold through a national
sales representative, which also receives a commission, while local advertising
time is sold by each station's sales staff. UTV has established a national sales
representative organization, United Television Sales, Inc. ("UTS"), which
represents nine of the ten BHC stations.
Practices with respect to the sale of advertising time do not differ
markedly between BHC's major network and UPN stations, although the
major-network affiliated stations have less inventory to sell.
Government Regulation
Television broadcasting operations are subject to the jurisdiction of
the FCC under the Communications Act of 1934, as amended (the "Communications
Act"). The Communications Act empowers the FCC, among other things, to issue,
revoke or modify broadcast licenses, to assign frequencies, to determine the
locations of stations, to regulate the broadcasting equipment used by stations,
to establish areas to be served, to adopt such regulations as may be necessary
to carry out the provisions of the Communications Act and to impose certain
penalties for violation of its regulations. BHC television stations are subject
to a wide range of technical, reporting and operational requirements imposed by
the Communications Act or by FCC rules and policies.
The Communications Act provides that a license may be granted to any
applicant if the public interest, convenience and necessity will be served
thereby, subject to certain limitations, including the requirement that the FCC
allocate licenses, frequencies, hours of operation and power in a manner that
will provide a fair, efficient and equitable distribution of service throughout
the United States. Prior to 1998, television licenses generally were issued for
five-year terms, but such licenses and their renewals are now normally issued
for eight years. Upon application, and in the absence of adverse questions as to
the licensee's qualifications or operations, television licenses have usually
been renewed for additional terms without a hearing by the FCC. An existing
license automatically continues in effect once a timely renewal application has
been filed until a final FCC decision is issued.
KMSP UPN 9's license renewal was granted on February 11, 2000 and is
due to expire on April 1, 2006. KTVX's license renewal was granted on October 9,
1998 and is due to expire on October 1, 2006. KUTP UPN 45's license renewal was
granted on April 20, 1999 and is due to expire on October 1, 2006. KCOP UPN 13's
license renewal was granted on January 8, 1999 and is due to expire on December
1, 2006. KBHK UPN 44's license renewal was granted on January 8, 1999 and is due
to expire on December 1, 2006. KPTV UPN 12's license renewal was granted on
January 28, 1999 and is due to expire on February 1, 2006. KMOL's license
renewal was granted on November 12, 1998 and is due to expire on August 1, 2006.
WWOR UPN 9's license renewal was granted on July 7, 1999 and is due to expire on
June 1, 2007. WUTB UPN 24's license was assigned to UTV of Baltimore, Inc., a
subsidiary of UTV, on January 20, 1998 and is due to expire on October 1, 2001.
WRBW UPN 65's license was assigned to UTV of Orlando, Inc., a subsidiary of UTV,
on July 7, 1999 and is due to expire on February 1, 2005.
<PAGE> 8
On August 5, 1999, the FCC adopted changes in several of its broadcast
ownership rules (collectively, the "FCC Ownership Rules"). These rule changes
became effective on November 16, 1999; however, several petitions have been
filed with the FCC seeking reconsideration of the new rules, so the rules may
change.
Among other changes, the FCC relaxed its "television duopoly" rule,
which barred any entity from having an attributable interest in more than one
television station with overlapping service areas. Under the new rules, one
entity may have attributable interests in two television stations in the same
DMA, provided that (1) one of the two stations is not among the top four in
audience share, and (2) at least eight independently owned and operated
commercial and noncommercial television stations will remain in the DMA, if the
proposed transaction is consummated. The new rules also permit common ownership
of television stations in the same DMA, if one of the stations to be commonly
owned has failed, is failing, or is unbuilt, or if extraordinary public interest
factors are present. To transfer ownership in two commonly owned television
stations in the same DMA, it will be necessary to again demonstrate compliance
with the new rules. Lastly, the new rules authorize the common ownership of
television stations with overlapping signal contours as long as the stations to
be commonly owned are located in different DMAs.
Similarly, the FCC relaxed its "one-to-a-market" rule, which restricts
the common ownership of television and radio stations in the same market. One
entity now may own up to two television stations and six radio stations or one
television station and seven radio stations in the same market, provided that
(1) 20 independent media voices (including certain newspapers and a single cable
system) will remain in the relevant market following consummation of the
proposed transaction, and (2) the proposed combination is consistent with the
television duopoly and local radio ownership rules. If fewer than 20 but more
than 9 independent voices will remain in a market following a proposed
transaction, and the proposed combination is otherwise consistent with the FCC's
rules, a single entity may have attributable interests in up to two television
stations and four radio stations. If these various "independent voices" tests
are not met, a party generally may have an attributable interest in no more than
one television station and one radio station in a market.
The FCC made other changes to its rules that determine what constitutes
an "attributable interest" in applying the FCC Ownership Rules. Under the new
rules, a party will be deemed to have an attributable interest in a television
or radio station, cable system, or daily newspaper that triggers the FCC's
cross-ownership restrictions, if (1) it is a non-passive investor, and it owns
5% or more of the voting stock in the media outlet or its controlling parent;
(2) it is a passive investor (i.e., bank trust department, insurance company or
mutual fund) and it owns 20% or more of the voting stock; or (3) its interests
(which may be in the form of debt or equity (even if non-voting), or both)
exceeds 33% of the total asset value of the media outlet, and it either (i)
supplies at least 15% of a station's weekly broadcast hours or (ii) has an
attributable interest in another media outlet in the same market.
The FCC also declared that local marketing agreements, or "LMAs", now
will be attributable interests for purposes of the FCC Ownership Rules. The FCC
will grandfather LMAs that were in effect prior to November 5, 1996, until it
has completed the review of its attribution regulations in 2004. Parties may
seek the permanent grandfathering of such an LMA, on a non-transferable basis,
by demonstrating that the LMA is in the public interest and that it otherwise
complies with FCC Ownership Rules.
Finally, the FCC eliminated its "cross interest" policy, which had
prohibited common ownership of a cognizable interest in one media outlet and a
"meaningful" non-cognizable interest in another media outlet serving essentially
the same market.
It is difficult to assess how these changes in the FCC ownership
restrictions will affect Chris-Craft's broadcast business.
FCC regulations further provide that a broadcast license will not be
granted if that grant would result in a concentration of control of radio and
television broadcasting in a manner inconsistent with the public interest,
convenience or necessity. FCC rules deem such concentration of control to exist
if any party, or any of its officers, directors or stockholders, directly or
indirectly, owned, operated, controlled, or had an attributable interest in
television stations capable of reaching, in the aggregate, a maximum of 35% of
the national audience. This percentage is determined by the DMA market rankings
of the percentage of the nation's television households considered within each
market. Because of certain limitations of the UHF signal, however, the FCC will
attribute only 50% of a market's DMA reach to owners of UHF stations for the
purpose of calculating the audience reach
<PAGE> 9
limits. Applying the 50% reach attribution rule to BHC's four UHF stations, the
10 BHC stations are deemed to reach approximately 19% of the nation's television
households. The FCC is considering whether to eliminate the 50% attribution
reduction under this rule for UHF stations.
FCC regulations also prohibit common ownership or control between two
of ABC, NBC, CBS, and Fox, or any one of those four networks, and, under current
interpretation, either UPN or WB. The FCC is considering whether to modify or
eliminate this rule.
The Telecom Act directed the FCC to conduct a rule-making proceeding to
require the inclusion, in all television sets 13 inches or larger, of a feature
(commonly referred to as the V-Chip) designed to enable viewers to block display
of programs carrying a common rating and authorized the FCC to establish an
advisory committee to recommend a system for rating video programming that
contains sexual, violent, or other indecent material about which parents should
be informed, before it is displayed to children, if the television industry does
not establish a satisfactory voluntary rating system of its own. On March 12,
1998, the FCC voted to accept an industry proposal providing for a voluntary
ratings system of "TV Parental Guidelines" under which all video programming
will be designated in one of six categories to permit the electronic blocking of
selected video programming. The FCC has begun a separate proceeding to address
technical issues related to the "V-Chip." The FCC has directed that all
television receiver models with picture screens 13 inches or greater be equipped
with "V-Chip" technology under a phased implementation beginning on July 1,
1999. Chris-Craft cannot predict how changes in the implementation of the
ratings system and "V-Chip" technology will affect Chris-Craft's business.
The FCC recently adopted regulations requiring increased
closed-captioning of video programming. Subject to various exemptions,
television stations will be required to begin broadcasting specified amounts or
a specified percentage of new programs with closed captioning in the year 2000
and specified percentages of pre-rule programming commencing in 2008.
FCC regulations prohibit the holder of an attributable interest in a
television station from having an attributable interest in a cable television
system located within the predicted coverage area of that station. FCC
regulations also prohibit the holder of an attributable interest in a television
station from having an attributable interest in a daily newspaper located within
the predicted coverage area of that station. The FCC intends to conduct a
rule-making proceeding to consider possible modification of this latter
regulation.
FCC regulations implementing the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act") require each television
broadcaster to elect, at three-year intervals beginning June 17, 1993, either to
(i) require carriage of its signal by cable systems in the station's market
("must-carry") or (ii) negotiate the terms on which such broadcast station would
permit transmission of its signal by the cable systems within its market
("retransmission consent"). In June 1997, the U.S. Supreme Court upheld the
constitutionality of the must-carry provisions.
The FCC has taken a number of steps to implement digital television
service ("DTV") (including high definition) in the United States. In December
1996, the FCC adopted a DTV broadcast standard. On February 17, 1998, the FCC
affirmed an amended table of digital channel allotments and rules for the
implementation of DTV, initially adopted in 1997. The digital table of
allotments provides each existing television station licensee or permittee with
a second broadcast channel to be used during the transition to DTV, conditioned
upon the surrender of one of the channels at the end of the DTV transition
period. The DTV channels assigned to the BHC television stations are as follows:
KCOP, channel 66; KBHK, channel 45; KMSP, channel 26; WWOR, channel 38; KPTV,
channel 30; KMOL, channel 58; KTVX, channel 40; KUTP, channel 26; WUTB, channel
41; and WRBW, channel 41. Implementation of DTV is expected to improve the
technical quality of television. Furthermore, the implementing rules permit
broadcasters to use their assigned digital spectrum flexibly to provide either
standard or high-definition video signals and additional services, including,
for example, data transfer, subscription video, interactive materials, and audio
signals, as long as they continue to provide at least one free, over-the-air
television service. However, the digital table of allotments was devised on the
basis of certain technical assumptions that have not been subjected to extensive
field testing and that, along with specific digital channel assignments, may be
subjected to further administrative and judicial review. Conversion to DTV may
reduce the geographic reach of the BHC television stations or result in
increased interference, with, in either case, a corresponding loss of population
coverage. DTV implementation will impose additional costs on the BHC television
stations, primarily due to the capital costs associated with construction of DTV
facilities, and increased operating costs, both during and after the
<PAGE> 10
transition period. In addition, the Telecommunications Act requires the FCC to
assess and collect a fee for any use of a broadcaster's DTV channel for which
it receives subscription fees or other compensation other than advertising
revenue. The FCC has set a target date of 2006 for expiration of the transition
period, subject to biennial reviews to evaluate the progress of DTV, including
the rate of consumer acceptance. The FCC is also conducting a rule-making
proceeding to determine whether and the extent to which cable television systems
should be obligated to carry the signals of broadcast DTV stations.
Some of BHC's television stations began broadcasting on their DTV
channels, in addition to their analog broadcasts, in 1999. BHC has filed
applications with the FCC for permits to construct DTV facilities for each of
its stations except WRBW, for which an extension of time has been granted.
Future capital expenditures by Chris-Craft will be compatible with the new
technology whenever possible.
The FCC is conducting a rulemaking proceeding to consider relaxing or
eliminating its rules prohibiting broadcast networks from (i) restricting their
affiliates' rights to reject network programming, (ii) reserving an option to
use specified amounts of their affiliates' broadcast time, and (iii) forbidding
their affiliates from broadcasting the programming of another network; and to
consider relaxing its rule prohibiting network affiliated stations from
preventing other stations from broadcasting the programming of their network.
Chris-Craft is unable to predict the outcome of these proceedings.
The Communications Act limits the amount of capital stock that aliens
(including their representatives, foreign governments, their representatives,
and entities organized under the laws of a foreign country) may own in a
television station licensee or any corporation directly or indirectly
controlling such licensee. No more than 20% of a licensee's capital stock and,
if the FCC so determines, no more than 25% of the capital stock of a company
controlling a licensee, may be owned, directly or indirectly, or voted by aliens
or their representatives. Should alien ownership exceed this limit, the FCC may
revoke or refuse to grant or renew a television station license or approve the
assignment or transfer of such license. Chris-Craft believes the ownership by
aliens of its stock and that of BHC and UTV to be below the applicable limit.
On January 20, 2000, the FCC approved new equal employment opportunity
and outreach requirements that will apply to all broadcast licensees (and cable
operators). Although the FCC has not yet released the text of these rules, the
key elements are: (1) licensees will be required to implement a minority
outreach program; (2) licensees with five or more full-time employees must place
a report regarding their outreach efforts in their public inspection file
annually, and, if they have more than 10 full-time employees, they must submit
the last four years of these reports to the FCC at the halfway point and
endpoint of their license terms, which will be subject to FCC review; (3)
licensees with five or more full-time employees also must file with the FCC a
"Statement of Compliance" with regard to their outreach efforts every two years;
and (4) licensees with five or more full-time employees also must file annual
employment reports, of the sort filed prior to 1998, which the FCC will use only
to monitor minority employment.
The Communications Act prohibits the assignment of a broadcast license
or the transfer of control of a licensee without the prior approval of the FCC.
Legislation was introduced in the past that would impose a transfer fee on sales
of broadcast properties. Although that legislation was not adopted, similar
proposals, or a general spectrum licensing fee, may be advanced and adopted in
the future. Recent legislation has imposed annual regulatory fees applicable to
BHC stations, currently ranging as high as $35,025 per station.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act or regulations and policies of the FCC
thereunder. Reference is made to the Communications Act, such regulations and
the public notices promulgated by the FCC for further information.
Other Federal agencies, including principally the Federal Trade
Commission, also impose a variety of requirements that affect the business and
operations of broadcast stations. Proposals for additional or revised
requirements are considered by the FCC, other Federal agencies or Congress from
time to time. Chris-Craft cannot predict what new or revised Federal
requirements may result from such consideration or what impact, if any, such
requirements might have upon the operation of BHC television stations.
<PAGE> 11
Competition
BHC television stations compete for advertising revenue in their
respective markets, primarily with other broadcast television stations and cable
television channels, and compete with other advertising media as well. Such
competition is intense.
In addition to programming, management ability and experience,
technical factors and television network affiliations are important in
determining competitive position. Competitive success of a television station
depends primarily on public response to the programs broadcast by the station in
relation to competing entertainment, and the results of this competition affect
the advertising revenues earned by the station from the sale of advertising
time.
Audience ratings provided by Nielsen have a direct bearing on the
competitive position of television stations. In general, major network programs
achieve higher ratings than other programs.
There are at least five other commercial television stations in each
market served by a BHC station. Chris-Craft believes that the three VHF
major-network affiliates and the two other VHF stations in New York City
generally attract a larger viewing audience than does WWOR UPN 9, and that WWOR
UPN 9 generally attracts a viewing audience larger than the audiences attracted
by the UHF stations in the New York City market. In Los Angeles, the three VHF
major-network affiliates, three other VHF stations, and one UHF station
generally attract a larger viewing audience than does KCOP UPN 13, and KCOP UPN
13 generally attracts a viewing audience larger than the other nine UHF stations
in Los Angeles. In Portland, the three VHF major-network affiliated stations
generally attract a larger audience than does KPTV UPN 12, which generally
attracts an audience equal to one and larger than the other of the independent
stations, both of which are UHF stations. Chris-Craft believes that, in
Minneapolis/St. Paul, KMSP UPN 9 generally attracts a smaller viewing audience
than the three major network-affiliated VHF stations, has a viewing audience the
same size as the Fox UHF affiliate, and has a larger viewing audience than the
other two stations, both of which are UHF stations. In Salt Lake City, KTVX
generally ranks second of the six television stations in terms of audience
share. In San Antonio, KMOL generally ranks first of the six stations in terms
of audience share. Of the 14 commercial television stations in San Francisco,
KBHK UPN 44 generally ranks fifth in terms of audience share, behind the three
major network-affiliated VHF television stations, and the VHF Fox affiliate.
KUTP UPN 45 generally ranks sixth in terms of audience share, of the eight
commercial stations in the Phoenix market. WRBW UPN 65 generally ranks sixth in
terms of audience share, of the twelve commercial stations in the Orlando
market. In Baltimore, WUTB UPN 24 generally ranks sixth of the six commercial
stations in terms of audience share.
BHC stations may face increased competition in the future from
additional television stations that may enter their respective markets. See note
(3) to the table under Television Division.
Cable television is a major competitor of television broadcasting
stations. Because cable television systems operate in each market served by a
BHC station, the stations are affected by rules governing cable operations. If a
station is not widely accessible by cable in those markets having strong cable
penetration, it may lose effective access to a significant portion of the local
audience. Even if a television station is carried on a local cable system, an
unfavorable channel or service tier position on the cable system may adversely
affect the station's audience ratings and, in some circumstances, a television
set's ability to receive the station being carried on an unfavorable channel
position. Some cable system operators may be inclined to place broadcast
stations in unfavorable channel locations.
While Federal law has until recently generally prohibited local
telephone companies from providing video programming to subscribers in their
service areas, this prohibition has been substantially eliminated by the Telecom
Act. The FCC has also recently adopted rules for "Open Video Systems" -- a new
structure of video delivery system authorized by the Telecom Act for provision
by local telephone companies and, if permitted by the FCC, others. Chris-Craft
is unable to predict the outcome or effect of these developments. As of June
1999, there were approximately 60,000 subscribers to OVS systems.
"Syndicated exclusivity" rules allow television stations to prevent
local cable operators from importing distant television programming that
duplicates syndicated programming in which local stations have acquired
exclusive rights. In conjunction with these rules, network nonduplication rules
protect the exclusivity of network broadcast programming within the local video
marketplace. The FCC is also reviewing its "territorial exclusivity" rule, which
limits the area in which a broadcaster can obtain exclusive rights to video
programming. Chris-Craft
<PAGE> 12
believes that the competitive position of BHC stations would likely be
enhanced by an expansion of broadcasters' permitted zones of exclusivity.
Alternative technologies could increase competition in the areas served
by BHC stations and, consequently, could adversely affect their profitability.
The emergence of home satellite dish antennas has made it possible for
individuals to receive a host of video programming options via satellite
transmission. Four direct to home satellite systems ("DTH") currently provide
service. The number of subscribers to DTH services increased substantially
during the past five years, to approximately 13.1 million, as of December 1999.
On November 29, 1999, the President signed the Satellite Home Viewer
Improvement Act ("SHVIA"). Among other things, SHVIA provides for a statutory
copyright license to enable satellite carriers to retransmit local television
broadcast stations' programming into the stations' respective local markets.
After May 27, 2000, satellite carriers will be prohibited from delivering a
local signal into their local markets - so called "local-into-local" service -
without the consent or must-carry election of such stations, but stations will
be obligated to engage in good faith retransmission consent negotiations with
the carriers. SHVIA does not require satellite carriers to, but provides that
carriers that choose to do so must, comply with certain mandatory signal
carriage requirements by a date certain, as defined by the Act, or as-yet to be
drafted FCC regulations. Further, the Act authorizes satellite carriers to
continue to provide certain network signals to unserved households, as defined
in SHVIA and FCC rules, except that carriers may not provide more than two
same-network stations to a household in a single day. Also, households that do
not receive a signal of Grade A intensity from any of a particular network's
affiliates may continue to receive distant station signals for that network
until December 31, 2004, under certain conditions. The FCC has initiated several
rule making proceedings, as required by SHVIA, to implement certain aspects of
the Act, such as standards for good faith retransmission consent negotiations,
must-carry procedures, exclusivity protection for local stations against certain
distant signals, and enforcement.
An additional challenge is now posed by wireless cable systems,
including multichannel distribution services ("MDS"). Two four-channel MDS
licenses have been granted in most television markets. MDS operation can provide
commercial programming on a paid basis. A similar service can also be offered
using the instructional television fixed service ("ITFS"). The FCC now allows
the educational entities that hold ITFS licenses to lease their "excess"
capacity for commercial purposes. The multichannel capacity of ITFS could be
combined with either an existing single channel MDS or a newer multichannel
multi-point distribution service to increase the number of available channels
offered by an individual operator. At the end of 1999, wireless cable systems
served about 1.5 million subscribers.
The broadcasting industry is continuously faced with technological
changes, competing entertainment and communications media and governmental
restrictions or actions of Federal regulatory bodies, including the FCC. These
technological changes may include the introduction of digital compression by
cable systems that would significantly increase the number and availability of
cable program services with which BHC stations compete for audience and revenue,
the establishment of interactive video services, and the offering of multimedia
services that include data networks and other computer technologies. Such
factors have affected, and will continue to affect, the revenue growth and
profitability of Chris-Craft.
INDUSTRIAL DIVISION
Chris-Craft Industrial Products, Inc., the wholly owned subsidiary of
Chris-Craft that constitutes its Industrial Division, is primarily engaged in
manufacturing plastic flexible films and distributing containment systems to the
healthcare industry. These products are marketed as roll and cut stock as well
as proprietary and private-label end products. The end products include plastic
flexible films and water-soluble hospital laundry bags.
Significant portions of the sales of the Industrial Division are to the
flexible film packaging industry, composite material fabricators, and health
care facilities. Sales of particular items may vary widely from year to year as
specifications, designs and other conditions change. The products of the
Industrial Division are sold by it directly and by sales agents and
distributors.
Sales of various kinds of plastic film to a large chemical manufacturer
equaled 24.2%, and sales to two health care customers equaled 9.0% and 7.5%, of
1999 Division revenues. Sales to these accounts are generally
<PAGE> 13
made on the basis of competitive bidding on each item sold. Similar arrangements
with these customers have prevailed for a number of years. The loss of these
customers, unless their business was replaced by others, would have an adverse
effect on the Industrial Division.
Plastic Flexible Films
Flexible films manufactured by Chris-Craft are based primarily on
polyvinyl alcohol polymers; some of the film products are water-soluble in their
end use applications, while other applications do not require water solubility.
Chris-Craft's major uses for such film are in water-soluble packaging for
pre-measured amounts of chemical compounds and composite material fabrication.
The films also are used in the manufacture of water-soluble hospital laundry
bags. Management is aware of competition from one other domestic and several
foreign producers of similar film.
Another series of polyvinyl alcohol film is used as a release medium in
connection with the fabrication of fiberglass-reinforced and other plastic
products. For certain of these applications, Chris-Craft's film competes with
those of a number of producers of other types of films.
M.D. Industries, Inc., a subsidiary of the Industrial Division, markets
health care products manufactured by the Division and by others, including
proprietary products made for M.D. Industries.
The Industrial Division is faced with keen competition in each of its
product lines from other companies that manufacture and sell these products.
Raw Materials
Principal raw materials used by the Industrial Division include
polymers and chemical additives. These have generally been readily available
from many sources.
ITEM 2. PROPERTIES.
Television Division
KCOP owns its studios and offices in two buildings in Los Angeles
containing a total of approximately 54,000 square feet located on adjacent sites
having a total area of approximately 1.93 acres. KCOP's transmitter is located
atop Mt. Wilson on property utilized pursuant to a permit issued by the United
States Forest Service.
KPTV owns its studios and offices in a building in Portland, Oregon,
containing approximately 45,300 square feet located on a site of approximately
2.0 acres. Its transmitter is located on its own property at a separate site
containing approximately 16.18 acres.
WWOR owns office and studio facilities in Secaucus, New Jersey,
containing approximately 110,000 square feet on approximately 3.5 acres and
leases additional office space in New York City. Along with almost all of the
television stations licensed to the New York market, WWOR's transmitter is
located on top of the World Trade Center in New York City pursuant to a lease
agreement which expires in 2004.
Physical facilities consisting of offices and studio facilities are
owned by UTV in Minneapolis, San Antonio and Phoenix and are leased in
Baltimore, Orlando, Salt Lake City and San Francisco. The Baltimore lease
expires in April 2005 and is renewable, at increased rental, for two five-year
periods. The Orlando lease expires in March 2004. The Salt Lake City lease
expired in August 1999, but has been extended on a month-to-month basis through
April 2000. UTV has acquired a 6.03 acre site in Salt Lake City, on which UTV is
completing construction of a new, approximately 48,000 square foot, studio
facility. The San Francisco lease expires in 2007. UTV also occupies leased
facilities in various cities throughout the country.
The Minneapolis facility includes approximately 49,700 square feet of
space on a 5.63-acre site. The current Salt Lake City facility is approximately
30,400 square feet on a 2.53-acre site. The San Antonio facility is
<PAGE> 14
approximately 41,000 square feet on a .92-acre site. The San Francisco facility
is approximately 27,700 square feet in downtown San Francisco. The Phoenix
facility is approximately 26,400 square feet on a 3.03-acre site. The Orlando
facility is approximately 8,750 square feet and is located at Universal Studios
in Orlando. The Baltimore facility is approximately 11,700 square feet and is
located in an office park in a suburb of Baltimore. Smaller buildings containing
transmission equipment are owned by UTV at sites separate from the studio
facilities.
UTV owns a 55-acre tract in Shoreview, Minnesota, of which 40 acres are
used by KMSP for transmitter facilities and tower.
KTVX's transmitter facilities and tower are located at a site on Mt.
Nelson, close to Salt Lake City, under a lease that expires in 2004. KTVX also
maintains back-up transmitter facilities and tower at a site on nearby Mt.
Vision under a lease that expires in July 2002 and is renewable, at no increase
in rental, for a 50-year period.
KMOL's transmitter facilities are located at a site near San Antonio on
land and on a tower owned by Texas Tall Tower Corporation, a corporation owned
in equal shares by UTV and another television station that also transmits from
the same tower.
KBHK's transmitter is located on Mt. Sutro, as part of the Sutro Tower
complex, which also houses equipment for other San Francisco television stations
and many of its FM radio stations. The lease for the Mt. Sutro facilities
expires in 2005 and is renewable for two five-year periods.
KUTP's transmitter facilities and tower are located on a site within
South Mountain Park, a communications park owned by the City of Phoenix, which
also contains transmitter facilities and towers for the other television
stations in Phoenix as well as facilities for several FM radio stations. The
license for this space expires in 2012.
WRBW's transmitter facilities are located on a site near Orlando. The
building containing the transmitter and the tower on which the antenna is
mounted are shared with another television station as well as several FM radio
stations. The lease for the tower and building expires in September 2001, and is
renewable for two five-year periods.
WUTB's transmitter facilities are located on a site near Baltimore. The
building containing the transmitter, and the tower on which the antenna is
mounted are shared with another television station. The lease for the tower and
building expires in December 2004 and is renewable for a five-year period.
Industrial Division
As described below, the Industrial Division owns a plant in Gary,
Indiana and leases facilities in Northbrook, Illinois and in South Holland,
Illinois, which leases expire on October 31, 2004 and June 30, 2003,
respectively.
FACTORY AND
PLANT OFFICE SPACE SITE
LOCATION PRINCIPAL PRODUCT (SQUARE FEET) (ACRES)
- -------------- ---------------------- ------------- -------
Gary, Plastic flexible films 55,600 5
Indiana and water-soluble
hospital bags
Northbrook, Health care products 3,169 --
Illinois
South Holland, Warehouse for healthcare 32,241 --
Illinois products distribution
<PAGE> 15
Chris-Craft believes its properties are adequate for their present
uses.
LEGAL PROCEEDINGS.
Montrose Chemical Corporation of California ("Montrose"), whose stock
is 50% owned by Chris-Craft and 50% by a subsidiary of Astra Zeneca Inc. (f/k/a
Zeneca, Inc.) ("Zeneca"), discontinued its manufacturing operations in 1983 and
has since been defending claims for costs and damages relating to environmental
matters.
In 1983, the United States of America and the State of California
instituted an action in the Federal District Court for the Central District of
California, entitled United States of America et al. v. J.B. Stringfellow, et
al., Case No. 83-2501 JMI (MCX), against Montrose and approximately 20 other
defendants relating to alleged environmental impairment at the Stringfellow
Hazardous Waste Disposal Site in California. Chris-Craft is not a defendant in
this action. The action seeks to impose joint and several liability against all
defendants for all costs of removal and remedial action incurred by the Federal
and state governments at the site. In 1990, the United States Environmental
Protection Agency ("EPA") issued a Record of Decision for the site which
selected some of the interim remedial measures preferred by the EPA and the
State, the estimated present value of the capital costs of which was estimated
by them to be $169 million although the estimate purports to be subject to
potential variations of up to 50%. Plaintiffs also seek recovery for remedial
expenditures and unspecified damages for alleged harm to natural resources. In
September 1998, the District Court entered a ruling now on appeal allocating
liability at the site under both the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA" or the "Superfund"
statute) and state law. The CERCLA allocation was 65% to the State of
California, 10% to the owners of the site and 25% to the generator defendants
(including Montrose). The state law allocation was 100% to the State. In
December 1998, the defendants (including Montrose) and the State executed a
settlement agreement that establishes a framework for resolving the litigation.
The agreement is subject to certain conditions, but does not contemplate any
monetary contribution by Chris-Craft.
In May 1998, a group of current or former residents of the vicinity of
the Stringfellow Site filed suit, entitled Austin v. Stringfellow, No. 312339,
California Superior Court, Riverside County, alleging personal injury and
property damage from exposure to the site. A second amended complaint was filed
in November 1998 on behalf of approximately 750 plaintiffs, approximately 100 of
whom are minors, and names Montrose and Chris-Craft and more than 160 additional
defendants. In March 2000, the court granted the defendants' motion to dismiss
the complaint as to almost all of the adult defendants on statute of limitations
grounds. A similar action filed in 1984 entitled Newman v. Stringfellow was
resolved by means of a settlement in which Montrose, but not Chris-Craft, made a
monetary contribution to resolve the claims of approximately 3,000 individual
plaintiffs.
In June 1990, the United States of America and the State of California
commenced an action in the United States District Court for the Central District
of California, entitled United States of America et al. v. Montrose Chemical
Corporation of California et al., Civil Action No. 90-3122 AAH (JRX), against,
among others, Montrose and Chris-Craft. Certain United States affiliates of
Zeneca (the "Zeneca Affiliates"), as well as CBS Corporation (formerly
Westinghouse Electric Corporation), which has no connection with Chris-Craft,
were also named as defendants. Brought under CERCLA, plaintiffs alleged with
respect to Montrose, Chris-Craft, and the Zeneca Affiliates, in the first cause
of action, that Montrose released hazardous substances, including DDT, into the
environment in and around Los Angeles, California, including the waters
surrounding the Palos Verdes Peninsula, the Los Angeles-Long Beach Harbor, and
the Channel Islands. The first cause of action also alleged that Westinghouse
(now CBS) released PCBs into the same waters. The complaint sought a declaration
that defendants are jointly and severally liable for damages (in amounts not
specified) resulting from injury to natural resources caused by the alleged
releases, including loss of use and costs of restoration, plus plaintiffs' costs
in assessing such damages. Montrose, Chris-Craft and the Zeneca Affiliates have
counterclaimed against the United States and the State on the grounds that they
are the former and current owners of the contaminated sediments and allowed the
sediments to be used as a repository for industrial sewage. In the second cause
of action, plaintiffs also sought to hold Montrose, Chris-Craft, and the Zeneca
Affiliates jointly and severally liable for all costs incurred and to be
incurred in connection with alleged hazardous substance contamination to soil
and ground water at the site of Montrose's former plant in Torrance, California.
Montrose and EPA are investigating the former plant site and
<PAGE> 16
evaluating potential response actions. A third cause of action added in August
1999 seeks to recover EPA's costs of investigating and responding to the alleged
contamination of the Palos Verdes Shelf.
In July 1996, EPA issued two internal memoranda in which it concluded
that ocean sediments on the Palos Verdes Shelf threaten human health and the
environment, and stated its intention to undertake an Engineering
Evaluation/Cost Analysis ("EE/CA") under CERCLA to identify appropriate interim
response actions. The actions under consideration include capping a portion of
the contaminated sediments and/or instituting controls aimed at preventing
contaminated fish from being caught and eaten. EPA has not yet selected such
actions, but, in February 2000, stated its intention to undertake a pilot
capping project. In August 1997, EPA initiated a formal rulemaking proceeding,
which currently is ongoing, to add the area of sediments to EPA's National
Priorities List of Contaminated Sites.
In March 1997, the plaintiffs lodged with the District Court an amended
$45.7 million settlement with the Los Angeles County Sanitation District and a
series of other local governmental entities that had been sued by Montrose,
Chris-Craft and other defendants as third-party defendants (the "LACSD
Defendants"), which purports to cover claims both for natural resource damages
and also for response costs (which are asserted by EPA) relating to the Palos
Verdes Shelf. In attempting to justify the settlement, plaintiffs have said they
value their total natural resource damage and response cost claims with respect
to the area of sediments at approximately $482 million. In December 1998, the
plaintiffs lodged with the District Court a $9.5 million consent decree with
CBS. In August 1999, the District Court approved the amended LACSD and CBS
consent decrees. Chris-Craft and the other remaining defendants have appealed.
As to all causes of action, Chris-Craft contends that it is not liable
and that it neither owned nor operated the facilities involved, nor did it
arrange for the disposal of hazardous substances. Chris-Craft and its
predecessors were shareholders of Montrose and provided certain management
services to Montrose as it conducted its operations. A hearing is scheduled for
May 2000 on cross-motions for summary judgment by Chris-Craft and the plaintiffs
as to Chris-Craft's liability. A non-jury trial on all claims in the case is set
for October 2000. Based on the available information, the status of the
proceedings, and the applicable legal and accounting standards, Chris-Craft, in
reliance on, among other things, the advice of counsel, believes that it should
have no liability (under CERCLA or otherwise) for the operations of Montrose and
does not presently consider liability to be "probable" in any of the
Montrose-related cases. Accordingly, under Statement of Financial Accounting
Standards No. 5, "Accounting for Contingencies," no amount has been reserved in
Chris-Craft's financial statements.
Since 1984, Montrose has been complying with a Consent Order entered
into with the Nevada Department of Conservation and Natural Resources Division
of Environmental Protection ("DEP") requiring operation of a ground water
intercept treatment system near a production facility used by Montrose until
1985 in Henderson, Nevada. The EPA and DEP are currently reconsidering whether
the complex that includes the Henderson facility should be included on the
National Priority List. In April 1991, and again in February and June 1996,
Montrose entered into additional consent orders with DEP and other parties
requiring investigation of environmental conditions at the Henderson facility.
In September 1994, the EPA notified Chris-Craft that it had been
designated as a "potentially responsible party" under CERCLA (a "PRP") in
connection with the Diamond Alkali Superfund Site on the Passaic River in
Newark, New Jersey. The EPA alleges that hazardous substances were released into
the river from a facility operated by a predecessor company. The facility was
located near the Diamond Alkali property, but not on the riverfront, and was
sold by Chris-Craft in 1972. Chris-Craft disputes that it is a responsible
party. At the request of the EPA, Maxus Energy Corp., the former owner of the
Diamond Alkali property and a designated PRP at the site, is currently
performing a feasibility study estimated to cost approximately $10 million to
determine the extent of contamination in the area and to evaluate possible
corrective actions. The Diamond Alkali Superfund Site matter does not involve
Montrose, and based on the review to date by Chris-Craft and its counsel, they
believe Chris-Craft has been erroneously identified as a PRP at the site;
Chris-Craft is unable to determine at this stage if it could have any liability
at the site.
If a court ultimately rejected Chris-Craft's defenses in one or more of
the foregoing matters, under CERCLA Chris-Craft might be held jointly and
severally liable, without regard to fault, for response costs and natural
resource damages. A party's ultimate liability at a site generally depends on
its involvement at the site, the nature and extent of contamination, the remedy
selected, the role of other parties in creating the alleged
<PAGE> 17
contamination and the availability of contribution from those parties, as well
as any insurance or indemnification agreements which may apply. In most cases,
both the resolution of the complex issues involved and any necessary remediation
expenditures occur over a number of years. Future legal and technical
developments in each of the foregoing matters will be periodically reviewed to
determine if an accrual of reserves would be appropriate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of Chris-Craft, as of February 29, 2000, are as
follows:
HAS SERVED
POSITIONS WITH CHRIS-CRAFT AND AS OFFICER
NAME AGE AS OF FEBRUARY 29, 2000 SINCE
- ----------------- ------------------------------ ----------
Herbert J. Siegel Chairman of the Board and 1968
President; 71
Evan C Thompson Executive Vice President and 1982
President, Television
Division; 57
John C. Siegel Executive Vice President; 47 1985
William D. Siegel Executive Vice President; 45 1985
Joelen K. Merkel Senior Vice President and 1980
Treasurer; 48
Brian C. Kelly Senior Vice President and 1992
General Counsel and
Secretary; 48
The principal occupation of each of the individuals for the past five
years is stated in the foregoing table.
All officers hold office until the meeting of the Board following the next
annual meeting of stockholders or until removed by the Board.
<PAGE> 18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information appearing in the Annual Report under the caption STOCK
PRICE, DIVIDEND AND RELATED INFORMATION is incorporated herein by this
reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information appearing in the Annual Report under the caption
SELECTED FINANCIAL DATA is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information appearing in the Annual Report under the caption
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ("MD&A") is incorporated herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information appearing in the MD&A under the caption QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK is incorporated herein by this
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements, Notes thereto, Report of
Independent Accountants thereon and Quarterly Financial Information (unaudited)
appearing in the Annual Report are incorporated herein by this reference. Except
as specifically set forth herein and elsewhere in this Form 10-K, no information
appearing in the Annual Report is incorporated by reference into this report,
nor is the Annual Report, deemed to be filed, as part of this report or
otherwise, pursuant to the Securities Exchange Act of 1934.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
<PAGE> 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information appearing in the Proxy Statement under the captions
ELECTION OF DIRECTORS--Nominees of the Board of Directors and ELECTION OF
DIRECTORS--Section 16(a) Beneficial Ownership Compliance is incorporated herein
by this reference. Information relating to Chris-Craft's executive officers is
set forth in Part I under the caption EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing in the Proxy Statement under the caption
ELECTION OF DIRECTORS--Executive Compensation is incorporated herein by this
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The information appearing in the Proxy Statement under the caption
ELECTION OF DIRECTORS--Voting Securities of Certain Beneficial Owners and
Management is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information appearing in the Proxy Statement under the caption
ELECTION OF DIRECTORS--Certain Relationships and Related Transactions is
incorporated herein by this reference.
<PAGE> 20
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. The financial statements and quarterly financial information
incorporated by reference from the Annual Report pursuant to Item 8.
2. The financial statements of UPN and report thereon listed under
the caption Schedules in the Index to Consolidated Financial
Statements and Schedules.
3. Exhibits listed in the Exhibit Index, including compensatory plans
or arrangements listed below:
* Benefit Equalization Plan
* 1994 Management Incentive Plan
* 1999 Management Incentive Plan
* Management Incentive Compensation Plan
* 1994 Director Stock Option Plan
* Employment Agreement dated January 1, 1994 between Herbert J.
Siegel and Chris-Craft.
* Employment Agreement dated January 1, 1994, as amended September
28, 1999, between Evan C Thompson and Chris-Craft.
* Employment Agreement dated September 28, 1999 between John C.
Siegel and Chris-Craft.
* Employment Agreement dated September 28, 1999 between William D.
Siegel and Chris-Craft.
* Employment Agreement dated September 28, 1999 between Joelen K.
Merkel and Chris-Craft.
* Employment Agreement dated September 28, 1999 between Brian C.
Kelly and Chris-Craft.
(b) No reports on Form 8-K were filed by the registrant during the last
quarter of the period covered by this report.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 2000
CHRIS-CRAFT INDUSTRIES, INC.
----------------------------
(Registrant)
By: WILLIAM D. SIEGEL
------------------------
William D. Siegel
Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature and Title Date
HERBERT J. SIEGEL March 29, 2000
---------------------------
Herbert J. Siegel
Chairman, President and
Director (principal executive
officer)
WILLIAM D. SIEGEL March 29, 2000
---------------------------
William D. Siegel
Executive Vice President and
Director (principal
financial officer)
JOELEN K. MERKEL March 29, 2000
---------------------------
Joelen K. Merkel
Senior Vice President and
Treasurer
(principal accounting
officer)
EVAN C THOMPSON March 29, 2000
---------------------------
Evan C Thompson
Executive Vice President and
Director
JOHN C. SIEGEL March 29, 2000
---------------------------
John C. Siegel
Executive Vice President and
Director
HOWARD ARVEY March 29, 2000
---------------------------
Howard Arvey
Director
<PAGE> 22
LAWRENCE R. BARNETT March 29, 2000
---------------------------
Lawrence R. Barnett
Director
JOHN C. BOGLE March 29, 2000
---------------------------
John C. Bogle
Director
T. CHANDLER HARDWICK, III March 29, 2000
---------------------------
T. Chandler Hardwick, III
Director
JEANE J. KIRKPATRICK March 29, 2000
---------------------------
Jeane J. Kirkpatrick
Director
DAVID F. LINOWES March 29, 2000
---------------------------
David F. Linowes
Director
NORMAN PERLMUTTER March 29, 2000
------------------
Norman Perlmutter
Director
JAMES J. ROCHLIS March 29, 2000
---------------------------
James J. Rochlis
Director
<PAGE> 23
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Income - For the Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Cash Flows - For the Years Ended December
31, 1999, 1998 and 1997
Consolidated Statements of Shareholders' Investment - For the Years
Ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
SCHEDULES:
UPN Financial Statements --
Report of Independent Accountants
Balance Sheets - December 31, 1999 and 1998
Statements of Operations -
For the Years Ended December 31, 1999, 1998 and 1997
Statements of Changes in Partners' Capital (Deficit) - For the
Years Ended December 31, 1999, 1998 and 1997
Statements of Cash Flows - For the Years Ended December 31,
1999, 1998 and 1997
Notes to Financial Statements
<PAGE>
United Paramount Network
(a partnership between BHC Network Partner, Inc.,
BHC Network Partner II, Inc., BHC Network Partner III, Inc.,
BHC Network Partner IV, PCI Network Partner Inc. and
PCI Network Partner II Inc.)
Report and Financial Statements
December 31, 1999, 1998 and 1997
Report of Independent Accountants
To the Partners
of United Paramount Network
In our opinion, the accompanying balance sheets and the related
statements of operations, of changes in partners' capital (deficit)
and of cash flows present fairly, in all material respects, the
financial position of United Paramount Network ("UPN", a partnership
between BHC Network Partner, Inc., BHC Network Partner II, Inc., BHC
Network Partner III, Inc., BHC Network Partner IV, PCI Network Partner
Inc., and PCI Network Partner II Inc.) at December 31, 1999 and 1998,
and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of United Paramount
Network's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Note 2 to the financial statements, UPN changed its
method of accounting for start-up costs to comply with Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities".
The accompanying financial statements have been prepared assuming that
UPN will continue as a going concern. As discussed in Note 7 to the
financial statements, on March 20, 2000 the partners of UPN entered
into a transaction which will result in UPN being owned by two of the
partners, which are under common ownership. As a result of this
transaction, the resulting owner of UPN may be in violation of certain
Federal Communication Commission ("FCC") rules and may not be able to
operate UPN in its present form. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Century City, California
January 31, 2000 except as to Note 7, which is as of March 20, 2000
<PAGE>
United Paramount Network
Balance Sheets
December 31, 1999 and 1998
- --------------------------------------------------------------------
(in thousands)
1999 1998
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 9,699 $ 24,704
Accounts receivable (net of allowance
for doubtful accounts of $430 and
$430, respectively) 33,748 18,787
Program rights and development costs
(net of reserve for abandonment of
$4,215 and $5,055, respectively) 37,080 46,893
Other current assets 5,004 2,550
----------- -----------
Total current assets 85,531 92,934
----------- -----------
Restricted investments 3,769 5,340
Furniture, fixtures, computer
equipment, at cost (net of
accumulated depreciation of
$2,194 and $1,454, respectively) 1,650 1,949
Intangible assets (net of accumulated
amortization of $7,166 and $2,972,
respectively) - 4,194
Other assets 25,407 15,822
----------- -----------
$ 116,357 $ 120,239
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Accounts payable $ 12,470 $ 11,654
Accrued program costs 58,274 73,130
Accrued expenses and other liabilities 25,971 34,224
----------- -----------
Total current liabilities 96,715 119,008
----------- -----------
Commitments and contingencies (Note 6)
Partners' capital (deficit):
BHC Network Partner (3,961) (4,192)
BHC Network Partner II - (4,072)
BHC Network Partner III - 8,879
BHC Network Partner IV 13,782 -
PCI Network Partner 7,857 492
PCI Network Partner II 1,964 124
----------- -----------
Total partners' capital 19,642 1,231
----------- -----------
$ 116,357 $ 120,239
=========== ===========
<PAGE>
United Paramount Network
Statements of Operations
For the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------
(in thousands)
1999 1998 1997
----------- ----------- -----------
Net revenues $ 134,127 $ 96,401 $ 89,997
Operating costs and expenses:
Operating expenses 229,499 182,225 177,874
Selling, general and
administrative expenses 95,595 90,871 82,294
Depreciation and
amortization 751 2,069 1,794
----------- ----------- -----------
325,845 275,165 261,962
----------- ----------- -----------
Operating loss (191,718) (178,764) (171,965)
----------- ----------- -----------
Other income (expense):
Other expense (188) - -
Interest and other income 1,412 1,571 1,736
Net income on investment
in joint venture - - 32
1,224 1,571 1,768
----------- ----------- -----------
Loss before cumulative effect
of change in accounting
principle (190,494) (177,193) (170,197)
Cumulative effect of change
in accounting principle (4,194) - -
----------- ----------- -----------
Net loss $ (194,688) $ (177,193) $ (170,197)
=========== =========== ===========
<PAGE>
<TABLE>
United Paramount Network
Statements of Changes in Partners' Capital
For the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------
(in thousands)
<CAPTION>
BHC BHC BHC BHC PCI PCI
Network Network Network Network Network Network
Partner Partner II Partner III Partner IV Partner Partner II Total
----------- ----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 $ (4,172) $ (3,703) $ 9,269 $ - $ - $ - $ 1,394
Exercise of options
by PCI Partners - - - - 155,014 38,754 193,768
Allocation of option
exercise 3,881 73,731 77,612 - (124,178) (31,046) -
Distribution to partners (2,907) (55,224) (58,130) - - - (116,261)
Capital contributions 1,205 22,888 24,092 - 36,268 9,067 93,520
Allocation of 1997
net loss (2,186) (41,529) (43,715) - (66,214) (16,553) (170,197)
----------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at
December 31, 1997 (4,179) (3,837) 9,128 - 890 222 2,224
Capital contributions 2,202 41,848 44,050 - 70,480 17,620 176,200
Allocation of 1998
net loss (2,215) (42,083) (44,299) - (70,878) (17,718) (177,193)
----------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at
December 31, 1998 (4,192) (4,072) 8,879 - 492 124 1,231
Capital contributions 2,664 40,114 42,225 21,547 85,240 21,309 213,099
Transfer of interest - 3,979 (8,978) 4,999 - - -
Allocation of 1999
net loss (2,433) (40,021) (42,126) (12,764) (77,875) (19,469) (194,688)
----------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at
December 31, 1999 $ (3,961) $ - $ - $ 13,782 $ 7,857 $ 1,964 $ 19,642
=========== =========== =========== =========== =========== =========== ============
</TABLE>
<PAGE>
United Paramount Network
Notes to Financial Statements
For the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------
(in thousands)
1999 1998 1997
---------- ---------- ----------
Cash flows from operating activities:
Net loss $ (194,688) $ (177,193) $ (170,197)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Amortization of program
costs 221,866 177,771 169,771
Payments for programming (229,897) (195,580) (118,912)
Depreciation and amortization 751 2,069 1,794
Abandonment reserve (840) (2,666) 2,108
Cumulative effect of change
in accounting principle 4,194 - -
Changes in assets and
liabilities:
(Increase) decrease in
accounts receivable (14,961) 20,500 (14,230)
Increase (decrease) in
accounts payable,
accrued expenses and
other current
liabilities (3,609) 1,468 8,470
Increase in other assets (5,737) (3,329) (12,110)
---------- ---------- ----------
Net cash used in
operating activities (222,921) (176,960) (133,306)
---------- ---------- ----------
Cash flows from investing activities:
Additions to property and
equipment (454) (1,565) (467)
Cash removed from (placed in)
restricted account 1,571 3,415 (7,598)
Loans to network affiliates (6,300) - -
Net investment in joint venture - (8) 304
---------- ---------- ----------
Net cash provided by (used in)
investing activities (5,183) 1,842 (7,761)
---------- ---------- ----------
Cash flows from financing activities:
Exercise of option by PCI
Partners - - 186,873
Capital contributions 213,099 176,200 93,520
Distributions to partners - - (116,261)
---------- ---------- ----------
Net cash provided by
financing activities 213,099 176,200 164,132
---------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents (15,005) 1,082 23,065
Cash and cash equivalents:
Beginning of year 24,704 23,622 557
---------- ---------- ----------
End of year $ 9,699 $ 24,704 $ 23,622
========== ========== ==========
Supplemental schedule of non-cash items:
Non-cash additions to
program costs $ - $ 9,822 $ 51,748
========== ========== ==========
Start-up costs incurred
by PCI Partners and
contributed to the
partnership $ - $ - $ 6,895
========== ========== ==========
<PAGE>
United Paramount Network
Notes to Financial Statements
For the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------
1. Organization
In July 1994, BHC Network Partner, Inc. ("BHC/NP"), a then wholly
owned subsidiary of Chris-Craft Industries, Inc.'s ("Chris-Craft")
majority owned subsidiary, BHC Communications, Inc. ("BHC"), along
with PCI Network Partner Inc. ("PCI/NP"), a wholly owned indirect
subsidiary of Viacom Inc.'s Paramount Television Group ("Viacom"),
formed the United Paramount Network ("UPN" or the "Network"), a
broadcast television network.
UPN was organized as a partnership in December 1994 between BHC/NP and
BHC Network Partner II, Inc. ("BHC/NP II"), a wholly owned indirect
subsidiary of BHC. BHC Network Partner III, Inc. ("BHC/NP III"), a
wholly owned indirect subsidiary of BHC, became a partner in 1996. On
December 30, 1996, all advances from related parties and related
accrued interest were converted to partnership equity. PCI/NP had an
option to acquire an interest in UPN equal to that of BHC/NP, BHC/NP
II, and BHC/NP III (collectively referred to as the "BHC Partners").
The option price included approximately one-half of the BHC Partners'
aggregate cash contributions to UPN through the exercise date, plus
interest, and additional cash available for ongoing UPN expenditures.
On January 15, 1997, PCI/NP and PCI Network Partner II Inc., a wholly
owned indirect subsidiary of Viacom, (collectively referred to as the
"PCI Partners") completed the exercise of the option in accordance
with the terms of the option agreement and became equal partners with
BHC Partners in UPN. In accordance with the option agreement, BHC
Partners received distributions amounting to approximately $116
million. In November 1999, BHC/NP II and BHC/NP III transferred all
of their respective partnership interests to BHC Network Partner IV
("BHC/NP IV"), a wholly owned partnership. (See also Note 7)
UPN began providing programming for broadcast in January 1995. At
December 31, 1999, 1998 and 1997, the Network had 181 affiliates in
markets covering approximately 97%, 185 affiliates in markets covering
approximately 95%, and 187 affiliates in markets covering
approximately 97% of U.S. television households, respectively. The
Network's revenues are derived primarily from providing television
programming and are, therefore, subject to fluctuations in the
advertising industry.
Operating costs of the Network have been funded through capital
contributions and loans made by BHC Partners, including BHC/NP IV, and
PCI Partners (collectively known as "Partners") and the sale of
advertising. Profits or losses are allocated between the Partners in
accordance with the partnership agreement. UPN is still in its
development and the cost of developing and expanding its programming
is expected to remain significant for several years.
2. Accounting Policies
Financial Instruments
Cash equivalents are securities having maturities at time of purchase
not exceeding three months.
Program Rights and Development Costs
Network programming rights and related liabilities are recorded at the
contractual amounts when the programming becomes available for
telecasting. Program costs are recorded at the lower of cost or net
realizable value. Capitalized program costs are amortized over the
estimated number of showings, using accelerated methods based on
management's estimate of the flow of revenues.
Management assesses the net realizable value of program rights on a
day-part basis.
The estimated costs of recorded program rights to be charged to income
within one year are included in current assets; payments on such
program rights due within one year are included in current
liabilities.
Costs incurred for the development of programs are capitalized and
included in the accompanying balance sheets, net of reserves
established for projects which may be terminated prior to being placed
into production.
Restricted Investments
Restricted investments consist of cash and marketable securities
placed in an account as a security deposit and as collateral for a
loan to a third party. The restricted investments are not available
for current operations of the Network and, therefore, have been
classified as non-current in the accompanying balance sheets. In
accordance with Statement of Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities,"
marketable securities have been classified as held-to-maturity and are
therefore carried at amortized cost.
Property and Equipment
Property and equipment is recorded at cost. Depreciation of
furniture, fixtures and computer equipment is computed on the
straight-line method over the estimated useful lives of the assets,
which range from three to five years. Amortization of leasehold
improvements is computed on a straight-line basis over the life of the
lease.
Intangible Assets
Intangible assets represent primarily the costs incurred by PCI
Partners during the start-up phase of the Network and contributed to
the partnership as a result of the acquisition by PCI Partners of an
interest in the partnership (Note 1). Also included in intangible
assets are costs associated with logo design and development. The
assets have been amortized on a straight-line basis over five years.
In April 1998, the American Institute of Certified Public Accountants
Accounting Standards Executive Committee issued Statement of Position
("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." This
SOP requires costs of start-up activities and organization costs to be
expensed as incurred. The Network adopted SOP 98-5 during the first
quarter of 1999 and wrote-off unamortized start-up costs of $4,194,000
as a cumulative change in accounting principle.
Other Assets
Other assets include primarily an investment in a joint venture with
Saban Entertainment, deferred network costs, and loans to network
affiliates. The joint venture was entered into for the purpose of
developing, producing, and distributing children's television
programming. Under terms of the joint venture agreement, UPN funded
certain programming costs in return for certain distribution rights to
such programming and a share of aggregate revenue. UPN accounts for
its interest in the joint venture using the equity method. Network
costs are amortized over the same period as the related agreements.
Interest rates on loans to network affiliates are generally current
market rates. Accordingly, the carrying value and fair value of the
loans approximate one another.
Long-Lived Assets
The carrying value of long-lived assets, primarily consisting of
investments, loans to affiliates, deferred network costs, and property
and equipment, is periodically reviewed by management. The Network
reviews the carrying value of long-lived assets for impairment
whenever events or changes in circumstances indicate the carrying
value may not be recoverable. Measurement of any impairment would
include a comparison of estimated future cash flows anticipated to be
generated during the remaining life of the long-lived asset to the net
carrying value of the long-lived asset.
Revenue Recognition
Revenues are recognized at contractual rates as advertisements are
aired.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Income Taxes
As a general partnership, the Network's losses are allocated to, and
reported by, the individual Partners. Therefore, no income tax
benefit is included in the accompanying financial statements.
Stock Appreciation Rights
Stock appreciation rights entitle an employee to receive, at a
specified future date or dates, the excess of the quoted market price
of a specified number of shares of a company's stock over the quoted
market price at the date of grant. On February 16, 1999, the Network
granted stock appreciation rights in 30,000 shares of both Viacom and
Chris-Craft stock, at a grant price of $83.50 and $42.81,
respectively. Due to a Viacom 2 for 1 stock split and a Chris-Craft
3% stock dividend, the adjusted granted appreciation rights in shares
of Viacom and Chris-Craft stock are 60,000 and 30,900, respectively,
and the adjusted grant prices are $41.75 and $41.57, respectively.
The stock appreciation rights vest equally over a three-year period.
The Network recognized $1,080,000 in compensation expense relating to
these stock appreciation rights during 1999.
3. Other Assets
At December 31, 1999 and 1998, other assets are comprised of deferred
network costs of $15,912,000 and $12,966,000, respectively, loans to
network affiliates of $6,964,000 and $325,000, respectively, and
investment in joint venture of $2,531,000 and $2,531,000,
respectively. The investment in joint venture is presented net of
reserves of $2,119,000 at December 31, 1999 and 1998.
Included in loans to network affiliates is a $6,000,000 note
receivable and $248,000 interest receivable from WOWL, UPN's affiliate
in Florence/Huntsville, Alabama. The loan bears a rate of interest
equal to the greater of 8% or the prime rate. WOWL is required to
begin making semi-annual payments to UPN on November 1, 2000 through
the maturity date of October 28, 2004 and is secured by the station's
assets. WOWL's current ownership group includes UPN's parents.
4. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
(in thousands)
December 31,
1999 1998
--------- ---------
Accrued advertising and marketing costs $ 13,701 $ 24,123
Accrued compensation 7,561 5,135
Other accrued expenses 4,709 4,966
--------- ---------
$ 25,971 $ 34,224
========= =========
5. Related Party Transactions
Prior to September 1997, advertising time was sold through Premier
Advertising Sales ("Premier") a wholly owned subsidiary of Paramount
Communications, Inc., which is a subsidiary of Viacom Inc. (Note 1).
Net revenues for sales made by Premier totaled $43,019,000 in 1997.
In September 1997, the Network established its own sales force which
sells advertising time for broadcast on UPN programs.
During the normal course of business, the Network enters into various
contracts to purchase programming from related parties. In 1999 and
1998, additions to capitalized programming costs from related parties
totaled $115,073,000 and $120,335,000, respectively.
Prior to September 1997, with respect to certain of its programming
provided by Viacom, UPN derived no revenue and incurred no programming
expense.
During the normal course of business, various services are provided to
the Network by related parties. In 1999 and 1998, payments for these
services totaled approximately $3,237,000 and $3,240,000,
respectively.
6. Commitments and Contingencies
During 1995, UPN entered into a five-year lease obligation for its
office space with an option to extend for an additional period of five
years. In 1999, UPN extended the lease for an additional three years.
The lease calls for certain penalty payments upon cancellation after
three years. Rental expense was $729,000, $802,000 and $766,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
During 1998, UPN entered into a nine year and ten month lease
obligation for its New York office space with an option to extend for
an additional period of five years. The lease is noncancelable for
six years and three months and calls for a cancellation fee if the
early cancellation clause is utilized.
Rental expense was $371,000 and $354,000 for the years ended December
31, 1999 and 1998, respectively. Additionally, as required by the
lease agreement, UPN obtained an irrevocable letter of credit in the
amount of $1,200,000 on behalf of the lessor.
As of December 31, 1999, the future minimum rental payments under
operating leases are as follows:
2000 $ 1,241,000
2001 1,380,000
2002 1,406,000
2003 1,028,000
2004 444,000
Thereafter 1,469,000
---------------
Total $ 6,968,000
===============
During the normal course of business, the Network enters into
contracts for programming, which are not currently available for
telecasting. The aggregate amounts of the payments required under
these agreements totaled approximately $112,310,000 and $87,083,000 at
December 31, 1999 and 1998, respectively.
During the normal course of business, the Network enters into various
affiliate agreements, which will require the Network to make future
promotional payments to its affiliate stations. The aggregate amounts
of the payments required under these agreements totaled approximately
$22,823,000 and $30,838,000 at December 31, 1999 and 1998,
respectively.
During the normal course of business, the Network enters into various
co-op advertising agreements with its affiliate stations, which will
require the Network to make payments to these affiliates for its share
of future advertising costs. The aggregate amounts of the payments
required under these agreements totaled approximately $2,657,000 and
$3,635,000 at December 31, 1999 and 1998, respectively.
The Network has contractual agreements with several key employees. As
of December 31, 1999, estimated future payments relating to these
agreements are as follows:
2000 $ 11,961,000
2001 6,179,000
2002 2,705,000
Thereafter -
----------------
Total $ 20,845,000
================
In the normal course of business, the Network is at times subject to
pending and threatened legal actions. In management's opinion, any
liabilities or benefits resulting from these matters will not have a
material effect on the financial position or results of operations of
the Network.
7. Subsequent Events
On September 7, 1999, Viacom announced its intent to merge with the
CBS Corporation. The combined company would then own the CBS
television broadcast network as well as its interest in UPN via its
ownership of The Paramount Television Group. The Viacom/CBS merger
awaits clearance from the Federal Communications Commission ("FCC").
Viacom's and CBS's shareholders have already voted to approve the
merger.
On February 3, 2000, Viacom initiated a buy-sell offer to BHC for $5.0
million, offering to either sell its 50% interest or to buy BHC's 50%
interest in UPN. On March 20, 2000, BHC elected to sell its 50%
interest in UPN to Viacom per the terms of the "buy-sell" provision of
the UPN Joint Venture Agreement. The sale is expected to close by
March 31, 2000. As a result of the sale, BHC will have no further
ownership interest in the Network or obligations to fund UPN's
operations.
Under the current FCC "dual network rule" the major broadcast networks
(ABC, CBS, NBC, FOX) are prohibited from merging and/or acquiring
another network (including UPN and the WB). Therefore, Viacom's
ownership of CBS and UPN will require that the FCC waive and/or modify
the existing rule. If the FCC will not allow Viacom to own two
networks, the future of the Network is uncertain. The financial
statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the
amount and classification of liabilities that might result should UPN
be unable to continue as a going concern.
<PAGE>
EXHIBIT INDEX
INCORPORATED BY
REFERENCE TO: EXHIBIT NO. EXHIBIT
- -------------------- ----------- ---------------------------------
Exhibit 3(A) [1] 3.1 Restated Certificate of
Incorporation
Exhibit 3(B) [1] 3.2 By-Laws
Exhibit 11(H) [2] 10.1 Benefit Equalization Plan of
registrant
Exhibit 10(B)(1) [5] 10.2 Amendment No. 1 thereto
Exhibit 10.3 [9] 10.3 Amendment No. 2 thereto
Exhibit 10(B) [7] 10.4 Employment Agreement dated
January 1, 1994 between
registrant and Herbert J. Siegel
Exhibit 10(C) [7] 10.5 Split-Dollar Agreement dated
January 6, 1994 between
registrant and William D. Siegel
Exhibit 10(D) [7] 10.6 Split-Dollar Agreement dated
January 6, 1994 between
registrant and John C.Siegel
Exhibit 10(E) [3] 10.7 Form of Agreement under Executive
Deferred Income Plan of registrant
Exhibit 10(F) [7] 10.8 Employment Agreement dated January
1, 1994 between registrant and
Evan C Thompson
* 10.9 Amendment thereto dated September
28, 1999
Exhibit 10(c) [4] 10.10 Management Agreement between the
registrant and BHC dated July 21,
1989
Exhibit 19 [6] 10.11 Amendment No. 1 thereto dated
October 31, 1991
Exhibit 10(H)(2) [7] 10.12 Amendment No. 2 thereto dated
March 24, 1994
Exhibit A to 10.13 1994 Management Incentive Plan
registrant's proxy
statement dated
March 25, 1994 (File
No. 1-2999)
Exhibit B to 10.14 1994 Director Stock Option Plan
registrant's proxy
statement dated
March 25, 1994 (File
No. 1-2999)
<PAGE>
INCORPORATED BY
REFERENCE TO: EXHIBIT NO. EXHIBIT
- -------------------- ----------- ---------------------------------
Exhibit 10.10 [8] 10.15 Option Agreement dated July 19,
1994 between BHC Network Partner,
Inc. and PCI Network Partner, Inc.
* 10.16 Management Incentive Compensation
Plan
* 10.17 Employment Agreement dated
September 28, 1999 between
John C.Siegel and Chris-Craft
* 10.18 Employment Agreement dated
September 28, 1999 between William
D. Siegel and Chris-Craft
* 10.19 Employment Agreement dated
September 28, 1999 between
Joelen K. Merkel and Chris-Craft
* 10.20 Employment Agreement dated
September 28, 1999 between Brian
C. Kelly and Chris-Craft
* 13 Portions of the Annual Report
incorporated by reference
* 21 Subsidiaries of the registrant
* 23 Consent of
PricewaterhouseCoopers LLP
* 27 Financial Data Schedule
- -------------------------
* Filed herewith.
[1] Registrant's Annual Report on Form 10-K for the year ended December 31,
1986.
[2] Registrant's Registration Statement on Form S-1 (Regis. No. 2-65906).
[3] Registrant's Annual Report on Form 10-K for the fiscal year ended August
31, 1983.
[4] BHC's Registration Statement on Form S-1 (Regis. No. 33-31091).
[5] Registrant's Annual Report on Form 10-K for the year ended December 31,
1989.
[6] Registrant's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1991.
[7] Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.
<PAGE>
[8] BHC's Annual Report on Form 10-K for the year ended December 31, 1994.
[9] Registrant's Annual Report on Form 10-K for the year ended December 31,
1994.
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT (this "Amendment") made as of September 28, 1999,
between CHRIS-CRAFT INDUSTRIES, INC., a Delaware corporation ("Chris-Craft"),
and EVAN C THOMPSON (the "Executive"). This Amendment amends the Agreement made
as of January 1, 1994 between Chris-Craft and the Executive as set forth below,
effective as of the date hereof, except as otherwise provided.
1. The Agreement is hereby amended by extending the Employment Term (as
defined in Section 1.2) to December 31, 2004.
2. Effective as of October 1, 1999, Section 4.3.2 of the Agreement is
hereby amended by
substituting "$47,916.67" for "$20,833.33" in clause (i) thereof.
3. The Agreement is hereby amended by revising Section 6.1(f) in its
entirety to read as follows:
(f) The Executive shall be entitled to such additional compensation and
benefits (including but not limited to additional grants of options and other
equity-based awards) as may be granted to him from time to time by the Board of
Directors of Chris-Craft or the Compensation Committee thereof. In this regard,
it is the intention of the compensation Committee to consider the adoption of an
equity plan, to submit such plan to the shareholders of Chris-Craft at the
annual meeting of shareholders to be held in 2000 and, if so adopted and
approved, to make an additional grant or grants to the Executive pursuant to
such plan.
4. The Agreement is hereby amended by adding a new Section 6.3 to read as
follows:
6.3 Pursuant to the action of the Compensation Committee of
the Board of Directors of Chris-Craft, Chris-Craft hereby grants to the
Executive, effective as of September 28, 1999, an option ("Option") to purchase
300,000 shares of the common stock of Chris-Craft ("Shares") under the
Chris-Craft Industries, Inc. 1999 Management Incentive Plan, as amended (the
"1999 Plan"), at a price per Share equal to the fair market value (as defined in
the 1999 Plan) of the Shares on such date. As long as the Executive remains
employed by or acts as a consultant to Chris-Craft (and except as may otherwise
be provided hereinbelow), (a) 50% of the Shares subject to the Option shall
first become exercisable on the fourth anniversary of the date of grant and the
remaining Shares subject to the Option shall first become exercisable on the
fifth anniversary of the date of grant, and (b) once exercisable, the Option
shall remain exercisable until the expiration of the applicable period set forth
in the 1999 Plan. In the event of the termination of the Employment Period by
reason of the Executive's death or disability (as defined in Section 10.2), the
Option granted pursuant to this Section 6.3 shall become fully exercisable and
shall remain exercisable for such period as is set forth in the 1999 Plan. In
the event the Executive's employment terminates for any reason (other than death
or disability) prior to a Change in Control and prior to the third anniversary
of the date of grant, the Option shall be forfeited in its entirety. In the
event that, prior to a Change in Control and between the third and fourth
anniversaries of the date of grant, the Executive's employment terminates under
circumstances entitling him to severance under Section 10.4.2, 30% of the Shares
subject to the Option shall become exercisable and shall remain exercisable for
a period of 90 days following the date of termination and the remainder of such
Option shall be forfeited. In the event of a termination of employment pursuant
to clause (1) of Section 1.4.1, then during the period in which the Executive
subsequently performs consulting services pursuant to Section 11 hereof, the
Option shall remain outstanding in accordance with its terms as if the Executive
remained in employment (and upon any subsequent termination of the Executive's
consulting services, the Executive's rights with respect to the Option shall be
determined as if such termination constituted a termination of employment). In
the event that, on or after a Change in Control, the Executive's employment
terminates under circumstances entitling him to severance under Section 10.4.2,
the Option shall become fully exercisable immediately upon the Executive's
termination of employment, shall remain exercisable until the 10th anniversary
of the date of grant and shall become transferable. In the event of a
termination of the Executive's employment not otherwise described herein, the
Option, to the extent not exercisable at the date of termination, shall be
forfeited and, to the extent exercisable at the date of termination, shall
remain exercisable for such period as is set forth in the 1999 Plan.
5. The Agreement is hereby amended by deleting Section 7 in its entirety.
6. The Agreement is hereby amended by restating Section 8 thereof in its
entirety to read as follows:
8. Change in Control.
8.1 For the purposes of this Agreement, a "Change in Control" shall mean:
8.1.1 Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the
stockholders of Chris-Craft, shall be approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) or other actual or threatened
solicitation of proxies or consents by or on behalf of any individual, entity or
group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person"), other than the Board; or
8.1.2 Approval by the stockholders of Chris-Craft of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation: (a) more than 50% of the combined voting power of the
then outstanding voting securities ("Outstanding Voting Securities") of the
corporation resulting from such reorganization, merger, or consolidation, which
may be Chris-Craft (the "Resulting Corporation"), entitled to vote generally in
the election of directors (the "Resulting Corporation Voting Securities") shall
then be owned beneficially, directly or indirectly, by all or substantially all
of the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger, or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger or
consolidation; and (b) at least 50% of the members of the board of directors of
the Resulting Corporation shall have been members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
8.1.3 Approval by the stockholders of Chris-Craft of (a) a complete
liquidation or dissolution of Chris-Craft or (b) the sale or other disposition
of all or substantially all of the assets of Chris-Craft, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 50% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors, shall be owned
beneficially, directly or indirectly, by all or substantially all of the Persons
who were the beneficial owners of the Outstanding Voting Securities immediately
prior to such sale or other disposition, in substantially the same proportion as
their respective ownerships of Outstanding Voting Securities immediately prior
to such sale or other disposition; and (ii) at least 50% of the members of the
board of directors of Buyer shall have been members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of Chris-Craft.
7. The Agreement is hereby amended by revising clause (c) of the first
sentence of Section 9 (Termination of Agreement for Cause) to read as follows:
(c) prior to a Change in Control, the Executive's dishonesty in the course
of fulfilling his duties hereunder;
8. The Agreement is hereby amended by substituting a semicolon and the word
"or" for the period at the end of clause (d) of the first sentence of Section 9
(Termination of Agreement for Cause) and by adding the following new clause (e)
thereafter, to read as follows:
(e) prior to a Change in Control, at least two-thirds ( ) of
the nonemployee members of the Board of Directors of Chris-Craft shall have
determined that the Executive has intentionally committed an act that could have
a material adverse effect on the reputation or business of Chris-Craft.
9. The Agreement is hereby amended by restating Section 10.4.1 in its
entirety to read as follows:
10.4.1 The Executive may (but shall not be obligated to)
terminate the Employment Term (1) on at least one year's notice if such notice
is given prior to a Change in Control, or (2) following a Change in Control, on
30 days' prior written notice, effective as of any date occurring during the
90-day period commencing on the Designated Date (as defined below in this
Section 10.4.1) for any reason or (3) on 30 days' prior written notice,
effective as of any time during the Employment Term, if, without the Executive's
express written consent, in the case of this clause (3) only, (a) the Executive
shall not be elected (and continued) as a director of Chris-Craft or UTV and as
the Executive Vice President of Chris-Craft and President of Chris-Craft's
Television Division, or the Executive shall be removed from such board or
office; or (b) Chris-Craft shall fail to cure a material breach of this
Agreement within 30 days after notice; or (c) the Executive shall not be
continuously afforded the authority, responsibilities and prerogatives
contemplated in Section 2.2 and 2.3; or (d) Chris-Craft shall materially reduce
any benefit to which the Executive is entitled pursuant to Section 6.1 and, if
the termination of the Employment Term shall occur prior to a Change in Control,
shall not have similarly reduced such benefit with respect to Chris-Craft senior
executives generally; (e) the Executive shall be required to perform his
principal services under this Agreement at a place other than that set forth in
Section 3; or (f) following a Change in Control, Chris-Craft fails to provide
the Executive a bonus (the "Minimum Bonus") equal to the higher of (1) the mean
performance bonuses theretofore paid to or payable to the Executive in respect
of the five fiscal years immediately preceding the fiscal year in which occurs
the Change in Control or (2) the bonus set forth in Section 4.4. Such right to
terminate the Employment Term shall be the Executive's exclusive remedy in the
event of the occurrence of any of the events descried in this Section 10.4.1.
For purposes of clause (c) of the preceding sentence, the Executive shall be
deemed not to have been continuously afforded the authority, responsibilities
and prerogatives contemplated in Sections 2.2 and 2.3 if there shall occur any
reduction in the scope, level or nature of the Executive's employment hereunder,
or any demotion, any phasing out or assignment to others, of the duties
contemplated in Section 2. For purposes of this Section 10.4, any determination
made by the Executive in good faith that any of the events described in clauses
(a) through (f) of the first sentence of Section 10.4.1 has occurred shall be
conclusive. For purposes of this Section 10.4, "Designated Date" shall mean the
12-month anniversary of the Change in Control; provided that the number 12 shall
be decreased (but not below 6) by the excess, if any, of the number of full
months elapsed between (x) the execution of the agreement that contemplates such
Change in Control transaction and (y) the consummation of such transaction. The
Executive may elect to rescind any notice previously furnished pursuant to
clause (1) of this Section, provided such rescission is furnished in writing to
Chris-Craft prior to a Change in Control and prior to the effective date of the
Executive's termination.
10. The Agreement is hereby amended by restating Section 10.4.2 in its
entirety to read as follows:
10.4.2 If the Executive shall elect to terminate the
Employment Term upon the occurrence of any event described in clause (2) or
clause (3) of Section 10.4.1, or if Chris-Craft shall terminate this Agreement
other than for cause or disability pursuant to Sections 9 and 10 hereof, then
the Executive shall have no further obligation to perform services for
Chris-Craft pursuant to Section 2, but he shall be entitled to receive from
Chris-Craft, within 30 days after the date of termination of the Employment
Term, in lieu of the amounts that would otherwise be payable hereunder, a lump
sum in cash of an amount equal to the sum of (a) one times (if such termination
occurs prior to a Change in Control) or three times (if such termination occurs
on or after a Change in Control) the aggregate of (i) compensation that would
have been payable each year at the rate of (A) the base salary payable to the
Executive pursuant to Section 4.1 and (B) all amounts of Deferred Compensation
payable to the Executive pursuant to Section 4.3 (each at the rate in effect on
the date of the termination of the Employment Term (including any COLA
Adjustment theretofore required to have been made)) and (ii) an amount equal to
the highest performance bonuses theretofore paid to or payable to the Executive
with respect to the five full fiscal years of Chris-Craft immediately preceding
the date of termination of the Employment Term; (b) all consulting fees that
would have been payable pursuant to Section 11 hereof without regard to any COLA
Adjustment; (c) a pro rata bonus based upon the target bonus under Section 4.4
for the year in which occurs the date of such termination; and (d) in the event
that the Executive shall have elected to terminate the Employment Term under
Section 10.4.1 (3) (f), an amount equal to the excess of (x) the Minimum Bonus
applicable to the Executive for each fiscal year, commencing with the year in
which occurs the Change in Control through and including the fiscal year prior
to the year in which occurs such date of ermination, over (y) the actual bonus
paid to the Executive for each such year. In addition, for the period beginning
on the date of termination of the Employment Term and running through the day on
which the Employment Term would have ended (as extended, if theretofore
extended) if not terminated pursuant to this Section 10.4.2 and ending on the
date on which the Consulting Term would have ended (the "Cutoff Date"),
Chris-Craft shall maintain, at its expense, all insurance coverages and medical
and health benefits in respect of the Executive that shall have been in effect
with respect to him prior to the occurrence of the event entitling the Executive
to terminate this Agreement (or, if such termination occurs following a Change
in Control, as in effect immediately prior to such Change in Control, if more
favorable to the Executive). In addition, the Executive shall become fully
vested under his Executive Deferred Compensation Income Agreement (to the extent
not previously vested). Notwithstanding the above, Deferred Compensation amounts
previously deferred and credited to the Account shall be paid in accordance with
Section 4.3.3.
11. The Agreement is hereby amended by adding a new Section 10.4.3 to read
as follows:
10.4.3 If the Executive shall elect to terminate the
Employment Term as described in clause (1) of Section 10.4.1 and if Chris-Craft
shall thereafter terminate this Agreement other than for cause or disability
pursuant to Sections 9 and 10 hereof prior to the effective date of the
termination of the Employment Term as set forth in the Executive's notice, then
the Executive shall have no further obligation to perform services for
Chris-Craft pursuant to Section 2, but he shall be entitled to receive from
Chris-Craft, within 30 days after the date of termination of the Employment
Term, in lieu of the amounts that would otherwise be payable hereunder, a lump
sum in cash of an amount equal to the compensation that would have been paid to
him under Sections 4.1, 4.3, 4.4 and 6.1(c) during the period remaining until
the effective date of termination of the Employment Term as set forth in the
Executive's notice. Notwithstanding any such termination by Chris-Craft, the
Consulting Term shall commence on the effective date of termination as set forth
in the Executive's notice.
12. The Agreement is hereby amended by restating the first sentence of
Section 11 thereof to read as follows:
If the Employment Term shall terminate on December 31, 2004
or, if earlier, on account of or termination by the Executive pursuant to clause
(1) of Section 10.4.1, or upon expiration of the period with respect to which
the Executive receives payment on account of disability pursuant to Section
10.2, then during the period beginning on the date of termination of the
Employment Term (or, in the case disability, on the date the Employment Term
would otherwise have ended) and ending on May 31, 2007 (the "Consulting Term"),
the Executive shall render to Chris-Craft such consultation and advice as the
Board of Directors or the Chief Executive Officer of Chris-Craft may request,
subject to the Executive's reasonable convenience and other business activities;
provided, however, that the Executive shall not be required to devote more than
240 hours in any calendar year to such services, which shall be performed at a
time and place mutually convenient to both parties.
13. The Agreement is hereby amended by restating the third sentence of
Section 12.2 thereof to read as follows:
Executive shall not, either during the Employment Term or the
Consulting Term, or, except in the case of a termination of employment by
Chris-Craft without cause or by the Executive as described in clause (2) or (3)
of Section 10.4.1 (whether occurring before or after a Change in Control), for
the one-year period thereafter, render services of any kind to others, engage in
any other business activity or acquire any interest of any type in any other
person or entity that would prevent his fulfilling his obligations under this
Agreement or that Executive knows is in competition with Chris-Craft or any
Affiliate.
14. The Agreement is hereby amended by adding thereto a new Section 14.8 to
read as follows:
14.8. Chris-Craft agrees that, if the Executive's employment
with Chris-Craft terminates during the Employment Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by Chris-Craft pursuant hereto. Further, the amount of
any payment or benefit provided for in this Agreement (other than as expressly
provided in Section 10.2) shall not be reduced by any compensation earned by the
Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
Chris-Craft, or otherwise.
Except as set forth above, the Agreement is hereby ratified
and confirmed in all respects.
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC.
By:
Herbert J. Siegel
Chairman
By:
Evan C Thompson
EMPLOYMENT AGREEMENT
AGREEMENT made as of September 28, 1999 (the "Effective Date"), between
CHRIS-CRAFT INDUSTRIES, INC., a Delaware corporation ("Chris-Craft"), and JOHN
C. SIEGEL (the "Executive").
The Executive currently serves as Senior Vice President of Chris-Craft.
Chris-Craft wishes to promote the Executive to the office of Executive Vice
President of Chris-Craft and to secure the continued services of the Executive
in that position for an additional extended period. In addition, because of the
position the Executive holds with Chris-Craft and the position that he will hold
during the term of his full-time employment under this Agreement, Chris-Craft
wishes to secure the further services of the Executive as a consultant to
Chris-Craft, and wishes to insure that the Executive will refrain from competing
with Chris-Craft, after the termination of his full time employment under
specified circumstances.
In consideration of the covenants and agreements herein contained, the
parties agree as follows:
1. Employment Term.
1.1 Chris-Craft shall employ the Executive, and the Executive
shall serve, as Executive Vice President of Chris-Craft during the Employment
Term (as defined in Section 1.2).
1.2 The term of the Executive's employment under Section 1.1
of this Agreement (the "Employment Term") shall commence on the Effective Date
and end on December 31, 2004, unless sooner terminated pursuant to the
provisions of Section 9 or Section 10.
2. Duties and Authority.
2.1 During the Employment Term, the Executive shall devote his
full business time and energies to the business and affairs of Chris-Craft and
shall not accept other employment or permit such personal business interests as
he may have to interfere with the performance of his duties hereunder. The
Executive agrees, during the Employment Term, to use his best efforts, skill and
abilities to promote Chris-Craft's interests; to be available to serve as a
director and officer of Chris-Craft and any of its domestic subsidiary
corporations if elected by the Board of Directors of Chris-Craft (the "Board")
or stockholders of Chris-Craft or any such subsidiary corporation; and to
perform such duties (consistent with his status set forth below in this Section
2) as may be assigned to him by the Chief Executive Officer of Chris-Craft (the
"Chief Executive Officer") or the Board.
2.2 Subject only to the direction and control of the Chief
Executive Officer and the Board (which direction and control shall be consistent
with the past practice of Chris-Craft), the Executive shall perform all services
and duties necessary or appropriate for the management of Chris-Craft's business
and that of its subsidiaries.
2.3 Throughout the Employment Term, the Executive shall be
continued in the office denominated that of Executive Vice President of
Chris-Craft and shall perform on behalf of Chris-Craft such functions of an
executive nature, and shall have such authority, duties and responsibilities of
an executive nature as shall be assigned to the Executive by the Chief Executive
Officer or the Board.
3. Location.
During the Employment Term, the Executive's services under
this Agreement shall be performed principally in the location in which the
Executive principally performs such services on the Effective Date. The parties,
however, acknowledge and agree that the nature of the Executive's duties
hereunder shall require reasonable domestic and international travel from time
to time.
4. Cash Compensation.
4.1 Base Salary. During the Employment Term, Chris-Craft shall
pay to the Executive, in monthly or more frequent installments in accordance
with Chris-Craft's regular payroll practices for senior executives, a base
salary at the rate per annum of $800,000, which shall be increased by the amount
of $50,000 on each of January 1, 2001 and the immediately following two
anniversaries of such date. As of January 1, 2004, the Executive's base salary
shall be adjusted upward, in proportion to any increase in the Consumer Price
Index, as defined in Section 4.4, between the December levels of the two
immediately preceding years ("COLA Adjustment"). Each such adjustment shall be
made retroactively when the Consumer Price Index for the December next preceding
the date of such adjustment becomes available. It is understood that Chris-Craft
may, at any time, in the discretion of its Board increase, but not decrease, the
Executive's base salary.
4.2 Deferred Compensation. During the Employment Term, Chris-Craft shall
credit to the Executive's Account (as defined in Section 4.2.1) the amount
specified in Section 4.2.2.
4.2.1 Chris-Craft shall maintain, on its books, a special account,
comprised of two sub-accounts, Subaccount A and Subaccount B, with respect to
the Executive (the "Account"), in accordance with the terms of this Agreement,
until the Executive shall have been paid all amounts required by Section 4.2.3
to be paid to the Executive with respect thereto. Prior to December 1 of each
year, Chris-Craft's General Counsel and Secretary shall notify the Executive of
the option to select the periods to which compensation payable pursuant to this
Section 4.2 will be deferred and, within fifteen (15) days following receipt of
such notice, the Executive shall notify Chris-Craft's Treasurer, if the
Executive wishes that the Deferred Compensation (as defined in clause (a) of the
first sentence of Section 4.2.2) be credited to Subaccount A, Subaccount B, or a
combination of both Subaccount A and Subaccount B (any such combination to be
specified in a manner that will not prevent Chris-Craft's Treasurer from
computing on a monthly basis the amounts to be credited to each subaccount in
accordance with Section 4.2.2). Absent such notice from the Executive, Deferred
Compensation for such year shall be credited to Subaccount B.
4.2.2 During each year of the Employment Term, Chris-Craft shall credit to
the
appropriate Subaccount, as of the end of each month, (a) an amount equal to
one-twelfth of $250,000, subject to COLA Adjustment commencing as of January 1,
2001 ("Deferred Compensation"), and (b) interest on the Account balance as of
the end of the preceding month, computed at a rate to be adjusted as of the last
day of each calendar quarter to equal the yield, as of the last business day of
such quarter, as reported in The Wall Street Journal, on U.S. Treasury Notes
maturing in the month that is five years after the last month of such quarter
(the "Interest Rate"). Amounts credited to the Account, excluding interest,
shall be deemed compensation for the year credited, for purposes of determining
benefits under the Chris-Craft Industries, Inc. Salaried Employees' Pension
Plan, Chris-Craft/UTV Employees' Stock Purchase Plan, Chris-Craft Industries,
Inc. Profit-Sharing Plan and Chris-Craft Industries, Inc. Benefit Equalization
Plan. If no yield for such notes is so published as of the last day of a
particular quarter, there shall be substituted the average of the yields so
published for the months next preceding and following. If The Wall Street
Journal is not published on the last day of a particular quarter, there shall be
substituted the appropriate yield reported on the last previous day on which The
Wall Street Journal was published. Following the Employment Term, Chris-Craft
shall credit to the Account, as of the last day of each month, interest on the
Account Balance as of such date, computed at the Interest Rate.
4.2.3 On the January 15 first-occurring following the year in which
expiration or termination of the Employment Term shall have occurred,
Chris-Craft shall pay a lump sum equal to the Subaccount A balance as of such
January 15 (including interest accrued in accordance with Section 4.2.2 at the
Interest Rate used for the last quarter of the previous year through such
January 15), and Chris-Craft will have no further obligation to make any payment
to the Executive with respect to Subaccount A. On such January 15, Chris-Craft
also shall pay to the Executive an amount equal to one-fifth of the Subaccount B
balance as of such January 15 (including interest accrued through such January
15) (the "First Payment"), and the balance of such Subaccount shall be reduced
by the amount of such First Payment. On each succeeding January 15, until
Chris-Craft shall have made five payments with respect to Subaccount B
(including the First Payment) pursuant to this Section 4.2.3, Chris-Craft shall
pay to the Executive a sum equal to the amount of the First Payment, plus
interest credited to Subaccount B through the date of such payment, from the
first day after the date of the immediately preceding payment, and the balance
shall be reduced by the amount of such sum, such that the entire Amount of
Subaccount B plus any interest thereon shall have been paid to the Executive by
the fourth anniversary of the First Payment. In the event that for tax purposes
Chris-Craft is required to treat any portion of Subaccount B in a manner
consistent with the notion that the Executive should include any unpaid amount
(determined without regard to this sentence) in taxable income, Chris-Craft
shall pay such amount to the Executive at the time such portion is so treated.
4.3 Bonus. In addition to his base salary and the deferred
amounts referred to in Section 4.2.2 above, the Executive shall be entitled,
with respect to fiscal year 1999, to receive a bonus determined and payable in
accordance with the past practice of Chris-Craft and, for fiscal years
commencing with Chris-Craft's 2000 fiscal year, to participate in the
Chris-Craft Management Incentive Compensation Plan (the "Incentive Plan"), which
Incentive Plan shall be subject to the approval of Chris-Craft's shareholders at
the annual shareholders meeting to be held in 2000. The Incentive Plan shall set
forth the terms and conditions of awards to be made thereunder. Such terms and
conditions shall include, but not be limited to, the following: The Incentive
Plan shall be administered by the Compensation Committee of the Board of
Directors; shall be designed to meet the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"); shall provide for the
Compensation Committee to convene within the first quarter of each fiscal year
to establish annual performance goals that must be satisfied for minimum, target
and maximum bonuses; and shall provide for annual awards to range from .3 to 2.0
times annual base salary.
4.4 Consumer Price Index. The words "Consumer Price Index," as
used in this Agreement, shall mean the Consumer Price Index for All Urban
Consumers, U.S. City Average, All Items (1982-84=100), as reported by the Bureau
of Labor Statistics of the U.S. Department of Labor. In the event that this
Consumer Price Index shall be superseded or shall be published by a different
agency, then the superseding index shall be substituted for this Consumer Price
Index in such a manner as to implement the intent of this Agreement that the
Executive's base salary shall be adjusted, beginning as of January 1, 2004, and
Deferred Compensation shall be adjusted annually, beginning as of January 1,
2001, so that the purchasing power thereof shall be maintained at a level at
least equivalent to the purchasing power thereof at the immediately preceding
January 1.
5. Expenses.
In addition to the compensation provided in Section 4 and in
Section 11, Chris-Craft will pay or reimburse the Executive for all reasonable
expenses actually incurred or paid by him during the Employment Term or the
Consulting Term (as defined in Section 11) in the performance of his services
hereunder upon presentation of expense statements, vouchers, or such other
supporting information as Chris-Craft may customarily require of its senior
executives. Such expense reimbursement policy shall be no less favorable to the
Executive than the policy in effect as of the Effective Date.
6. Additional Benefits.
6.1 During the Employment Term:
(a) The Executive will be entitled to reasonable annual vacation periods,
with full pay and allowances (in accordance with the past practice and policy of
Chris-Craft with respect to its senior officers with the Executive's position
and title).
(b) The Executive will also be eligible for sick leave in accordance with
Chris-Craft's customary practice for senior executives.
(c) The Executive will be entitled to participate in any insurance,
pension,
profit-sharing, stock option, stock purchase or other benefit plan and fringe
benefit arrangements of Chris-Craft now existing or hereafter adopted for the
benefit of the employees generally or of the executives of Chris-Craft.
(d) Chris-Craft shall match the Executive's contributions (including any
contribution by any trust of which the Executive is the grantor) to recognized
charities or educational institutions, during each fiscal year of the Employment
Term and the Consulting Term, in an amount equal to the sum of (i) $50,000, such
sum to be prorated with respect to any partial fiscal year occurring within the
Employment Term. Matching contributions made by Chris-Craft pursuant hereto
shall be in addition to any contributions made to match Executive's
contributions under any other charitable gift matching program generally
applicable with respect to contributions made by employees or directors of
Chris-Craft or any of its subsidiaries.
(e) The Executive shall be entitled to such additional compensation and
benefits (including but not limited to additional grants of options and other
equity-based awards) as may be granted to him from time to time by the Board or
the Compensation Committee thereof. In this regard, it is the intention of the
Compensation Committee to consider the adoption of an equity plan, to submit
such plan to the shareholders of Chris-Craft for approval at the annual meeting
of shareholders to be held in 2000 and, if such plan is so adopted and approved,
to make an additional grant or grants to the Executive pursuant to such plan.
6.2 Pursuant to the action of the Compensation Committee of
the Board, and subject to the execution of this Agreement by the Executive,
Chris-Craft hereby grants to the Executive an option ("Option") to purchase
250,000 shares of the common stock of Chris-Craft ("Shares"), effective as of
the Effective Date, under the Chris-Craft Industries, Inc. 1999 Management
Incentive Plan, as amended (the "1999 Plan"), at a price per share equal to the
fair market value (as defined in the plan) of the Shares on the Effective Date.
As long as the Executive remains employed by or acts as a consultant to
Chris-Craft (except as may otherwise be provided in Sections 10.1, 10.2, 10.5.1
and 10.5.2), (a) 50% of the Shares subject to the Option shall first become
exercisable on the fourth anniversary of the Effective Date and the remaining
Shares subject to the Option shall first become exercisable on the fifth
anniversary of the Effective Date, and (b) once exercisable, the Option shall
remain exercisable until the 10th anniversary of the Effective Date or, if
earlier, until the expiration of the period set forth in the 1999 Plan.
6.3 No payment or benefit made or provided under this
Agreement shall be deemed to constitute payment to the Executive, his legal
representatives or beneficiaries in lieu of, or in reduction of, any benefit or
payment under an insurance, pension, profit-sharing or other benefit plan, and
no payment under any such plan shall reduce any payment or benefit due under
this Agreement.
7. [This section has been intentionally left blank.]
8. Change in Control.
8.1 For the purposes of this Agreement, a "Change in Control" shall mean:
8.1.1 Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the
stockholders of Chris-Craft, shall be approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) or other actual or threatened
solicitation of proxies or consents by or on behalf of any individual, entity or
group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person"), other than the Board; or
8.1.2 Approval by the stockholders of Chris-Craft of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation: (a) more than 50% of the combined voting power of the
then outstanding voting securities ("Outstanding Voting Securities") of the
corporation resulting from such reorganization, merger, or consolidation, which
may be Chris-Craft (the "Resulting Corporation"), entitled to vote generally in
the election of directors (the "Resulting Corporation Voting Securities") shall
then be owned beneficially, directly or indirectly, by all or substantially all
of the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger, or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger or
consolidation; and (b) at least 50% of the members of the board of directors of
the Resulting Corporation shall have been members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
8.1.3 Approval by the stockholders of Chris-Craft of (a) a complete
liquidation or dissolution of Chris-Craft or (b) the sale or other disposition
of all or substantially all of the assets of Chris-Craft, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 50% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors, shall be owned
beneficially, directly or indirectly, by all or substantially all of the Persons
who were the beneficial owners of the Outstanding Voting Securities immediately
prior to such sale or other disposition, in substantially the same proportion as
their respective ownerships of Outstanding Voting Securities immediately prior
to such sale or other disposition; and (ii) at least 50% of the members of the
board of directors of Buyer shall have been members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of Chris-Craft.
9. Termination of Agreement for Cause.
Chris-Craft may terminate this Agreement, and all of
Chris-Craft's obligations hereunder except its obligation to pay to the
Executive the Account Balance pursuant to Section 4.2 and salary accrued to the
date of termination, "for cause" upon 30 days written notice. The Executive
shall also be entitled to normal post-termination compensation and benefits
under Chris-Craft's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior to the Date of
Termination. As used in this Agreement, the term "for cause" shall mean and be
limited to the following events: (a) the Executive's conviction (which
conviction, through lapse of time or otherwise, is not subject to appeal) in a
court of law of a felony involving moral turpitude; (b) the Executive's material
breach of any of the covenants set forth in Section 12; (c) prior to a Change in
Control, the Executive's dishonesty in the course of fulfilling his duties
hereunder; (d) the Executive's continuing, repeated, wilful failure or refusal
to perform his duties in accordance with the terms of Section 2; provided,
however, that this Agreement may not be terminated for cause under this clause
(d), unless the Executive shall have first received written notice from the
Chief Executive Officer or the Board advising him of the specific acts or
omissions alleged to constitute a failure or refusal to perform his duties, and
such failure or refusal to perform his duties continues after the Executive
shall have had a reasonable opportunity to correct the acts or omissions cited
in such notice; or (e) prior to a Change in Control, at least two-thirds ( ) of
the nonemployee members of the Board shall have determined that the Executive
has intentionally committed an act that could have a material adverse effect on
the reputation or business of Chris-Craft.
10. Termination Other Than for Cause.
10.1 Death. If the Executive shall die during the Employment
Term, this Agreement, and all of Chris-Craft's obligations hereunder, shall
terminate, except (a) with regard to payments from the Account pursuant to
Section 4.2.3 (which Account shall include Deferred Compensation payable through
the last day of the month in which his death occurred), (b) that Chris-Craft
shall pay to the Executive's estate, (i) within 30 days after his death, the
base salary, and pro rata target bonus with respect to the then current fiscal
year, that would have been payable to the Executive under Section 4 had the
Employment Term ended on the last day of the month in which his death occurred,
and (ii) an amount (payable at the same times as salary is paid to other senior
executives of Chris-Craft) equal to the Executive's "Average Annual
Compensation" (as defined in Section 10.3) at the date of his death, such amount
to be payable for the 12-month period beginning on the first day of the month
following the month in which the Executive's death shall occur, and (c) all
outstanding stock options, including the Option granted pursuant to Section 6.2,
held by the Executive shall become fully exercisable and shall remain
exercisable pursuant to the terms of the plan under which it was granted. The
Executive's estate shall also be entitled to normal post-termination
compensation and benefits under Chris-Craft's retirement, insurance and other
compensation or benefit plans, programs and arrangements as in effect
immediately prior to the Date of Termination.
10.2 Disability. If, during the Employment Term, the Executive
shall become disabled (as defined in Chris-Craft's then existing disability
policy) so that he shall be unable substantially to perform his services
hereunder, (a) for a period of six consecutive months or (b) for an aggregate of
six months within any period of 12 consecutive months, then the Chief Executive
Officer or the Board may, at any time during the continuance of such disability,
terminate the Employment Term on 30 days' prior written notice to the Executive.
After such termination, the Executive shall have no further obligation to
perform services for Chris-Craft pursuant to Section 2 but shall be entitled to
receive from Chris-Craft, in lieu of the amounts which would otherwise be
payable under Section 4, (i) within 30 days after such termination, the base
salary, and pro rata target bonus with respect to the then current fiscal year,
that would have been payable to the Executive under Section 4, had the
Employment Term ended on the last day of the month in which the Employment Term
was terminated pursuant to this Section 10.2, (ii) an amount (payable at the
same times as salary is paid to the other senior executives of Chris-Craft) at
an annual rate equal to one-half of the Executive's "Average Annual
Compensation" (as defined in Section 10.3) at the date of the termination of the
Employment Term, such amount to be payable for the 12-month period beginning on
the first day of the month following the month in which the Employment Term
shall have been terminated pursuant to this Section 10.2, and (iii) pursuant to
Section 4.2.3, all Deferred Compensation amounts previously deferred and
credited to the Account. The Executive shall also be entitled to normal
post-termination compensation and benefits under Chris-Craft's retirement,
insurance and other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination. After such termination,
all outstanding stock options, including the Optio granted pursuant to Section
6.2, held by the Executive shall become fully exercisable and shall remain
exercisable pursuant to the terms of the plan under which it was granted. The
Executive shall have no obligation to accept any employment offered to him by
others in order to minimize, or to be set off against, the amounts to which he
is entitled pursuant to this Section 10.2. Chris-Craft shall not interpose any
defense against payment of such amounts based on refusal of the Executive to
seek or accept other employment. However, if the Executive shall obtain other
employment, then amounts due to him pursuant to clause (ii) of this Section 10.2
shall be reduced, pro tanto, by amounts actually received by him for services
rendered in such other employment during the time amounts are payable pursuant
to said clause (ii).
10.3 Average Annual Compensation. As used in Sections 10.1 and
10.2, the term "Average Annual Compensation" shall mean the mean annual
compensation received or receivable by the Executive pursuant to Sections 4.1,
4.2 and 4.3 with respect to each of the three full fiscal years of Chris-Craft,
or such shorter period of the Executive's employment with Chris-Craft pursuant
hereto, immediately preceding the date of the Executive's death (in the case of
Section 10.1) or the date of the termination of the Employment Term (in the case
of Section 10.2).
10.4 Termination by Executive.
10.4.1 The Executive, on 30 days' prior written notice, may (but shall not
be obligated to) terminate the Employment Term effective as of any date
occurring during (1) the 90-day period commencing on the Designated Date (as
defined below in this Section 10.4.1) for any reason; or (2) the Employment Term
if, without the Executive's written consent, in the case of this clause (2)
only, (a) the Executive shall not be continued as Executive Vice President of
Chris-Craft or the Executive shall be removed from such office; or (b)
Chris-Craft shall fail to cure a material breach of this Agreement (including
but not limited to a breach of Section 2 hereof) within 10 days after written
notice; or (c) following a Change in Control, the Executive's authority, duties
and responsibilities are materially reduced from those in effect immediately
prior to the Change in Control; or (d) Chris-Craft shall materially reduce any
benefit to which the Executive is entitled pursuant to Section 6.1 and, if the
termination of the Employment Term shall occur prior to a Change in Control,
shall not have similarly reduced such benefit with respect to Chris-Craft senior
executives generally; or (e) the Executive shall be required to perform his
principal services under this Agreement at a place other than that set forth in
Section 3. Such right to terminate the Employment Term shall be the Executive's
exclusive remedy in the event of the occurrence of any of the events described
in this Section 10.4.1. For purposes of clause (c) of the preceding sentence,
the Executive's authority, duties and responsibilities shall be deemed to have
been materially reduced if there shall occur any material reduction in the
scope, level or nature of the Executive's authority, duties or responsibilities
from those in effect immediately prior to the Change in Control, or if there
shall occur any demotion, any phasing out or assignment to others, of the duties
of the Executive as in effect immediately prior to the Change in Control. For
purposes of this Secion 10.4, with respect to any of the events described in
clauses (a) through (e) of the first sentence of this Section 10.4.1 alleged to
have occurred on or after a Change in Control, any determination made by the
Executive in good faith that any such event has occurred shall be conclusive.
For purposes of this Section 10.4, "Designated Date" shall mean the 12-month
anniversary of the Change in Control; provided that the number 12 shall be
decreased (but not below 6) by the number of full months between (x) the
execution of the agreement that contemplates such Change in Control transaction
and (y) the consummation of such transaction.
10.5 Qualifying Termination. If the Executive shall elect to
terminate the Employment Term upon the occurrence of any event described in
Section 10.4.1, or if Chris-Craft shall terminate this Agreement other than for
cause or disability pursuant to Sections 9 and 10 hereof (each, a "Qualifying
Termination"), then the Executive shall have no further obligation to perform
services for Chris-Craft pursuant to Section 2, but he shall be entitled to
receive from Chris-Craft the amounts and other benefits set forth in Sections
10.5.1 or 10.5.2 below.
10.5.1 If the Qualifying Termination shall occur prior to a Change in
Control:
(a) Chris-Craft shall pay the Executive, within 30 days after the date of
termination of the Employment Term, in lieu of the amounts that would otherwise
be payable hereunder, a lump sum (or, if so elected by the Executive, on a
deferred basis) in cash of an amount equal to the sum of (i) the base salary,
and pro rata target bonus with respect to the then current fiscal year, that
would have been payable to the Executive under Section 4, had the Employment
Term ended on the last day of the month in which the Employment Term was
terminated; and (ii) the base salary that would have been payable to the
Executive pursuant to Section 4.1 (at the rate in effect on the date of the
termination of the Employment Term (including any COLA Adjustment theretofore
required to have been made)), for the period beginning on the date of such
termination and running through the last day of the calendar month in which
occurs the first anniversary of the date of such termination (the "Continuation
Period"), multiplied by 1.3. The Executive shall be entitled to receive, in
accordance with Section 4.2.3, all Deferred Compensation amounts previously
deferred and credited to the Account. The Executive shall also be entitled to
normal post-termination compensation and benefits under Chris-Craft's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination;
(b) Until the last day of the Continuation Period, Chris-Craft shall
maintain, at its expense, all insurance coverages and medical and health
benefits in respect of the Executive that shall have been in effect with respect
to him prior to the occurrence of the event entitling the Executive to terminate
this Agreement; provided, however, that this coverage shall be reduced to the
extent the Executive receives equivalent coverage and benefits during the
Continuation Period under the plans, programs and/or arrangements of a
subsequent employer without increased cost to the Executive (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit
basis); and
(c) With respect to the Option granted pursuant to Section 6.2, (i) if the
date of termination of the Employment Term shall occur following the third, and
prior to the fourth, anniversary of the Effective Date, 30% of the Shares
subject to the Option shall become exercisable on the date of such termination,
(ii) to the extent then exercisable, the Option shall remain exercisable for 90
days following the date of such termination, and (iii) to the extent not then
exercisable, the Option shall terminate.
10.5.2 If the Qualifying Termination shall occur on or after a Change in
Control:
(a) Chris-Craft shall pay the Executive, within 30 days after the date of
termination of the Employment Term, in lieu of the amounts that would otherwise
be payable hereunder, a lump sum (or, if so elected by the Executive, on a
deferred basis) in cash of an amount equal to the sum of (i) the base salary,
and pro rata target bonus with respect to the then current fiscal year, that
would have been payable to the Executive under Section 4, had the Employment
Term ended on the last day of the month in which the Employment Term was
terminated; (ii) the aggregate of (A) the base salary that would have been
payable to the Executive pursuant to Section 4.1 (at the rate in effect on the
date of the termination of the Employment Term (including any COLA Adjustment
theretofore required to have been made)) and (B) an amount equal to the maximum
performance bonus under Section 4.3 payable to the Executive pursuant to the
Incentive Plan or any successor thereto with respect to the fiscal year in which
occurs the date of such termination (using the base salary described in clause
(i)(A) of this Section 10.5.2(a), such aggregate, multiplied by three; and (iii)
all consulting fees that would have been payable pursuant to Section 11 hereof
during the Consulting Term (without regard to any adjustment thereof). The
Executive shall be entitled to receive, in accordance with Section 4.2.3, all
Deferred Compensation amounts previously deferred and credited to the Account.
The Executive shall also be entitled to normal post-termination compensation and
benefits under Chris-Craft's retirement, insurance and other compensation or
benefit plans, programs and arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, immediately prior to
the Change in Control;
(b) Chris-Craft shall maintain, at its expense, all insurance coverages,
medical and health benefits in respect of the Executive that shall have been in
effect with respect to him prior to the occurrence of the event entitling the
Executive to terminate this Agreement (or, if more favorable to the Executive,
as in effect immediately prior to the Change in Control), for the period
beginning on the date of such termination and ending on the third anniversary of
the date of such termination; provided, however, this coverage shall be reduced
to the extent the Executive receives equivalent coverage and benefits during
such period under the plans, programs and/or arrangements of a subsequent
employer without increased cost to the Executive (such coverage and benefits to
be determined on a coverage-by-coverage or benefit-by-benefit basis);
(c) The Option granted pursuant to Section 6.2 shall become fully
exercisable, shall remain exercisable until the 10th anniversary of the
Effective Date and shall become transferable; and
(d) The Executive's account, if any, under the Executive Deferred Income
Plan shall become fully vested (to the extent not previously vested).
11. Consulting Services.
If the Employment Period shall terminate on December 31, 2004
or, if earlier, on account of disability, then during the five-year period (the
"Consulting Term") beginning on the date of termination of the Employment Term,
the Executive shall render to Chris-Craft such consultation and advice as the
Board of Directors or the Chief Executive Officer of Chris-Craft may request,
subject to the Executive's reasonable convenience and other business activities;
provided, however, that the Executive shall not be required to devote more than
240 hours in any twelve-month period to such services, which shall be performed
at a time and place mutually convenient to both parties. For his consulting
services, the Executive shall receive, as a consulting fee, compensation at the
rate of $250,000 per annum, payable in equal monthly installments. The
consulting fee shall be adjusted upward, as of each January 1 following the
beginning of the Consulting Term to the end of the Consulting Term, in
proportion to any increase in the Consumer Price Index, as defined in Section
4.4, between the December levels of the two immediately preceding years. Each
such adjustment shall be made retroactively when the Consumer Price Index for
the month next preceding the date of such adjustment becomes available. In
addition, the Executive shall be entitled to participate in each insurance plan
or medical or health plan generally available to Chris-Craft senior executives
and to the reimbursement of expenses on the level made available to the
Executive immediately prior to the termination of the Employment Term. In the
event that the Executive shall be discharged by Chris-Craft during the
Consulting Term other than for cause (as defined in Section 9) or disability (as
described below in this Section 11), he shall nevertheless be entitled to
continue to receive his full consulting fee, and the above-mentioned welfare
plan coverage, for the remainder of the Consulting Term. If the Executive shall
die during the Consulting Term, his estate shal be entitled to receive the full
consulting fee payable hereunder until the earlier to occur of (a) the first
anniversary of the date of his death or (b) the end of the Consulting Term. If,
during the Consulting Term, the Executive shall be disabled from performing his
consulting services, and such disability shall continue for a period of six
consecutive months or for an aggregate of six months within any period of 12
consecutive months, or if such disability shall exist at the start of the
Consulting Term and shall be a continuation of a disability for which the
Employment Term shall have been terminated pursuant to Section 10.2, and the
Board, by written notice to the Executive (before the Executive shall recover
from such disability) shall terminate the Executive's consulting services, the
Executive shall have no further obligation to perform consulting services for
Chris-Craft and shall be entitled to receive compensation at the rate of
one-half of the consulting fee payable hereunder until the earlier to occur of
(a) the first anniversary of such termination or (b) the end of the Consulting
Term. In the event that the Executive voluntarily terminates the Consulting
Term, he shall, following such termination, forfeit his right hereunder to any
further consulting fees and to the above-mentioned welfare plan coverage, which
forfeiture shall constitute the full damages to which Chris-Craft shall be
entitled in such event.
12. Protection of Confidential Information; Non-Competition.
12.1 The Executive agrees that, in view of the fact that his
work for Chris-Craft will bring him into close contact with many confidential
affairs of Chris-Craft not readily available to the public, he will not at any
time (whether during the Employment Term, the Consulting Term, or thereafter)
disclose to any person, firm, corporation, partnership or other entity
whatsoever (except Chris-Craft or any of its subsidiaries), or any officer,
director, stockholder, partner, associate, employee, agent or representative of
any such firm, corporation or other entity, any confidential information or
trade secrets of Chris-Craft which may come into his possession during the
Employment Term or the Consulting Term (the "Confidential Materials"). The term
"Confidential Materials" does not include information which at the time of
disclosure or thereafter is generally available to or known by the public
otherwise than by reason of the Executive's disclosure thereof in violation of
this Agreement (ii) is, was or becomes available to the Executive on a
non-confidential basis from a source other than Chris-Craft, provided that the
Executive has no reason to believe that such source is or was bound by a
confidentiality agreement with Chris-Craft, (iii) has been made available, or is
made available, on an unrestricted basis to a third party by Chris-Craft, by an
individual authorized to do so, or (iv) is known by the Executive prior to its
disclosure to the Executive. The Executive may use and disclose Confidential
Materials to the extent necessary to assert any right or defend against any
claim arising under this Agreement or pertaining to Confidential Materials or
their use, to the extent necessary to comply with any applicable statute,
constitution, treaty, rule, regulation, ordinance or order, whether of the
United States, any state thereof, or any other jurisdiction applicable to the
Executive, or if the Executive receives a request to disclose all or any part of
the information contained in the Confidential Materials unde the terms of a
subpoena, order, civil investigative demand or similar process issued by a court
of competent jurisdiction or by a governmental body or agency, whether of the
United States or any state thereof, or any other jurisdiction applicable to the
Executive.
12.2 During the Noncompetition Period (as defined below in
this Section 12.2), the Executive will not, except on behalf of Chris-Craft or
any of its subsidiaries, directly or indirectly, whether as an officer,
director, stockholder, partner, associate, employee, agent or representative,
become or be interested in, or associated with, any other person, firm,
corporation, partnership or other entity whatsoever, engaged in a business
competitive with any of the businesses of Chris-Craft or any of its subsidiaries
in any of the markets in which Chris-Craft or any of its subsidiaries carries on
such business; provided, however, that the Executive may own as an investor
securities of any such corporation which securities are registered under Section
12(b) or 12(g) of the Exchange Act, so long as he is not part of any control
group of such corporation. "Noncompetition Period" shall mean (a) any period
during which the Executive renders services to Chris-Craft pursuant to Section
1.2 or 11 (the "Period of Service"), and (b) the one-year period following the
Period of Service (other than in the event of death), provided that this clause
(b) shall not apply in the event of a Qualifying Termination (whether occurring
before or after a Change in Control).
12.3 The Executive agrees that a violation of the covenants
set forth in Section 12.1 or 12.2, or any provision thereof, will cause
irreparable injury to Chris-Craft and that Chris-Craft shall be entitled, in
addition to any other rights and remedies it may have, at law or in equity, to
an injunction enjoining and restraining the Executive from doing or continuing
to do any such act and any other violation or threatened violation of said
Section 12.1 or 12.2.
12.4 If any provision of Section 12 as applied to any
circumstance shall be adjudged by a court to be invalid or unenforceable, the
same shall in no way affect any other provision of this Section 12, the
application of such provision in any other circumstances, or the validity or
enforceability of this Section 12. Chris-Craft and the Executive intend this
Section 12 to be enforced as written. However, if any provision, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, or otherwise, Chris-Craft and the Executive agree
that the court making such determination shall have the power to reduce the
duration and/or area of such provision, and/or to delete specific words or
phrases ("blue-penciling"), and in its reduced or blue-pencilled form such
provision shall then be enforceable and shall be enforced.
12.5 Chris-Craft and the Executive intend to, and do hereby,
confer jurisdiction to enforce the covenants contained in this Section 12 upon
the courts of any state of the United States and any other governmental
jurisdiction within the geographical scope of such covenants. If the courts of
any one or more of such states or jurisdictions shall hold such covenants wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of Chris-Craft and the Executive that such determination shall not bar
or in any way affect Chris-Craft's right to the relief provided above in the
courts of any other state or jurisdiction within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states or
jurisdictions, the above covenants as they relate to each state or jurisdiction
being, for this purpose, severable into diverse and independent covenants.
13. Notices.
All notices, requests, consents and other communications, required or
permitted to be given hereunder, shall be in writing and shall be deemed to have
been duly given (a) if delivered personally, when delivered; (b) if delivered by
overnight carrier, on the first business day following such delivery; (c) if
delivered by registered or certified mail, return receipt requested, on the
third business day after having been mailed. In any case, each such notice,
request, or consent or other communication shall be addressed as follows or to
such other address as either party shall designate by notice in writing to the
other in accordance herewith:
13.1 If to Chris-Craft:
Chris-Craft Industries, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Board of Directors
13.2 If to the Executive to him at his address set forth on the personnel
records of Chris-Craft.
14. General.
14.1 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
14.2 The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
14.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties. This Agreement does not apply to any stock options
granted to the Executive prior to the date on which the Option described in
Section 6.2 was granted.
14.4 This Agreement and the benefits hereunder are personal to
Chris-Craft and are not assignable or transferable, nor may the services to be
performed hereunder be assigned by Chris-Craft to any person, firm or
corporation; provided, however, that this Agreement and the benefits hereunder
may be assigned by Chris-Craft to any corporation acquiring all or substantially
all of the assets of Chris-Craft or to any corporation into which Chris-Craft
may be merged or consolidated, and this Agreement and the benefits hereunder
will automatically be deemed assigned to any such corporation (and references
herein to Chris-Craft will include any successor corporation), subject, however,
to the Executive's right to terminate the Employment Term in such event as
provided in Section 10.4. Chris-Craft may delegate any of its obligations
hereunder to any subsidiary of Chris-Craft, provided that such delegation shall
not relieve Chris-Craft of its obligations hereunder.
14.5 This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by either
party of the breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.
14.6 Whenever this Agreement provides for any payment to the
Executive's estate, such payment may be made instead to such beneficiary or
beneficiaries as the Executive may have designated by written notice to
Chris-Craft. The Executive shall have the right to revoke any such designation
and to redesignate a beneficiary or beneficiaries by written notice to
Chris-Craft to such effect.
14.7 In case of any dispute or disagreement arising out of, or
in connection with, this Agreement, until the final determination of such
dispute or disagreement Chris-Craft shall continue to pay to the Executive all
of the compensation provided in this Agreement, and the Executive shall be
entitled to continue to receive all of the other benefits provided herein. If,
following a Change in Control, any such dispute or disagreement shall result in
legal action between Chris-Craft and the Executive, the Executive shall be
entitled to recover from Chris-Craft any actual expenses for attorney's fees and
disbursements incurred by him in connection with the Executive's good faith
maintenance or defense of such action, on an after-tax basis. During the
pendency of any such action, Chris-Craft shall pay all actual attorney's fees
and expenses incurred by the Executive in connection therewith upon receipt of
an undertaking by the Executive to repay such amounts as shall be found in such
action as having been incurred in connection with the Executive's maintenance or
defense of such action other than in good faith.
14.8 Chris-Craft agrees that, if the Executive's employment
with Chris-Craft terminates during the Employment Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by Chris-Craft pursuant hereto. Further, the amount of
any payment or benefit provided for in this Agreement (other than as expressly
provided in Sections 10.2, 10.5.1(b) and 10.5.2(b)) shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to Chris-Craft, or otherwise.
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC.
--------------------------------
Name:
Title:
--------------------------------
JOHN C. SIEGEL
<PAGE>
Section Page
1. Employment Term 1
2. Duties and Authority 1
3. Location 2
4. Cash Compensation 2
4.1 Base Salary 2
4.2 Deferred Compensation 3
4.3 Bonus 4
4.4 Consumer Price Index 5
5. Expenses 5
6. Additional Benefits 5
7. [This section has been intentionally left blank.]
7
8. Change in Control 7
9. Termination of Agreement for Cause 8
10. Termination Other Than for Cause 9
10.1 Death 9
10.2 Disability 9
10.3 Average Annual Compensation 10
10.4 Termination by Executive 10
10.5 Qualifying Termination 11
11. Consulting Services 14
12. Protection of Confidential Information; Non-Competition 15
13. Notices 17
14. General 18
EMPLOYMENT AGREEMENT
AGREEMENT made as of September 28, 1999 (the "Effective Date"), between
CHRIS-CRAFT INDUSTRIES, INC., a Delaware corporation ("Chris-Craft"), and
WILLIAM D. SIEGEL (the "Executive").
The Executive currently serves as Senior Vice President of Chris-Craft.
Chris-Craft wishes to promote the Executive to the office of Executive Vice
President of Chris-Craft and to secure the continued services of the Executive
in that position for an additional extended period. In addition, because of the
position the Executive holds with Chris-Craft and the position that he will hold
during the term of his full-time employment under this Agreement, Chris-Craft
wishes to secure the further services of the Executive as a consultant to
Chris-Craft, and wishes to insure that the Executive will refrain from competing
with Chris-Craft, after the termination of his full time employment under
specified circumstances.
In consideration of the covenants and agreements herein contained, the
parties agree as follows:
1. Employment Term.
1.1 Chris-Craft shall employ the Executive, and the Executive
shall serve, as Executive Vice President of Chris-Craft during the Employment
Term (as defined in Section 1.2).
1.2 The term of the Executive's employment under Section 1.1
of this Agreement (the "Employment Term") shall commence on the Effective Date
and end on December 31, 2004, unless sooner terminated pursuant to the
provisions of Section 9 or Section 10.
2. Duties and Authority.
2.1 During the Employment Term, the Executive shall devote his
full business time and energies to the business and affairs of Chris-Craft and
shall not accept other employment or permit such personal business interests as
he may have to interfere with the performance of his duties hereunder. The
Executive agrees, during the Employment Term, to use his best efforts, skill and
abilities to promote Chris-Craft's interests; to be available to serve as a
director and officer of Chris-Craft and any of its domestic subsidiary
corporations if elected by the Board of Directors of Chris-Craft (the "Board")
or stockholders of Chris-Craft or any such subsidiary corporation; and to
perform such duties (consistent with his status set forth below in this Section
2) as may be assigned to him by the Chief Executive Officer of Chris-Craft (the
"Chief Executive Officer") or the Board.
2.2 Subject only to the direction and control of the Chief
Executive Officer and the Board (which direction and control shall be consistent
with the past practice of Chris-Craft), the Executive shall perform all services
and duties necessary or appropriate for the management of Chris-Craft's business
and that of its subsidiaries.
2.3 Throughout the Employment Term, the Executive shall be
continued in the office denominated that of Executive Vice President of
Chris-Craft and shall perform on behalf of Chris-Craft such functions of an
executive nature, and shall have such authority, duties and responsibilities of
an executive nature as shall be assigned to the Executive by the Chief Executive
Officer or the Board.
3. Location.
During the Employment Term, the Executive's services under
this Agreement shall be performed principally in the location in which the
Executive principally performs such services on the Effective Date, except that
the Executive may, at his election, perform services under this Agreement
principally in Los Angeles, California. The parties, however, acknowledge and
agree that the nature of the Executive's duties hereunder shall require
reasonable domestic and international travel from time to time.
4. Cash Compensation.
4.1 Base Salary. During the Employment Term, Chris-Craft shall
pay to the Executive, in monthly or more frequent installments in accordance
with Chris-Craft's regular payroll practices for senior executives, a base
salary at the rate per annum of $800,000, which shall be increased by the amount
of $50,000 on each of January 1, 2001 and the immediately following two
anniversaries of such date. As of January 1, 2004, the Executive's base salary
shall be adjusted upward, in proportion to any increase in the Consumer Price
Index, as defined in Section 4.4, between the December levels of the two
immediately preceding years ("COLA Adjustment"). Each such adjustment shall be
made retroactively when the Consumer Price Index for the December next preceding
the date of such adjustment becomes available. It is understood that Chris-Craft
may, at any time, in the discretion of its Board increase, but not decrease, the
Executive's base salary.
4.2 Deferred Compensation. During the Employment Term, Chris-Craft shall
credit to the Executive's Account (as defined in Section 4.2.1) the amount
specified in Section 4.2.2.
4.2.1 Chris-Craft shall maintain, on its books, a special account,
comprised of two sub-accounts, Subaccount A and Subaccount B, with respect to
the Executive (the "Account"), in accordance with the terms of this Agreement,
until the Executive shall have been paid all amounts required by Section 4.2.3
to be paid to the Executive with respect thereto. Prior to December 1 of each
year, Chris-Craft's General Counsel and Secretary shall notify the Executive of
the option to select the periods to which compensation payable pursuant to this
Section 4.2 will be deferred and, within fifteen (15) days following receipt of
such notice, the Executive shall notify Chris-Craft's Treasurer, if the
Executive wishes that the Deferred Compensation (as defined in clause (a) of the
first sentence of Section 4.2.2) be credited to Subaccount A, Subaccount B, or a
combination of both Subaccount A and Subaccount B (any such combination to be
specified in a manner that will not prevent Chris-Craft's Treasurer from
computing on a monthly basis the amounts to be credited to each subaccount in
accordance with Section 4.2.2). Absent such notice from the Executive, Deferred
Compensation for such year shall be credited to Subaccount B.
4.2.2 During each year of the Employment Term, Chris-Craft shall credit to
the appropriate Subaccount, as of the end of each month, (a) an amount equal to
one-twelfth of $250,000, subject to COLA Adjustment commencing as of January 1,
2001 ("Deferred Compensation"), and (b) interest on the Account balance as of
the end of the preceding month, computed at a rate to be adjusted as of the last
day of each calendar quarter to equal the yield, as of the last business day of
such quarter, as reported in The Wall Street Journal, on U.S. Treasury Notes
maturing in the month that is five years after the last month of such quarter
(the "Interest Rate"). Amounts credited to the Account, excluding interest,
shall be deemed compensation for the year credited, for purposes of determining
benefits under the Chris-Craft Industries, Inc. Salaried Employees' Pension
Plan, Chris-Craft/UTV Employees' Stock Purchase Plan, Chris-Craft Industries,
Inc. Profit-Sharing Plan and Chris-Craft Industries, Inc. Benefit Equalization
Plan. If no yield for such notes is so published as of the last day of a
particular quarter, there shall be substituted the average of the yields so
published for the months next preceding and following. If The Wall Street
Journal is not published on the last day of a particular quarter, there shall be
substituted the appropriate yield reported on the last previous day on which The
Wall Street Journal was published. Following the Employment Term, Chris-Craft
shall credit to the Account, as of the last day of each month, interest on the
Account Balance as of such date, computed at the Interest Rate.
4.2.3 On the January 15 first-occurring following the year in which
expiration or
termination of the Employment Term shall have occurred, Chris-Craft shall pay a
lump sum equal to the Subaccount A balance as of such January 15 (including
interest accrued in accordance with Section 4.2.2 at the Interest Rate used for
the last quarter of the previous year through such January 15), and Chris-Craft
will have no further obligation to make any payment to the Executive with
respect to Subaccount A. On such January 15, Chris-Craft also shall pay to the
Executive an amount equal to one-fifth of the Subaccount B balance as of such
January 15 (including interest accrued through such January 15) (the "First
Payment"), and the balance of such Subaccount shall be reduced by the amount of
such First Payment. On each succeeding January 15, until Chris-Craft shall have
made five payments with respect to Subaccount B (including the First Payment)
pursuant to this Section 4.2.3, Chris-Craft shall pay to the Executive a sum
equal to the amount of the First Payment, plus interest credited to Subaccount B
through the date of such payment, from the first day after the date of the
immediately preceding payment, and the balance shall be reduced by the amount of
such sum, such that the entire Amount of Subaccount B plus any interest thereon
shall have been paid to the Executive by the fourth anniversary of the First
Payment. In the event that for tax purposes Chris-Craft is required to treat any
portion of Subaccount B in a manner consistent with the notion that the
Executive should include any unpaid amount (determined without regard to this
sentence) in taxable income, Chris-Craft shall pay such amount to the Executive
at the time such portion is so treated.
4.3 Bonus. In addition to his base salary and the deferred
amounts referred to in Section 4.2.2 above, the Executive shall be entitled,
with respect to fiscal year 1999, to receive a bonus determined and payable in
accordance with the past practice of Chris-Craft and, for fiscal years
commencing with Chris-Craft's 2000 fiscal year, to participate in the
Chris-Craft Management Incentive Compensation Plan (the "Incentive Plan"), which
Incentive Plan shall be subject to the approval of Chris-Craft's shareholders at
the annual shareholders meeting to be held in 2000. The Incentive Plan shall set
forth the terms and conditions of awards to be made thereunder. Such terms and
conditions shall include, but not be limited to, the following: The Incentive
Plan shall be administered by the Compensation Committee of the Board of
Directors; shall be designed to meet the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"); shall provide for the
Compensation Committee to convene within the first quarter of each fiscal year
to establish annual performance goals that must be satisfied for minimum, target
and maximum bonuses; and shall provide for annual awards to range from .3 to 2.0
times annual base salary.
4.4 Consumer Price Index. The words "Consumer Price Index," as
used in this Agreement, shall mean the Consumer Price Index for All Urban
Consumers, U.S. City Average, All Items (1982-84=100), as reported by the Bureau
of Labor Statistics of the U.S. Department of Labor. In the event that this
Consumer Price Index shall be superseded or shall be published by a different
agency, then the superseding index shall be substituted for this Consumer Price
Index in such a manner as to implement the intent of this Agreement that the
Executive's base salary shall be adjusted, beginning as of January 1, 2004, and
Deferred Compensation shall be adjusted annually, beginning as of January 1,
2001, so that the purchasing power thereof shall be maintained at a level at
least equivalent to the purchasing power thereof at the immediately preceding
January 1.
5. Expenses.
In addition to the compensation provided in Section 4 and in
Section 11, Chris-Craft will pay or reimburse the Executive for all reasonable
expenses actually incurred or paid by him during the Employment Term or the
Consulting Term (as defined in Section 11) in the performance of his services
hereunder upon presentation of expense statements, vouchers, or such other
supporting information as Chris-Craft may customarily require of its senior
executives. Such expense reimbursement policy shall be no less favorable to the
Executive than the policy in effect as of the Effective Date.
6. Additional Benefits.
6.1 During the Employment Term:
(a) The Executive will be entitled to reasonable annual vacation periods,
with full pay and allowances (in accordance with the past practice and policy of
Chris-Craft with respect to its senior officers with the Executive's position
and title).
(b) The Executive will also be eligible for sick leave in accordance with
Chris-Craft's customary practice for senior executives.
(c) The Executive will be entitled to participate in any insurance,
pension, profit-sharing, stock option, stock purchase or other benefit plan and
fringe benefit arrangements of Chris-Craft now existing or hereafter adopted for
the benefit of the employees generally or of the executives of Chris-Craft.
(d) Chris-Craft shall match the Executive's contributions (including any
contribution by any trust of which the Executive is the grantor) to recognized
charities or educational institutions, during each fiscal year of the Employment
Term and the Consulting Term, in an amount equal to the sum of (i) $50,000, such
sum to be prorated with respect to any partial fiscal year occurring within the
Employment Term. Matching contributions made by Chris-Craft pursuant hereto
shall be in addition to any contributions made to match Executive's
contributions under any other charitable gift matching program generally
applicable with respect to contributions made by employees or directors of
Chris-Craft or any of its subsidiaries.
(e) The Executive shall be entitled to such additional compensation and
benefits (including but not limited to additional grants of options and other
equity-based awards) as may be granted to him from time to time by the Board or
the Compensation Committee thereof. In this regard, it is the intention of the
Compensation Committee to consider the adoption of an equity plan, to submit
such plan to the shareholders of Chris-Craft for approval at the annual meeting
of shareholders to be held in 2000 and, if such plan is so adopted and approved,
to make an additional grant or grants to the Executive pursuant to such plan.
6.2 Pursuant to the action of the Compensation Committee of
the Board, and subject to the execution of this Agreement by the Executive,
Chris-Craft hereby grants to the Executive an option ("Option") to purchase
250,000 shares of the common stock of Chris-Craft ("Shares"), effective as of
the Effective Date, under the Chris-Craft Industries, Inc. 1999 Management
Incentive Plan, as amended (the "1999 Plan"), at a price per share equal to the
fair market value (as defined in the plan) of the Shares on the Effective Date.
As long as the Executive remains employed by or acts as a consultant to
Chris-Craft (except as may otherwise be provided in Sections 10.1, 10.2, 10.5.1
and 10.5.2), (a) 50% of the Shares subject to the Option shall first become
exercisable on the fourth anniversary of the Effective Date and the remaining
Shares subject to the Option shall first become exercisable on the fifth
anniversary of the Effective Date, and (b) once exercisable, the Option shall
remain exercisable until the 10th anniversary of the Effective Date or, if
earlier, until the expiration of the period set forth in the 1999 Plan.
6.3 No payment or benefit made or provided under this
Agreement shall be deemed to constitute payment to the Executive, his legal
representatives or beneficiaries in lieu of, or in reduction of, any benefit or
payment under an insurance, pension, profit-sharing or other benefit plan, and
no payment under any such plan shall reduce any payment or benefit due under
this Agreement.
7. [This section has been intentionally left blank.]
8. Change in Control.
8.1 For the purposes of this Agreement, a "Change in Control" shall mean:
8.1.1 Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the
stockholders of Chris-Craft, shall be approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) or other actual or threatened
solicitation of proxies or consents by or on behalf of any individual, entity or
group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person"), other than the Board; or
8.1.2 Approval by the stockholders of Chris-Craft of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation: (a) more than 50% of the combined voting power of the
then outstanding voting securities ("Outstanding Voting Securities") of the
corporation resulting from such reorganization, merger, or consolidation, which
may be Chris-Craft (the "Resulting Corporation"), entitled to vote generally in
the election of directors (the "Resulting Corporation Voting Securities") shall
then be owned beneficially, directly or indirectly, by all or substantially all
of the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger, or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger or
consolidation; and (b) at least 50% of the members of the board of directors of
the Resulting Corporation shall have been members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
8.1.3 Approval by the stockholders of Chris-Craft of (a) a complete
liquidation or dissolution of Chris-Craft or (b) the sale or other disposition
of all or substantially all of the assets of Chris-Craft, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 50% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors, shall be owned
beneficially, directly or indirectly, by all or substantially all of the Persons
who were the beneficial owners of the Outstanding Voting Securities immediately
prior to such sale or other disposition, in substantially the same proportion as
their respective ownerships of Outstanding Voting Securities immediately prior
to such sale or other disposition; and (ii) at least 50% of the members of the
board of directors of Buyer shall have been members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of Chris-Craft.
9. Termination of Agreement for Cause.
Chris-Craft may terminate this Agreement, and all of
Chris-Craft's obligations hereunder except its obligation to pay to the
Executive the Account Balance pursuant to Section 4.2 and salary accrued to the
date of termination, "for cause" upon 30 days written notice. The Executive
shall also be entitled to normal post-termination compensation and benefits
under Chris-Craft's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior to the Date of
Termination. As used in this Agreement, the term "for cause" shall mean and be
limited to the following events: (a) the Executive's conviction (which
conviction, through lapse of time or otherwise, is not subject to appeal) in a
court of law of a felony involving moral turpitude; (b) the Executive's material
breach of any of the covenants set forth in Section 12; (c) prior to a Change in
Control, the Executive's dishonesty in the course of fulfilling his duties
hereunder; (d) the Executive's continuing, repeated, wilful failure or refusal
to perform his duties in accordance with the terms of Section 2; provided,
however, that this Agreement may not be terminated for cause under this clause
(d), unless the Executive shall have first received written notice from the
Chief Executive Officer or the Board advising him of the specific acts or
omissions alleged to constitute a failure or refusal to perform his duties, and
such failure or refusal to perform his duties continues after the Executive
shall have had a reasonable opportunity to correct the acts or omissions cited
in such notice; or (e) prior to a Change in Control, at least two-thirds ( ) of
the nonemployee members of the Board shall have determined that the Executive
has intentionally committed an act that could have a material adverse effect on
the reputation or business of Chris-Craft.
10. Termination Other Than for Cause.
10.1 Death. If the Executive shall die during the Employment
Term, this Agreement, and all of Chris-Craft's obligations hereunder, shall
terminate, except (a) with regard to payments from the Account pursuant to
Section 4.2.3 (which Account shall include Deferred Compensation payable through
the last day of the month in which his death occurred), (b) that Chris-Craft
shall pay to the Executive's estate, (i) within 30 days after his death, the
base salary, and pro rata target bonus with respect to the then current fiscal
year, that would have been payable to the Executive under Section 4 had the
Employment Term ended on the last day of the month in which his death occurred,
and (ii) an amount (payable at the same times as salary is paid to other senior
executives of Chris-Craft) equal to the Executive's "Average Annual
Compensation" (as defined in Section 10.3) at the date of his death, such amount
to be payable for the 12-month period beginning on the first day of the month
following the month in which the Executive's death shall occur, and (c) all
outstanding stock options, including the Option granted pursuant to Section 6.2,
held by the Executive shall become fully exercisable and shall remain
exercisable pursuant to the terms of the plan under which it was granted. The
Executive's estate shall also be entitled to normal post-termination
compensation and benefits under Chris-Craft's retirement, insurance and other
compensation or benefit plans, programs and arrangements as in effect
immediately prior to the Date of Termination.
10.2 Disability. If, during the Employment Term, the Executive
shall become disabled (as defined in Chris-Craft's then existing disability
policy) so that he shall be unable substantially to perform his services
hereunder, (a) for a period of six consecutive months or (b) for an aggregate of
six months within any period of 12 consecutive months, then the Chief Executive
Officer or the Board may, at any time during the continuance of such disability,
terminate the Employment Term on 30 days' prior written notice to the Executive.
After such termination, the Executive shall have no further obligation to
perform services for Chris-Craft pursuant to Section 2 but shall be entitled to
receive from Chris-Craft, in lieu of the amounts which would otherwise be
payable under Section 4, (i) within 30 days after such termination, the base
salary, and pro rata target bonus with respect to the then current fiscal year,
that would have been payable to the Executive under Section 4, had the
Employment Term ended on the last day of the month in which the Employment Term
was terminated pursuant to this Section 10.2, (ii) an amount (payable at the
same times as salary is paid to the other senior executives of Chris-Craft) at
an annual rate equal to one-half of the Executive's "Average Annual
Compensation" (as defined in Section 10.3) at the date of the termination of the
Employment Term, such amount to be payable for the 12-month period beginning on
the first day of the month following the month in which the Employment Term
shall have been terminated pursuant to this Section 10.2, and (iii) pursuant to
Section 4.2.3, all Deferred Compensation amounts previously deferred and
credited to the Account. The Executive shall also be entitled to normal
post-termination compensation and benefits under Chris-Craft's retirement,
insurance and other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination. After such termination,
all outstanding stock options, including the Optio granted pursuant to Section
6.2, held by the Executive shall become fully exercisable and shall remain
exercisable pursuant to the terms of the plan under which it was granted. The
Executive shall have no obligation to accept any employment offered to him by
others in order to minimize, or to be set off against, the amounts to which he
is entitled pursuant to this Section 10.2. Chris-Craft shall not interpose any
defense against payment of such amounts based on refusal of the Executive to
seek or accept other employment. However, if the Executive shall obtain other
employment, then amounts due to him pursuant to clause (ii) of this Section 10.2
shall be reduced, pro tanto, by amounts actually received by him for services
rendered in such other employment during the time amounts are payable pursuant
to said clause (ii).
10.3 Average Annual Compensation. As used in Sections 10.1 and
10.2, the term "Average Annual Compensation" shall mean the mean annual
compensation received or receivable by the Executive pursuant to Sections 4.1,
4.2 and 4.3 with respect to each of the three full fiscal years of Chris-Craft,
or such shorter period of the Executive's employment with Chris-Craft pursuant
hereto, immediately preceding the date of the Executive's death (in the case of
Section 10.1) or the date of the termination of the Employment Term (in the case
of Section 10.2).
10.4 Termination by Executive.
10.4.1 The Executive, on 30 days' prior written notice, may (but shall not
be obligated to) terminate the Employment Term effective as of any date
occurring during (1) the 90-day period commencing on the Designated Date (as
defined below in this Section 10.4.1) for any reason; or (2) the Employment Term
if, without the Executive's written consent, in the case of this clause (2)
only, (a) the Executive shall not be continued as Executive Vice President of
Chris-Craft or the Executive shall be removed from such office; or (b)
Chris-Craft shall fail to cure a material breach of this Agreement (including
but not limited to a breach of Section 2 hereof) within 10 days after written
notice; or (c) following a Change in Control, the Executive's authority, duties
and responsibilities are materially reduced from those in effect immediately
prior to the Change in Control; or (d) Chris-Craft shall materially reduce any
benefit to which the Executive is entitled pursuant to Section 6.1 and, if the
termination of the Employment Term shall occur prior to a Change in Control,
shall not have similarly reduced such benefit with respect to Chris-Craft senior
executives generally; or (e) the Executive shall be required to perform his
principal services under this Agreement at a place other than that set forth in
Section 3. Such right to terminate the Employment Term shall be the Executive's
exclusive remedy in the event of the occurrence of any of the events described
in this Section 10.4.1. For purposes of clause (c) of the preceding sentence,
the Executive's authority, duties and responsibilities shall be deemed to have
been materially reduced if there shall occur any material reduction in the
scope, level or nature of the Executive's authority, duties or responsibilities
from those in effect immediately prior to the Change in Control, or if there
shall occur any demotion, any phasing out or assignment to others, of the duties
of the Executive as in effect immediately prior to the Change in Control. For
purposes of this Secion 10.4, with respect to any of the events described in
clauses (a) through (e) of the first sentence of this Section 10.4.1 alleged to
have occurred on or after a Change in Control, any determination made by the
Executive in good faith that any such event has occurred shall be conclusive.
For purposes of this Section 10.4, "Designated Date" shall mean the 12-month
anniversary of the Change in Control; provided that the number 12 shall be
decreased (but not below 6) by the number of full months between (x) the
execution of the agreement that contemplates such Change in Control transaction
and (y) the consummation of such transaction.
10.5 Qualifying Termination. If the Executive shall elect to
terminate the Employment Term upon the occurrence of any event described in
Section 10.4.1, or if Chris-Craft shall terminate this Agreement other than for
cause or disability pursuant to Sections 9 and 10 hereof (each, a "Qualifying
Termination"), then the Executive shall have no further obligation to perform
services for Chris-Craft pursuant to Section 2, but he shall be entitled to
receive from Chris-Craft the amounts and other benefits set forth in Sections
10.5.1 or 10.5.2 below.
10.5.1 If the Qualifying Termination shall occur prior to a Change in
Control:
(a) Chris-Craft shall pay the Executive, within 30 days after the date of
termination of the Employment Term, in lieu of the amounts that would otherwise
be payable hereunder, a lump sum (or, if so elected by the Executive, on a
deferred basis) in cash of an amount equal to the sum of (i) the base salary,
and pro rata target bonus with respect to the then current fiscal year, that
would have been payable to the Executive under Section 4, had the Employment
Term ended on the last day of the month in which the Employment Term was
terminated; and (ii) the base salary that would have been payable to the
Executive pursuant to Section 4.1 (at the rate in effect on the date of the
termination of the Employment Term (including any COLA Adjustment theretofore
required to have been made)), for the period beginning on the date of such
termination and running through the last day of the calendar month in which
occurs the first anniversary of the date of such termination (the "Continuation
Period"), multiplied by 1.3. The Executive shall be entitled to receive, in
accordance with Section 4.2.3, all Deferred Compensation amounts previously
deferred and credited to the Account. The Executive shall also be entitled to
normal post-termination compensation and benefits under Chris-Craft's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination;
(b) Until the last day of the Continuation Period, Chris-Craft shall
maintain, at
its expense, all insurance coverages and medical and health benefits in respect
of the Executive that shall have been in effect with respect to him prior to the
occurrence of the event entitling the Executive to terminate this Agreement;
provided, however, that this coverage shall be reduced to the extent the
Executive receives equivalent coverage and benefits during the Continuation
Period under the plans, programs and/or arrangements of a subsequent employer
without increased cost to the Executive (such coverage and benefits to be
determined on a coverage-by-coverage or benefit-by-benefit basis); and
(c) With respect to the Option granted pursuant to Section 6.2, (i) if the
date of termination of the Employment Term shall occur following the third, and
prior to the fourth, anniversary of the Effective Date, 30% of the Shares
subject to the Option shall become exercisable on the date of such termination,
(ii) to the extent then exercisable, the Option shall remain exercisable for 90
days following the date of such termination, and (iii) to the extent not then
exercisable, the Option shall terminate.
10.5.2 If the Qualifying Termination shall occur on or after a Change in
Control:
(a) Chris-Craft shall pay the Executive, within 30 days after the date of
termination of the Employment Term, in lieu of the amounts that would otherwise
be payable hereunder, a lump sum (or, if so elected by the Executive, on a
deferred basis) in cash of an amount equal to the sum of (i) the base salary,
and pro rata target bonus with respect to the then current fiscal year, that
would have been payable to the Executive under Section 4, had the Employment
Term ended on the last day of the month in which the Employment Term was
terminated; (ii) the aggregate of (A) the base salary that would have been
payable to the Executive pursuant to Section 4.1 (at the rate in effect on the
date of the termination of the Employment Term (including any COLA Adjustment
theretofore required to have been made)) and (B) an amount equal to the maximum
performance bonus payable under Section 4.3 to the Executive pursuant to the
Incentive Plan or any successor thereto with respect to the fiscal year in which
occurs the date of such termination (using the base salary described in clause
(i)(A) of this Section 10.5.2(a), such aggregate, multiplied by three; and (iii)
all consulting fees that would have been payable pursuant to Section 11 hereof
during the Consulting Term (without regard to any adjustment thereof). The
Executive shall be entitled to receive, in accordance with Section 4.2.3, all
Deferred Compensation amounts previously deferred and credited to the Account.
The Executive shall also be entitled to normal post-termination compensation and
benefits under Chris-Craft's retirement, insurance and other compensation or
benefit plans, programs and arrangements as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, immediately prior to
the Change in Control;
(b) Chris-Craft shall maintain, at its expense, all insurance coverages,
medical and health benefits in respect of the Executive that shall have been in
effect with respect to him prior to the occurrence of the event entitling the
Executive to terminate this Agreement (or, if more favorable to the Executive,
as in effect immediately prior to the Change in Control), for the period
beginning on the date of such termination and ending on the third anniversary of
the date of such termination; provided, however, this coverage shall be reduced
to the extent the Executive receives equivalent coverage and benefits during
such period under the plans, programs and/or arrangements of a subsequent
employer without increased cost to the Executive (such coverage and benefits to
be determined on a coverage-by-coverage or benefit-by-benefit basis);
(c) The Option granted pursuant to Section 6.2 shall become fully
exercisable, shall remain exercisable until the 10th anniversary of the
Effective Date and shall become transferable; and
(d) The Executive's account, if any, under the Executive Deferred Income
Plan shall become fully vested (to the extent not previously vested).
11. Consulting Services.
If the Employment Period shall terminate on December 31, 2004
or, if earlier, on account of disability, then during the five-year period (the
"Consulting Term") beginning on the date of termination of the Employment Term,
the Executive shall render to Chris-Craft such consultation and advice as the
Board of Directors or the Chief Executive Officer of Chris-Craft may request,
subject to the Executive's reasonable convenience and other business activities;
provided, however, that the Executive shall not be required to devote more than
240 hours in any twelve-month period to such services, which shall be performed
at a time and place mutually convenient to both parties. For his consulting
services, the Executive shall receive, as a consulting fee, compensation at the
rate of $250,000 per annum, payable in equal monthly installments. The
consulting fee shall be adjusted upward, as of each January 1 following the
beginning of the Consulting Term to the end of the Consulting Term, in
proportion to any increase in the Consumer Price Index, as defined in Section
4.4, between the December levels of the two immediately preceding years. Each
such adjustment shall be made retroactively when the Consumer Price Index for
the month next preceding the date of such adjustment becomes available. In
addition, the Executive shall be entitled to participate in each insurance plan
or medical or health plan generally available to Chris-Craft senior executives
and to the reimbursement of expenses on the level made available to the
Executive immediately prior to the termination of the Employment Term. In the
event that the Executive shall be discharged by Chris-Craft during the
Consulting Term other than for cause (as defined in Section 9) or disability (as
described below in this Section 11), he shall nevertheless be entitled to
continue to receive his full consulting fee, and the above-mentioned welfare
plan coverage, for the remainder of the Consulting Term. If the Executive shall
die during the Consulting Term, his estate shal be entitled to receive the full
consulting fee payable hereunder until the earlier to occur of (a) the first
anniversary of the date of his death or (b) the end of the Consulting Term. If,
during the Consulting Term, the Executive shall be disabled from performing his
consulting services, and such disability shall continue for a period of six
consecutive months or for an aggregate of six months within any period of 12
consecutive months, or if such disability shall exist at the start of the
Consulting Term and shall be a continuation of a disability for which the
Employment Term shall have been terminated pursuant to Section 10.2, and the
Board, by written notice to the Executive (before the Executive shall recover
from such disability) shall terminate the Executive's consulting services, the
Executive shall have no further obligation to perform consulting services for
Chris-Craft and shall be entitled to receive compensation at the rate of
one-half of the consulting fee payable hereunder until the earlier to occur of
(a) the first anniversary of such termination or (b) the end of the Consulting
Term. In the event that the Executive voluntarily terminates the Consulting
Term, he shall, following such termination, forfeit his right hereunder to any
further consulting fees and to the above-mentioned welfare plan coverage, which
forfeiture shall constitute the full damages to which Chris-Craft shall be
entitled in such event.
12. Protection of Confidential Information; Non-Competition.
12.1 The Executive agrees that, in view of the fact that his
work for Chris-Craft will bring him into close contact with many confidential
affairs of Chris-Craft not readily available to the public, he will not at any
time (whether during the Employment Term, the Consulting Term, or thereafter)
disclose to any person, firm, corporation, partnership or other entity
whatsoever (except Chris-Craft or any of its subsidiaries), or any officer,
director, stockholder, partner, associate, employee, agent or representative of
any such firm, corporation or other entity, any confidential information or
trade secrets of Chris-Craft which may come into his possession during the
Employment Term or the Consulting Term (the "Confidential Materials"). The term
"Confidential Materials" does not include information which at the time of
disclosure or thereafter is generally available to or known by the public
otherwise than by reason of the Executive's disclosure thereof in violation of
this Agreement (ii) is, was or becomes available to the Executive on a
non-confidential basis from a source other than Chris-Craft, provided that the
Executive has no reason to believe that such source is or was bound by a
confidentiality agreement with Chris-Craft, (iii) has been made available, or is
made available, on an unrestricted basis to a third party by Chris-Craft, by an
individual authorized to do so, or (iv) is known by the Executive prior to its
disclosure to the Executive. The Executive may use and disclose Confidential
Materials to the extent necessary to assert any right or defend against any
claim arising under this Agreement or pertaining to Confidential Materials or
their use, to the extent necessary to comply with any applicable statute,
constitution, treaty, rule, regulation, ordinance or order, whether of the
United States, any state thereof, or any other jurisdiction applicable to the
Executive, or if the Executive receives a request to disclose all or any part of
the information contained in the Confidential Materials unde the terms of a
subpoena, order, civil investigative demand or similar process issued by a court
of competent jurisdiction or by a governmental body or agency, whether of the
United States or any state thereof, or any other jurisdiction applicable to the
Executive.
12.2 During the Noncompetition Period (as defined below in
this Section 12.2), the Executive will not, except on behalf of Chris-Craft or
any of its subsidiaries, directly or indirectly, whether as an officer,
director, stockholder, partner, associate, employee, agent or representative,
become or be interested in, or associated with, any other person, firm,
corporation, partnership or other entity whatsoever, engaged in a business
competitive with any of the businesses of Chris-Craft or any of its subsidiaries
in any of the markets in which Chris-Craft or any of its subsidiaries carries on
such business; provided, however, that the Executive may own as an investor
securities of any such corporation which securities are registered under Section
12(b) or 12(g) of the Exchange Act, so long as he is not part of any control
group of such corporation. "Noncompetition Period" shall mean (a) any period
during which the Executive renders services to Chris-Craft pursuant to Section
1.2 or 11 (the "Period of Service"), and (b) the one-year period following the
Period of Service (other than in the event of death), provided that this clause
(b) shall not apply in the event of a Qualifying Termination (whether occurring
before or after a Change in Control).
12.3 The Executive agrees that a violation of the covenants
set forth in Section 12.1 or 12.2, or any provision thereof, will cause
irreparable injury to Chris-Craft and that Chris-Craft shall be entitled, in
addition to any other rights and remedies it may have, at law or in equity, to
an injunction enjoining and restraining the Executive from doing or continuing
to do any such act and any other violation or threatened violation of said
Section 12.1 or 12.2.
12.4 If any provision of Section 12 as applied to any
circumstance shall be adjudged by a court to be invalid or unenforceable, the
same shall in no way affect any other provision of this Section 12, the
application of such provision in any other circumstances, or the validity or
enforceability of this Section 12. Chris-Craft and the Executive intend this
Section 12 to be enforced as written. However, if any provision, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, or otherwise, Chris-Craft and the Executive agree
that the court making such determination shall have the power to reduce the
duration and/or area of such provision, and/or to delete specific words or
phrases ("blue-penciling"), and in its reduced or blue-pencilled form such
provision shall then be enforceable and shall be enforced.
12.5 Chris-Craft and the Executive intend to, and do hereby,
confer jurisdiction to enforce the covenants contained in this Section 12 upon
the courts of any state of the United States and any other governmental
jurisdiction within the geographical scope of such covenants. If the courts of
any one or more of such states or jurisdictions shall hold such covenants wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of Chris-Craft and the Executive that such determination shall not bar
or in any way affect Chris-Craft's right to the relief provided above in the
courts of any other state or jurisdiction within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states or
jurisdictions, the above covenants as they relate to each state or jurisdiction
being, for this purpose, severable into diverse and independent covenants.
13. Notices.
All notices, requests, consents and other communications, required or
permitted to be given hereunder, shall be in writing and shall be deemed to have
been duly given (a) if delivered personally, when delivered; (b) if delivered by
overnight carrier, on the first business day following such delivery; (c) if
delivered by registered or certified mail, return receipt requested, on the
third business day after having been mailed. In any case, each such notice,
request, or consent or other communication shall be addressed as follows or to
such other address as either party shall designate by notice in writing to the
other in accordance herewith:
13.1 If to Chris-Craft:
Chris-Craft Industries, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Board of Directors
13.2 If to the Executive to him at his address set forth on the personnel
records of Chris-Craft.
14. General.
14.1 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
14.2 The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
14.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties. This Agreement does not apply to any stock options
granted to the Executive prior to the date on which the Option described in
Section 6.2 was granted.
14.4 This Agreement and the benefits hereunder are personal to
Chris-Craft and are not assignable or transferable, nor may the services to be
performed hereunder be assigned by Chris-Craft to any person, firm or
corporation; provided, however, that this Agreement and the benefits hereunder
may be assigned by Chris-Craft to any corporation acquiring all or substantially
all of the assets of Chris-Craft or to any corporation into which Chris-Craft
may be merged or consolidated, and this Agreement and the benefits hereunder
will automatically be deemed assigned to any such corporation (and references
herein to Chris-Craft will include any successor corporation), subject, however,
to the Executive's right to terminate the Employment Term in such event as
provided in Section 10.4. Chris-Craft may delegate any of its obligations
hereunder to any subsidiary of Chris-Craft, provided that such delegation shall
not relieve Chris-Craft of its obligations hereunder.
14.5 This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by either
party of the breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.
14.6 Whenever this Agreement provides for any payment to the
Executive's estate, such payment may be made instead to such beneficiary or
beneficiaries as the Executive may have designated by written notice to
Chris-Craft. The Executive shall have the right to revoke any such designation
and to redesignate a beneficiary or beneficiaries by written notice to
Chris-Craft to such effect.
14.7 In case of any dispute or disagreement arising out of, or
in connection with, this Agreement, until the final determination of such
dispute or disagreement Chris-Craft shall continue to pay to the Executive all
of the compensation provided in this Agreement, and the Executive shall be
entitled to continue to receive all of the other benefits provided herein. If,
following a Change in Control, any such dispute or disagreement shall result in
legal action between Chris-Craft and the Executive, the Executive shall be
entitled to recover from Chris-Craft any actual expenses for attorney's fees and
disbursements incurred by him in connection with the Executive's good faith
maintenance or defense of such action, on an after-tax basis. During the
pendency of any such action, Chris-Craft shall pay all actual attorney's fees
and expenses incurred by the Executive in connection therewith upon receipt of
an undertaking by the Executive to repay such amounts as shall be found in such
action as having been incurred in connection with the Executive's maintenance or
defense of such action other than in good faith.
14.8 Chris-Craft agrees that, if the Executive's employment
with Chris-Craft terminates during the Employment Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by Chris-Craft pursuant hereto. Further, the amount of
any payment or benefit provided for in this Agreement (other than as expressly
provided in Sections 10.2, 10.5.1(b) and 10.5.2(b)) shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to Chris-Craft, or otherwise.
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC.
--------------------------------
Name:
Title:
--------------------------------
WILLIAM D. SIEGEL
<PAGE>
Section Page
1. Employment Term 1
2. Duties and Authority 1
3. Location 2
4. Cash Compensation 2
4.1 Base Salary 2
4.2 Deferred Compensation 3
4.3 Bonus 4
4.4 Consumer Price Index 5
5. Expenses 5
6. Additional Benefits 5
7. [This section has been intentionally left blank.]
7
8. Change in Control 7
9. Termination of Agreement for Cause 8
10. Termination Other Than for Cause 9
10.1 Death 9
10.2 Disability 9
10.3 Average Annual Compensation 10
10.4 Termination by Executive 11
10.5 Qualifying Termination 11
11. Consulting Services 14
12. Protection of Confidential Information; Non-Competition 15
13. Notices 17
14. General 18
EMPLOYMENT AGREEMENT
AGREEMENT made as of September 28, 1999 (the "Effective Date"), between
CHRIS-CRAFT INDUSTRIES, INC., a Delaware corporation ("Chris-Craft"), and JOELEN
K. MERKEL (the "Executive").
The Executive currently serves as Vice President and Treasurer of
Chris-Craft. Chris-Craft wishes to promote the Executive to the position of
Senior Vice President and to secure the continued services of the Executive in
that position and as Treasurer of Chris-Craft for an additional extended period.
In addition, because of the position the Executive holds with Chris-Craft and
the position that she will hold during the term of her full-time employment
under this Agreement, Chris-Craft wishes to secure the further services of the
Executive as a consultant to Chris-Craft, and wishes to insure that the
Executive will refrain from competing with Chris-Craft, after the termination of
her full time employment under specified circumstances.
In consideration of the covenants and agreements herein contained, the
parties agree as follows:
1. Employment Term.
1.1 Chris-Craft shall employ the Executive, and the Executive
shall serve, as Senior Vice President and Treasurer of Chris-Craft during the
Employment Term (as defined in Section 1.2).
1.2 The term of the Executive's employment under Section 1.1
of this Agreement (the "Employment Term") shall commence on the Effective Date
and end on December 31, 2004, unless sooner terminated pursuant to the
provisions of Section 9 or Section 10.
2. Duties and Authority.
2.1 During the Employment Term, the Executive shall devote her
full business time and energies to the business and affairs of Chris-Craft and
shall not accept other employment or permit such personal business interests as
she may have to interfere with the performance of her duties hereunder. The
Executive agrees, during the Employment Term, to use her best efforts, skill and
abilities to promote Chris-Craft's interests; to be available to serve as a
director and officer of Chris-Craft and any of its domestic subsidiary
corporations if elected by the Board of Directors of Chris-Craft (the "Board")
or stockholders of Chris-Craft or any such subsidiary corporation; and to
perform such duties (consistent with her status set forth below in this Section
2) as may be assigned to her by the Chief Executive Officer of Chris-Craft (the
"Chief Executive Officer") or the Board.
2.2 Subject only to the direction and control of the Chief
Executive Officer and the Board (which direction and control shall be consistent
with the past practice of Chris-Craft), the Executive shall perform all services
and duties necessary or appropriate for the management of Chris-Craft's business
and that of its subsidiaries.
2.3 Throughout the Employment Term, the Executive shall be
continued in the offices denominated Senior Vice President and Treasurer of
Chris-Craft and shall perform on behalf of Chris-Craft such functions of an
executive nature, and shall have such authority, duties and responsibilities of
an executive nature as shall be assigned to the Executive by the Chief Executive
Officer or the Board.
3. Location.
During the Employment Term, the Executive's services under
this Agreement shall be performed principally in the location in which the
Executive principally performs such services on the Effective Date. The parties,
however, acknowledge and agree that the nature of the Executive's duties
hereunder shall require reasonable domestic and international travel from time
to time.
4. Cash Compensation.
4.1 Base Salary. During the Employment Term, Chris-Craft shall
pay to the Executive, in monthly or more frequent installments in accordance
with Chris-Craft's regular payroll practices for senior executives, a base
salary at the rate per annum of $550,000, which shall be increased by the amount
of $25,000 on each of January 1, 2001 and the immediately following anniversary
of such date. As of January 1, 2003 and as of each successive January 1 to the
end of the Employment Term, the Executive's base salary shall be adjusted
upward, in proportion to any increase in the Consumer Price Index, as defined in
Section 4.4, between the December levels of the two immediately preceding years
("COLA Adjustment"). Each such adjustment shall be made retroactively when the
Consumer Price Index for the December next preceding the date of such adjustment
becomes available. It is understood that Chris-Craft may, at any time, in the
discretion of its Board increase, but not decrease, the Executive's base salary.
4.2 Deferred Compensation. During the Employment Term, Chris-Craft shall
credit to the Executive's Account (as defined in Section 4.2.1) the amount
specified in Section 4.2.2.
4.2.1 Chris-Craft shall maintain, on its books, a special account,
comprised of two sub-accounts, Subaccount A and Subaccount B, with respect to
the Executive (the "Account"), in accordance with the terms of this Agreement,
until the Executive shall have been paid all amounts required by Section 4.2.3
to be paid to the Executive with respect thereto. Prior to December 1 of each
year, Chris-Craft's General Counsel and Secretary shall notify the Executive of
the option to select the periods to which compensation payable pursuant to this
Section 4.2 will be deferred and, within fifteen (15) days following receipt of
such notice, the Executive shall notify Chris-Craft's Treasurer, if the
Executive wishes that the Deferred Compensation (as defined in clause (a) of the
first sentence of Section 4.2.2) be credited to Subaccount A, Subaccount B, or a
combination of both Subaccount A and Subaccount B (any such combination to be
specified in a manner that will not prevent Chris-Craft's Treasurer from
computing on a monthly basis the amounts to be credited to each subaccount in
accordance with Section 4.2.2). Absent such notice from the Executive, Deferred
Compensation for such year shall be credited to Subaccount B.
4.2.2 During each year of the Employment Term, Chris-Craft shall credit to
the appropriate Subaccount, as of the end of each month, (a) an amount equal to
one-twelfth of $100,000, subject to COLA Adjustment commencing as of January 1,
2001 ("Deferred Compensation"), and (b) interest on the Account balance as of
the end of the preceding month, computed at a rate to be adjusted as of the last
day of each calendar quarter to equal the yield, as of the last business day of
such quarter, as reported in The Wall Street Journal, on U.S. Treasury Notes
maturing in the month that is five years after the last month of such quarter
(the "Interest Rate"). Amounts credited to the Account, excluding interest,
shall be deemed compensation for the year credited, for purposes of determining
benefits under the Chris-Craft Industries, Inc. Salaried Employees' Pension
Plan, Chris-Craft/UTV Employees' Stock Purchase Plan, Chris-Craft Industries,
Inc. Profit-Sharing Plan and Chris-Craft Industries, Inc. Benefit Equalization
Plan. If no yield for such notes is so published as of the last day of a
particular quarter, there shall be substituted the average of the yields so
published for the months next preceding and following. If The Wall Street
Journal is not published on the last day of a particular quarter, there shall be
substituted the appropriate yield reported on the last previous day on which The
Wall Street Journal was published. Following the Employment Term, Chris-Craft
shall credit to the Account, as of the last day of each month, interest on the
Account Balance as of such date, computed at the Interest Rate.
4.2.3 On the January 15 first-occurring following the year in which
expiration or termination of the Employment Term shall have occurred,
Chris-Craft shall pay a lump sum equal to the Subaccount A balance as of such
January 15 (including interest accrued in accordance with Section 4.2.2 at the
Interest Rate used for the last quarter of the previous year through such
January 15), and Chris-Craft will have no further obligation to make any payment
to the Executive with respect to Subaccount A. On such January 15, Chris-Craft
also shall pay to the Executive an amount equal to one-fifth of the Subaccount B
balance as of such January 15 (including interest accrued through such January
15) (the "First Payment"), and the balance of such Subaccount shall be reduced
by the amount of such First Payment. On each succeeding January 15, until
Chris-Craft shall have made five payments with respect to Subaccount B
(including the First Payment) pursuant to this Section 4.2.3, Chris-Craft shall
pay to the Executive a sum equal to the amount of the First Payment, plus
interest credited to Subaccount B through the date of such payment, from the
first day after the date of the immediately preceding payment, and the balance
shall be reduced by the amount of such sum, such that the entire Amount of
Subaccount B plus any interest thereon shall have been paid to the Executive by
the fourth anniversary of the First Payment. In the event that for tax purposes
Chris-Craft is required to treat any portion of Subaccount B in a manner
consistent with the notion that the Executive should include any unpaid amount
(determined without regard to this sentence) in taxable income, Chris-Craft
shall pay such amount to the Executive at the time such portion is so treated.
4.3 Bonus. In addition to her base salary and the deferred
amounts referred to in Section 4.2.2 above, the Executive shall be entitled,
with respect to fiscal year 1999, to receive a bonus determined and payable in
accordance with the past practice of Chris-Craft and, for fiscal years
commencing with Chris-Craft's 2000 fiscal year, to participate in the
Chris-Craft Management Incentive Compensation Plan (the "Incentive Plan"), which
Incentive Plan shall be subject to the approval of Chris-Craft's shareholders at
the annual shareholders meeting to be held in 2000. The Incentive Plan shall set
forth the terms and conditions of awards to be made thereunder. Such terms and
conditions shall include, but not be limited to, the following: The Incentive
Plan shall be administered by the Compensation Committee of the Board of
Directors; shall be designed to meet the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"); shall provide for the
Compensation Committee to convene within the first quarter of each fiscal year
to establish annual performance goals that must be satisfied for minimum, target
and maximum bonuses; and shall provide for annual awards to range from .3 to 2.0
times annual base salary.
4.4 Consumer Price Index. The words "Consumer Price Index," as
used in this Agreement, shall mean the Consumer Price Index for All Urban
Consumers, U.S. City Average, All Items (1982-84=100), as reported by the Bureau
of Labor Statistics of the U.S. Department of Labor. In the event that this
Consumer Price Index shall be superseded or shall be published by a different
agency, then the superseding index shall be substituted for this Consumer Price
Index in such a manner as to implement the intent of this Agreement that the
Executive's base salary shall be adjusted, beginning as of January 1, 2003, and
Deferred Compensation shall be adjusted annually, beginning as of January 1,
2001, so that the purchasing power thereof shall be maintained at a level at
least equivalent to the purchasing power thereof at the immediately preceding
January 1.
5. Expenses.
In addition to the compensation provided in Section 4 and in
Section 11, Chris-Craft will pay or reimburse the Executive for all reasonable
expenses actually incurred or paid by her during the Employment Term or the
Consulting Term (as defined in Section 11) in the performance of her services
hereunder upon presentation of expense statements, vouchers, or such other
supporting information as Chris-Craft may customarily require of its senior
executives. Such expense reimbursement policy shall be no less favorable to the
Executive than the policy in effect as of the Effective Date.
6. Additional Benefits.
6.1 During the Employment Term:
(a) The Executive will be entitled to reasonable annual vacation periods,
with full pay and allowances (in accordance with the past practice and policy of
Chris-Craft with respect to its senior officers with the Executive's position
and title).
(b) The Executive will also be eligible for sick leave in accordance with
Chris-Craft's customary practice for senior executives.
(c) The Executive will be entitled to participate in any insurance,
pension, profit-sharing, stock option, stock purchase or other benefit plan and
fringe benefit arrangements of Chris-Craft now existing or hereafter adopted for
the benefit of the employees generally or of the executives of Chris-Craft.
(d) Chris-Craft shall match the Executive's contributions (including any
contribution by any trust of which the Executive is the grantor) to recognized
charities or educational institutions, during each fiscal year of the Employment
Term and the Consulting Term, in an amount equal to the sum of (i) $25,000, such
sum to be prorated with respect to any partial fiscal year occurring within the
Employment Term. Matching contributions made by Chris-Craft pursuant hereto
shall be in addition to any contributions made to match Executive's
contributions under any other charitable gift matching program generally
applicable with respect to contributions made by employees of Chris-Craft or any
of its subsidiaries.
(e) The Executive shall be entitled to such additional compensation and
benefits
(including but not limited to additional grants of options and other
equity-based awards) as may be granted to her from time to time by the Board or
the Compensation Committee thereof. In this regard, it is the intention of the
Compensation Committee to consider the adoption of an equity plan, to submit
such plan to the shareholders of Chris-Craft for approval at the annual meeting
of shareholders to be held in 2000 and, if such plan is so adopted and approved,
to make an additional grant or grants to the Executive pursuant to such plan.
6.2 Pursuant to the action of the Compensation Committee of
the Board, and subject to the execution of this Agreement by the Executive,
Chris-Craft hereby grants to the Executive an option ("Option") to purchase
150,000 shares of the common stock of Chris-Craft ("Shares"), effective as of
the Effective Date, under the Chris-Craft Industries, Inc. 1999 Management
Incentive Plan, as amended (the "1999 Plan"), at a price per share equal to the
fair market value (as defined in the plan) of the Shares on the Effective Date.
As long as the Executive remains employed by or acts as a consultant to
Chris-Craft (except as may otherwise be provided in Sections 10.1, 10.2, 10.5.1
and 10.5.2), (a) 50% of the Shares subject to the Option shall first become
exercisable on the fourth anniversary of the Effective Date and the remaining
Shares subject to the Option shall first become exercisable on the fifth
anniversary of the Effective Date, and (b) once exercisable, the Option shall
remain exercisable until the 10th anniversary of the Effective Date or, if
earlier, until the expiration of the period set forth in the 1999 Plan.
6.3 No payment or benefit made or provided under this
Agreement shall be deemed to constitute payment to the Executive, her legal
representatives or beneficiaries in lieu of, or in reduction of, any benefit or
payment under an insurance, pension, profit-sharing or other benefit plan, and
no payment under any such plan shall reduce any payment or benefit due under
this Agreement.
7. [This section has been intentionally left blank.]
8. Change in Control.
8.1 For the purposes of this Agreement, a "Change in Control" shall mean:
8.1.1 Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the
stockholders of Chris-Craft, shall be approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) or other actual or threatened
solicitation of proxies or consents by or on behalf of any individual, entity or
group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person"), other than the Board; or
8.1.2 Approval by the stockholders of Chris-Craft of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation: (a) more than 50% of the combined voting power of the
then outstanding voting securities ("Outstanding Voting Securities") of the
corporation resulting from such reorganization, merger, or consolidation, which
may be Chris-Craft (the "Resulting Corporation"), entitled to vote generally in
the election of directors (the "Resulting Corporation Voting Securities") shall
then be owned beneficially, directly or indirectly, by all or substantially all
of the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger, or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger or
consolidation; and (b) at least 50% of the members of the board of directors of
the Resulting Corporation shall have been members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
8.1.3 Approval by the stockholders of Chris-Craft of (a) a complete
liquidation or dissolution of Chris-Craft or (b) the sale or other disposition
of all or substantially all of the assets of Chris-Craft, other than to a
corporation (the "Buyer") with respect to which (i) following such sale or other
disposition, more than 50% of the combined voting power of securities of Buyer
entitled to vote generally in the election of directors, shall be owned
beneficially, directly or indirectly, by all or substantially all of the Persons
who were the beneficial owners of the Outstanding Voting Securities immediately
prior to such sale or other disposition, in substantially the same proportion as
their respective ownerships of Outstanding Voting Securities immediately prior
to such sale or other disposition; and (ii) at least 50% of the members of the
board of directors of Buyer shall have been members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of Chris-Craft.
9. Termination of Agreement for Cause.
Chris-Craft may terminate this Agreement, and all of
Chris-Craft's obligations hereunder except its obligation to pay to the
Executive the Account Balance pursuant to Section 4.2 and salary accrued to the
date of termination, "for cause" upon 30 days written notice. The Executive
shall also be entitled to normal post-termination compensation and benefits
under Chris-Craft's retirement, insurance and other compensation or benefit
plans, program and arrangements as in effect immediately prior to the Date of
Termination. As used in this Agreement, the term "for cause" shall mean and be
limited to the following events: (a) the Executive's conviction (which
conviction, through lapse of time or otherwise, is not subject to appeal) in a
court of law of a felony involving moral turpitude; (b) the Executive's material
breach of any of the covenants set forth in Section 12; (c) prior to a Change in
Control, the Executive's dishonesty in the course of fulfilling her duties
hereunder; (d) the Executive's continuing, repeated, wilful failure or refusal
to perform her duties in accordance with the terms of Section 2; provided,
however, that this Agreement may not be terminated for cause under this clause
(d), unless the Executive shall have first received written notice from the
Chief Executive Officer or the Board advising her of the specific acts or
omissions alleged to constitute a failure or refusal to perform her duties, and
such failure or refusal to perform her duties continues after the Executive
shall have had a reasonable opportunity to correct the acts or omissions cited
in such notice; or (e) prior to a Change in Control, at least two-thirds ( ) of
the nonemployee members of the Board shall have determined that the Executive
has intentionally committed an act that could have a material adverse effect on
the reputation or business of Chris-Craft.
10. Termination Other Than for Cause.
10.1 Death. If the Executive shall die during the Employment
Term, this Agreement, and all of Chris-Craft's obligations hereunder, shall
terminate, except (a) with regard to payments from the Account pursuant to
Section 4.2.3 (which Account shall include Deferred Compensation payable through
the last day of the month in which her death occurred), (b) that Chris-Craft
shall pay to the Executive's estate, (i) within 30 days after her death, the
base salary, and pro rata target bonus with respect to the then current fiscal
year, that would have been payable to the Executive under Section 4 had the
Employment Term ended on the last day of the month in which her death occurred,
and (ii) an amount (payable at the same times as salary is paid to other senior
executives of Chris-Craft) equal to the Executive's "Average Annual
Compensation" (as defined in Section 10.3) at the date of her death, such amount
to be payable for the 12-month period beginning on the first day of the month
following the month in which the Executive's death shall occur, and (c) all
outstanding stock options, including the Option granted pursuant to Section 6.2,
held by the Executive shall become fully exercisable and shall remain
exercisable pursuant to the terms of the plan under which it was granted. The
Executive's estate shall also be entitled to normal post-termination
compensation and benefits under Chris-Craft's retirement, insurance and other
compensation or benefit plans, program and arrangements as in effect immediately
prior to the Date of Termination.
10.2 Disability. If, during the Employment Term, the Executive
shall become disabled (as defined in Chris-Craft's then existing disability
policy) so that she shall be unable substantially to perform her services
hereunder, (a) for a period of six consecutive months or (b) for an aggregate of
six months within any period of 12 consecutive months, then the Chief Executive
Officer or the Board may, at any time during the continuance of such disability,
terminate the Employment Term on 30 days' prior written notice to the Executive.
After such termination, the Executive shall have no further obligation to
perform services for Chris-Craft pursuant to Section 2 but shall be entitled to
receive from Chris-Craft, in lieu of the amounts which would otherwise be
payable under Section 4, (i) within 30 days after such termination, the base
salary, and pro rata target bonus with respect to the then current fiscal year,
that would have been payable to the Executive under Section 4, had the
Employment Term ended on the last day of the month in which the Employment Term
was terminated pursuant to this Section 10.2, (ii) an amount (payable at the
same times as salary is paid to the other senior executives of Chris-Craft) at
an annual rate equal to one-half of the Executive's "Average Annual
Compensation" (as defined in Section 10.3) at the date of the termination of the
Employment Term, such amount to be payable for the 12-month period beginning on
the first day of the month following the month in which the Employment Term
shall have been terminated pursuant to this Section 10.2, and (iii) pursuant to
Section 4.2.3, all Deferred Compensation amounts previously deferred and
credited to the Account. The Executive shall also be entitled to normal
post-termination compensation and benefits under Chris-Craft's retirement,
insurance and other compensation or benefit plans, program and arrangements as
in effect immediately prior to the Date of Termination. After such termination,
all outstanding stock options, including the Optio granted pursuant to Section
6.2, held by the Executive shall become fully exercisable and shall remain
exercisable pursuant to the terms of the plan under which it was granted. The
Executive shall have no obligation to accept any employment offered to her by
others in order to minimize, or to be set off against, the amounts to which she
is entitled pursuant to this Section 10.2. Chris-Craft shall not interpose any
defense against payment of such amounts based on refusal of the Executive to
seek or accept other employment. However, if the Executive shall obtain other
employment, then amounts due to her pursuant to clause (ii) of this Section 10.2
shall be reduced, pro tanto, by amounts actually received by her for services
rendered in such other employment during the time amounts are payable pursuant
to said clause (ii).
10.3 Average Annual Compensation. As used in Sections 10.1 and
10.2, the term "Average Annual Compensation" shall mean the mean annual
compensation received or receivable by the Executive pursuant to Sections 4.1,
4.2 and 4.3 with respect to each of the three full fiscal years of Chris-Craft,
or such shorter period of the Executive's employment with Chris-Craft pursuant
hereto, immediately preceding the date of the Executive's death (in the case of
Section 10.1) or the date of the termination of the Employment Term (in the case
of Section 10.2).
10.4 Termination by Executive.
10.4.1 The Executive, on 30 days' prior written notice, may (but shall not
be obligated to) terminate the Employment Term effective as of any date
occurring during (1) the 90-day period commencing on the Designated Date (as
defined below in this Section 10.4.1) for any reason; or (2) the Employment Term
if, without the Executive's written consent, in the case of this clause (2)
only, (a) the Executive shall not be continued as Senior Vice President and
Treasurer of Chris-Craft, or the Executive shall be removed from any such
office; or (b) Chris-Craft shall fail to cure a material breach of this
Agreement (including but not limited to a breach of Section 2 hereof) within 10
days after written notice; or (c) following a Change in Control, the Executive's
authority, duties and responsibilities are materially reduced from those in
effect immediately prior to the Change in Control; or (d) Chris-Craft shall
materially reduce any benefit to which Executive is entitled pursuant to Section
6.1 and, if the termination of the Employment Term shall occur prior to a Change
in Control, shall not have similarly reduced such benefit with respect to
Chris-Craft senior executives generally; or (e) the Executive shall be required
to perform her principal services under this Agreement at a place other than
that set forth in Section 3. Such right to terminate the Employment Term shall
be the Executive's exclusive remedy in the event of the occurrence of any of the
events described in this Section 10.4.1. For purposes of clause (c) of the
preceding sentence, the Executive's authority, duties and responsibilities shall
be deemed to have been materially reduced if there shall occur any material
reduction in the scope, level or nature of the Executive's authority, duties or
responsibilities from those in effect immediately prior to the Change in
Control, or if there shall occur any demotion, any phasing out or assignment to
others, of the duties of the Executive as in effect immediately prior to the
Change in Control. For purposesof this Section 10.4, with respect to any of the
events described in clauses (a) through (e) of the first sentence of this
Section 10.4.1 alleged to have occurred on or after a Change in Control, any
determination made by the Executive in good faith that any such event has
occurred shall be conclusive. For purposes of this Section 10.4, "Designated
Date" shall mean the 12-month anniversary of the Change in Control; provided
that the number 12 shall be decreased (but not below 6) by the number of full
months between (x) the execution of the agreement that contemplates such Change
in Control transaction and (y) the consummation of such transaction.
10.5 Qualifying Termination. If the Executive shall elect to
terminate the Employment Term upon the occurrence of any event described in
Section 10.4.1, or if Chris-Craft shall terminate this Agreement other than for
cause or disability pursuant to Sections 9 and 10 hereof (each, a "Qualifying
Termination"), then the Executive shall have no further obligation to perform
services for Chris-Craft pursuant to Section 2, but she shall be entitled to
receive from Chris-Craft the amounts and other benefits set forth in Sections
10.5.1 or 10.5.2 below.
10.5.1 If the Qualifying Termination shall occur prior to a Change in
Control:
(a) Chris-Craft shall pay the Executive, within 30 days after the date of
termination of the Employment Term, in lieu of the amounts that would otherwise
be payable hereunder, a lump sum (or, if so elected by the Executive, on a
deferred basis) in cash of an amount equal to the sum of (i) the base salary,
and pro rata target bonus with respect to the then current fiscal year, that
would have been payable to the Executive under Section 4, had the Employment
Term ended on the last day of the month in which the Employment Term was
terminated; and (ii) the base salary that would have been payable to the
Executive pursuant to Section 4.1 (at the rate in effect on the date of the
termination of the Employment Term (including any COLA Adjustment theretofore
required to have been made)), for the period beginning on the date of such
termination and running through the last day of the calendar month in which
occurs the first anniversary of the date of such termination (the "Continuation
Period"), multiplied by 1.3. The Executive shall be entitled to receive, in
accordance with Section 4.2.3, all Deferred Compensation amounts previously
deferred and credited to the Account. The Executive shall also be entitled to
normal post-termination compensation and benefits under Chris-Craft's
retirement, insurance and other compensation or benefit plans, program and
arrangements as in effect immediately prior to the Date of Termination;
(b) Until the last day of the Continuation Period, Chris-Craft shall
maintain, at its expense, all insurance coverages and medical and health
benefits in respect of the Executive that shall have been in effect with respect
to her prior to the occurrence of the event entitling the Executive to terminate
this Agreement; provided, however, that this coverage shall be reduced to the
extent the Executive receives equivalent coverage and benefits during the
Continuation Period under the plans, programs and/or arrangements of a
subsequent employer without increased cost to the Executive (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit
basis); and
(c) With respect to the Option granted pursuant to Section 6.2, (i) if the
date of termination of the Employment Term shall occur following the third, and
prior to the fourth, anniversary of the Effective Date, 30% of the Shares
subject to the Option shall become exercisable on the date of such termination,
(ii) to the extent then exercisable, the Option shall remain exercisable for 90
days following the date of such termination, and (iii) to the extent not then
exercisable, the Option shall terminate.
10.5.2 If the Qualifying Termination shall occur on or after a Change in
Control:
(a) Chris-Craft shall pay the Executive, within 30 days after the date of
termination of the Employment Term, in lieu of the amounts that would otherwise
be payable hereunder, a lump sum (or, if so elected by the Executive, on a
deferred basis) in cash of an amount equal to the sum of (i) the base salary,
and pro rata target bonus with respect to the then current fiscal year, that
would have been payable to the Executive under Section 4, had the Employment
Term ended on the last day of the month in which the Employment Term was
terminated; (ii) the aggregate of (A) the base salary that would have been
payable to the Executive pursuant to Section 4.1 (at the rate in effect on the
date of the termination of the Employment Term (including any COLA Adjustment
theretofore required to have been made)) and (B) an amount equal to .3 times the
base salary described in clause (i) (A) of this Section 10.5.2(a), such
aggregate, multiplied by three; and (iii) all consulting fees that would have
been payable pursuant to Section 11 hereof during the Consulting Term (without
regard to any adjustment thereof). The Executive shall be entitled to receive,
in accordance with Section 4.2.3, all Deferred Compensation amounts previously
deferred and credited to the Account. The Executive shall also be entitled to
normal post-termination compensation and benefits under Chris-Craft's
retirement, insurance and other compensation or benefit plans, program and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, immediately prior to the Change in Control;
(b) Chris-Craft shall maintain, at its expense, all insurance coverages,
medical and health benefits in respect of the Executive that shall have been in
effect with respect to her prior to the occurrence of the event entitling the
Executive to terminate this Agreement (or, if more favorable to the Executive,
as in effect immediately prior to the Change in Control), for the period
beginning on the date of such termination and ending on the third anniversary of
the date of such termination; provided, however, this coverage shall be reduced
to the extent the Executive receives equivalent coverage and benefits during
such period under the plans, programs and/or arrangements of a subsequent
employer without increased cost to the Executive (such coverage and benefits to
be determined on a coverage-by-coverage or benefit-by-benefit basis);
(c) The Option granted pursuant to Section 6.2 shall become fully
exercisable, shall remain exercisable until the 10th anniversary of the
Effective Date and shall become transferable; and
(d) The Executive's account, if any, under the Executive Deferred Income
Plan shall become fully vested (to the extent not previously vested).
11. Consulting Services.
If the Employment Period shall terminate on December 31, 2004
or, if earlier, on account of disability, then during the five-year period (the
"Consulting Term") beginning on the date of termination of the Employment Term,
the Executive shall render to Chris-Craft such consultation and advice as the
Board of Directors or the Chief Executive Officer of Chris-Craft may request,
subject to the Executive's reasonable convenience and other business activities;
provided, however, that the Executive shall not be required to devote more than
240 hours in any twelve-month period to such services, which shall be performed
at a time and place mutually convenient to both parties. For her consulting
services, the Executive shall receive, as a consulting fee, compensation at the
rate of $100,000 per annum, payable in equal monthly installments. The
consulting fee shall be adjusted upward, as of each January 1 following the
beginning of the Consulting Term to the end of the Consulting Term, in
proportion to any increase in the Consumer Price Index, as defined in Section
4.4, between the December levels of the two immediately preceding years. Each
such adjustment shall be made retroactively when the Consumer Price Index for
the month next preceding the date of such adjustment becomes available. In
addition, the Executive shall be entitled to participate in each insurance plan
or medical or health plan generally available to Chris-Craft senior executives
and to the reimbursement of expenses on the level made available to the
Executive immediately prior to the termination of the Employment Term. In the
event that the Executive shall be discharged by Chris-Craft during the
Consulting Term other than for cause (as defined in Section 9) or disability (as
described below in this Section 11), she shall nevertheless be entitled to
continue to receive her full consulting fee, and the above-mentioned welfare
plan coverage, for the remainder of the Consulting Term. If the Executive shall
die during the Consulting Term, her estate shll be entitled to receive the full
consulting fee payable hereunder until the earlier to occur of (a) the first
anniversary of the date of her death or (b) the end of the Consulting Term. If,
during the Consulting Term, the Executive shall be disabled from performing her
consulting services, and such disability shall continue for a period of six
consecutive months or for an aggregate of six months within any period of 12
consecutive months, or if such disability shall exist at the start of the
Consulting Term and shall be a continuation of a disability for which the
Employment Term shall have been terminated pursuant to Section 10.2, and the
Board, by written notice to the Executive (before the Executive shall recover
from such disability) shall terminate the Executive's consulting services, the
Executive shall have no further obligation to perform consulting services for
Chris-Craft and shall be entitled to receive compensation at the rate of
one-half of the consulting fee payable hereunder until the earlier to occur of
(a) the first anniversary of such termination or (b) the end of the Consulting
Term. In the event that the Executive voluntarily terminates the Consulting
Term, she shall, following such termination, forfeit her right hereunder to any
further consulting fees and to the above-mentioned welfare plan coverage, which
forfeiture shall constitute the full damages to which Chris-Craft shall be
entitled in such event.
12. Protection of Confidential Information; Non-Competition.
12.1 The Executive agrees that, in view of the fact that her
work for Chris-Craft will bring her into close contact with many confidential
affairs of Chris-Craft not readily available to the public, she will not at any
time (whether during the Employment Term, the Consulting Term, or thereafter)
disclose to any person, firm, corporation, partnership or other entity
whatsoever (except Chris-Craft or any of its subsidiaries), or any officer,
director, stockholder, partner, associate, employee, agent or representative of
any such firm, corporation or other entity, any confidential information or
trade secrets of Chris-Craft which may come into her possession during the
Employment Term or the Consulting Term (the "Confidential Materials"). The term
"Confidential Materials" does not include information which at the time of
disclosure or thereafter is generally available to or known by the public
otherwise than by reason of the Executive's disclosure thereof in violation of
this Agreement (ii) is, was or becomes available to the Executive on a
non-confidential basis from a source other than Chris-Craft, provided that the
Executive has no reason to believe that such source is or was bound by a
confidentiality agreement with Chris-Craft, (iii) has been made available, or is
made available, on an unrestricted basis to a third party by Chris-Craft, by an
individual authorized to do so, or (iv) is known by the Executive prior to its
disclosure to the Executive. The Executive may use and disclose Confidential
Materials to the extent necessary to assert any right or defend against any
claim arising under this Agreement or pertaining to Confidential Materials or
their use, to the extent necessary to comply with any applicable statute,
constitution, treaty, rule, regulation, ordinance or order, whether of the
United States, any state thereof, or any other jurisdiction applicable to the
Executive, or if the Executive receives a request to disclose all or any part of
the information contained in the Confidential Materials undr the terms of a
subpoena, order, civil investigative demand or similar process issued by a court
of competent jurisdiction or by a governmental body or agency, whether of the
United States or any state thereof, or any other jurisdiction applicable to the
Executive.
12.2 During the Noncompetition Period (as defined below in
this Section 12.2), the Executive will not, except on behalf of Chris-Craft or
any of its subsidiaries, directly or indirectly, whether as an officer,
director, stockholder, partner, associate, employee, agent or representative,
become or be interested in, or associated with, any other person, firm,
corporation, partnership or other entity whatsoever, engaged in a business
competitive with any of the businesses of Chris-Craft or any of its subsidiaries
in any of the markets in which Chris-Craft or any of its subsidiaries carries on
such business; provided, however, that the Executive may own as an investor
securities of any such corporation which securities are registered under Section
12(b) or 12(g) of the Exchange Act, so long as she is not part of any control
group of such corporation. "Noncompetition Period" shall mean (a) any period
during which the Executive renders services to Chris-Craft pursuant to Section
1.2 or 11 (the "Period of Service"), and (b) the one-year period following the
Period of Service (other than in the event of death), provided that this clause
(b) shall not apply in the event of a Qualifying Termination (whether occurring
before or after a Change in Control).
12.3 The Executive agrees that a violation of the covenants
set forth in Section 12.1 or 12.2, or any provision thereof, will cause
irreparable injury to Chris-Craft and that Chris-Craft shall be entitled, in
addition to any other rights and remedies it may have, at law or in equity, to
an injunction enjoining and restraining the Executive from doing or continuing
to do any such act and any other violation or threatened violation of said
Section 12.1 or 12.2.
12.4 If any provision of Section 12 as applied to any
circumstance shall be adjudged by a court to be invalid or unenforceable, the
same shall in no way affect any other provision of this Section 12, the
application of such provision in any other circumstances, or the validity or
enforceability of this Section 12. Chris-Craft and the Executive intend this
Section 12 to be enforced as written. However, if any provision, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, or otherwise, Chris-Craft and the Executive agree
that the court making such determination shall have the power to reduce the
duration and/or area of such provision, and/or to delete specific words or
phrases ("blue-penciling"), and in its reduced or blue-pencilled form such
provision shall then be enforceable and shall be enforced.
12.5 Chris-Craft and the Executive intend to, and do hereby,
confer jurisdiction to enforce the covenants contained in this Section 12 upon
the courts of any state of the United States and any other governmental
jurisdiction within the geographical scope of such covenants. If the courts of
any one or more of such states or jurisdictions shall hold such covenants wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of Chris-Craft and the Executive that such determination shall not bar
or in any way affect Chris-Craft's right to the relief provided above in the
courts of any other state or jurisdiction within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states or
jurisdictions, the above covenants as they relate to each state or jurisdiction
being, for this purpose, severable into diverse and independent covenants.
13. Notices.
All notices, requests, consents and other communications, required or
permitted to be given hereunder, shall be in writing and shall be deemed to have
been duly given (a) if delivered personally, when delivered; (b) if delivered by
overnight carrier, on the first business day following such delivery; (c) if
delivered by registered or certified mail, return receipt requested, on the
third business day after having been mailed. In any case, each such notice,
request, or consent or other communication shall be addressed as follows or to
such other address as either party shall designate by notice in writing to the
other in accordance herewith:
13.1 If to Chris-Craft:
Chris-Craft Industries, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Board of Directors
13.2 If to the Executive to her at her address set forth on the personnel
records of Chris-Craft.
14. General.
14.1 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
14.2 The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
14.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties. This Agreement does not apply to any stock options
granted to the Executive prior to the date on which the Option described in
Section 6.2 was granted.
14.4 This Agreement and the benefits hereunder are personal to
Chris-Craft and are not assignable or transferable, nor may the services to be
performed hereunder be assigned by Chris-Craft to any person, firm or
corporation; provided, however, that this Agreement and the benefits hereunder
may be assigned by Chris-Craft to any corporation acquiring all or substantially
all of the assets of Chris-Craft or to any corporation into which Chris-Craft
may be merged or consolidated, and this Agreement and the benefits hereunder
will automatically be deemed assigned to any such corporation (and references
herein to Chris-Craft will include any successor corporation), subject, however,
to the Executive's right to terminate the Employment Term in such event as
provided in Section 10.4. Chris-Craft may delegate any of its obligations
hereunder to any subsidiary of Chris-Craft, provided that such delegation shall
not relieve Chris-Craft of its obligations hereunder.
14.5 This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by either
party of the breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.
14.6 Whenever this Agreement provides for any payment to the
Executive's estate, such payment may be made instead to such beneficiary or
beneficiaries as the Executive may have designated by written notice to
Chris-Craft. The Executive shall have the right to revoke any such designation
and to redesignate a beneficiary or beneficiaries by written notice to
Chris-Craft to such effect.
14.7 In case of any dispute or disagreement arising out of, or
in connection with, this Agreement, until the final determination of such
dispute or disagreement Chris-Craft shall continue to pay to the Executive all
of the compensation provided in this Agreement, and the Executive shall be
entitled to continue to receive all of the other benefits provided herein. If,
following a Change in Control, any such dispute or disagreement shall result in
legal action between Chris-Craft and the Executive, the Executive shall be
entitled to recover from Chris-Craft any actual expenses for attorney's fees and
disbursements incurred by her in connection with the Executive's good faith
maintenance or defense of such action, on an after-tax basis. During the
pendency of any such action, Chris-Craft shall pay all actual attorney's fees
and expenses incurred by the Executive in connection therewith upon receipt of
an undertaking by the Executive to repay such amounts as shall be found in such
action as having been incurred in connection with the Executive's maintenance or
defense of such action other than in good faith.
14.8 Chris-Craft agrees that, if the Executive's employment
with Chris-Craft terminates during the Employment Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by Chris-Craft pursuant hereto. Further, the amount of
any payment or benefit provided for in this Agreement (other than as expressly
provided in Sections 10.2, 10.5.1(b) and 10.5.2(b)) shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to Chris-Craft, or otherwise.
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC.
--------------------------------
Name:
Title:
--------------------------------
JOELEN K. MERKEL
<PAGE>
Section Page
1. Employment Term 1
2. Duties and Authority 1
3. Location 2
4. Cash Compensation 2
4.1 Base Salary 2
4.2 Deferred Compensation 3
4.3 Bonus 4
4.4 Consumer Price Index 5
5. Expenses 5
6. Additional Benefits 5
7. [This section has been intentionally left blank.]
7
8. Change in Control 7
9. Termination of Agreement for Cause 8
10. Termination Other Than for Cause 9
10.1 Death 9
10.2 Disability 9
10.3 Average Annual Compensation 10
10.4 Termination by Executive 11
10.5 Qualifying Termination 11
11. Consulting Services 14
12. Protection of Confidential Information; Non-Competition 15
13. Notices 17
14. General 18
EMPLOYMENT AGREEMENT
AGREEMENT made as of September 28, 1999 (the "Effective Date"), between
CHRIS-CRAFT INDUSTRIES, INC., a Delaware corporation ("Chris-Craft"), and BRIAN
C. KELLY (the "Executive").
The Executive currently serves as Vice President and General Counsel
and Secretary of Chris-Craft. Chris-Craft wishes to promote the Executive to the
position of Senior Vice President and to secure the continued services of the
Executive in that position and as General Counsel and Secretary for an
additional extended period. In addition, because of the position the Executive
holds with Chris-Craft and the position that he will hold during the term of his
full-time employment under this Agreement, Chris-Craft wishes to secure the
further services of the Executive as a consultant to Chris-Craft, and wishes to
insure that the Executive will refrain from competing with Chris-Craft, after
the termination of his full time employment under specified circumstances.
In consideration of the covenants and agreements herein contained, the
parties agree as follows:
1. Employment Term.
1.1 Chris-Craft shall employ the Executive, and the Executive
shall serve, as Senior Vice President of Chris-Craft during the Employment Term
(as defined in Section 1.2).
1.2 The term of the Executive's employment under Section 1.1
of this Agreement (the "Employment Term") shall commence on the Effective Date
and end on December 31, 2004, unless sooner terminated pursuant to the
provisions of Section 9 or Section 10.
2. Duties and Authority.
2.1 During the Employment Term, the Executive shall devote his
full business time and energies to the business and affairs of Chris-Craft and
shall not accept other employment or permit such personal business interests as
he may have to interfere with the performance of his duties hereunder. The
Executive agrees, during the Employment Term, to use his best efforts, skill and
abilities to promote Chris-Craft's interests; to be available to serve as a
director and officer of Chris-Craft and any of its domestic subsidiary
corporations if elected by the Board of Directors of Chris-Craft (the "Board")
or stockholders of Chris-Craft or any such subsidiary corporation; and to
perform such duties (consistent with his status set forth below in this Section
2) as may be assigned to him by the Chief Executive Officer of Chris-Craft (the
"Chief Executive Officer") or the Board.
2.2 Subject only to the direction and control of the Chief
Executive Officer and the Board (which direction and control shall be consistent
with the past practice of Chris-Craft), the Executive shall perform all services
and duties necessary or appropriate for the management of Chris-Craft's business
and that of its subsidiaries.
2.3 Throughout the Employment Term, the Executive shall be
continued in the offices denominated those of Senior Vice President and General
Counsel and Secretary of Chris-Craft and shall perform on behalf of Chris-Craft
such functions of an executive nature, and shall have such authority, duties and
responsibilities of an executive nature as shall be assigned to the Executive by
the Chief Executive Officer or the Board.
3. Location.
During the Employment Term, the Executive's services under
this Agreement shall be performed principally in the location in which the
Executive principally performs such services on the Effective Date. The parties,
however, acknowledge and agree that the nature of the Executive's duties
hereunder shall require reasonable domestic and international travel from time
to time.
4. Cash Compensation.
4.1 Base Salary. During the Employment Term, Chris-Craft shall
pay to the Executive, in monthly or more frequent installments in accordance
with Chris-Craft's regular payroll practices for senior executives, a base
salary at the rate per annum of $525,000, which shall be increased by the amount
of $25,000 on each of January 1, 2001 and the immediately following anniversary
of such date. As of January 1, 2003 and as of each successive January 1 to the
end of the Employment Term, the Executive's base salary shall be adjusted
upward, in proportion to any increase in the Consumer Price Index, as defined in
Section 4.4, between the December levels of the two immediately preceding years
("COLA Adjustment"). Each such adjustment shall be made retroactively when the
Consumer Price Index for the December next preceding the date of such adjustment
becomes available. It is understood that Chris-Craft may, at any time, in the
discretion of its Board increase, but not decrease, the Executive's base salary.
4.2 Deferred Compensation. During the Employment Term, Chris-Craft shall
credit to the Executive's Account (as defined in Section 4.2.1) the amount
specified in Section 4.2.2.
4.2.1 Chris-Craft shall maintain, on its books, a special account,
comprised of two sub-accounts, Subaccount A and Subaccount B, with respect to
the Executive (the "Account"), in accordance with the terms of this Agreement,
until the Executive shall have been paid all amounts required by Section 4.2.3
to be paid to the Executive with respect thereto. Prior to December 1 of each
year, Chris-Craft's General Counsel and Secretary shall notify the Executive of
the option to select the periods to which compensation payable pursuant to this
Section 4.2 will be deferred and, within fifteen (15) days following receipt of
such notice, the Executive shall notify Chris-Craft's Treasurer, if the
Executive wishes that the Deferred Compensation (as defined in clause (a) of the
first sentence of Section 4.2.2) be credited to Subaccount A, Subaccount B, or a
combination of both Subaccount A and Subaccount B (any such combination to be
specified in a manner that will not prevent Chris-Craft's Treasurer from
computing on a monthly basis the amounts to be credited to each subaccount in
accordance with Section 4.2.2). Absent such notice from the Executive, Deferred
Compensation for such year shall be credited to Subaccount B.
4.2.2 During each year of the Employment Term, Chris-Craft shall credit to
the appropriate Subaccount, as of the end of each month, (a) an amount equal to
one-twelfth of $100,000, subject to COLA Adjustment commencing as of January 1,
2001 ("Deferred Compensation"), and (b) interest on the Account balance as of
the end of the preceding month, computed at a rate to be adjusted as of the last
day of each calendar quarter to equal the yield, as of the last business day of
such quarter, as reported in The Wall Street Journal, on U.S. Treasury Notes
maturing in the month that is five years after the last month of such quarter
(the "Interest Rate"). Amounts credited to the Account, excluding interest,
shall be deemed compensation for the year credited, for purposes of determining
benefits under the Chris-Craft Industries, Inc. Salaried Employees' Pension
Plan, Chris-Craft/UTV Employees' Stock Purchase Plan, Chris-Craft Industries,
Inc. Profit-Sharing Plan and Chris-Craft Industries, Inc. Benefit Equalization
Plan. If no yield for such notes is so published as of the last day of a
particular quarter, there shall be substituted the average of the yields so
published for the months next preceding and following. If The Wall Street
Journal is not published on the last day of a particular quarter, there shall be
substituted the appropriate yield reported on the last previous day on which The
Wall Street Journal was published. Following the Employment Term, Chris-Craft
shall credit to the Account, as of the last day of each month, interest on the
Account Balance as of such date, computed at the Interest Rate.
4.2.3 On the January 15 first-occurring following the year in which
expiration or termination of the Employment Term shall have occurred,
Chris-Craft shall pay a lump sum equal to the Subaccount A balance as of such
January 15 (including interest accrued in accordance with Section 4.2.2 at the
Interest Rate used for the last quarter of the previous year through such
January 15), and Chris-Craft will have no further obligation to make any payment
to the Executive with respect to Subaccount A. On such January 15, Chris-Craft
also shall pay to the Executive an amount equal to one-fifth of the Subaccount B
balance as of such January 15 (including interest accrued through such January
15) (the "First Payment"), and the balance of such Subaccount shall be reduced
by the amount of such First Payment. On each succeeding January 15, until
Chris-Craft shall have made five payments with respect to Subaccount B
(including the First Payment) pursuant to this Section 4.2.3, Chris-Craft shall
pay to the Executive a sum equal to the amount of the First Payment, plus
interest credited to Subaccount B through the date of such payment, from the
first day after the date of the immediately preceding payment, and the balance
shall be reduced by the amount of such sum, such that the entire Amount of
Subaccount B plus any interest thereon shall have been paid to the Executive by
the fourth anniversary of the First Payment. In the event that for tax purposes
Chris-Craft is required to treat any portion of Subaccount B in a manner
consistent with the notion that the Executive should include any unpaid amount
(determined without regard to this sentence) in taxable income, Chris-Craft
shall pay such amount to the Executive at the time such portion is so treated.
4.3 Bonus. In addition to his base salary and the deferred
amounts referred to in Section 4.2.2 above, the Executive shall be entitled,
with respect to fiscal year 1999, to receive a bonus determined and payable in
accordance with the past practice of Chris-Craft and, for fiscal years
commencing with Chris-Craft's 2000 fiscal year, to participate in the
Chris-Craft Management Incentive Compensation Plan (the "Incentive Plan"), which
Incentive Plan shall be subject to the approval of Chris-Craft's shareholders at
the annual shareholders meeting to be held in 2000. The Incentive Plan shall set
forth the terms and conditions of awards to be made thereunder. Such terms and
conditions shall include, but not be limited to, the following: The Incentive
Plan shall be administered by the Compensation Committee of the Board of
Directors; shall be designed to meet the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"); shall provide for the
Compensation Committee to convene within the first quarter of each fiscal year
to establish annual performance goals that must be satisfied for minimum, target
and maximum bonuses; and shall provide for annual awards to range from .3 to 2.0
times annual base salary.
4.4 Consumer Price Index. The words "Consumer Price Index," as
used in this Agreement, shall mean the Consumer Price Index for All Urban
Consumers, U.S. City Average, All Items (1982-84=100), as reported by the Bureau
of Labor Statistics of the U.S. Department of Labor. In the event that this
Consumer Price Index shall be superseded or shall be published by a different
agency, then the superseding index shall be substituted for this Consumer Price
Index in such a manner as to implement the intent of this Agreement that the
Executive's base salary shall be adjusted, beginning as of January 1, 2003, and
Deferred Compensation shall be adjusted annually, beginning as of January 1,
2001, so that the purchasing power thereof shall be maintained at a level at
least equivalent to the purchasing power thereof at the immediately preceding
January 1.
5. Expenses.
In addition to the compensation provided in Section 4 and in
Section 11, Chris-Craft will pay or reimburse the Executive for all reasonable
expenses actually incurred or paid by him during the Employment Term or the
Consulting Term (as defined in Section 11) in the performance of his services
hereunder upon presentation of expense statements, vouchers, or such other
supporting information as Chris-Craft may customarily require of its senior
executives. Such expense reimbursement policy shall be no less favorable to the
Executive than the policy in effect as of the Effective Date.
6. Additional Benefits.
6.1 During the Employment Term:
(a) The Executive will be entitled to reasonable annual vacation periods,
with full pay and allowances (in accordance with the past practice and policy of
Chris-Craft with respect to its senior officers with the Executive's position
and title).
(b) The Executive will also be eligible for sick leave in accordance with
Chris-Craft's customary practice for senior executives.
(c) The Executive will be entitled to participate in any insurance,
pension, profit-sharing, stock option, stock purchase or other benefit plan and
fringe benefit arrangements of Chris-Craft now existing or hereafter adopted for
the benefit of the employees generally or of the executives of Chris-Craft.
(d) Chris-Craft shall match the Executive's contributions (including any
contribution by any trust of which the Executive is the grantor) to recognized
charities or educational institutions, during each fiscal year of the Employment
Term and the Consulting Term, in an amount equal to the sum of (i) $25,000, such
sum to be prorated with respect to any partial fiscal year occurring within the
Employment Term. Matching contributions made by Chris-Craft pursuant hereto
shall be in addition to any contributions made to match Executive's
contributions under any other charitable gift matching program generally
applicable with respect to contributions made by employees or directors of
Chris-Craft or any of its subsidiaries.
(e) The Executive shall be entitled to such additional compensation and
benefits
(including but not limited to additional grants of options and other
equity-based awards) as may be granted to him from time to time by the Board or
the Compensation Committee thereof. In this regard, it is the intention of the
Compensation Committee to consider the adoption of an equity plan, to submit
such plan to the shareholders of Chris-Craft for approval at the annual meeting
of shareholders to be held in 2000 and, if such plan is so adopted and approved,
to make an additional grant or grants to the Executive pursuant to such plan.
6.2 Pursuant to the action of the Compensation Committee of
the Board, and subject to the execution of this Agreement by the Executive,
Chris-Craft hereby grants to the Executive an option ("Option") to purchase
150,000 shares of the common stock of Chris-Craft ("Shares"), effective as of
the Effective Date, under the Chris-Craft Industries, Inc. 1999 Management
Incentive Plan, as amended (the "1999 Plan"), at a price per share equal to the
fair market value (as defined in the plan) of the Shares on the Effective Date.
As long as the Executive remains employed by or acts as a consultant to
Chris-Craft (except as may otherwise be provided in Sections 10.1, 10.2, 10.5.1
and 10.5.2), (a) 50% of the Shares subject to the Option shall first become
exercisable on the fourth anniversary of the Effective Date and the remaining
Shares subject to the Option shall first become exercisable on the fifth
anniversary of the Effective Date, and (b) once exercisable, the Option shall
remain exercisable until the 10th anniversary of the Effective Date or, if
earlier, until the expiration of the period set forth in the 1999 Plan.
6.3 No payment or benefit made or provided under this
Agreement shall be deemed to constitute payment to the Executive, his legal
representatives or beneficiaries in lieu of, or in reduction of, any benefit or
payment under an insurance, pension, profit-sharing or other benefit plan, and
no payment under any such plan shall reduce any payment or benefit due under
this Agreement.
7. [This section has been intentionally left blank.]
8. Change in Control.
8.1 For the purposes of this Agreement, a "Change in Control" shall mean:
8.1.1 Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by the
stockholders of Chris-Craft, shall be approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) or other actual or threatened
solicitation of proxies or consents by or on behalf of any individual, entity or
group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person"), other than the Board; or
8.1.2 Approval by the stockholders of Chris-Craft of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation: (a) more than 50% of the combined voting power of the
then outstanding voting securities ("Outstanding Voting Securities") of the
corporation resulting from such reorganization, merger, or consolidation, which
may be Chris-Craft (the "Resulting Corporation"), entitled to vote generally in
the election of directors (the "Resulting Corporation Voting Securities") shall
then be owned beneficially, directly or indirectly, by all or substantially all
of the Persons who were the beneficial owners of Outstanding Voting Securities
immediately prior to such reorganization, merger, or consolidation, in
substantially the same proportions as their respective ownerships of Outstanding
Voting Securities immediately prior to such reorganization, merger or
consolidation; and (b) at least 50% of the members of the board of directors of
the Resulting Corporation shall have been members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
8.1.3 Approval by the stockholders of Chris-Craft of (a) a complete
liquidation or
dissolution of Chris-Craft or (b) the sale or other disposition of all or
substantially all of the assets of Chris-Craft, other than to a corporation (the
"Buyer") with respect to which (i) following such sale or other disposition,
more than 50% of the combined voting power of securities of Buyer entitled to
vote generally in the election of directors, shall be owned beneficially,
directly or indirectly, by all or substantially all of the Persons who were the
beneficial owners of the Outstanding Voting Securities immediately prior to such
sale or other disposition, in substantially the same proportion as their
respective ownerships of Outstanding Voting Securities immediately prior to such
sale or other disposition; and (ii) at least 50% of the members of the board of
directors of Buyer shall have been members of the Incumbent Board at the time of
the execution of the initial agreement or action of the Board providing for such
sale or other disposition of assets of Chris-Craft.
9. Termination of Agreement for Cause.
Chris-Craft may terminate this Agreement, and all of
Chris-Craft's obligations hereunder except its obligation to pay to the
Executive the Account Balance pursuant to Section 4.2 and salary accrued to the
date of termination, "for cause" upon 30 days written notice. The Executive
shall also be entitled to normal post-termination compensation and benefits
under Chris-Craft's retirement, insurance and other compensation or benefit
plans, program and arrangements as in effect immediately prior to the Date of
Termination. As used in this Agreement, the term "for cause" shall mean and be
limited to the following events: (a) the Executive's conviction (which
conviction, through lapse of time or otherwise, is not subject to appeal) in a
court of law of a felony involving moral turpitude; (b) the Executive's material
breach of any of the covenants set forth in Section 12; (c) prior to a Change in
Control, the Executive's dishonesty in the course of fulfilling his duties
hereunder; (d) the Executive's continuing, repeated, wilful failure or refusal
to perform his duties in accordance with the terms of Section 2; provided,
however, that this Agreement may not be terminated for cause under this clause
(d), unless the Executive shall have first received written notice from the
Chief Executive Officer or the Board advising him of the specific acts or
omissions alleged to constitute a failure or refusal to perform his duties, and
such failure or refusal to perform his duties continues after the Executive
shall have had a reasonable opportunity to correct the acts or omissions cited
in such notice; or (e) prior to a Change in Control, at least two-thirds ( ) of
the nonemployee members of the Board shall have determined that the Executive
has intentionally committed an act that could have a material adverse effect on
the reputation or business of Chris-Craft.
10. Termination Other Than for Cause.
10.1 Death. If the Executive shall die during the Employment
Term, this Agreement, and all of Chris-Craft's obligations hereunder, shall
terminate, except (a) with regard to payments from the Account pursuant to
Section 4.2.3 (which Account shall include Deferred Compensation payable through
the last day of the month in which his death occurred), (b) that Chris-Craft
shall pay to the Executive's estate, (i) within 30 days after his death, the
base salary, and pro rata target bonus with respect to the then current fiscal
year, that would have been payable to the Executive under Section 4 had the
Employment Term ended on the last day of the month in which his death occurred,
and (ii) an amount (payable at the same times as salary is paid to other senior
executives of Chris-Craft) equal to the Executive's "Average Annual
Compensation" (as defined in Section 10.3) at the date of his death, such amount
to be payable for the 12-month period beginning on the first day of the month
following the month in which the Executive's death shall occur, and (c) all
outstanding stock options, including the Option granted pursuant to Section 6.2,
held by the Executive shall become fully exercisable and shall remain
exercisable pursuant to the terms of the plan under which it was granted. The
Executive's estate shall also be entitled to normal post-termination
compensation and benefits under Chris-Craft's retirement, insurance and other
compensation or benefit plans, program and arrangements as in effect immediately
prior to the Date of Termination.
10.2 Disability. If, during the Employment Term, the Executive
shall become disabled (as defined in Chris-Craft's then existing disability
policy) so that he shall be unable substantially to perform his services
hereunder, (a) for a period of six consecutive months or (b) for an aggregate of
six months within any period of 12 consecutive months, then the Chief Executive
Officer or the Board may, at any time during the continuance of such disability,
terminate the Employment Term on 30 days' prior written notice to the Executive.
After such termination, the Executive shall have no further obligation to
perform services for Chris-Craft pursuant to Section 2 but shall be entitled to
receive from Chris-Craft, in lieu of the amounts which would otherwise be
payable under Section 4, (i) within 30 days after such termination, the base
salary, and pro rata target bonus with respect to the then current fiscal year,
that would have been payable to the Executive under Section 4, had the
Employment Term ended on the last day of the month in which the Employment Term
was terminated pursuant to this Section 10.2, (ii) an amount (payable at the
same times as salary is paid to the other senior executives of Chris-Craft) at
an annual rate equal to one-half of the Executive's "Average Annual
Compensation" (as defined in Section 10.3) at the date of the termination of the
Employment Term, such amount to be payable for the 12-month period beginning on
the first day of the month following the month in which the Employment Term
shall have been terminated pursuant to this Section 10.2, and (iii) pursuant to
Section 4.2.3, all Deferred Compensation amounts previously deferred and
credited to the Account. The Executive shall also be entitled to normal
post-termination compensation and benefits under Chris-Craft's retirement,
insurance and other compensation or benefit plans, program and arrangements as
in effect immediately prior to the Date of Termination. After such termination,
all outstanding stock options, including the Optiongranted pursuant to Section
6.2, held by the Executive shall become fully exercisable and shall remain
exercisable pursuant to the terms of the plan under which it was granted. The
Executive shall have no obligation to accept any employment offered to him by
others in order to minimize, or to be set off against, the amounts to which he
is entitled pursuant to this Section 10.2. Chris-Craft shall not interpose any
defense against payment of such amounts based on refusal of the Executive to
seek or accept other employment. However, if the Executive shall obtain other
employment, then amounts due to him pursuant to clause (ii) of this Section 10.2
shall be reduced, pro tanto, by amounts actually received by him for services
rendered in such other employment during the time amounts are payable pursuant
to said clause (ii).
10.3 Average Annual Compensation. As used in Sections 10.1 and
10.2, the term "Average Annual Compensation" shall mean the mean annual
compensation received or receivable by the Executive pursuant to Sections 4.1,
4.2 and 4.3 with respect to each of the three full fiscal years of Chris-Craft,
or such shorter period of the Executive's employment with Chris-Craft pursuant
hereto, immediately preceding the date of the Executive's death (in the case of
Section 10.1) or the date of the termination of the Employment Term (in the case
of Section 10.2).
10.4 Termination by Executive.
10.4.1 The Executive, on 30 days' prior written notice, may (but shall not
be obligated to) terminate the Employment Term effective as of any date
occurring during (1) the 90-day period commencing on the Designated Date (as
defined below in this Section 10.4.1) for any reason; or (2) the Employment Term
if, without the Executive's written consent, in the case of this clause (2)
only, (a) the Executive shall not be continued as Senior Vice President and
General Counsel and Secretary of Chris-Craft, or the Executive shall be removed
from any such office; or (b) Chris-Craft shall fail to cure a material breach of
this Agreement (including but not limited to a breach of Section 2 hereof)
within 10 days after written notice; or (c) following a Change in Control, the
Executive's authority, duties and responsibilities are materially reduced from
those in effect immediately prior to the Change in Control; or (d) Chris-Craft
shall materially reduce any benefit to which the Executive is entitled pursuant
to Section 6.1 and, if the termination of the Employment Term shall occur prior
to a Change in Control, shall not have similarly reduced such benefit with
respect to Chris-Craft senior executives generally; or (e) the Executive shall
be required to perform his principal services under this Agreement at a place
other than that set forth in Section 3. Such right to terminate the Employment
Term shall be the Executive's exclusive remedy in the event of the occurrence of
any of the events described in this Section 10.4.1. For purposes of clause (c)
of the preceding sentence, the Executive's authority, duties and
responsibilities shall be deemed to have been materially reduced if there shall
occur any material reduction in the scope, level or nature of the Executive's
authority, duties or responsibilities from those in effect immediately prior to
the Change in Control, or if there shall occur any demotion, any phasing out or
assignment to others, of the duties of the Executive as in effect immediately
prior to the Change i Control. For purposes of this Section 10.4, with respect
to any of the events described in clauses (a) through (e) of the first sentence
of this Section 10.4.1 alleged to have occurred on or after a Change in Control,
any determination made by the Executive in good faith that any such event has
occurred shall be conclusive. For purposes of this Section 10.4, "Designated
Date" shall mean the 12-month anniversary of the Change in Control; provided
that the number 12 shall be decreased (but not below 6) by the number of full
months between (x) the execution of the agreement that contemplates such Change
in Control transaction and (y) the consummation of such transaction.
10.5 Qualifying Termination. If the Executive shall elect to
terminate the Employment Term upon the occurrence of any event described in
Section 10.4.1, or if Chris-Craft shall terminate this Agreement other than for
cause or disability pursuant to Sections 9 and 10 hereof (each, a "Qualifying
Termination"), then the Executive shall have no further obligation to perform
services for Chris-Craft pursuant to Section 2, but he shall be entitled to
receive from Chris-Craft the amounts and other benefits set forth in Sections
10.5.1 or 10.5.2 below.
10.5.1 If the Qualifying Termination shall occur prior to a Change in
Control:
(a) Chris-Craft shall pay the Executive, within 30 days after the date of
termination of the Employment Term, in lieu of the amounts that would otherwise
be payable hereunder, a lump sum (or, if so elected by the Executive, on a
deferred basis) in cash of an amount equal to the sum of (i) the base salary,
and pro rata target bonus with respect to the then current fiscal year, that
would have been payable to the Executive under Section 4, had the Employment
Term ended on the last day of the month in which the Employment Term was
terminated; and (ii) the base salary that would have been payable to the
Executive pursuant to Section 4.1 (at the rate in effect on the date of the
termination of the Employment Term (including any COLA Adjustment theretofore
required to have been made)), for the period beginning on the date of such
termination and running through the last day of the calendar month in which
occurs the first anniversary of the date of such termination (the "Continuation
Period"), multiplied by 1.3. The Executive shall be entitled to receive, in
accordance with Section 4.2.3, all Deferred Compensation amounts previously
deferred and credited to the Account. The Executive shall also be entitled to
normal post-termination compensation and benefits under Chris-Craft's
retirement, insurance and other compensation or benefit plans, program and
arrangements as in effect immediately prior to the Date of Termination;
(b) Until the last day of the Continuation Period, Chris-Craft shall
maintain, at its expense, all insurance coverages and medical and health
benefits in respect of the Executive that shall have been in effect with respect
to him prior to the occurrence of the event entitling the Executive to terminate
this Agreement; provided, however, that this coverage shall be reduced to the
extent the Executive receives equivalent coverage and benefits during the
Continuation Period under the plans, programs and/or arrangements of a
subsequent employer without increased cost to the Executive (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit
basis); and
(c) With respect to the Option granted pursuant to Section 6.2, (i) if the
date of termination of the Employment Term shall occur following the third, and
prior to the fourth, anniversary of the Effective Date, 30% of the Shares
subject to the Option shall become exercisable on the date of such termination,
(ii) to the extent then exercisable, the Option shall remain exercisable for 90
days following the date of such termination, and (iii) to the extent not then
exercisable, the Option shall terminate.
10.5.2 If the Qualifying Termination shall occur on or after a Change in
Control:
(a) Chris-Craft shall pay the Executive, within 30 days after the date of
termination of the Employment Term, in lieu of the amounts that would otherwise
be payable hereunder, a lump sum (or, if so elected by the Executive, on a
deferred basis) in cash of an amount equal to the sum of (i) the base salary,
and pro rata target bonus with respect to the then current fiscal year, that
would have been payable to the Executive under Section 4, had the Employment
Term ended on the last day of the month in which the Employment Term was
terminated; (ii) the aggregate of (A) the base salary that would have been
payable to the Executive pursuant to Section 4.1 (at the rate in effect on the
date of the termination of the Employment Term (including any COLA Adjustment
theretofore required to have been made)) and (B) an amount equal to .3 times the
base salary described in clause (i)(A) of this Section 10.5.2(a), such
aggregate, multiplied by three; and (iii) all consulting fees that would have
been payable pursuant to Section 11 hereof during the Consulting Term (without
regard to any adjustment thereof). The Executive shall be entitled to receive,
in accordance with Section 4.2.3, all Deferred Compensation amounts previously
deferred and credited to the Account. The Executive shall also be entitled to
normal post-termination compensation and benefits under Chris-Craft's
retirement, insurance and other compensation or benefit plans, program and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, immediately prior to the Change in Control;
(b) Chris-Craft shall maintain, at its expense, all insurance coverages,
medical and health benefits in respect of the Executive that shall have been in
effect with respect to him prior to the occurrence of the event entitling the
Executive to terminate this Agreement (or, if more favorable to the Executive,
as in effect immediately prior to the Change in Control), for the period
beginning on the date of such termination and ending on the third anniversary of
the date of such termination; provided, however, this coverage shall be reduced
to the extent the Executive receives equivalent coverage and benefits during
such period under the plans, programs and/or arrangements of a subsequent
employer without increased cost to the Executive (such coverage and benefits to
be determined on a coverage-by-coverage or benefit-by-benefit basis);
(c) The Option granted pursuant to Section 6.2 shall become fully
exercisable, shall remain exercisable until the 10th anniversary of the
Effective Date and shall become transferable; and
(d) The Executive's account, if any, under the Executive Deferred Income
Plan shall become fully vested (to the extent not previously vested).
11. Consulting Services.
If the Employment Period shall terminate on December 31, 2004
or, if earlier, on account of disability, then during the five-year period (the
"Consulting Term") beginning on the date of termination of the Employment Term,
the Executive shall render to Chris-Craft such consultation and advice as the
Board of Directors or the Chief Executive Officer of Chris-Craft may request,
subject to the Executive's reasonable convenience and other business activities;
provided, however, that the Executive shall not be required to devote more than
240 hours in any twelve-month period to such services, which shall be performed
at a time and place mutually convenient to both parties. For his consulting
services, the Executive shall receive, as a consulting fee, compensation at the
rate of $100,000 per annum, payable in equal monthly installments. The
consulting fee shall be adjusted upward, as of each January 1 following the
beginning of the Consulting Term to the end of the Consulting Term, in
proportion to any increase in the Consumer Price Index, as defined in Section
4.4, between the December levels of the two immediately preceding years. Each
such adjustment shall be made retroactively when the Consumer Price Index for
the month next preceding the date of such adjustment becomes available. In
addition, the Executive shall be entitled to participate in each insurance plan
or medical or health plan generally available to Chris-Craft senior executives
and to the reimbursement of expenses on the level made available to the
Executive immediately prior to the termination of the Employment Term. In the
event that the Executive shall be discharged by Chris-Craft during the
Consulting Term other than for cause (as defined in Section 9) or disability (as
described below in this Section 11), he shall nevertheless be entitled to
continue to receive his full consulting fee, and the above-mentioned welfare
plan coverage, for the remainder of the Consulting Term. If the Executive shall
die during the Consulting Term, his estate shal be entitled to receive the full
consulting fee payable hereunder until the earlier to occur of (a) the first
anniversary of the date of his death or (b) the end of the Consulting Term. If,
during the Consulting Term, the Executive shall be disabled from performing his
consulting services, and such disability shall continue for a period of six
consecutive months or for an aggregate of six months within any period of 12
consecutive months, or if such disability shall exist at the start of the
Consulting Term and shall be a continuation of a disability for which the
Employment Term shall have been terminated pursuant to Section 10.2, and the
Board, by written notice to the Executive (before the Executive shall recover
from such disability) shall terminate the Executive's consulting services, the
Executive shall have no further obligation to perform consulting services for
Chris-Craft and shall be entitled to receive compensation at the rate of
one-half of the consulting fee payable hereunder until the earlier to occur of
(a) the first anniversary of such termination or (b) the end of the Consulting
Term. In the event that the Executive voluntarily terminates the Consulting
Term, he shall, following such termination, forfeit his right hereunder to any
further consulting fees and to the above-mentioned welfare plan coverage, which
forfeiture shall constitute the full damages to which Chris-Craft shall be
entitled in such event.
12. Protection of Confidential Information; Non-Competition.
12.1 The Executive agrees that, in view of the fact that his
work for Chris-Craft will bring him into close contact with many confidential
affairs of Chris-Craft not readily available to the public, he will not at any
time (whether during the Employment Term, the Consulting Term, or thereafter)
disclose to any person, firm, corporation, partnership or other entity
whatsoever (except Chris-Craft or any of its subsidiaries), or any officer,
director, stockholder, partner, associate, employee, agent or representative of
any such firm, corporation or other entity, any confidential information or
trade secrets of Chris-Craft which may come into his possession during the
Employment Term or the Consulting Term (the "Confidential Materials"). The term
"Confidential Materials" does not include information which at the time of
disclosure or thereafter is generally available to or known by the public
otherwise than by reason of the Executive's disclosure thereof in violation of
this Agreement (ii) is, was or becomes available to the Executive on a
non-confidential basis from a source other than Chris-Craft, provided that the
Executive has no reason to believe that such source is or was bound by a
confidentiality agreement with Chris-Craft, (iii) has been made available, or is
made available, on an unrestricted basis to a third party by Chris-Craft, by an
individual authorized to do so, or (iv) is known by the Executive prior to its
disclosure to the Executive. The Executive may use and disclose Confidential
Materials to the extent necessary to assert any right or defend against any
claim arising under this Agreement or pertaining to Confidential Materials or
their use, to the extent necessary to comply with any applicable statute,
constitution, treaty, rule, regulation, ordinance or order, whether of the
United States, any state thereof, or any other jurisdiction applicable to the
Executive, or if the Executive receives a request to disclose all or any part of
the information contained in the Confidential Materials unde the terms of a
subpoena, order, civil investigative demand or similar process issued by a court
of competent jurisdiction or by a governmental body or agency, whether of the
United States or any state thereof, or any other jurisdiction applicable to the
Executive.
12.2 During the Noncompetition Period (as defined below in
this Section 12.2), the Executive will not, except on behalf of Chris-Craft or
any of its subsidiaries, directly or indirectly, whether as an officer,
director, stockholder, partner, associate, employee, agent or representative,
become or be interested in, or associated with, any other person, firm,
corporation, partnership or other entity whatsoever, engaged in a business
competitive with any of the businesses of Chris-Craft or any of its subsidiaries
in any of the markets in which Chris-Craft or any of its subsidiaries carries on
such business; provided, however, that the Executive may own as an investor
securities of any such corporation which securities are registered under Section
12(b) or 12(g) of the Exchange Act, so long as he is not part of any control
group of such corporation. "Noncompetition Period" shall mean (a) any period
during which the Executive renders services to Chris-Craft pursuant to Section
1.2 or 11 (the "Period of Service"), and (b) the one-year period following the
Period of Service (other than in the event of death), provided that this clause
(b) shall not apply in the event of a Qualifying Termination (whether occurring
before or after a Change in Control).
12.3 The Executive agrees that a violation of the covenants
set forth in Section 12.1 or 12.2, or any provision thereof, will cause
irreparable injury to Chris-Craft and that Chris-Craft shall be entitled, in
addition to any other rights and remedies it may have, at law or in equity, to
an injunction enjoining and restraining the Executive from doing or continuing
to do any such act and any other violation or threatened violation of said
Section 12.1 or 12.2.
12.4 If any provision of Section 12 as applied to any
circumstance shall be adjudged by a court to be invalid or unenforceable, the
same shall in no way affect any other provision of this Section 12, the
application of such provision in any other circumstances, or the validity or
enforceability of this Section 12. Chris-Craft and the Executive intend this
Section 12 to be enforced as written. However, if any provision, or any part
thereof, is held to be unenforceable because of the duration of such provision
or the area covered thereby, or otherwise, Chris-Craft and the Executive agree
that the court making such determination shall have the power to reduce the
duration and/or area of such provision, and/or to delete specific words or
phrases ("blue-penciling"), and in its reduced or blue-pencilled form such
provision shall then be enforceable and shall be enforced.
12.5 Chris-Craft and the Executive intend to, and do hereby,
confer jurisdiction to enforce the covenants contained in this Section 12 upon
the courts of any state of the United States and any other governmental
jurisdiction within the geographical scope of such covenants. If the courts of
any one or more of such states or jurisdictions shall hold such covenants wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of Chris-Craft and the Executive that such determination shall not bar
or in any way affect Chris-Craft's right to the relief provided above in the
courts of any other state or jurisdiction within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states or
jurisdictions, the above covenants as they relate to each state or jurisdiction
being, for this purpose, severable into diverse and independent covenants.
13. Notices.
All notices, requests, consents and other communications, required or
permitted to be given hereunder, shall be in writing and shall be deemed to have
been duly given (a) if delivered personally, when delivered; (b) if delivered by
overnight carrier, on the first business day following such delivery; (c) if
delivered by registered or certified mail, return receipt requested, on the
third business day after having been mailed. In any case, each such notice,
request, or consent or other communication shall be addressed as follows or to
such other address as either party shall designate by notice in writing to the
other in accordance herewith:
13.1 If to Chris-Craft:
Chris-Craft Industries, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Board of Directors
13.2 If to the Executive to him at his address set forth on the personnel
records of Chris-Craft.
14. General.
14.1 This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
14.2 The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
14.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties. This Agreement does not apply to any stock options
granted to the Executive prior to the date on which the Option described in
Section 6.2 was granted.
14.4 This Agreement and the benefits hereunder are personal to
Chris-Craft and are not assignable or transferable, nor may the services to be
performed hereunder be assigned by Chris-Craft to any person, firm or
corporation; provided, however, that this Agreement and the benefits hereunder
may be assigned by Chris-Craft to any corporation acquiring all or substantially
all of the assets of Chris-Craft or to any corporation into which Chris-Craft
may be merged or consolidated, and this Agreement and the benefits hereunder
will automatically be deemed assigned to any such corporation (and references
herein to Chris-Craft will include any successor corporation), subject, however,
to the Executive's right to terminate the Employment Term in such event as
provided in Section 10.4. Chris-Craft may delegate any of its obligations
hereunder to any subsidiary of Chris-Craft, provided that such delegation shall
not relieve Chris-Craft of its obligations hereunder.
14.5 This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties hereto, or in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by either
party of the breach of any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver of
the breach of any other term or covenant contained in this Agreement.
14.6 Whenever this Agreement provides for any payment to the
Executive's estate, such payment may be made instead to such beneficiary or
beneficiaries as the Executive may have designated by written notice to
Chris-Craft. The Executive shall have the right to revoke any such designation
and to redesignate a beneficiary or beneficiaries by written notice to
Chris-Craft to such effect.
14.7 In case of any dispute or disagreement arising out of, or
in connection with, this Agreement, until the final determination of such
dispute or disagreement Chris-Craft shall continue to pay to the Executive all
of the compensation provided in this Agreement, and the Executive shall be
entitled to continue to receive all of the other benefits provided herein. If,
following a Change in Control, any such dispute or disagreement shall result in
legal action between Chris-Craft and the Executive, the Executive shall be
entitled to recover from Chris-Craft any actual expenses for attorney's fees and
disbursements incurred by him in connection with the Executive's good faith
maintenance or defense of such action, on an after-tax basis. During the
pendency of any such action, Chris-Craft shall pay all actual attorney's fees
and expenses incurred by the Executive in connection therewith upon receipt of
an undertaking by the Executive to repay such amounts as shall be found in such
action as having been incurred in connection with the Executive's maintenance or
defense of such action other than in good faith.
14.8 Chris-Craft agrees that, if the Executive's employment
with Chris-Craft terminates during the Employment Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by Chris-Craft pursuant hereto. Further, the amount of
any payment or benefit provided for in this Agreement (other than as expressly
provided in Sections 10.2, 10.5.1(b) and 10.5.2(b)) shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to Chris-Craft, or otherwise.
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC.
--------------------------------
Name:
Title:
--------------------------------
BRIAN C. KELLY
<PAGE>
Section Page
1. Employment Term 1
2. Duties and Authority 1
3. Location 2
4. Cash Compensation 2
4.1 Base Salary 2
4.2 Deferred Compensation 3
4.3 Bonus 4
4.4 Consumer Price Index 5
5. Expenses 5
6. Additional Benefits 5
7. [This section has been intentionally left blank.]
7
8. Change in Control 7
9. Termination of Agreement for Cause 8
10. Termination Other Than for Cause 9
10.1 Death 9
10.2 Disability 9
10.3 Average Annual Compensation 10
10.4 Termination by Executive 11
10.5 Qualifying Termination 12
11. Consulting Services 14
12. Protection of Confidential Information; Non-Competition 15
13. Notices 17
14. General 18
Stock Price, Dividend and Related Information
Chris-Craft Industries, Inc. and Subsidiaries
Chris-Craft common stock is traded on the New York Stock Exchange
and the Pacific Exchange. The high and low sales prices reported in
the consolidated transaction reporting system are shown below for the
periods indicated. Since Chris-Craft Class B common stock is
ordinarily nontransferable, there is no trading market for such class.
1999 1998
High Low High Low
- ---------------------------------------------------------------
First Quarter 48 7/16 41 5/16 59 3/8 49 1/8
Second Quarter 49 3/4 43 7/8 60 3/8 51 1/4
Third Quarter 59 1/2 46 56 15/16 41 1/4
Fourth Quarter 78 1/4 55 7/8 49 39 7/8
Chris-Craft paid 3% stock dividends on its common stock in April
1999 and April 1998. The Board of Directors plans to continue to
consider, on an annual basis, the payment of dividends in common
stock. As of February 29, 2000, there were 2,464 holders of record of
common stock and 1,528 holders of record of Class B common stock.
Report of Independent Accountants
- ---------------------------------
1301 Avenue of the Americas
New York, New York 10019
To the Board of Directors and
Shareholders of Chris-Craft Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, shareholders' investment
and cash flows present fairly, in all material respects, the financial
position of Chris-Craft Industries, Inc. and its subsidiaries at
December 31, 1999 and 1998, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers
February 14, 2000, except as to Note 11 which is as of March 20, 2000
Consolidated Statements of Cash Flows
Chris-Craft Industries, Inc. and Subsidiaries
Year ended December 31,
-----------------------------
(In Thousands of Dollars) 1999 1998 1997
- ----------------------------------------------------------------------
Cash Flows from Operating
Activities:
Net income $ 42,433 $ 29,470 $ 93,501
Adjustments to reconcile net
income to net cash provided from
operating activities:
Film contract amortization 99,735 88,507 95,244
Film contract payments (100,834) (100,824) (99,513)
Prepaid broadcast rights - - 21,114
Depreciation and other
amortization 24,378 22,088 19,568
Equity in United Paramount
Network loss 97,344 88,597 87,430
Gain on disposition of
marketable securities (33,123) (5,316) (1,079)
Gain on change of ownership
in United Paramount Network - - (153,933)
Minority interest 28,303 24,440 49,483
Other (3,482) 2,486 6,044
Changes in assets and liabilities:
Accounts receivable (12,613) 1,090 1,463
Other assets (5,499) 7,271 (7,816)
Accounts payable and other
liabilities 23,479 1,198 14,921
Income taxes (4,056) 8,900 21,004
- ----------------------------------------------------------------------
Net cash provided from
operating activities 156,065 167,907 147,431
- ----------------------------------------------------------------------
Cash Flows from Investing Activities:
Disposition of marketable
securities 463,317 414,133 1,002,103
Purchase of marketable securities (484,480) (391,963) (948,862)
Station acquisitions (includes
$58,903 and $77,646 of intangible
assets) (61,269) (80,214) -
Distribution from United
Paramount Network - - 116,261
Investment in United
Paramount Network (106,550) (88,100) (48,185)
Other investments (21,247) (22,153) (4,631)
Capital expenditures, net (20,616) (12,260) (7,788)
Other (3,118) (1,852) (4,042)
- ----------------------------------------------------------------------
Net cash (used in) provided
from investing activities (233,963) (182,409) 104,856
- ----------------------------------------------------------------------
Cash Flows from Financing Activities:
Capital transactions of
subsidiaries (2,445) (56,408) (101,756)
Purchase of treasury stock (11,145) (20,171) (22,449)
Proceeds from exercise of employee
stock options 7,020 5,783 14,664
Dividends on preferred stock (402) (414) (420)
- ----------------------------------------------------------------------
Net cash used in
financing activities (6,972) (71,210) (109,961)
- ----------------------------------------------------------------------
Net (Decrease) Increase in Cash and
Cash Equivalents (84,870) (85,712) 142,326
- ----------------------------------------------------------------------
Cash and Cash Equivalents at
Beginning of Year 204,297 290,009 147,683
- ----------------------------------------------------------------------
Cash and Cash Equivalents at
End of Year $ 119,427 $ 204,297 $ 290,009
======================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
Consolidated Statements of Income
Chris-Craft Industries, Inc. and Subsidiaries
(In thousands except Year ended December 31,
per share data) 1999 1998 1997
Operating Revenues:
Television revenues $ 469,347 $ 445,850 $ 443,499
Sales of manufactured products 22,200 21,243 21,147
- ----------------------------------------------------------------------
491,547 467,093 464,646
- ----------------------------------------------------------------------
Operating Expenses:
Television expenses 219,936 210,947 212,183
Cost of manufactured
products sold 13,833 13,754 14,336
Selling, general and
administrative 163,581 147,722 142,602
- ----------------------------------------------------------------------
397,350 372,423 369,121
- ----------------------------------------------------------------------
Operating income 94,197 94,670 95,525
- ----------------------------------------------------------------------
Other Income (Expense):
Interest and other income, net 106,183 80,337 80,556
Equity in United Paramount
Network loss (97,344) (88,597) (87,430)
Gain on change of ownership
in United Paramount Network - - 153,933
- ----------------------------------------------------------------------
8,839 (8,260) 147,059
- ----------------------------------------------------------------------
Income before provision for
income taxes and minority
interest 103,036 86,410 242,584
Provision for Income Taxes 32,300 32,500 99,600
- ----------------------------------------------------------------------
Income before minority
interest 70,736 53,910 142,984
Minority Interest 28,303 24,440 49,483
- ----------------------------------------------------------------------
Net income $ 42,433 $ 29,470 $ 93,501
======================================================================
Weighted Average Common
Shares Outstanding 34,599 34,545 34,432
======================================================================
Earnings per Share:
Basic $ 1.21 $ .84 $ 2.70
======================================================================
Diluted $ .97 $ .67 $ 2.13
======================================================================
The accompanying notes to consolidated financial statements are an
integral part of these statements.
Consolidated Balance Sheets
December 31,
(In thousands of dollars) 1999 1998
Assets
- ------
Current Assets:
Cash and cash equivalents $ 119,427 $ 204,297
Marketable securities (substantially
all U.S. Government securities) 1,240,241 1,211,246
Accounts receivable, less allowance
for doubtful accounts of $4,676
and $4,956 102,292 88,382
Film contract rights 111,819 99,883
Prepaid expenses and other current assets 71,316 52,933
- ---------------------------------------------------------------------
Total current assets 1,645,095 1,656,741
- ---------------------------------------------------------------------
Investments 104,176 69,881
- ---------------------------------------------------------------------
Film Contract Rights, including deposits,
less estimated portion to be used
within one year 39,550 23,619
- ---------------------------------------------------------------------
Property and Equipment, at cost:
Land, buildings and improvements 49,559 44,305
Machinery and equipment 132,665 115,314
- ---------------------------------------------------------------------
182,224 159,619
Less - Accumulated depreciation 117,185 108,040
- ---------------------------------------------------------------------
65,039 51,579
- ---------------------------------------------------------------------
Intangible Assets 474,846 428,254
- ---------------------------------------------------------------------
Other Assets 17,279 15,349
- ---------------------------------------------------------------------
$2,345,985 $2,245,423
=====================================================================
December 31,
1999 1998
- ---------------------------------------------------------------------
Liabilities and Shareholders' Investment
- ----------------------------------------
Current Liabilities:
Film contracts payable within one year $ 102,737 $ 96,595
Accounts payable and accrued expenses 153,509 130,515
Income taxes payable 34,907 41,653
- ---------------------------------------------------------------------
Total current liabilities 291,153 268,763
- ---------------------------------------------------------------------
Film Contracts Payable after One Year 84,372 62,050
- ---------------------------------------------------------------------
Other Long-Term Liabilities 25,210 26,321
- ---------------------------------------------------------------------
Minority Interest 503,447 479,820
- ---------------------------------------------------------------------
Commitments and Contingencies (Note 9)
Shareholders' Investment:
Cumulative preferred stock -
Prior preferred stock - $1.00 dividend;
stated at liquidating value of $21.50
per share; currently authorized 73,399
shares; outstanding 73,399 shares 1,578 1,578
Convertible preferred stock - $1.40
dividend; stated at $17.50 per
share; currently authorized 234,374
shares; outstanding 234,374 and
235,935 shares (liquidating value
$23.00 per share, aggregating $5,391) 4,102 4,129
Class B common stock - par value $.50
per share; currently authorized
50,000,000 shares; outstanding
7,997,292 and 8,127,937 shares 3,999 4,064
Common stock - par value $.50 per share;
currently authorized 100,000,000
shares; outstanding 25,781,763
and 24,556,196 shares 13,682 13,069
Capital surplus 420,390 376,375
Retained earnings 991,398 993,184
Accumulated other comprehensive
income 6,654 16,070
- ---------------------------------------------------------------------
1,441,803 1,408,469
- ---------------------------------------------------------------------
$2,345,985 $2,245,423
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<TABLE>
Consolidated Statements of Shareholders' Investment
<CAPTION>
Dollar
Treasury Amount
Outstanding Shares Shares (In thousands)
Class B $1.00 $1.40 Common
Common Common Preferred Preferred Common Stocks
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 22,472,409 7,870,807 73,399 253,195 - $15,962
Comprehensive income:
Net income - - - - - -
Other comprehensive income:
Unrealized net gain on
securities (net of tax
of $4,668) - - - - - -
Reclassification adjustment
(net of tax of $397) - - - - - -
Other comprehensive income,
net of tax - - - - - -
Total comprehensive income - - - - - -
Capital transactions
of subsidiaries - - - - - -
Dividends on preferred stock - - - - - -
Common stock dividend - 3% 676,458 238,283 - - - 457
Conversion of preferred stock 103,482 108,335 - (6,594) - 106
Conversion of Class B
common stock 287,041 (287,041) - - - -
Stock options, including
related tax benefits 599,125 - - - - 300
Acquisition of
treasury stock - - - - (486,500) -
Retirement of treasury stock (486,500) - - - 486,500 (243)
- -------------------------------------------------------------------------------------------
Balance at
December 31, 1997 23,652,015 7,930,384 73,399 246,601 - 16,582
Comprehensive income:
Net income - - - - - -
Other comprehensive income:
Unrealized net gain on
securities (net of tax
of $8,954) - - - - - -
Reclassification
adjustment (net of
tax of $1,887) - - - - - -
Other comprehensive
income, net of tax - - - - - -
Total comprehensive income - - - - - -
Capital transactions of
subsidiaries - - - - - -
Dividends on preferred stock - - - - - -
Common stock dividend - 3% 708,435 237,302 - - - 473
Conversion of preferred stock 151,109 209,566 - (10,666) - 180
Conversion of Class B common
stock 249,315 (249,315) - - - -
Stock options, including
related tax benefits 190,722 - - - - 96
Acquisition of treasury stock - - - - (395,400) -
Retirement of treasury stock (395,400) - - - 395,400 (198)
- -------------------------------------------------------------------------------------------
Balance at
December 31, 1998 24,556,196 8,127,937 73,399 235,935 - 17,133
Comprehensive income:
Net income - - - - - -
Other comprehensive income:
Unrealized net gain on
securities (net of tax
of $4,810) - - - - - -
Reclassification
adjustment (net of tax
of $11,020) - - - - - -
Other comprehensive
income, net of tax - - - - - -
Total comprehensive income - - - - - -
Capital transactions of
subsidiaries - - - - - -
Dividends on preferred stock - - - - - -
Common stock dividend - 3% 733,553 242,313 - - - 488
Conversion of preferred stock 54,232 46 - (1,561) - 27
Conversion of Class B
common stock 373,004 (373,004) - - - -
Stock options, including
related tax benefits 310,278 - - - - 155
Acquisition of treasury stock - - - - (245,500) -
Retirement of treasury stock (245,500) - - - 245,500 (122)
- -------------------------------------------------------------------------------------------
Balance at
December 31, 1999 25,781,763 7,997,292 73,399 234,374 - $17,681
</TABLE>
<TABLE>
<CAPTION>
Dollar Amount (In thousands)
Accumulated
Other
Preferred Capital Retained Treasury Comprehensive Comprehensive
Stocks Surplus Earnings Stock Income Income
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 $6,009 $311,623 $954,048 $ - $1,276
Comprehensive income:
Net income - - 93,501 - - $93,501
Other comprehensive income: -------
Unrealized net gain on
securities (net of tax
of $4,668) - - - - - 5,537
Reclassification adjustment
(net of tax of $397) - - - - - (448)
Other comprehensive income, -------
net of tax - - - - 5,089 5,089
-------
Total comprehensive income - - - - - $98,590
=======
Capital transactions
of subsidiaries - 714 - - -
Dividends on preferred stock - - (420) - -
Common stock dividend - 3% - 36,288 (36,745) - -
Conversion of preferred stock (116) 8 - - -
Conversion of Class B
common stock - - - - -
Stock options, including
related tax benefits - 17,976 - - -
Acquisition of
treasury stock - - - (22,896) -
Retirement of treasury stock - (22,653) - 22,896 -
- -----------------------------------------------------------------------------------
Balance at
December 31, 1997 5,893 343,956 1,010,384 - 6,365
Comprehensive income:
Net income - - 29,470 - - $29,470
Other comprehensive income: -------
Unrealized net gain on
securities (net of tax
of $8,954) - - - - - 12,199
Reclassification
adjustment (net of
tax of $1,887) - - - - - (2,494)
Other comprehensive -------
income, net of tax - - - - 9,705 9,705
-------
Total comprehensive income - - - - - $39,175
=======
Capital transactions of
subsidiaries - (924) - - -
Dividends on preferred stock - - (414) - -
Common stock dividend - 3% - 45,783 (46,256) - -
Conversion of preferred stock (186) 6 - - -
Conversion of Class B common
stock - - - - -
Stock options, including
related tax benefits - 6,877 - - -
Acquisition of treasury stock - - - (19,521) -
Retirement of treasury stock - (19,323) - 19,521 -
Balance at
December 31, 1998 5,707 376,375 993,184 - 16,070
Comprehensive income:
Net income - - 42,433 - - $42,433
Other comprehensive income: -------
Unrealized net gain on
securities (net of tax
of $4,810) - - - - - 7,187
Reclassification
adjustment (net of tax
of $11,020) - - - - - (16,603)
Other comprehensive -------
income, net of tax - - - - (9,416) (9,416)
-------
Total comprehensive income - - - - - $33,017
=======
Capital transactions of
subsidiaries - 1,474 - - -
Dividends on preferred stock - - (402) - -
Common stock dividend - 3% - 43,328 (43,817) - -
Conversion of preferred stock (27) - - - -
Conversion of Class B
common stock - - - - -
Stock options, including
related tax benefits - 10,236 - - -
Acquisition of treasury stock - - - (11,145) -
Retirement of treasury stock - (11,023) - 11,145 -
- ------------------------------------------------------------------------------------
Balance at
December 31, 1999 $5,680 $420,390 $991,398 $ - $6,654
====================================================================================
The accompanying notes to consolidated financial statements are an integral part of these
statements.
</TABLE>
Notes to Consolidated Financial Statements
Chris-Craft Industries, Inc. and Subsidiaries
- ---------------------------------------------
NOTE 1
- --------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) BUSINESS AND BASIS OF PRESENTATION
Chris-Craft's primary business is television broadcasting,
conducted through its majority owned (80.0% at December 31, 1999 and
79.96% at December 31, 1998) television broadcasting subsidiary, BHC
Communications, Inc. BHC wholly owned subsidiaries operate three
television stations, and BHC's majority owned (58.1% at December 31,
1999 and 58.5% at December 31, 1998) subsidiary, United Television,
Inc. (UTV), operates seven television stations, one of which was
acquired in July 1999.
BHC accounts for its interest in the partnership that operates
the United Paramount Network (UPN), a broadcast television network
which premiered in January 1995, under the equity method. BHC recorded
100% of UPN's start-up losses from the network's 1994 inception
through January 15, 1997, when Viacom Inc. completed its acquisition
of a 50% interest in the partnership. Thereafter, BHC has recorded 50%
of UPN's start-up losses. On March 20, 2000, BHC elected to sell its
50% interest in UPN to Viacom, and expects to close the transaction by
March 31, 2000. As a result of the sale, BHC will have no further
ownership interest in the network or obligation to fund UPN's
operations. See Note 11.
The accompanying consolidated financial statements include the
accounts of Chris-Craft and its subsidiaries, after elimination of all
significant intercompany accounts and transactions. The pro rata
interests of BHC and UTV minority shareholders in the net income and
net assets of BHC and UTV are set forth as Minority Interest in the
Consolidated Statements of Income and Consolidated Balance Sheets,
respectively. Chris-Craft has elected to present Comprehensive Income
in the Consolidated Statements of Shareholders' Investment. Such
amounts have been presented net of income taxes and minority
interests. Preparation of financial statements in accordance with
generally accepted accounting principles requires the use of
management estimates and assumptions. Actual results could differ.
Certain prior year amounts have been restated to conform with the 1999
presentation.
(B) FINANCIAL INSTRUMENTS
Cash equivalents are securities having maturities at time of
purchase not exceeding three months. The fair value of cash
equivalents approximates carrying value, reflecting their short
maturities.
All of Chris-Craft's marketable securities have been categorized
as available for sale and are carried at fair market value. Since
marketable securities are available for current operations, all are
included in current assets, as follows:
Gross Unrealized
------------------
(In thousands) Cost Gains Losses Fair Value
- -----------------------------------------------------------------
December 31, 1999:
U.S. Government
securities $1,149,089 $ 35 $ 2,520 $1,146,604
Other 75,342 21,090 2,795 93,637
- -----------------------------------------------------------------
$1,224,431 $21,125 $ 5,315 $1,240,241
=================================================================
Gross Unrealized
-----------------
(In thousands) Cost Gains Losses Fair Value
- -----------------------------------------------------------------
December 31, 1998:
U.S. Government
securities $1,093,744 $ 1,656 $ 27 $1,095,373
Other 83,881 33,034 1,042 115,873
- -----------------------------------------------------------------
$1,177,625 $ 34,690 $1,069 $1,211,246
=================================================================
Of the U.S. Government securities held at December 31, 1999, 98%
mature within one year and all within 16 months.
Certain additional information related to Chris-Craft's
marketable securities as of and for the years ended December 31, 1999,
1998 and 1997 is as follows:
(In thousands) 1999 1998 1997
- ------------------------------------------------------------------
Sales proceeds $ 463,317 $ 414,133 $ 1,002,103
Realized gains 33,153 6,018 1,256
Realized losses 30 702 177
Net unrealized gain 15,810 33,621 13,780
Adjustment for unrealized
gain, net of deferred
income taxes and minority
interests $ 6,654 $ 16,070 $ 6,365
==================================================================
For purposes of computing realized gains and losses, cost was
determined using the specific identification method.
(C) FILM CONTRACTS
Chris-Craft's television stations own film contract rights which
allow generally for limited showings of films and syndicated programs.
Film contract rights and related liabilities are recorded when the
programming becomes available for telecasting.
Contracts are amortized over the estimated number of showings,
using primarily accelerated methods as films are used, based on
management's estimates of the flow of revenue and the ultimate total
cost for each contract. In the opinion of management, future revenue
derived from airing programming will be sufficient to cover related
unamortized rights balances at December 31, 1999. The estimated costs
of recorded film contract rights to be charged to income within one
year are included in current assets; payments on such contracts due
within one year are included in current liabilities. The approximate
future maturities of film contracts payable after one year at December
31, 1999 are $45,997,000, $26,548,000, $11,331,000 and $496,000 in
2001, 2002, 2003 and thereafter, respectively. The net present value
at December 31, 1999 of such payments, based on an 8.5% discount rate,
was approximately $68,400,000. See Note 9.
(D) DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is generally provided on
the straight-line method over the estimated useful lives of the
assets, ranging from three to 40 years, except that leasehold
improvements are amortized over the lives of the respective leases, if
shorter.
(E) INTANGIBLE ASSETS
Intangible assets reflect the excess of the purchase prices of
businesses acquired over net tangible assets at dates of acquisition.
The carrying values of such intangibles as of December 31, 1999 and
1998 are as follows:
(In thousands) 1999 1998
- -------------------------------------------------------------------
Television Division $474,072 $427,480
Industrial Division 774 774
- -------------------------------------------------------------------
$474,846 $428,254
===================================================================
Television Division amounts primarily relate to television
station WWOR, which was acquired in 1992, and television stations WRBW
and WUTB, the assets of which were acquired in 1999 and 1998,
respectively, and are being amortized on a straight-line basis over
40-year periods. Accumulated amortization of intangible assets
totalled $90,650,000 at December 31, 1999 and $77,342,000 at December
31, 1998. Intangible assets at December 31, 1999 include goodwill
totalling $56,652,000 resulting from purchases by BHC of its own
shares at prices greater than net book value.
(F) REVENUE RECOGNITION AND BARTER TRANSACTIONS
Revenue is recognized upon broadcast of television advertising
and upon shipment of manufactured products. The estimated fair value
of goods or services received by Chris-Craft's television stations in
barter (nonmonetary) transactions, most of which relate to the
acquisition of programming, is recognized as revenue when the air time
is used by the advertiser. Barter revenue totalled $44,222,000 in
1999, $47,654,000 in 1998 and $43,944,000 in 1997. Barter expense in
each year approximated barter revenue.
(G) EARNINGS PER SHARE
Earnings per share amounts have been computed as follows:
Year ended December 31,
(In thousands except per share data) 1999 1998 1997
- ---------------------------------------------------------------------
Basic -
Net income $42,433 $29,470 $93,501
Less: Preferred stock dividends (402) (410) (420)
- ---------------------------------------------------------------------
Income available to common shareholders $42,031 $29,060 $93,081
=====================================================================
Weighted average common shares
outstanding 34,599 34,545 34,432
=====================================================================
Basic per share amount $ 1.21 $ .84 $ 2.70
=====================================================================
Year ended December 31,
(In thousands except per share data) 1999 1998 1997
- ---------------------------------------------------------------------
Diluted -
Income available to common
shareholders $42,031 $29,060 $93,081
Effect of dilutive securities -
Convertible preferred stock dividend 329 337 347
Dilution of UTV net income from UTV
stock options (76) (82) (138)
- ---------------------------------------------------------------------
Income available assuming dilution $42,284 $29,315 $93,290
=====================================================================
Weighted average common shares
outstanding 34,599 34,545 34,432
Effect of dilutive securities -
Convertible preferred stock 8,442 8,707 8,900
Stock options 483 312 365
- ---------------------------------------------------------------------
Weighted average shares
outstanding assuming dilution 43,524 43,564 43,697
=====================================================================
Diluted per share amount $ .97 $ .67 $ 2.13
=====================================================================
Amounts give retroactive effect to all stock dividends declared
through March 16, 2000. See Note 11. All securities which could dilute
per share amounts are included in the computation of diluted earnings
per share.
(H) STOCK-BASED COMPENSATION
Chris-Craft has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." See Note 6.
(I) SUPPLEMENTAL CASH FLOW INFORMATION AND DISCLOSURE OF NONCASH
INVESTING ACTIVITIES
Cash paid for income taxes totalled $36,100,000 in 1999,
$30,600,000 in 1998 and $79,400,000 in 1997.
The 1997 distribution from UPN to BHC was net of approximately
$38,800,000, representing additional BHC capital contributions.
NOTE 2
- ---------------------------------------------------------------------
UNITED PARAMOUNT NETWORK:
In July 1994, BHC, along with Viacom Inc.'s Paramount Television
Group, formed the United Paramount Network, a broadcast television
network which premiered in January 1995. BHC owned 100% of UPN from
its inception through January 15, 1997, when Viacom completed the
exercise of its option to acquire a 50% interest in UPN. The option
price included approximately one-half of BHC's aggregate cash
contributions to UPN through the exercise date, plus interest, and
additional cash available for ongoing UPN expenditures. UPN
distributed $116,261,000 to BHC pursuant to the option exercise, and
BHC realized a 1997 pretax gain on the exercise of $153,933,000. On
March 20, 2000, BHC elected to sell its 50% interest in UPN to Viacom,
and expects to close the transaction by March 31, 2000. As a result
of the sale, BHC will have no further ownership interest in the
network or obligation to fund UPN's operations. See Note 11.
UPN has been organized as a partnership, and BHC's partnership
interest is accounted for under the equity method. The carrying value
of such interest, which reflects BHC funding of $106,550,000 in 1999
and $88,100,000 in 1998, and BHC's pro rata share of UPN losses in
those years, totalled $9,821,000 at December 31, 1999 and $615,000 at
December 31, 1998, and is included in Investments on the accompanying
Consolidated Balance Sheets. Condensed consolidated financial
statements of UPN are as follows:
BALANCE SHEETS
December 31,
(In thousands) 1999 1998
- ---------------------------------------------------------------------
Current assets $ 85,531 $ 92,934
Other assets 30,826 27,305
- ---------------------------------------------------------------------
$ 116,357 $ 120,239
=====================================================================
Current liabilities $ 96,715 $ 119,008
Partners' capital 19,642 1,231
- ---------------------------------------------------------------------
$ 116,357 $ 120,239
=====================================================================
STATEMENTS OF OPERATIONS
Year ended December 31,
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------
Operating revenues* $ 134,127 $ 96,401 $ 89,997
Operating expenses* 325,845 275,165 261,962
- ---------------------------------------------------------------------
Operating loss (191,718) (178,764) (171,965)
Other income (expense), net (2,970) 1,571 1,768
- ---------------------------------------------------------------------
Net loss $(194,688) $(177,193) $(170,197)
=====================================================================
* With respect to certain of its programming, through August 31, 1997
UPN derived no revenue and incurred no programming expense.
The following information as it relates to UPN is provided in
accordance with Statement of Financial Accounting Standards (SFAS)
131. See Note 11.
Year ended December 31,
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------
Depreciation and amortization $ 751 $ 2,069 $ 1,794
Capital expenditures $ 454 $ 1,565 $ 467
NOTE 3
- ---------------------------------------------------------------------
ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the
following:
December 31,
(In thousands) 1999 1998
- ---------------------------------------------------------------------
Accounts payable $ 9,830 $ 7,757
Accrued expenses -
Payroll and compensation 76,189 63,011
Deferred barter revenue 39,754 38,824
Other 27,736 20,923
- ---------------------------------------------------------------------
$ 153,509 $ 130,515
=====================================================================
NOTE 4
- ---------------------------------------------------------------------
SHAREHOLDERS' INVESTMENT:
Each share of $1.00 prior preferred stock is redeemable by Chris-
Craft at $25.00. Each share of $1.40 convertible preferred stock is
redeemable by Chris-Craft at $40.00 and is convertible into common
stock as set forth below. Chris-Craft has authorized 10,000,000 shares
of preferred stock, $1.00 par value, that may be issued without
further shareholder approval, in one or more series, the terms and
provisions of which shall be set by the Board of Directors.
Each share of Class B common stock entitles the holder to ten
votes (common stock entitles the holder to one vote per share), is
convertible at all times into common stock on a share-for-share basis,
is not transferable except to specified persons ("Permitted
Transferees") and, in general, carries the same per share dividend and
liquidation rights as a share of common stock, except that the Board
of Directors may in its discretion declare greater cash dividends per
share on the common stock than on the Class B common stock. No
additional Class B shares may be issued without further shareholder
approval, except upon the conversion of $1.40 convertible preferred
shares by holders of record on November 10, 1986 (the record date for
the initial distribution of Class B common stock) or Permitted
Transferees, or in payment of stock dividends or stock splits on
outstanding shares of Class B common stock.
So long as any Class B common stock is outstanding, each share of
$1.40 convertible preferred stock will entitle the holder on November
10, 1986, or Permitted Transferees, to convert such share of $1.40
convertible preferred stock into 11.62760 shares of common stock and
23.25520 shares of Class B common stock, and to 243.6 votes (11.97643,
23.95286 and 252.0, respectively, as adjusted for the 2000 stock
dividend. See Note 11). The foregoing special conversion and voting
rights will be available to holders of $1.40 convertible preferred
stock transferred after November 10, 1986 only under the same
circumstances as those in which the Class B common stock is
transferable. Each share of $1.40 convertible preferred stock
transferred after November 10, 1986 entitles its holder (other than a
Permitted Transferee) to convert such share into 34.88280 shares of
common stock and 34.9 votes (35.92929 and 35.9, respectively, as
adjusted for the 2000 stock dividend. See Note 11).
Chris-Craft, from time to time, has purchased shares of its
capital stock, including 1999 purchases of 245,500 shares of common
stock. At December 31, 1999, 586,602 shares of common stock and 12,899
shares of $1.00 prior preferred stock remained authorized for
purchase.
As of December 31, 1999, shares of Chris-Craft's authorized but
unissued common stock were reserved for issuance as follows:
Shares
- ---------------------------------------------------------------------
Conversion of Class B common stock 7,997,292
Conversion of $1.40 convertible preferred stock* 8,175,621
Stock options (including options outstanding
for 3,657,942 shares) 5,027,596
- ---------------------------------------------------------------------
21,200,509
=====================================================================
* Including Class B common shares.
NOTE 5
- ---------------------------------------------------------------------
CAPITAL TRANSACTIONS OF SUBSIDIARIES:
BHC had outstanding, at December 31, 1999, 4,511,605 shares of
Class A common stock and 18,000,000 shares of Class B common stock.
Chris-Craft owns all outstanding Class B common shares and 10,000
Class A common shares, which represented 80% of BHC's then outstanding
equity and 97.6% of BHC's voting power. From January 1990, when BHC
became a public company and was 60% owned by Chris-Craft, through
December 31, 1998, BHC purchased 6,895,590 shares of its Class A
common stock, including 226,503 from UTV in 1998, at an aggregate cost
of $516,503,000. BHC treasury stock expenditures totalled $46,305,000
in 1998 and $95,408,000 in 1997. No additional shares were acquired by
BHC during 1999. At December 31, 1999, 185,497 Class A common shares
remained authorized for purchase.
UTV has also acquired its own shares, expending $828,000 in 1999,
$7,010,000 in 1998 and $2,755,000 in 1997, and received proceeds of
$4,849,000 in 1999, $3,579,000 in 1998 and $3,939,000 in 1997 from the
exercise of stock options.
Such transactions, together with BHC special dividends of $1.00
per share in 1999, 1998 and 1997, and UTV dividends of $.50 per share
in 1999, 1998 and 1997, are reflected in the accompanying Consolidated
Statements of Cash Flows and Consolidated Statements of Shareholders'
Investment under the caption Capital transactions of subsidiaries, net
of intercompany eliminations and minority interests.
NOTE 6
- ---------------------------------------------------------------------
STOCK OPTIONS:
Under the 1999 Management Incentive Plan, adopted by Chris-Craft
shareholders in May 1999, options (including Incentive Stock Options)
to purchase shares of common stock may be granted from time to time to
employees of Chris-Craft and its subsidiaries, at prices not less than
the fair market value at date of grant. The 1999 Plan replaced a
similar plan, the 1994 Plan, which was terminated with respect to the
grant of additional options when the 1999 Plan became effective.
Options under the 1999 Plan are exercisable in 50% installments
commencing four years from date of grant. Options under the 1994 Plan
are exercisable in cumulative annual installments of 33 1/3%
commencing one year from date of grant. Options expire over a period
determined by the Plan Committees, which may not exceed ten years from
date of grant. Options currently outstanding expire either five or ten
years from date of grant.
Both the 1999 Plan and the 1994 Plan permit the Plan Committees
to award stock appreciation rights to holders of options granted under
the Plans. Such rights entitle the holders, in lieu of exercising
their options, to receive payment from Chris-Craft in cash, stock or a
combination thereof, equal to the greater of the appreciation in
market value or book value of the shares covered by exercisable
options. No stock appreciation rights have been awarded under either
Plan.
Transactions under the two Plans during the three years ended
December 31, 1999 were as follows:
(In thousands of dollars Shares under Weighted Average
except per share data) Option Exercise Price Total
- ---------------------------------------------------------------------
Outstanding,
December 31, 1996 1,644,337 $30.83 $ 50,693
Increase to reflect
3% stock dividend 47,694 - -
Exercised (639,900) $27.06 (17,317)
Cancelled (1,620) $33.95 (55)
- ---------------------------------------------------------------------
Outstanding,
December 31, 1997 1,050,511 $31.72 33,321
Increase to reflect
3% stock dividend 30,333 - -
Granted 122,500 $51.31 6,285
Exercised (174,571) $31.21 (5,449)
- ---------------------------------------------------------------------
Outstanding,
December 31, 1998 1,028,773 $33.20 34,157
Increase to reflect
3% stock dividend 76,300 - -
Granted 2,716,800 $51.14 138,947
Exercised (364,618) $30.78 (11,222)
Cancelled (7,897) $49.89 (394)
- ---------------------------------------------------------------------
Outstanding,
December 31, 1999 3,449,358 $46.82 $161,488
=====================================================================
Of the 3,449,358 shares under option under the above Plans at
December 31, 1999, 608,246 are currently exercisable at $29.65 to
$49.82 per share and expire from June 14, 2003 through April 27, 2004.
The remaining 2,841,112 at $42.11 to $57.50 per share expire from June
14, 2003 to September 27, 2009. At December 31, 1999, options for
1,300,000 shares were available for grant under the 1999 Plan.
Chris-Craft received 83,310 common shares in 1999, 7,396 common
shares in 1998 and 74,867 common shares in 1997 as partial payment of
exercised options.
Under the 1994 Director Stock Option Plan, a fixed number of
immediately exercisable options to purchase shares of common stock are
granted annually to each nonemployee director of Chris-Craft, at
prices equal to fair market value at date of grant. The 1994 Director
Stock Option Plan replaced a similar plan which has been terminated
with respect to the grant of additional options. Transactions under
the two Plans during the three years ended December 31, 1999, were as
follows:
(In thousands of dollars Shares under Weighted Average
except per share data) Option Exercise Price Total
- ---------------------------------------------------------------------
Outstanding,
December 31, 1996 145,630 $34.36 $ 5,004
Increase to reflect
3% stock dividend 4,358 - -
Granted 43,704 $42.88 1,873
Exercised (34,092) $29.10 (992)
- ---------------------------------------------------------------------
Outstanding,
December 31, 1997 159,600 $36.87 5,885
Increase to reflect
3% stock dividend 4,597 - -
Granted 45,008 $56.50 2,542
Exercised (23,547) $31.46 (741)
- ---------------------------------------------------------------------
Outstanding,
December 31, 1998 185,658 $41.40 7,686
Increase to reflect
3% stock dividend 5,544 - -
Granted 46,352 $47.00 2,178
Exercised (28,970) $29.66 (859)
- ---------------------------------------------------------------------
Outstanding,
December 31, 1999 208,584 $43.17 $9,005
=====================================================================
Of the 208,584 shares under option under the 1994 Director Stock
Option Plan at December 31, 1999, 115,880 are currently exercisable at
$29.99 to $40.41 per share and expire from April 26, 2000 through May
5, 2002. The remaining 92,704 are currently exercisable at $47.00 to
$54.85 per share and expire from May 2, 2003 to May 3, 2004. At
December 31, 1999, options for 69,654 shares were available for grant
under this Plan.
UTV also maintains stock option plans, and has chosen, like
Chris-Craft, to continue to account for stock-based compensation using
the intrinsic value method. If Chris-Craft and UTV had elected to
recognize compensation expense based upon the fair value at the grant
date for awards under their plans using the methodology prescribed by
SFAS 123, Chris-Craft net income and earnings per share would have
been the pro forma amounts as follows:
(In thousands except per Year ended December 31,
share amounts) 1999 1998 1997
- ---------------------------------------------------------------------
Net income:
As reported $42,433 $29,470 $93,501
Pro forma $37,608 $28,975 $92,855
Earnings per share:
Basic -
As reported $ 1.21 $ .84 $ 2.70
Pro forma $ 1.08 $ .83 $ 2.68
Diluted -
As reported $ .97 $ .67 $ 2.13
Pro forma $ .86 $ .66 $ 2.12
======================================================================
These pro forma amounts may not be representative of the pro
forma effect on net income in future years, since the estimated fair
value of stock options is amortized over the vesting period, pro forma
compensation expense related to grants made prior to 1995 is not
considered and additional options may be granted in future years.
The weighted average fair values of Chris-Craft options granted
during 1999, 1998 and 1997 were $11.10, $12.24 and $13.16 per share,
respectively, at dates of grant. The fair values of options were
estimated using the Black-Scholes option pricing model with the
following weighted average assumptions for the years ended December
31, 1999, 1998 and 1997, respectively: dividend yields of zero for all
periods; expected volatility of 17.6%, 15.6% and 16.3%; risk free
interest rates of 5.1%, 5.4% and 6.4%; and expected option life of
3.5, 3.9 and 5 years for 1999, 1998 and for 1997.
NOTE 7
- ---------------------------------------------------------------------
RETIREMENT PLANS:
Chris-Craft and UTV maintain noncontributory defined benefit
pension plans covering substantially all their employees. Benefits
accrue annually based on compensation paid to participants each year.
The funding policy is to contribute annually to the plans amounts
sufficient to fund current service costs and to amortize any unfunded
accrued liability over periods not to exceed 30 years.
The estimated funded status of the Chris-Craft and UTV plans,
including amounts accrued in the nonqualified plans, was as follows:
December 31,
(In thousands) 1999 1998
- ---------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 59,181 $49,681
Service cost 4,065 4,187
Interest cost 3,931 3,574
Actuarial (gain)/loss (7,825) 2,156
Amendments - 471
Benefits paid (2,430) (888)
- ---------------------------------------------------------------------
Benefit obligation at end of year 56,922 59,181
- ---------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning
of year 37,219 32,633
Actual return on plan assets 3,082 3,649
Employer contributions 4,139 1,825
Benefits paid (2,430) (888)
- ---------------------------------------------------------------------
Fair value of plan assets at end of year 42,010 37,219
Plan assets less than projected
benefit obligation (14,912) (21,962)
Unrecognized initial net asset (34) (84)
Unrecognized prior service cost 699 746
Unrecognized net actuarial gain (9,308) (1,313)
- ---------------------------------------------------------------------
Pension liability $(23,555) $(22,613)
=====================================================================
Pension expense, including amounts accrued in Chris-Craft and UTV
nonqualified plans for retirement benefits in excess of statutory
limitations, was as follows:
Year ended December 31,
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------
Service cost $ 4,065 $ 4,187 $ 3,837
Interest cost 3,931 3,574 3,122
Expected return on plan assets (2,912) (2,533) (2,264)
Amortization:
Initial unrecognized net asset (50) (50) (50)
Prior service cost 48 47 12
Actuarial loss/(gain) - (9) 22
- ---------------------------------------------------------------------
Net periodic pension cost $ 5,082 $ 5,216 $ 4,679
=====================================================================
Assumptions used in accounting for pension plans for each year
are as follows:
1999 1998 1997
- ---------------------------------------------------------------------
Discount rate at end of year 7.50% 6.75% 7.25%
Rate of increase in future compensation
levels 4.00% 4.00% 4.50%
Expected long-term rate of return on assets 7.75% 7.75% 7.75%
The accumulated benefit obligation, projected benefit obligation
and fair value of plan assets for the above plans that had an
accumulated benefit obligation in excess of the fair value of plan
assets were $10,456,000, $13,972,000 and $0, respectively, at December
31, 1999, and $27,464,000, $35,883,000 and $14,973,000, respectively,
at December 31, 1998.
Chris-Craft and certain of its subsidiaries maintain other
retirement plans, primarily stock purchase and profit sharing plans.
The aggregate costs of such plans, including related amounts accrued
in the nonqualified plans referred to above, were $18,263,000 in 1999,
$8,931,000 in 1998 and $16,936,000 in 1997.
NOTE 8
INCOME TAXES:
- ---------------------------------------------------------------------
Income taxes are provided in the accompanying Consolidated
Statements of Income as follows:
Year ended December 31,
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------
Current:
Federal $29,300 $24,300 $63,000
State 10,000 8,500 18,600
- ---------------------------------------------------------------------
39,300 32,800 81,600
- ---------------------------------------------------------------------
Deferred:
Federal (7,200) (800) 17,900
State 200 500 100
- ---------------------------------------------------------------------
(7,000) (300) 18,000
- ---------------------------------------------------------------------
$32,300 $32,500 $99,600
=====================================================================
Differences between income taxes at the federal statutory income
tax rate and total income taxes provided are as follows:
Year ended December 31,
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------
Taxes at federal statutory rate $36,063 $30,244 $84,904
State income taxes, net 6,630 5,850 12,155
Amortization of intangible assets 3,626 3,250 3,127
Dividend from BHC 1,260 1,260 1,260
Reversal of valuation allowance (8,973) - -
Realization of tax benefit (6,500) (8,500) -
Other 194 396 (1,846)
- ---------------------------------------------------------------------
$32,300 $32,500 $99,600
=====================================================================
Deferred tax assets and deferred tax liabilities reflect the tax
effect of the following differences between financial statement
carrying amounts and tax bases of assets and liabilities:
December 31,
(In thousands) 1999 1998
- ---------------------------------------------------------------------
Accrued liabilities not deductible until paid $36,759 $32,816
Film contract rights 8,254 8,325
Tax credit and loss carryforwards 2,947 9,314
Other 205 168
- ---------------------------------------------------------------------
48,165 50,623
Valuation allowance - (8,973)
- ---------------------------------------------------------------------
Deferred tax assets, net 48,165 41,650
- ---------------------------------------------------------------------
Investments (12,402) (14,179)
Other intangibles (3,324) (1,589)
Property and equipment (2,259) (2,422)
SFAS 115 adjustment (5,809) (12,019)
- ---------------------------------------------------------------------
Deferred tax liabilities (23,794) (30,209)
- ---------------------------------------------------------------------
Net deferred tax assets $24,371 $11,441
=====================================================================
The valuation allowance reflected the uncertainty with respect to
the realization of future tax benefits relating to certain tax
carryforwards and future dispositions of certain investments having
tax bases greater than related financial statement carrying amounts.
This valuation allowance was reversed in 1999 as the uncertainty was
removed when BHC became a member of the Chris-Craft affiliated group.
Tax benefits of $3,371,000, $1,189,000 and $3,612,000 arising
from the exercise of employee stock options were credited to capital
surplus in 1999, 1998 and 1997, respectively.
NOTE 9
COMMITMENTS AND CONTINGENCIES:
- ---------------------------------------------------------------------
The aggregate amount payable by Chris-Craft's television stations
under contracts for programming not currently available for
telecasting and, accordingly, not included in film contracts payable
and the related contract rights in the accompanying Consolidated
Balance Sheets totalled $278,000,000 at December 31, 1999 (including
$78,300,000 applicable to UTV).
At December 31, 1999, UTV remains obligated for possible future
consideration relating to the purchase of WRBW of up to $25,000,000.
In April 1999, a jury awarded damages totalling $7.3 million
(approximately $8.4 million including legal fees and interest through
March 2000) to a former WWOR employee who filed suit alleging
discrimination by the station. The station and its counsel believe the
award to be unjustified and have filed an appeal which is expected to
be heard in late 2000. It is not possible to reasonably estimate the
amount, if any, which ultimately will be paid. Accordingly, no amount
has been reserved in Chris-Craft's financial statements relating to
this matter.
Montrose Chemical Corporation of California, whose stock is 50%
owned by Chris-Craft and 50% by a subsidiary of AstraZeneca Inc.,
discontinued its manufacturing operations in 1983 and has since been
defending claims for costs and damages relating to environmental
matters. Chris-Craft is a defendant in one of these actions. After
insurance reimbursements totalling $1,174,000 in 1999, $3,611,000 in
1998 and $558,000 in 1997, Montrose-related net expenses of $1,632,000
in 1999, $1,279,000 in 1998 and $3,383,000 in 1997, are included in
the accompanying Consolidated Statements of Income under the caption
Interest and other income, net.
Montrose is one of numerous defendants in a suit relating to
alleged environmental impairment at the Stringfellow Hazardous Waste
Disposal Site in California, brought in 1983 by the Federal Government
and the State of California, which claim Montrose generated
approximately 19% of the waste placed at the site. In 1990, the U.S.
Environmental Protection Agency issued a Record of Decision for the
site, which selected some of the interim remedial measures preferred
by the EPA and the State, the present value of which was estimated by
them to be $169 million, although the estimate is subject to potential
variations of up to 50%. A ruling issued in 1995 allocated at least
65% of the liability (under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ["CERCLA"]) at the
site to the State of California and approximately 25% of the liability
to the generator defendants (including Montrose). A separate ruling
under California law allocated 100% of the liability to the State. The
State's appeal of the allocation rulings is pending. In December 1998,
the State and the defendants, including Montrose, preliminarily agreed
to a structure that, if certain conditions are satisfied, would
resolve the Stringfellow suit. Chris-Craft is not a defendant.
In May 1998, a group of approximately 750 current or former
residents of the vicinity of the Stringfellow Site filed suit against
Montrose, Chris-Craft and approximately 160 other defendants alleging
personal injury and property damage from exposure to the site. The
defendants have moved to dismiss the complaint as to the adult
plaintiffs on statute of limitations grounds. A similar action filed
in 1984 by approximately 3,000 plaintiffs was resolved by means of a
settlement to which Montrose, but not Chris-Craft, contributed
monetarily.
In June 1990, the Federal Government and the State of California
commenced an action against Montrose, Chris-Craft, and other
defendants, alleging that Montrose and others released hazardous
substances into Los Angeles Harbor and adjacent waters, and seeking to
recover damages resulting from alleged injury to natural resources. In
1997, the Federal and State Governments stated they estimate the
alleged damages at approximately $482 million. The action also seeks
recovery for costs related to alleged hazardous substance
contamination of the Montrose plant site in Torrance, California. A
trial is scheduled for October 2000.
Chris-Craft intends vigorously to defend itself in this action.
Chris-Craft contends that it is not liable and that it neither owned
nor operated the facilities involved, nor did it arrange for the
disposal of hazardous substances. Chris-Craft and its predecessors
were shareholders of Montrose and provided certain management services
to Montrose, as it conducted its operations. Based on the available
information, the status of the proceeding, and the applicable legal
and accounting standards, Chris-Craft, in reliance among other things
on the advice of counsel, believes that it should have no liability
(under CERCLA or otherwise) for the operations of Montrose and does
not presently consider liability to be "probable." Accordingly, under
Statement of Financial Accounting Standards No. 5, "Accounting for
Contingencies," no amount has been reserved for this action in Chris-
Craft's financial statements.
In September 1994, the EPA designated Chris-Craft as a
"potentially responsible party" under CERCLA (a "PRP") in connection
with the Diamond Alkali Superfund Site on the Passaic River in Newark,
New Jersey. The EPA alleges that hazardous substances were released
into the river from a facility operated by a Chris-Craft predecessor
company. The facility was located near the Diamond Alkali property,
but not on the river front, and was sold by Chris-Craft in 1972.
Chris-Craft disputes that it is a responsible party. The former owner
of the Diamond Alkali property is currently performing a study
estimated to cost approximately $10 million to determine the extent of
contamination in the area and to evaluate possible corrective actions.
The Diamond Alkali Superfund Site matter does not involve Montrose,
and based on the review to date by Chris-Craft and its counsel, they
believe Chris-Craft has been erroneously identified as a PRP at the
site; Chris-Craft is unable to determine at this stage if it could
have any liability at the site.
If a court ultimately rejected Chris-Craft's defenses in one
or more of the foregoing matters, under CERCLA, Chris-Craft could be
held jointly and severally liable, without regard to fault, for
response costs and natural resource damages. A party's ultimate
liability at a site generally depends on its involvement at the site,
the nature and extent of contamination, the remedy selected, the role
of other parties in creating the alleged contamination and the
availability of contribution from those parties, as well as any
insurance or indemnification agreements which may apply. In most
cases, both the resolution of the complex issues involved and any
necessary remediation expenditures occur over a number of years.
Future legal and technical developments in each of the foregoing
matters will be periodically reviewed to determine if an accrual of
reserves for possible liability would be appropriate.
Chris-Craft is a party to various other pending legal proceedings
arising in the ordinary course of business. In the opinion of
management, after taking into account the opinion of counsel with
respect thereto, the ultimate resolution of these other matters will
not have a material effect on Chris-Craft's consolidated financial
position or results of operations.
NOTE 10
INDUSTRY SEGMENT INFORMATION:
In 1998, Chris-Craft adopted SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information." This table
presents Chris-Craft's two reportable segments, the Television
Division and the Industrial Division. UPN, which is accounted for on
the equity method, is also considered a reportable segment under SFAS
131. However, all required segment information is included in Note 2.
The accounting policies of the segments are the same as those
described in the "Summary of Significant Accounting Policies." See
Note 1.
<TABLE>
<CAPTION>
Deferred
Depreciation Tax
Operating Operating and Capital Segment Investment Assets
(In thousands) Revenues Income (Loss) Amortization Expenditures Assets in UPN (Liabilities)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended
December 31, 1999
Television
Division $469,347 $114,726 $23,824 $19,636 $2,281,100(b) $9,821 $ (334)
Industrial
Division 22,200 4,204 520 945 10,943 - 211
Reconciling
items (a) - (24,733) 34 45 53,942 - 24,494
- ---------------------------------------------------------------------------------------------------------------
$491,547 $ 94,197 $24,378 $20,626 $2,345,985 $9,821 $ 24,371
===============================================================================================================
Year Ended
December 31, 1998
Television
Division $445,850 $109,299 $21,278 $11,347 $2,199,687(b) $ 615 $ (8,305)
Industrial
Division 21,243 3,642 424 1,119 8,738 - 234
Reconciling
items (a) - (18,271) 386 67 36,998 - 19,512
- ---------------------------------------------------------------------------------------------------------------
$467,093 $ 94,670 $22,088 $12,533 $2,245,423 $ 615 $ 11,441
===============================================================================================================
Year Ended
December 31, 1997
Television
Division $443,499 $113,908 $19,187 $ 7,040 $2,177,679(b) $1,112 $ (4,330)
Industrial
Division 21,147 2,889 359 747 9,174 - 377
Reconciling
items (a) - (21,272) 22 1 39,576 - 19,306
- ---------------------------------------------------------------------------------------------------------------
$464,646 $ 95,525 $19,568 $ 7,788 $2,226,429 $1,112 $15,353
===============================================================================================================
(a) Consists of Corporate Office and subsidiaries not included in Television Division or Industrial Division.
Related operating loss consists solely of general and administrative expenses and, accordingly, excludes
nonoperating income. Related assets consist primarily of cash and marketable securities.
(b) Includes marketable securities having an aggregate carrying value of $1,219,144, at December 31, 1999,
$1,202,070 at December 31, 1998 and $1,204,776 at December 31, 1997.
</TABLE>
NOTE 11
SUBSEQUENT EVENTS:
On March 16, 2000, the Board of Directors declared a 3% common
stock dividend, payable in April 2000, which will increase by 3%
Chris-Craft's common and Class B common shares outstanding and will
also increase by 3% the number of common shares issuable upon
conversion of Chris-Craft's $1.40 convertible preferred stock and upon
exercise of stock options. Applicable conversion rates and exercise
prices will be adjusted.
On March 20, 2000, BHC elected to sell its 50% interest in UPN to
Viacom for a $5,000,000 cash payment, under the "buy-sell" provisions
of the UPN Joint Venture Agreement, which Viacom had triggered. On
March 16, 2000, a New York State Supreme Court upheld Viacom's
exercise of the buy-sell in a lawsuit brought by BHC that sought to
enjoin the Viacom-CBS merger as a violation of the non-compete
provision of the Joint Venture Agreement. The sale is expected to
close by March 31, 2000.
As a result of the sale, BHC will have no further ownership
interest in the network or obligation to fund UPN's operations. BHC's
eight television stations that are currently affiliated with UPN will
remain affiliates after the sale. BHC expects to record a loss of
approximately $10,000,000 in connection with the sale, to be reflected
in results of operations for the three months ended March 31, 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CHRIS-CRAFT INDUSTRIES, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Chris-Craft's financial position continues to be strong and
highly liquid. Cash and marketable securities totaled $1.36 billion at
December 31, 1999, and Chris-Craft has no debt outstanding. Chris-
Craft's 80.0% owned television broadcasting subsidiary, BHC
Communications, Inc., has expended significant funds developing United
Paramount Network since UPN's inception in 1994, but cash flow
provided from BHC's operating activities has exceeded such BHC funding
of UPN.
Chris-Craft's operating cash flow is generated primarily by its
Television Division's core television station group. Broadcast cash
flow reflects station operating income plus depreciation and film
contract amortization less film contract payments. The relationship
between film contract payments and related amortization may vary
greatly between periods (payments exceeded amortization by $1.1
million in 1999 and by $12.3 million in 1998), and is dependent upon
the mix of programs aired and payment terms of the stations'
contracts. Reflecting such amounts, broadcast cash flow in 1999
increased 17%, while station earnings increased 7%, as explained
below. Although broadcast cash flow is often used in the broadcast
television industry as an ancillary measure, it is not synonymous with
operating cash flow computed in accordance with generally accepted
accounting principles, and should not be considered alone or as a
substitute for measures of performance computed in accordance with
generally accepted accounting principles.
Chris-Craft's cash flow additionally reflects earnings associated
with its cash and marketable securities, most of which are held by
BHC. Such balances declined slightly, to $1.36 billion at December 31,
1999, from $1.42 billion at December 31, 1998. Such $55.9 million
decline was incurred despite 1999 operating cash flow of $156.1
million, primarily due to the $61.3 million cash acquisition of
television station WRBW, UPN funding totalling $106.6 million, capital
expenditures totalling $20.6 million and Chris-Craft treasury stock
purchases totalling $11.1 million.
BHC generates most of Chris-Craft's consolidated cash flow.
Parent company obligations consist solely of corporate office
expenditures, current and accrued. Most parent company cash flow in
recent years has been provided from the receipt by Chris-Craft of its
share of special dividends paid by BHC. BHC paid a special cash
dividend of $2.00 per share in February 2000, aggregating $45.0
million, of which Chris-Craft received $36.0 million. BHC also paid
special $1.00 per share cash dividends in February 1999, aggregating
$22.5 million, February 1998, aggregating $22.7 million, and February
1997, aggregating $23.6 million, with Chris-Craft receiving $18
million of each such amount. BHC plans to consider annually the
payment of a special dividend.
Chris-Craft, from time to time, has purchased shares of its own
capital stock, including 245,500 common shares purchased during 1999
at an aggregate cost of $11,145,000. At December 31, 1999, 586,602
common shares remained authorized for purchase.
During the period from April 1990 through December 31, 1998, BHC
expended $516.5 million to purchase 6,895,590 of its Class A common
shares, including 226,503 shares in 1998 from United Television, Inc.,
BHC's 58% owned subsidiary. No additional shares have been purchased
by BHC in 1999, and 185,497 Class A shares remained authorized for
purchase at December 31, 1999. During the four year period ended
December 31, 1999, UTV expended $43.4 million acquiring its own common
shares, of which $0.8 million was expended in 1999, and, at December
31, 1999, 721,249 UTV shares remained authorized for purchase.
In January 1998, UTV purchased the assets of UHF television
station WHSW, Channel 24, in Baltimore, Maryland for $80.2 million in
cash. The station's call letters were changed to WUTB, and the station
became a UPN affiliate. In July 1999, UTV purchased the assets of UHF
television station WRBW, Channel 65, a UPN affiliate in Orlando,
Florida, for $61.3 million in cash and possible future consideration.
Chris-Craft intends to further expand its operations in the media,
entertainment and communications industries and to explore business
opportunities in other industries. Chris-Craft believes it is capable
of raising significant additional capital to augment its already
substantial financial resources, if desired, to fund such additional
expansion.
In July 1994, BHC, along with Viacom Inc.'s Paramount Television
Group, formed UPN, a broadcast television network which premiered in
January 1995. BHC owned 100% of UPN from its inception through January
15, 1997, when Viacom completed the exercise of its option to acquire
a 50% interest in UPN. Since then, BHC and Viacom have shared equally
UPN's losses and funding requirements. On March 20, 2000, BHC elected
to sell its 50% interest in UPN to Viacom, and expects to close the
transaction by March 31, 2000. As a result of the sale, BHC will have
no further ownership interest in the network or obligation to fund
UPN's operations. See Note 11. UPN incurred start-up losses of $194.7
million in 1999, $177.2 million in 1998, $170.2 million in 1997,
$146.3 million in 1996 and $129.3 million in 1995. BHC funding of UPN
totalled $106.6 million in 1999, $88.1 million in 1998
and $48.2 million in 1997.
Chris-Craft's television stations make commitments for
programming that will not be available for telecasting until future
dates. At December 31, 1999, commitments for such programming totalled
approximately $278.0 million, including $78.3 million applicable to
UTV. Chris-Craft's capital expenditures generally have not been
material in relation to its financial position, and the related
capital expenditure commitments at December 31, 1999 (including any
related to UPN) were not material. During 1999, Chris-Craft stations
continued the process of converting to digital television (DTV). This
conversion requires the purchase of digital transmitting equipment to
telecast over newly assigned frequencies. KCOP in Los Angeles, KBHK in
San Francisco and KTVX in Salt Lake City made the initial conversion
to DTV signal transmission during 1999. This conversion rollout is
expected to take a number of years and will be subject to competitive
market conditions.
Chris-Craft expects that its expenditures for future film
contract commitments and capital requirements for its present
business, including the cost to convert to DTV, will be satisfied
primarily from operations, marketable securities or cash balances. As
set forth in Note 9, Chris-Craft has been named as a defendant (or a
"potentially responsible party") in certain actions seeking recovery
for environmental damage allegedly related to (i) the activities
(discontinued since 1983) of 50% owned Montrose Chemical Corporation
of California ("Montrose California") and (ii) the activities of
Montrose Chemical Co., a predecessor company to Chris-Craft. As
further set forth in Note 9, Chris-Craft does not presently consider
liability to be "probable" in any of the Montrose California related
matters and believes it has been erroneously identified as a
potentially responsible party and is unable to determine at this stage
if it could have any liability regarding Montrose Chemical Co.
Accordingly, no amount has been reserved in Chris-Craft's financial
statements relating to these matters.
Year 2000 issues had no material effect on Chris-Craft business,
results of operations, or financial condition, and the compliance cost
was immaterial.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Chris-Craft is subject to certain market risk relating to its
marketable securities holdings, which are all held for other than
trading purposes. The table below provides information as of December
31, 1999 about the U.S. Government securities which are subject to
interest rate sensitivity and the equity securities which are subject
to equity market sensitivity.
(In thousands) Cost Fair Value
- ----------------------------------------------------------
U.S. Government securities $1,149,089 $1,146,604
Equity securities $ 75,342 $ 93,637
All of Chris-Craft's marketable securities have been categorized
as available for sale, and are comprised substantially of U.S.
Government securities, 98% of which mature in one year and all of
which mature in 16 months.
RESULTS OF OPERATIONS - 1999 VERSUS 1998
Chris-Craft net income in 1999 rose to $42,433,000, or $1.21 per
share ($.97 per share diluted), from net income in 1998 of
$29,470,000, or $.84 per share ($.67 per share diluted). The 44%
increase in net income is mostly attributable to marketable securities
gains.
Television station earnings in 1999 increased 7%, to $131,808,000
from $123,123,000, and rose 10% excluding expense associated with
stock price based retirement plans. The increase in station earnings
primarily reflects growth in station operating revenues, which more
than offset modest increases in station operating expenses. Station
operating revenues rose 5%, to $459,938,000 from $436,664,000, and
same station operating revenues rose 4%. Station operating revenues
were positively affected by generally strong demand for television
advertising time, as well as the generally positive impact of UPN's
improved competitive position on the prime time results of BHC's eight
UPN affiliates. Nonetheless, several BHC stations recorded lower
operating revenues in 1999. Station operating revenues in 1998 include
retroactive network compensation recorded by our NBC affiliate upon
finalization of a long-term affiliation agreement. Such compensation
was offset by certain copyright royalty revenues recorded in 1999.
The increase in station earnings was partially offset by a decline, to
$8,777,000 from $10,202,000, in earnings at BHC's television
production subsidiaries, and a $1.1 million increase in the corporate
office expenses of BHC and UTV. Television Division operating income
in 1999 accordingly rose 5%, to $114,726,000 from $109,299,000.
Excluding stock price based retirement plan expense, Television
Division operating income increased 9% in 1999.
Industrial Division operating income rose 15% in 1999, to a
record $4,204,000 from $3,642,000 in 1998. The Division's operating
revenues increased 5%, to $22,200,000 from $21,243,000 in 1998, and
its profit margin was enhanced by improved product mix and
manufacturing efficiencies.
Consolidated operating income declined slightly, to $94,197,000
from $94,670,000, primarily due to an increase of approximately $3.2
million in corporate office stock price based retirement plan expense.
Excluding all such expense, which in 1999 reflects the 54% increase
during the year in the market price of Chris-Craft common stock,
consolidated operating income increased 7% in 1999.
UPN's loss in 1999 widened to $194,688,000 from $177,193,000,
reflecting the expansion of the network's prime time schedule to five
weekday evenings from three during most of 1998, as well as ratings
shortfalls and expenses related to cancelled programs earlier in 1999.
BHC's 50% share of UPN's loss accordingly rose to $97,344,000 from
$88,597,000 in 1998. On March 20, 2000, BHC elected to sell its 50%
interest in UPN to Viacom, and expects to close the transaction by
March 31, 2000. As a result of the sale, BHC will have no further
ownership interest in the network or obligation to fund UPN's
operations. See Note 11.
Interest and other income, which consists mostly of amounts
earned on Chris-Craft's consolidated cash and marketable securities
holdings, rose significantly in 1999, to $106,183,000 from
$80,337,000. The increase reflects a $27.8 million increase, to
approximately $33.1 million from approximately $5.3 million, in
marketable securities gains. Interest income declined slightly in
1999, due to a modest decline in the average amount of funds invested.
Chris-Craft's effective income tax rate reflects in both years
the realization of certain income tax benefits and, in 1999, the
reversal of the valuation allowance recorded in previous years, since
the uncertainty of realization of those benefits has been removed.
Minority interest reflects the interest of shareholders other
than Chris-Craft in the net income of BHC, 80.0% owned by Chris-Craft
at December 31, 1999, 79.96% owned by Chris-Craft at December 31, 1998
and 78.6% owned by Chris-Craft at December 31, 1997, and the interest
of shareholders other than BHC in the net income of UTV, 58.1% owned
by BHC at December 31, 1999, and 58.5% owned by BHC at December 31,
1998 and December 31, 1997.
RESULTS OF OPERATIONS - 1998 VERSUS 1997
Chris-Craft net income in 1998 declined to $29,470,000, or $.84
per share ($.67 per share diluted), from net income in 1997 of
$93,501,000, or $2.70 per share ($2.13 per share diluted). The decline
in net income primarily reflects BHC's pretax gain of $153,933,000
recorded on the transaction through which BHC reduced its UPN
ownership interest to 50% from 100%. See Note 11.
Consolidated operating income declined just slightly, to
$94,670,000 from $95,525,000, as a decline in Television Division
operating income was nearly offset by a reduction in Chris-Craft
corporate office expense and an increase in Industrial Division
operating income.
Television station earnings, after a small loss at station WUTB,
were $123,123,000, down 2% from 1997 earnings of $125,966,000. Station
group earnings in 1998 reflect increased current year and retroactive
revenue resulting from a new long-term affiliation agreement at our
NBC affiliate. In addition, 1998 station earnings reflect a reduction
of approximately $3,300,000 in expense associated with stock price
based retirement plans. Total station operating revenues rose
slightly, to $436,664,000 from $434,729,000, while same station
revenues, reflecting disappointing ratings in several key markets,
declined less than 2%, after adjusting for the prior years' network
affiliation fees. The decline in station earnings was fully offset by
an increase, to $10,202,000 from $7,098,000, in earnings at BHC's
television production subsidiaries. However, after WUTB goodwill
amortization and a non-recurring severance expense, Television
Division operating income in 1998 declined 4%, to $109,299,000 from
$113,908,000 in 1997.
Industrial Division operating income rose 26%, to $3,642,000 from
$2,889,000 in 1997. The earnings growth is primarily attributable to
significant improvements in profit margins, as operating revenues rose
just very slightly, to $21,243,000 from $21,147,000 in 1997. Margins
were positively impacted by improvements in manufacturing
efficiencies, product quality and mix, and offshore sourcing.
Chris-Craft corporate office expense declined to $18,271,000 from
$21,272,000 in 1997, primarily reflecting a reduction of approximately
$4,400,000 in corporate office stock price based retirement plan
expense.
UPN incurred a loss of $177,193,000 in 1998, compared to a loss
of $170,197,000 in 1997. The network's costs increased due to the
expansion of its prime time schedule to five nights a week from three.
BHC's 50% share of the loss totalled $88,597,000, compared to its 1997
share of $87,430,000.
Interest and other income, which consists mostly of amounts
earned on Chris-Craft's consolidated cash and marketable securities
holdings, totalled $80,337,000 in 1998, about the same as the
$80,556,000 recorded in 1997. The impact of lower interest rates was
offset by an increase of approximately $4,200,000 in gains on
dispositions of marketable securities, and a decline, to $1,279,000
from $3,383,000 in expense associated with Montrose matters.
Chris-Craft's effective income tax rate declined to 37.6% in 1998
from 41.1% in 1997, primarily reflecting the realization in 1998 of
certain income tax benefits.
EXHIBIT 21
The following are the registrant's subsidiaries, other than
subsidiaries that, if considered in the aggregate as a single subsidiary, would
not constitute a significant subsidiary:
JURISDICTION
OF
NAME OF SUBSIDIARY INCORPORATION
- ------------------ -------------
BHC Communications, Inc. Delaware
Chris-Craft Television, Inc. Delaware
KCOP Television, Inc. California
Oregon Television, Inc. Oregon
Pinelands, Inc. Delaware
United Television, Inc. Delaware
UTV of San Francisco, Inc. California
UTV of San Antonio, Inc. Texas
UTV of Baltimore, Inc. Delaware
UTV of Orlando, Inc. Delaware
United Television Sales, Inc. Delaware
Chris-Craft Industrial Products, Inc. Delaware
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (Nos. 333-91189, 333-69875 and 33-54817) of Chris-Craft
Industries, Inc. of our report dated February 14, 2000, except as to Note 11
which is as of March 20, 2000, relating to the financial statements, which
appears in the Annual Report to Shareholders, which is incorporated in this
Annual Report on Form 10-K and our report dated January 31, 2000, except as to
Note 7 which is as of March 20, 2000, relating to the financial statements of
United Paramount Network, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
New York, New York
March 29, 2000
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