Form 10-K
Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For the fiscal year ended December 31, 1995 Commission File number: 33-9443
OUTLET BROADCASTING, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Rhode Island 05-0194550
-------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 Kenney Drive
Cranston, Rhode Island 02920
(Address of principal executive offices)
Registrant's telephone number, including area code: (401) 455-9200
----------------
Securities registered pursuant to Section 12(b) of the Act: None
------
Securities registered pursuant to Section 12(g) of the Act: None
------
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)
The aggregate market value of the voting stock held by non-affiliates of the
registrant was none.
Documents Incorporated by Reference: None
The number of shares of the registrant's Class A Common Stock, par value
$.01 per share, outstanding as of March 21, 1996, was 1,000,000.
The Exhibit Index for this document appears on page 72 hereof.
----
Page 1 of 173 Pages
-----
<PAGE>
PART I
------
Item 1. Business.
---------
Introduction
Outlet Broadcasting, Inc., a Rhode Island corporation ("Outlet
Broadcasting"), is a wholly-owned subsidiary of Outlet Communications, Inc., a
Delaware corporation ("Outlet Communications"). The operations of Outlet
Broadcasting, a television broadcasting company, consist of three owned
television stations and one television station for which Outlet Broadcasting
supplies programming under a time brokerage agreement. The owned stations
include two NBC network-affiliated VHF television stations and one NBC network-
affiliated UHF television station. Outlet Broadcasting has also entered into an
agreement to supply programming under a time brokerage agreement with the
permittee of a station still under construction in New Bedford, Massachusetts,
WLWC(TV) (formerly WFDG(TV)).
The two VHF television stations are WJAR(TV), Providence, Rhode Island,
which serves the Providence-New Bedford market area and WCMH(TV), which is
located in Columbus, Ohio and serves that market. The owned UHF television
station is WNCN(TV), Goldsboro, North Carolina, which has studios and offices
located in Raleigh, North Carolina and broadcasts in the Raleigh-Durham
(Fayetteville, Goldsboro and Rocky Mount), North Carolina market area. Outlet
Broadcasting acquired WNCN(TV) on August 10, 1994.
Since April 18, 1994, Outlet Broadcasting has also provided programming to
UHF television station WWHO(TV), Chillicothe, Ohio, under a time brokerage
agreement with that station's licensee. Outlet Broadcasting serves as a broker
for the sale of that station's advertising time and provides it with certain
programming and operating capabilities. In return, Outlet Broadcasting retains
a substantial percentage of WWHO(TV)'s net operating income to the extent that
it exceeds cumulative net operating losses. This station is an affiliate of The
WB Television Network.
By letters dated March 7, 1996, the licensee of WWHO(TV) and the permittee
of WLWC(TV), which are under common ownership, purported to terminate the two
time brokerage agreements referred to above on the basis of claims that Outlet
had breached the agreements. By letters dated March 11, 1996, Outlet advised
the licensee of WWHO(TV) and the permittee of WLWC(TV) that Outlet had not
breached the agreements, that the termination letters dated March 7 were
therefore ineffective, and that the agreements remain in full force and effect.
This dispute remains unresolved.
Outlet Broadcasting also offers production services to advertisers and
others on an occasional basis. This activity does not generate significant
revenues.
- 2 -
<PAGE>
On August 2, 1995 Outlet Communications executed a definitive merger
agreement with the National Broadcasting Company, Inc. ("NBC") and CO
Acquisition Corporation, a subsidiary of NBC, providing for a transaction in
which NBC would acquire Outlet Communications and Outlet Communications'
stockholders would receive $47.25 per common share in cash. The merger
agreement was approved by Outlet Communications' Board of Directors and by the
holders of a majority of Outlet Communications' outstanding common stock. The
transaction closed on February 2, 1996.
Television
Outlet Broadcasting's television broadcasting revenues are derived from
regional and national spot advertising, from local advertising, and from network
compensation.
Advertising rates charged by a television station are based primarily upon
the population and number of television sets in the area served by the station,
as well as the station's ability to attract audiences as reflected in surveys
made by the A.C. Nielsen Company ("Nielsen") of the number of sets tuned to the
station at various times. Nielsen measures ratings within specific geographic
markets by dividing the nation into Designated Market Areas ("DMA").
Advertising rates are highest during the most desirable viewing hours, with
corresponding reductions during other hours. The rates for national spot and
local advertising are determined by each station. Katz Communications, Inc. is
Outlet Broadcasting's national sales representative firm. Local advertising
time is sold by each station's own sales force.
Effective September 1, 1994, Outlet Broadcasting and NBC agreed to renew
the NBC network affiliation for Outlet Broadcasting's VHF television stations
for a period of six years. Effective October 2, 1995, Outlet Broadcasting and
NBC agreed to an NBC network affiliation for WNCN(TV) for a period of six years.
The affiliations give Outlet Broadcasting's owned television stations the right
to rebroadcast all programs transmitted by the NBC network. For each hour of
programming that is rebroadcast by the affiliate, the network pays the affiliate
a fee, which varies in amount depending on the time of day during which the
program is broadcast. Although the hourly rates of network compensation are
fixed, the total amount of network compensation received by each affiliated
station is subject to the number of network program hours rebroadcast by that
station.
Network programs are produced either by the networks themselves or by
independent production companies and are primarily transmitted via satellite by
the network to its affiliated stations for rebroadcast. Each of Outlet
Broadcasting's television stations also acquires programs from non-network
sources and produces its own programs for broadcast.
- 3 -
<PAGE>
Approximately 62% of the television programming aired on Outlet
Broadcasting's Providence station is provided by NBC and approximately 25% is
provided or licensed by independent third parties. Outlet Broadcasting's
Columbus station receives 56% of its programming from NBC and 30% is provided or
licensed by independent third parties. Outlet Broadcasting's Raleigh station
receives 65% of its programming from NBC and 24% is provided or licensed by
independent third parties. The remaining portion of Outlet Broadcasting's owned
television station programming consists principally of local programs, such as
news, public affairs and children's programs, produced by the individual
television stations.
Another factor affecting television revenues is the increase in straight
barter and cash-plus-barter arrangements. Under such arrangements national
program distributors retain varying amounts of the advertising time that would
otherwise be available for sale by the stations to national or local
advertisers. While these arrangements reduce the cost of new programming
because the value of the advertising time withheld is credited against its cost,
they also result in decreased revenues to stations and introduce new competitors
to the advertising market.
The principal portion of television station programming for WWHO(TV)
consists of syndicated shows, children's programs, movies and news. Outlet
Broadcasting has also entered into an agreement with The WB Television Network
("WB") for WB to provide network programming to WWHO(TV). Commencing in January
1995, WB provided one night of prime time programming for two hours. A second
night of prime-time programming commenced during the third quarter of 1995 along
with selected children's programming. Additional programming will thereafter be
provided in accordance with a schedule of roll-out dates to the extent that WB
makes available such programming for rebroadcast. The initial period of the WB
agreement is for three years and may be extended for additional successive
periods of two years each if agreed upon by the parties.
In order to compensate WB for its programming, Outlet Broadcasting will pay
WB an annual payment based on Outlet Broadcasting's WB affiliated station
television market ratings for prime time broadcast periods of WB programming.
The payments are based on the value and/or profitability added to such station
as a result of its affiliation with WB and to pay to WB 25% of such added value
and/or profitability. No payment was made for 1995 nor was a payment required.
The following is a description of each of the television stations operated
by Outlet Broadcasting.
WJAR(TV)
WJAR(TV) is a VHF station affiliated with the NBC network. It is located
in Cranston, Rhode Island but is licensed to and serves the capital city of
Providence, Rhode Island and broadcasts over Channel 10 in the Providence-New
Bedford television market. This market is ranked 46th in the nation in terms of
number of television households in its DMA.
- 4 -
<PAGE>
WCMH(TV)
WCMH(TV) broadcasts over Channel 4 in Columbus, the capital city of Ohio,
and is a VHF station affiliated with NBC. The Columbus television market is
ranked 34th in the country in its DMA.
WNCN(TV)
WNCN(TV), Goldsboro, North Carolina, is a UHF television station with
studios and offices located in Raleigh, North Carolina. It broadcasts over
Channel 17 in the Raleigh-Durham (Fayetteville, Goldsboro and Rocky Mount) North
Carolina television market, which is ranked 30th in the nation in terms of
number of television households in its DMA. Since September 10, 1995, the
station has broadcast programming provided by NBC. Prior to that time, WNCN(TV)
broadcast WB programming.
WWHO(TV)
WWHO(TV) is a UHF television station that became affiliated with The WB
Television Network as of January 11, 1995. It is located in Chillicothe, Ohio
but serves the capital city of Columbus, Ohio and broadcasts over Channel 53 in
the Columbus-Chillicothe television market area.
Competition
Outlet Broadcasting's television stations compete for revenues with other
broadcasting stations in their respective markets, including radio, as well as
with other advertising media, such as newspapers, magazines, outdoor
advertising, transit advertising, direct mail and cable systems.
Competition in the broadcasting industry occurs primarily in individual
markets. Generally, except as set forth below, a television broadcasting
station in one market does not compete with stations in other market areas.
Outlet Broadcasting television stations are located in highly competitive
markets.
Factors that are material to competitive positions include authorized
power, assigned frequency, management experience, network affiliation, audience
characteristics and local program acceptance, as well as strength of local
competition. The broadcasting industry is continuously faced with technological
change and innovation, the possible rise of popularity of competing
entertainment and communications media, changes in labor conditions, and
governmental restrictions or actions of federal regulatory bodies, including the
Federal Communications Commission ("FCC") and the Federal Trade Commission
("FTC"). Any of such developments could possibly have a material effect on
Outlet Broadcasting's operations and profits.
Under present FCC regulations, no additional conventional, full power, VHF
or UHF commercial television stations may be constructed or operated in any of
the markets where Outlet Broadcasting's television stations are located except
there is a construction permit for WLWC(TV), Channel 28, New Bedford,
Massachusetts in the Providence market. See "Introduction" above, with respect
to Outlet Broadcasting's time brokerage agreement with the permittee of
WLWC(TV).
- 5 -
<PAGE>
There are sources of video programming other than conventional television
stations, the most common being cable television ("CATV"). These other sources
have increased the competition for broadcasting stations by bringing into their
markets distant broadcasting signals not otherwise available to the stations'
audience and also serving as a distribution system for programs originating on
the cable system. Programming is now being distributed to CATVs by both
terrestrial microwave systems and by satellite. The FCC has also authorized
intermediate carriers to pick up the signals of so-called "superstations" and to
deliver them to CATV systems via satellite, including CATV systems in each of
Outlet Broadcasting's television markets.
The Signal Carriage Provisions of the Cable Television Consumer Protection
and Competition Act of 1992 require CATV system operators to transmit the
broadcast signal of local commercial television stations that request such
carriage. In certain circumstances, the CATV operator is prohibited from
carrying broadcast stations without obtaining the stations' consent. Once every
three years a television broadcaster must choose whether to proceed under its
must carry, but uncompensated, alternative or instead to negotiate a grant of
retransmission consent. Because Outlet Broadcasting's television stations enjoy
significant viewership, the stations are carried by most of the cable television
systems serving their market area. In this regard, the VHF stations have,
primarily, granted retransmission consent to their cable operators and in return
have obtained, in certain instances, the right to produce news programs which
will be carried by available channels on such cable systems. The UHF stations
have generally proceeded with cable system operators under the must carry
alternative.
Other sources of competition include pay cable, multi-point distribution
systems and multichannel multi-point distribution systems, satellite-fed master
antenna systems and home entertainment systems (including television game
devices, video cassette recorder and playback systems, and video discs). Outlet
Broadcasting's television stations also face competition from Direct Broadcast
Satellites ("DBS"), which transmit programming directly to homes equipped with
special receiving antennas or to CATV systems for transmission to their
subscribers. Under the Telecommunications Act of 1996 (the "Telcom Act"), a
local telephone company will be permitted to deliver video programming directly
to consumers, operating as cable system operators, as common carriers, or as
"open video systems", which will have attributes of both cable systems and
common carrier operations. See "Business--Federal Regulation of Broadcasting"
for possible additional competitive impact from proposed technological changes.
Strategy
Despite the changing dynamics of the television industry, management
believes that there will continue to be opportunities to generate significant
revenues from mass marketed programming and associated advertising. Management
believes that an increasing number of national "niche" cable channels will
continue
- 6 -
<PAGE>
to fractionalize video viewing, including the cable networks themselves, and
that these channels may find it difficult to attract enough viewers to generate
significant advertiser support or obtain satisfactory programming on a cost-
effective basis. However, management believes that Outlet Broadcasting's blend
of strong local news programming, combined with national network programming and
selective use of syndicated programming at its owned television stations, will
continue to attract large viewing audiences and advertiser support.
Additionally, management believes that the syndicated programs, movies and
children's programs offered by WWHO(TV) provide an attractive alternative to the
more traditional news and network-provided programming.
Successful programming of broadcast television requires constant
refinement, on the basis of cost effectiveness, of the match between available
programming and the changing tastes of the local viewing audience. In
conjunction with its strategy to reduce overall costs and increase
profitability, Outlet Broadcasting has directed the programming focus at its
owned television stations towards building on local news leadership and
selectively reducing purchases of syndicated programs. At WWHO(TV), Outlet
Broadcasting has engaged in a network affiliation while simultaneously
developing local news programming and improving its offerings of syndicated and
children's programs. Outlet Broadcasting intends to continuously refine its
programming mix in order to attract and hold the audiences desired by
advertisers and to increase profitability. Outlet Broadcasting's strategy has
the following elements:
Build on Local News Leadership. Local news programming is
commercially valuable because of its high viewership level, the
attractiveness to advertisers of the demographic characteristics of
the typical news audience (allowing stations to charge higher rates
for advertising time) and the enhanced ratings of other programming in
time periods following the news. In addition, strong local news
product helps differentiate local broadcast stations from cable system
competitors, which generally do not provide this service. The cost of
producing local news programming is generally lower than other sources
of non-network programming, and the amount of local news programming
can be increased for very modest incremental increases in cost.
Moreover, such programming can be increased or decreased on very short
notice, providing Outlet Broadcasting with greater programming
flexibility. Outlet Broadcasting has focused on maintaining and
building each owned station's local news franchise as the foundation
of its strategy to maintain and build audience loyalty and increase
revenues and profitability. According to the November 1995 Nielsen
report, WJAR(TV) remained as the leading news station in its market
while WCMH (TV)'s weekday news programs generally captured the second
largest share of the Columbus audience in their time periods.
WNCN(TV) is now broadcasting news shows at 5:30 to 7:00 AM and at
6:00, 7:00 and 11:00 PM while WWHO(TV) has instituted a one-half hour
10:00 p.m. news program.
- 7 -
<PAGE>
Optimize Selection of Syndicated Programming. At its owned television
stations, Outlet Broadcasting has operated to reduce its dependence
on, and financial commitment to, syndicated programming. Within this
framework, Outlet Broadcasting has balanced the cost of available
syndicated programs with their potential to increase advertising
revenue, while giving due consideration to the risk of reduced
popularity during the term of the program contract. Outlet
Broadcasting is now selectively buying only those programs which are
available on a cost-effective basis and for contractual periods which
permit financial and programming flexibility. Selected programs must
also complement a station's overall and/or competitive programming
strategies.
However, WWHO(TV) is more dependent on syndicated programs for its
overall programming needs. At this station, Outlet Broadcasting has
sought to upgrade the quality of syndicated programs, on a cost-
effective basis, in order to provide a more attractive product to
viewers.
Strengthen Advertiser Relationships. Advertising by political
candidates injects significant revenues in relatively short time
periods, but disrupts traditional commercial advertising. In
conjunction with a policy decision not to accept advertising by
political candidates during local news programs, Outlet Broadcasting
effectively limited the amount of such advertising its stations will
carry, thereby minimizing the disruption to commercial advertisers.
Outlet Broadcasting also maintains up-to-date production facilities
and audience research capabilities that it makes available for the
benefit of its advertisers. In addition, Outlet Broadcasting's sales
staff is committed to serve and support its advertising customers.
Management believes, therefore, that Outlet Broadcasting's
relationships with its customer base is facilitated and strengthened
through its policy decisions, physical capabilities and sales support
activities.
Control Costs. Management believes that controlling costs is
essential to achieving and maintaining the profitability of its
broadcast television stations. Therefore, Outlet Broadcasting
implemented a program to control costs which, beginning in 1992, led
to substantially improved operating results. The cost control
measures included reducing financial commitments to costly, long-term
syndicated program contracts, increasing the amount of local news
programming, reducing staff and corporate overhead and relocating
WJAR(TV) and corporate headquarters to a more efficient facility.
Through its ongoing strategic planning and annual budget processes,
Outlet Broadcasting intends to continue to identify and implement cost
saving opportunities.
- 8 -
<PAGE>
Seasonality
Outlet Broadcasting's operating revenues are generally highest in the
second and fourth quarters of each year, due in part to increases in beverage
advertising in the spring and retail advertising in the period leading up to and
including the holiday season. Revenues may also be affected by special events
carried by NBC, such as the Olympic Games or the Super Bowl. In addition,
advertising revenues are generally higher during political election years due to
campaign spending by political candidates.
Other Activities
In addition to its broadcasting properties, Outlet Broadcasting has
interests in certain television production activities. These activities now
only include the offering by each of Outlet Broadcasting's television stations
of production services to advertisers and others. It is not anticipated that
any of such activities will generate significant revenues.
Federal Regulation of Broadcasting
Television broadcasting is subject to the jurisdiction of the FCC under the
Communications Act of 1934, as amended (the "Communications Act"). The
Communications Act prohibits television broadcasting except in accordance with a
license issued by the FCC and limits the percentage of alien ownership of
broadcast stations. The Communications Act also empowers the FCC, among other
things, to issue, revoke or modify broadcasting licenses, to determine the
location of stations, to regulate the equipment used by stations, to adopt such
regulations as may be necessary to carry out the provisions of the
Communications Act, and to impose penalties for violation of such regulations.
The assignment of a broadcast license or the transfer of control of a
corporation holding a license cannot be effected without the prior approval of
the FCC.
Effective with the Telcom Act, the terms of television licenses will, upon
their next renewals, be extended from five years to eight years. Licenses are
renewable for additional terms upon application to the FCC, which will approve
the renewal without a hearing if there are no petitions to deny by third parties
conflicting with the renewal applications (which could require a hearing), or
adverse findings as to the licensee's qualifications. In recent years, there
have been a number of challenges and competing applications to broadcast license
renewal applications although, under the Telcom Act, comparative renewal
proceedings are eliminated by requiring the FCC to decide whether a station's
license should be renewed before accepting competing applications. In the vast
majority of cases, television licenses are renewed by the FCC.
- 9 -
<PAGE>
Outlet Broadcasting's station licenses have the following expiration dates,
until renewed:
WJAR(TV) . . . . . . . . . . . . . April 1, 1999
WCMH(TV) . . . . . . . . . . . . . October 1, 1997
WNCN(TV) . . . . . . . . . . . . . February 1, 1997
WWHO(TV) . . . . . . . . . . . . . October 1, 1997
The FCC rules now permit cognizable ownership by one entity of an unlimited
number of television stations, nationally, except for an ownership limit based
on audience reach. Under the audience-reach limitation, an entity may acquire
cognizable ownership interests in television stations only if the aggregate
number of television households reached by the television stations does not
exceed 35% of the national television household audience as determined by
market households. The percentage of the national television household audience
reached by the television stations owned by Outlet Broadcasting will be
aggregated with the percentage of the national audience reached by television
stations in which NBC and General Electric Company have an attributable
interest. The percentage of national television households reached by all such
stations is significantly below the 35% limitation.
There is no overall limitation on the number of radio stations a single
entity may own. There are certain limitations, however, based on market size
and the number of commercial radio stations in each market.
Present FCC rules prohibit ownership of two television stations with
overlapping Grade B signal contours. Currently, FCC rules generally prohibit
the common ownership of a television station and either an AM or an FM radio
station with overlapping areas of local service. Ownership of a newspaper, CATV
system, and a television station in the same market is also prohibited. These
rules apply only to those who seek new authorizations or FCC approval of
transfers of existing combinations. All of the FCC's local ownership
limitations that apply to television (except the newspaper/TV limitation) are
under reexamination in an FCC rulemaking proceeding that is not expected to be
concluded prior to the fourth quarter of 1996.
The FCC requires the attribution of the licenses held by a broadcasting
company to its officers, directors, and holders of specified levels of its
voting securities. There would be a violation of FCC regulations if an officer,
director, or corporate stockholder of a broadcasting company held an
attributable interest in more than the permitted number of stations or in
stations that serve the same area.
- 10 -
<PAGE>
Effective January 1, 1992, the FCC implemented commercial time limitations
in children's programming, pursuant to legislation adopted by Congress in 1990.
Commercial matter in programs designed for viewing by children 12 years of age
and under is limited to 12 minutes per hour on weekdays and 10.5 minutes per
hour on weekends. In addition, all television stations have been required since
October 1, 1991 to broadcast some television programming specifically designed
to meet the educational and informational needs of children 16 years of age and
under.
New methods of digital television transmission will in the future make it
technically feasible for television stations to transmit "high definition
television" having greatly improved picture resolution, color rendition and
sound, and wider screen picture. Alternatively, digital transmission will
permit stations to transmit multiple standard definition television channels and
other non-broadcast materials in the same amount of frequency space currently
used to transmit one current television signal. Digital broadcasting will
ultimately also permit consumers to utilize a single reception device for
television, computer data, materials offered via the Internet, and any other
form of digital information. Because existing television sets cannot receive a
digital signal, however, it will be necessary to transition to a new digital
system by broadcasting digital signals on a second set of television channels
for a period of years, while existing stations continue to broadcast their
present analogue signals on their present channels. After the transition is
complete, the government intends to reclaim one set of channels.
Under the Telcom Act, the FCC would be permitted to allocate frequency
space for the transition to digital television. If the FCC does make such an
allocation, the Telcom Act provides that the eligibility to receive the
additional transition frequencies will be limited to existing television
licensees; that special fees would be assesssed such licensees with respect to
any non-broadcast uses of the frequencies; and that, under a schedule to be
determined by the FCC (and which continues to be a subject of debate within the
government), each broadcaster would eventually be required to give back to the
government one of its two frequencies. Notwithstanding these provisions of the
Telcom Act, various members of Congress continue to advocate a present auction
of the transition frequencies, and the FCC has agreed to make no allocation of
transition channels until Congress has had a further opportunity to review the
matter.
Broadcasters who obtain a second channel for the transition to digital
transmission will be required to make significant capital investments in order
to build and operate a second station in each market. Should broadcasters fail
to make this additional investment, they would in the long term be likely to
suffer competitive adverse effects because cable television, direct broadcast
satellites and distributors of recorded video materials are likely to deliver
digital signals and programs to consumers. Broadcasters would also suffer
adverse effects were the government to determine that the digital transition
channels must be made available for present auction, or if the time period
permitted for the digital transition process is unduly short.
- 11 -
<PAGE>
The foregoing is only a brief summary of certain provisions of the
Communications Act and the regulations of the FCC. Reference is made to the
Communications Act, the Telcom Act, FCC regulations and the public notices
promulgated by the FCC for further information. Outlet Broadcasting is unable
to predict what impact, if any, changes in these laws would have.
Music Licensing
In July 1995 Outlet Broadcasting was advised that a committee representing
the television industry reached agreement with ASCAP music licensing
organization on the final terms of music license fees payable by television
stations. Pursuant to the agreement, industry-wide blanket license fees were
established for the initial license period October 1, 1995 to March 31, 1997
which fees would be allocated to each station according to the formula used to
allocate additional fees payable to ASCAP during 1995. Industry-wide blanket
fees were set at annual levels of $88.4 million - pro-rated for the fourth
quarter of 1995, $91.8 million for 1996, and $91.8 million pro-rated for the
first quarter of 1997. Effective with the 1995 fourth quarter, the new
agreement resulted in increased music license fees payable by the Outlet
Broadcasting television stations totalling approximately $88,000 per year.
The agreement with ASCAP also provided for a one year extension of the
license period to March 31, 1998. The industry-wide blanket license fee
applicable to the extension has not yet been determined but will be subject to
allocation pursuant to existing methodology. Either ASCAP or the television
industry may opt out of the final twelve months of this agreement, effective
April 1, 1997, and elect to begin negotiations on new license terms. If either
party chooses this option and the negotiations fail to produce an agreement, the
unresolved negotiations will be referred automatically to the ASCAP rate court.
BMI music licensing organization currently receives approximately 70% of
what ASCAP receives. However, BMI is continuing to advocate that it should be
paid on parity with ASCAP. As a result, BMI and the committee representing the
television industry are continuing to negotiate fee determinations. The final
fee determinations, as noted above, could have an effect on Outlet
Broadcasting's continuing costs of music licensing for its television
properties.
Employee Relations
Outlet Communications and Outlet Broadcasting have approximately 439 full-
time employees. Approximately 181 of such employees are represented by labor
unions under collective bargaining agreements. These agreements expire on
various dates through November 1997. Outlet Broadcasting contributes to and
maintains employee benefit and retirement plans for its employees.
- 12 -
<PAGE>
Item 2. Properties
----------
Outlet Broadcasting's and Outlet Communications' corporate headquarters as
well as the studio facility for WJAR(TV) are located at 23 Kenney Drive,
Cranston, Rhode Island 02920.
The following table sets forth certain information concerning Outlet
Broadcasting's principal facilities.
Owned or Approximate Square
Location: Leased Footage
- --------- -------- -------------------
Corporate Headquarters/
WJAR(TV) Studio Facilities
Cranston, Rhode Island Owned 42,000
WCMH(TV) Studio Facilities
Columbus, Ohio Owned 54,000
WNCN(TV) Studio Facilities
Raleigh, North Carolina Leased 23,200
WWHO(TV) Studio Facilities
Chillicothe, Ohio (A) 1,162
(A) Leased by licensee
The tower site for WJAR(TV) is owned. The tower sites for WCMH(TV) and WNCN(TV)
are leased. The tower site for WWHO(TV) is leased by that station's licensee.
Item 3. Legal Proceedings.
------------------
Outlet Broadcasting is not a party, and none of its assets is subject, to
any pending legal proceedings, other than ordinary routine litigation incidental
to Outlet Broadcasting's businesses and against which it is adequately insured,
or which are not material.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None.
- 13 -
<PAGE>
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
-------------------------------------------------
Stockholder Matters.
--------------------
Outlet Broadcasting's authorized capital stock consists of 3,000,000 shares
of Class A Common Stock, par value $.01 per share, 1,000,000 shares of non-
voting Class B Stock, par value $.01 per share, and 1,000,000 shares of
Preferred Stock, with no par value. Of such shares, 1,000,000 shares of Class A
Common Stock and no shares of Class B Common Stock or Preferred Stock are issued
and outstanding. All of Outlet Broadcasting's issued and outstanding shares are
owned by Outlet Communications. Accordingly, there is no established public
trading market for Outlet Broadcasting's common stock.
Outlet Broadcasting has no present intention to pay dividends on its common
stock. Among other things, the future payment of dividends will depend on
Outlet Broadcasting's earnings and financial condition, capital requirements,
and general economic conditions. In addition, Outlet Broadcasting's ability to
pay dividends is restricted by the terms of its debt agreements.
Item 6. Selected Financial Information.
-------------------------------
The comparability of net income (loss) in the following table of Selected
Financial Information is affected by the cumulative effect of a change in method
of accounting for income taxes in the amount of $4,434,000, and an extraordinary
loss for debt extinguishment of $1,826,000, both of which occurred in 1993.
Also, net income in 1995 includes an extraordinary loss for merger expenses
totalling $4,733,000
Outlet Broadcasting has not paid cash dividends on its capital stock during
any of the periods presented below.
(dollars in thousands, except per share amounts)
- -------------------------------------------------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------------
Net revenue $ 66,210 $ 59,442 $ 46,952 $ 45,153 $ 39,434
Operating income 19,767 20,175 12,428 10,297 2,232
Income (loss) before
non-recurring items
and income taxes 11,772 11,229 2,342 (2,825) (12,343)
Net income (loss) 3,439 10,569 4,634 (1,552) (9,265)
Income (loss) per share $ 3.44 $ 10.57 $ 4.63 $ (1.55)$ (9.27)
Total assets $129,545 $129,928 $117,611 $126,646 $143,029
Long-term debt excluding
current maturities 70,000 75,000 79,500 87,447 95,961
Other long-term
liabilities 12,926 15,098 13,392 18,085 18,933
Stockholder's equity 22,421 16,404 5,785 1,113 2,665
_______________________________________________________________________________
- 14 -
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
------------------------------------
Results of Operations
- ---------------------
Outlet Broadcasting's operations consist of three owned television stations
and one television station operated under a time brokerage agreement. The owned
stations include two NBC network-affiliated VHF television stations and one NBC
network-affiliated UHF television station. The two VHF television stations are
WJAR-TV, which serves the Providence, Rhode Island-New Bedford, Massachusetts
area and WCMH-TV, which serves the Columbus, Ohio area. The UHF television
station, acquired by Outlet Broadcasting on August 10, 1994, is WNCN-TV which
serves the Raleigh-Durham (Fayetteville, Goldsboro and Rocky Mount), North
Carolina market area.
Outlet Broadcasting also operates UHF television station WWHO-TV,
Chillicothe, Ohio, under a time brokerage agreement with that station's
licensee. Outlet Broadcasting serves as a broker for the sale of WWHO-TV's
advertising time and provides it with certain programming and operating
capabilities. In return, Outlet Broadcasting retains a substantial percentage
of the station's net operating income to the extent that it exceeds cumulative
net operating losses. Operations under the time brokerage agreement became
effective April 18, 1994. WWHO-TV is affiliated with The WB Television Network.
Outlet Broadcasting has also entered into an agreement to supply
programming under a time brokerage agreement with the permittee of a station
still under construction in New Bedford, Massachusetts, WLWC-TV (formerly WFDG-
TV). On March 7, 1996, the licensee of WWHO-TV and the permittee of WLWC-TV,
which are both under common ownership, notified Outlet Broadcasting that they
were terminating the local marketing agreements. Outlet Broadcasting believes
and has notified the licensee/permittee that they have no right to terminate,
that the notice was ineffective and that the agreement remain in full force
and effect.
On August 2, 1995 Outlet Communications executed a definitive merger
agreement with the National Broadcasting Company, Inc. ("NBC") and CO
Acquisition Corporation, a subsidiary of NBC, providing for a transaction in
which the NBC subsidiary would be merged into Outlet Communications and Outlet
Communications stockholders would receive $47.25 per common share in cash. The
merger agreement was approved by Outlet Communications' Board of Directors and
by the holders of a majority of Outlet Communication's outstanding common stock.
The transaction closed on February 2, 1996.
- 15 -
<PAGE>
The following table summarizes Outlet Broadcasting's operating results for
the last three years and shows rates of change applicable thereto. The table
also shows the amounts of revenue obtained from both non-political and political
revenue sources.
Dollars in thousands 1995 % Change 1994 % Change 1993
- ------------------------------------------------------------------------
Net revenue:
Non-political $65,645 17.9% $55,696 19.2% $46,735
Political 565 (b) 3,746 (b) 217
_______________________________________________________________________
Total revenue 66,210 11.4% 59,442 26.6% 46,952
Operating expenses 46,443 18.3% 39,267 13.7% 34,524
_______________________________________________________________________
Operating income $19,767 (2.0%) $20,175 62.3% $12,428
=========================================================================
Net cash provided
by operations (a) $ 7,944 (59.2%) $19,466 402.7% $ 3,872
=========================================================================
Operating cash
flow (a) $25,634 .3% $25,555 47.9% $17,276
=========================================================================
(a) "Net cash provided by operations" means all cash flows (including working
capital changes) other than cash flow associated with investing or
financing activities and "Operating cash flow" means operating income plus
depreciation and amortization of intangibles.
(b) Not shown, since most political advertising occurs in alternate years.
Revenues
In 1995, total net revenue of $66,210,000 increased by $6,768,000 or 11.4%
compared with $59,442,000 in 1994. Outlet Broadcasting's two VHF television
stations had a combined revenue increase of 3.1% with both of the stations
contributing to such increase. Outlet Broadcasting's two UHF stations provided
a 1995 revenue increase amounting to 8.3% of the prior year's revenue total.
However, because these stations were added to Outlet Broadcasting's operations
during 1994, their revenue comparison reflects operations for all of 1995 versus
only part of the prior year.
Non-political revenue in 1995 totalled $65,645,000. This was an increase
of $9,949,000 or 17.9% compared with $55,696,000 in 1994. The increase in non-
political revenue at the VHF stations was 9.2%. Favorable market conditions and
attractive programming enabled those stations to maintain advantageous audience
levels during 1995. This allowed for selected improvements in advertising
rates. The VHF stations increased their national spot and local time sales over
the prior year by 9.2% and 5.4%, respectively. Also, an increase in network
compensation of approximately $1,465,000, or 51.9%, resulted from the VHF
stations' renewed affiliation with the NBC network, as of September 1, 1994, on
more favorable terms.
- 16 -
<PAGE>
Political revenue in 1995 totalled $565,000. Since 1995 was not a major
election year, advertiser spending for political campaigns was not significant.
In the 1994 election year, political revenue totalled $3,746,000 and comprised
6.3% of total revenue.
For the fourth consecutive year, WCMH-TV established a record high in
station revenue. The station increased its non-political local and national
spot revenue for the year by approximately 4.2%. The increased revenue
reflected an estimated 7% growth in the Columbus advertising market.
WJAR-TV increased its non-political local and national spot revenue for the
year by approximately 17.1%. The increased revenue reflected an estimated 2%
growth in the Providence advertising market. Thus, WJAR-TV was able to increase
its market share from that of 1994.
WNCN-TV significantly improved its revenue growth, and programming, by
introducing a local news show during 1995 and by becoming an affiliate of the
NBC network. During the year, the Raleigh-Durham, North Carolina television
market advanced from 32nd position to be the 30th ranked television market in
the country.
Since becoming part of Outlet Broadcasting's operations, in 1994, both
WNCN-TV and WWHO-TV have made continued progress. By improving their
organizational structure, programming and signal delivery, the stations have
become more productive; have been able to increase advertising rates; and have
generally enhanced their overall operating and revenue performance.
In 1994, total net revenue of $59,442,000 increased by $12,490,000 or 26.6%
compared with $46,952,000 in 1993. Of the 1994 revenue total, non-political
revenue amounted to $55,696,000. This was an increase of $8,961,000 or 19.2%
compared with $46,735,000 in the prior year. Revenue contributed by stations
WWHO-TV and WNCN-TV amounted to less than 4% of the prior year's revenue total.
The increase in non-political revenue was primarily attributable to overall
improvement in economic conditions, a strong demand for advertising time and
favorable viewership of Outlet Broadcasting's VHF television stations, all of
which allowed advertising rates to continue to trend higher. There were
increases in both national spot and local time sales. Improved terms in Outlet
Broadcasting's renewed affiliation with the NBC network resulted in an increase
of more than 16% in network compensation.
Advertiser spending for political campaigns was significant in the 1994
election year and political revenue totalled $3,746,000. Since 1993 was not a
major election year, political revenue amounted to a minimal $217,000.
- 17 -
<PAGE>
Both of Outlet Broadcasting's VHF television stations increased their total
revenue during 1994. WCMH-TV increased its non-political local and national
spot revenue by approximately 11.4%. Political advertising provided an
additional 4.6% increase in the station's revenues. The increased revenue
reflected an estimated 15% growth in the Columbus advertising market.
WJAR-TV increased its non-political local and national spot revenue in 1994
by approximately 20.6%. Political advertising provided a further increase of
12.4% to the station's total revenue. The increased revenue reflected an
estimated 17% growth in the Providence advertising market. Thus, WJAR-TV was
able to increase its market share from that of 1993.
Operating Expenses
Operating expenses in 1995 totalled $46,443,000. This was an increase of
$7,176,000 or 18.3% compared with $39,267,000 in 1994. The increase was
attributable to inclusion of operating expenses for WNCN-TV and WWHO-TV for a
full year in 1995. Excluding the effect of those added stations, there was a
moderate 1% decrease in total operating expenses. In 1994, total operating
expenses of $39,267,000 increased by $4,743,000 or 13.7% compared with
$34,524,000 in 1993. Most of this increase also resulted from the addition of
the two UHF stations during the year. As a percentage of revenue, total
expenses increased to 70.1% in 1995 after having decreased to 66.1% in 1994 from
73.5% in 1993.
Technical, programming and news expenses in 1995 of $23,784,000 increased
by $3,671,000 or 18.3% compared with $20,113,000 in 1994. All of the increase
was accounted for by the effect of added stations. In 1994, technical,
programming and news expenses increased by $2,078,000 or 11.5% from $18,035,000
in the prior year. Virtually all of this increase also resulted from the added
stations.
Programming expense at Outlet Broadcasting's VHF television stations
decreased by approximately 7.4% and 2% in 1995 and 1994, respectively.
Programming expenses include departmental operating costs as well as charges for
amortization of film contract rights. Outlet Broadcasting has strategically
reduced its annual cost for film contract amortization by selectively replacing
more costly programs with local programming, particularly news, or by otherwise
replacing costly programs with more popular and/or cost-effective programs.
During 1995, 1994 and 1993, Outlet Broadcasting recorded lump-sum charges
of $1,453,000, $598,000 and $358,000, respectively, representing valuation
write-downs of certain film contracts. The 1995 charge primarily includes
write-downs of "Empty Nest" at the VHF television stations and, at the UHF
stations, a film contract valuation adjustment for "Full House". The 1994 and
1993 write-downs primarily apply to film contract valuations for "Who's the
Boss."
- 18 -
<PAGE>
Outlet Broadcasting believes that increasing its commitment to local
programs, while at the same time reducing its reliance on, and the term of,
purchased programming, will help increase its market share and improve
programming as well as provide cost flexibility. As a result, Outlet
Broadcasting has undertaken to expand its production of local news programs.
Total news department expenses at the VHF stations increased by approximately 2%
in 1995 after having increased by approximately 6% in 1994. In addition, a news
program instituted at WNCN-TV in September 1995 resulted in a significant
increase in that station's news costs.
Selling, general and administrative expenses of $16,792,000 in 1995
increased by $3,018,000 or 21.9% compared with $13,774,000 in 1994.
Approximately 90% of the total increase resulted from inclusion of television
stations WNCN-TV and WWHO-TV for a full year in 1995. The balance of the
increase reflected increased promotion costs at WJAR-TV along with higher sales
commissions and incentive awards payable because of Outlet Broadcasting's
improved operating performance. In 1994, selling, general and administrative
expenses of $13,774,000 increased by $2,133,000 or 18.3% compared with
$11,641,000 in the prior year. The higher amount for 1994 also reflected the
costs of two added television stations as well as increased incentive payments.
Depreciation expense increased in 1995 because of Outlet Broadcasting's
prior year investments in WWHO-TV and WNCN-TV. Amortization of intangible
assets decreased as certain programming and advertising contracts acquired with
the new television stations became fully amortized. In 1994, depreciation
expense and amortization of intangibles both increased due to addition of the
new stations.
Outlet Broadcasting's operating income of $19,767,000 for 1995 decreased by
$408,000 or 2% when compared with operating income of $20,175,000 in 1994. The
current year's reduction in operating income reflects revenue growth of 11.4%
reduced by a 18.3% increase in total expenses. In 1994, operating income of
$20,175,000 increased by $7,747,000 or 62.3% when compared with operating income
of $12,428,000 in 1993. The 1994 improvement reflected a 26.6% increase in
revenue reduced by a 13.7% increase in total expenses.
As a percentage of revenue, operating income for 1995 declined to 29.9%
from 33.9% in 1994, although up from 26.5% in 1993. The 1995 decrease in
operating income percent was primarily attributable to operating losses
sustained by the two UHF television stations. These stations remain categorized
as start-up operations, although Outlet Broadcasting has made significant
improvements to their overall development.
- 19 -
<PAGE>
Interest Expense
The following table summarizes interest expense for the last three years.
Dollars in thousands 1995 % Change 1994 % Change 1993
- -----------------------------------------------------------------------
Interest expense:
Loan and notes payable $8,505 .4% $8,467 14.5% $ 7,392
Note to shareholder -0- - -0- - 4,016
- -----------------------------------------------------------------------
Total $8,505 .4% $8,467 (25.8%) $11,408(a)
=======================================================================
(a) Net of capitalized interest of $225,000.
Interest expense increased by $38,000 in 1995, when compared with 1994,
because of the effect of higher market interest rates on Outlet Broadcasting's
senior loan with a bank. Interest expense decreased in 1994 versus 1993 due to
reductions made in outstanding debt and also due to a 1993 refinancing of total
debt with borrowings having a reduced rate of interest.
In 1993, interest expense for loan and notes payable included an amount
applicable to 13 1/4% Senior Subordinated Notes (the "Senior Notes") which were
repaid during the year. Interest expense on the note to shareholder represents
the annual accretion on the Junior Subordinated Note (the "Junior Note") payable
to The Mutual Benefit Life Insurance Company which was also repaid in 1993.
Details of the 1993 refinancing are provided in the discussion on net cash used
by financing activities.
Cash interest payments for 1995, 1994 and 1993 were $8,108,000, $8,096,000
and $13,071,000 (net of capitalized interest of $225,000), respectively. The
amounts paid in 1995 and 1994 include interest of $1,583,000 and $1,571,000,
respectively, on Outlet Broadcasting's senior bank loan and interest of
$6,525,000 in each year on the outstanding 10 7/8% Senior Subordinated Notes.
The amount paid in 1993 includes interest of $6,769,000 on loan and notes
payable (primarily the Senior Notes), along with interest of $6,527,000 (two
semi-annual installments of $3,125,000 each plus accrued interest through date
of redemption) on the Junior Note. An accretion of debt discount of $649,000 in
1993 represents interest accrued on the Junior Note in excess of the $6,250,000
payment, pursuant to the Junior Note's effective interest rate of 17.2%.
Other Income (Expense) Items
Interest income increased in 1995 due to higher average cash balances
maintained during the year and because of improved returns on invested funds.
Interest income declined in 1994 as a result of lower cash balances and/or lower
market interest rates. Other income increased in 1995 because of the reversal
of accruals for music license fees and other items that were no longer
- 20 -
<PAGE>
required. A gain on the sale of marketable securities provided a further
increase to other income. In 1994, other income principally represents tower
rental income and other sundry items. In 1993, other income principally
represents an accrual that was reversed upon settlement of a music licensing
dispute.
Other expense in 1995 and 1994 includes miscellaneous charges associated
with the UHF stations along with approximately $456,000 and $260,000,
respectively, as the cost of employee stock options. In 1993, other expense
included a write-down of $117,000 pertaining to an unsuccessful attempt to
license a black and white television series.
The 1995, 1994 and 1993 income tax expenses of $3,600,000, $660,000 and
$316,000, respectively, represent the applicable current year's provision for
taxes. The provisions for 1995 and 1994 were reduced as the result of
adjustments of prior year net operating losses. See Note 5 to the Consolidated
Financial Statements.
In 1995, an extraordinary loss of $4,733,000 or ($4.73) per share, net
of taxes, represents costs incurred in connection with Outlet Communications'
pending merger with NBC that was consummated on February 2, 1996. In 1993, an
extraordinary loss of $1,826,000 or ($1.83) per share, net of taxes, represented
one-time debt extinguishment costs resulting from a debt refinancing. See Notes
6 and 8 to the Consolidated Financial Statements.
Effective January 1, 1993, Outlet Broadcasting adopted Financial Accounting
Standards Board (FASB) Statement No. 109, "Accounting for Income Taxes", which
requires a change to the liability method of accounting for deferred income
taxes. Adoption of Statement 109 resulted in a cumulative effect of change in
accounting principle, in the amount of $4,434,000 or $4.43 per share,
representing the recognition of previously unrecognized tax benefits.
Outlet Broadcasting also adopted, as of January 1, 1993, FASB Statement No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
See Note 10 to the Consolidated Financial Statements. The effect of adoption of
Statement 106 was not material.
In 1995, Outlet Broadcasting had income before extraordinary loss of
$8,172,000 or $8.17 per share. This compares with 1994 net income of
$10,569,000 or $10.57 per share. After the extraordinary loss, net income for
1995 amounted to $3,439,000 or $3.44 per share. In 1993, Outlet Broadcasting's
income before extraordinary loss and cumulative effect of change in accounting
principle was $2,026,000 or $2.03 per share. After giving effect to the
extraordinary loss and change in accounting principle, net income for 1993
amounted to $4,634,000 or $4.63 per share.
- 21 -
<PAGE>
Liquidity and Capital Resources
In 1995, net cash provided by operations totalled $7,944,000. This was a
decrease of $11,522,000 or 59.2% when compared with net cash provided by
operations of $19,466,000 in 1994. The decrease included the effect of a
bonus of $5.5 million paid to an officer of Outlet Broadcasting in
December 1995, pursuant to the terms of an agreement with the officer.
The payment was recorded as an extraordinary loss. The decrease in net
cash provided by operations also included other merger related expenses
reported as an extraordinary loss. See Note 8 to the Consolidated Financial
Statements.
The 1995 decrease in net cash provided by operations further reflected an
amount of $5 million received in 1994 from NBC upon renewal of Outlet
Broadcasting's affiliation with that network. This was a one-time payment not
repeated in 1995. The amount has been reported as deferred revenue and is being
amortized into revenue over the six year duration of the affiliation. The
amount of deferred revenue to be amortized over the ensuing period of twelve
months is included in current liabilities.
In 1994, net cash provided by operations of $19,466,000 increased by
$15,594,000 or 402.7% compared with $3,872,000 in 1993. The improvement
included the one-time payment received from NBC as described above and also
reflected Outlet Broadcasting's trend of improved operating results.
The effect of non-cash operating expenses on Outlet Broadcasting's 1995
operating results contributed to a moderate increase in operating cash flow.
Operating cash flow in 1995 of $25,634,000 increased by $79,000 or .3% compared
with $25,555,000 in 1994. In 1993, operating cash flow amounted to $17,276,000.
Outlet Broadcasting's increased investment in film contract rights during
the years 1995, 1994 and 1993 amounted to $5,672,000, $4,149,000 and $4,672,000,
respectively. The increases for 1995 and 1994 were partially attributable to
film contract rights acquired for WNCN-TV and WWHO-TV, the television stations
that were added during 1994.
The amounts invested in film contract rights have enabled Outlet
Broadcasting to maintain attractive programs on a cost-effective basis. The
result has been successful in that audience levels have been retained, while
investments in film contract rights have been reasonable and manageable. In
addition, the increased number of viewing hours committed to news shows has
reduced the need for film acquisitions.
- 22 -
<PAGE>
Although Outlet Broadcasting is strategically committed to a reduced
investment in film contract rights, it has been selective in this process. At
December 31, 1995 Outlet Broadcasting had commitments to acquire approximately
$10,641,000 of film contract rights compared to commitments of $10,992,000 at
December 31, 1994. The total amounts are substantially effected by an extended
commitment to the Oprah Winfrey Show, to the year 2000, by WJAR-TV. Management
believes that the total benefits to be derived from this program will provide a
sound economic return to the broadcast station.
The net decreases in film contracts payable of $372,000, $1,773,000 and
$409,000 in 1995, 1994 and 1993, respectively, reflect payments of film contract
obligations in accordance with the contracted terms and in the normal course of
business. Amortization of film contract rights reflect the normal write-off of
film contract values over the period of their use. The reported amounts for the
years 1993 through 1995 also include the previously described lump-sum charges
for valuation write-downs of certain film contracts.
The increase in accounts receivable of $2,933,000 in 1995 primarily results
from the year's increased volume of business and the effect of two television
stations added in 1994. The 1995 increase in accrued expenses primarily
reflects accrued costs related to the pending merger of Outlet Communications
with NBC and a stockholders' equity pension adjustment resulting from the
requirement to recognize an additional minimum pension liability.
In 1995, net cash used by investing activities amounted to $10,863,000.
This included capital expenditures totalling $10,307,000 of which approximately
two-thirds was spent in behalf of WNCN-TV. During the year, WNCN-TV moved its
broadcast studio and offices to a newly leased facility in Raleigh, North
Carolina. This required capital outlays for new equipment, fixtures and studio
and office renovations. Outlet Broadcasting's television stations currently
operate from modern studio facilities and it is not expected that significant
amounts of capital will be required to be invested each year.
Investing activities also include payments made, in the amount of $556,000,
pursuant to a time brokerage agreement entered into with the licensee of a
television station to be constructed and operated in New Bedford, Massachusetts.
Subject to final regulatory approvals, it is expected that the New Bedford
station will be operational in the second half of 1996. It is also anticipated
that any further funds required in this venture will be available from internal
operations.
In 1994, net cash used by investing activities totalled $9,932,000. This
included capital expenditures of $3,385,000, for all four television stations,
and an investment of $1,055,000 pursuant to a time brokerage agreement entered
into with the licensee of WWHO-TV. In addition, Outlet Broadcasting purchased
the assets and broadcast license of WNCN-TV for an aggregate price of
$5,478,000, including acquisition costs of approximately $105,000.
- 23 -
<PAGE>
In 1993, net cash used by investing activities of $5,907,000 represented
capital expenditures for, primarily, completion of renovations and improvements
to Outlet Broadcasting's new corporate headquarters and WJAR-TV broadcast
facility in Cranston, Rhode Island. This amount also included costs for
equipping such facility with studio and technical equipment.
Net cash used by financing activities in 1995 amounted to $4,032,000. This
included a total of $4,500,000 in quarterly installments paid to Outlet
Broadcasting's senior bank lender on a term loan. In 1994, net cash used by
investing activities of $3,450,000 included total payments to the senior bank
lender of $3,500,000.
In 1995, 1994 and 1993, Outlet Broadcasting received capital contributions
of $1,084,000, $50,000 and $38,000, respectively, from the exercise of Outlet
Communications stock options. The amount for 1995 was reduced by an accrual
for stock option expense in the amount of $616,000. Also in 1995, Outlet
Broadcasting received a tax benefit of $1,989,000 from an employee's premature
disposition of Outlet Communications common stock acquired under a stock option,
which amount was recorded as a non-cash contribution of capital.
In 1993, net cash used by financing activities amounted to $10,416,000.
During the year, Outlet Broadcasting undertook a refinancing of its total debt
and thereby obtained benefits from lower interest rates and extended maturities
on its subordinated borrowings along with improved financial flexibility.
Pursuant to the refinancing, on June 28, 1993 Outlet Broadcasting entered into
a Credit and Guaranty Agreement with a bank (the "Senior Loan") under which the
bank agreed to provide a secured senior credit facility consisting of a term
loan in the principal amount of $25,000,000 and revolving loans in the maximum
principal amount outstanding of $5,000,000.
On July 15, 1993 Outlet Broadcasting completed a public offering of 10
7/8% Senior Subordinated Notes due 2003 (the "Senior Subordinated Notes"), in
the principal amount of $60,000,000. Proceeds of the public offering were used
to prepay the principal balance of the Junior Note due 1997 at its carrying
value of $43,946,000 plus accrued interest.
Also, on August 17, 1993 Outlet Broadcasting redeemed in full its Senior
Notes due 1997 in the principal amount of $44,150,000, at 105% of par plus
accrued interest. The premium payment on the redemption totalled $2,207,000.
Funds for the redemption included a balance remaining from the above public
offering along with available cash and funds provided by the Senior Loan in the
amount of $28,000,000. The interest rates applicable to the public offering and
the Senior Loan were less than the interest rates on the Senior Notes and the
Junior Note. The reduced interest rates contributed to subsequent reductions in
annual interest expense.
Costs incurred in connection with the debt refinancing, $3,151,000, were
capitalized to other assets. On a pretax basis, debt extinguishment costs,
comprised of the premium on debt refinancing - $2,207,000, unamortized note
costs of the redeemed debt - $555,000, and other - $4,000, were reported as an
extraordinary loss.
- 24 -
<PAGE>
During 1993, Outlet Broadcasting repaid $5,000,000, net, against its Senior
Loan including term loan installments of $2,000,000. Overall, there was a net
decrease in long-term debt in 1993 of $4,447,000.
On February 2, 1996, upon Outlet Communications' merger with NBC, the
outstanding Senior Loan was repaid in full from funds provided by NBC and the
Credit and Guaranty Agreement dated June 28, 1993 was terminated. As a result,
Outlet Broadcasting's revolving credit facility was also terminated.
On March 2, 1996, Outlet Broadcasting commenced an offer to repurchase
its outstanding Senior Subordinated Notes in whole, or in part in multiples
of $1,000, in cash in an amount equal to 101% of the aggregate principal amount
plus interest accrued to the change of control payment date specified in such
offer, April 1, 1996. The funds will be provided by NBC.
At December 31, 1995 Outlet Broadcasting had an excess of current
liabilities over current assets, in the amount of $2,434,000. This was a
reduction of 5,009,000 compared with an excess of current assets over current
liabilities of $2,575,000 at December 31, 1994. The decrease in net working
capital primarily resulted from the bonus paid to an officer.
In 1995, operating cash flow totalled $25,634,000 and the ratio of such
amount to interest expense of $8,505,000 was 3.0 to 1. In 1994, the ratio of
operating cash flow of $25,555,000 to interest expense of $8,467,000 was also
3.0 to 1, although in 1993 such ratio was 1.5 to 1.
Outlet Broadcasting's cash position decreased by $6,951,000 during 1995.
This reflected funds provided by operations of $7,944,000 reduced by aggregate
funds of $14,895,000 used in investing and financing activities. The funds were
primarily used for capital expenditures and debt reduction. In 1994, improved
results of operations provided a net increase of $6,084,000 in Outlet
Broadcasting's cash position and also contributed to that year's overall
increase in net working capital. It is expected that 1996 operations, along
with current cash on hand, will provide sufficient funds to meet all cash
requirements for that year, including debt service.
- 25 -
<PAGE>
Item 8. Financial Statements and Supplementary Data,
--------------------------------------------
The Financial Statements of Outlet Broadcasting appear on Pages F-1 through
F-24 hereof.
Item 9. Changes in and Disagreements on Accounting and
----------------------------------------------
Financial Disclosure.
---------------------
None
- 26 -
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
The following named individuals were the executive officers and directors
of Outlet Broadcasting through February 2, 1996, the date of Outlet
Communications' merger with NBC:
Position with Years with
Name Age Outlet Broadcasting Outlet Broadcasting
- ---- --- ------------------- -------------------
James G. Babb 64 Chairman of the (3)
Board, President
and Chief Executive
Officer
Felix W. Oziemblewski 61 Vice President and 27
Chief Financial
Officer
Joanne E. Schenck 38 Secretary 21
Linda Sullivan 42 Vice President-- 11
General Manager
WJAR-TV
Douglas E. Gealy 35 Vice President-- (3)
General Manager
WCMH-TV
Adam G. Polacek 53 Vice President-- (1)
General Manager
WNCN-TV
Letitia Baldrige 70 Director (5)
Julius Koppelman 79 Director (5)
Frank E. Walsh, Jr. 55 Director (5)
Frank E. Richardson 56 Director (5)
Robert C. Butler 65 Director (4)
Leonard Lieberman 67 Director (4)
James K. Makrianes 71 Director (4)
Stephen J. Carlotti 53 Director (3)
Frederick R. Griffiths 75 Director (2)
Solomon M. Yas 54 Director (2)
_____________________
(1) Since 1994.
(2) Since 1992.
(3) Since 1991.
(4) Since 1988.
(5) Since 1986.
- 27 -
<PAGE>
Set forth below is certain information with respect to the executive
officers and directors of Outlet Broadcasting through February 2, 1996:
James G. Babb
Mr. Babb was elected Chairman, President and Chief Executive Officer of
Outlet Broadcasting as of May 1, 1991. Before joining Outlet Broadcasting, from
November 1988 to January 1991, Mr. Babb was President of Jefferson-Pilot
Communications Company, an owner-operator of radio and television broadcasting
stations and broadcasting-related businesses. Prior thereto, he served as
Executive Vice President and Chief Operating Officer of that company.
Felix W. Oziemblewski
Mr. Oziemblewski has been with Outlet Broadcasting since 1968, has served
as its Vice President and Chief Financial Officer since 1984 and has served
Outlet Communications in those capacities since its formation in 1986. Prior to
joining Outlet Broadcasting, Mr. Oziemblewski, a certified public accountant,
was employed by Ernst & Young LLP. He has been active in several professional
organizations.
Joanne E. Schenck
Ms. Schenck has been with Outlet Broadcasting since 1974 and has served as
its Personnel Administrator since 1985. She was appointed Secretary in January
1992.
Douglas E. Gealy
Mr. Gealy was appointed Vice President-General Manager of WCMH-TV in July
1991 and also made General Manager of WWHO-TV in April 1994. Prior to joining
Outlet Broadcasting, from 1989 to 1991, Mr. Gealy was President and General
Manager of WHOI-TV, Peoria, Illinois. Prior thereto, he was associated with
WKEF-TV Dayton, Ohio for five years where he became General Sales Manager.
Linda Sullivan
Ms. Sullivan has been with Outlet Broadcasting since 1985. She was
appointed Vice President-General Manager of WJAR-TV in February 1991. From 1985
to 1986 she was the National Sales Manager for WJAR-TV and from 1986 until
February 1991 she served that station as its General Sales Manager.
Adam G. Polacek
Mr. Polacek was appointed Vice President-General Manager of WNCN-TV in
August 1994. Prior to joining Outlet Broadcasting, from 1991 to 1994, Mr.
Polacek was Vice President and General Manager of WLFL-TV, Raleigh, North
Carolina. Prior thereto, he was President and Chief Operating Officer of
Heritage Broadcast Group, Inc. for approximately five years.
Letitia Baldrige
Since 1964, Ms. Baldrige has been the owner of Letitia Baldrige
Enterprises, Inc., a management training and public relations consulting firm.
She is an author, lecturer, and columnist. Ms. Baldrige is also a director of
Hartmarx Corporation, Federal Home Loan Bank of Atlanta and a member of the
board of numerous non-profit organizations.
- 28 -
<PAGE>
Robert C. Butler
Mr. Butler was Senior Vice President and Chief Financial Officer of
International Paper Company, a forest products company, from 1988 to September
1995. Mr. Butler was a Group Executive Vice President of the National
Broadcasting Company ("NBC") from 1984 to 1988. From 1979 to 1984 he served
as Executive Vice President-Finance of NBC.
Stephen J. Carlotti
Mr. Carlotti is Managing Partner of Hinckley, Allen & Snyder, a Providence,
Rhode Island law firm, and has been a partner in that firm since January 1992
and from May 1970 to July 1989. He was Senior Executive Vice President, Chief
Operating Officer and General Counsel of The Mutual Benefit Life Insurance
Company ("Mutual Benefit") from August 1989 to August 1991 and a consultant to
Mutual Benefit from September 1991 to December 1991.
Frederick R. Griffiths
Mr. Griffiths is a retired former Vice President-Corporate Affairs of
Outlet Broadcasting for the period from 1976 to 1987. He previously served in
various administrative and creative capacities during a thirty year affiliation
with Outlet Broadcasting.
Julius Koppelman
Mr. Koppelman has been Chairman of the Board of Harding Service Corporation
("Harding Service"), a management consulting firm, since 1985 and was previously
Chairman of the Board of Harding Resources, Inc. ("Harding"), its predecessor.
From 1982 to 1985, he was President of Harding. For more than five years prior
to September 1981, when he retired, he was Executive Vice President and a
director of RCA Corporation, a communications and electronics company. Mr.
Koppelman is also a director of other companies, including Dyersburg Fabrics,
Inc. and Princess House, Inc.
Leonard Lieberman
Mr. Lieberman was elected a director of Outlet Broadcasting in 1988. Mr.
Lieberman was elected on January 4, 1991 to serve as Chairman, President and
Chief Executive Officer of Outlet Broadcasting until he was succeeded by Mr.
Babb. Mr. Lieberman was President and Chief Executive Officer of Supermarkets
General Corporation from 1983 to 1987 and was Chairman of that company from 1986
to 1987. He is also a director of other corporations, including Celestial
Seasonings, Inc., Republic New York Corporation, Sonic Corp., The William Carter
Company and La Petite Academy, Inc.
James K. Makrianes
Mr. Makrianes is a Director of Webb, Johnson Associates, an executive
search firm, since March 1995. He was formerly a Partner of Ward Howell
International, an executive search firm, from February 1989 to February 1995.
Mr. Makrianes was President of Haley Associates, an executive recruitment firm,
from 1981 to 1987, and was Chairman of the Board of that firm from 1987 to 1988.
- 29 -
<PAGE>
Frank E. Richardson
Mr. Richardson is President and a Director of Wesray Capital Corporation
("Wesray"), a private investment banking firm of which he has been an officer
for over five years. He is a director of several other corporations, including
Alex. Brown & Sons, Dyersburg Fabrics, Inc., New River Industries, Inc. and
Sonic Corp.
Frank E. Walsh, Jr.
Mr. Walsh has been Chairman of Wesray since August 1989. Mr. Walsh was
Vice Chairman of Wesray from 1986 to 1989 and Executive Vice President of Wesray
from 1984 to 1986. He has been a director of Wesray since 1984. Mr. Walsh is
also a director of other companies, including Tyco Laboratories, Inc.
Solomon M. Yas
Mr. Yas is a consultant in the field of Human Resources. He is a former
Vice President-Human Resources of Outlet Broadcasting, having served from 1985
until retirement as of June 1, 1991. From 1964 to 1973, he was Director of
Personnel for ARA Services, Inc.
Effective with the February 2, 1996 merger of Outlet Communications with
NBC, the above named executive officers and directors of Outlet Broadcasting
were removed from office, except for Ms. Sullivan and Messrs. Gealy and Polacek
(who retained their position), and Ms. Schenck (who was elected an Assistant
Secretary), and replaced with the following listed executive officers and
directors:
Position with Years with
Name Age Outlet Broadcasting Outlet Broadcasting
- ---- --- ------------------- -------------------
John Rohrbeck 55 President (a)
Robert Finnerty 52 Vice President (a)
Warren Jenson 39 Vice President & (a)
Treasurer and
Director
Richard Cotton 51 Secretary and
Director (a)
Robert C. Wright 52 Director (a)
Edward L. Scanlon 61 Director (a)
(a) Since February 2, 1996
Set forth below is certain information with respect to the newly elected
executive officers and directors of Outlet Broadcasting:
John Rohrbeck
Mr. Rohrbeck was named President, NBC Television Stations in December 1991.
From August 1984 until December 1991, Mr. Rohrbeck was President and General
Manager of KNBC-TV in Los Angeles.
- 30 -
<PAGE>
Robert Finnerty
Mr. Finnerty has been Vice President, Finance and Operations of NBC since
December 1987.
Warren Jenson
Mr. Jenson was named Senior Vice President, Chief Financial Officer of NBC
in July 1992. Prior to joining NBC, Mr. Jenson spent four years at General
Electric, first as Staff Executive and Manager of Mergers and Acquisitions, and
then as Director of GE Investor Relations.
Robert C. Wright
Mr. Wright has been President and Chief Executive Officer of NBC since
September 1986, when he joined that company.
Edward L. Scanlon
Mr. Scanlon has been Executive Vice President, Employee Relations at NBC
since 1987.
Richard Cotton
Mr. Cotton has been Executive Vice President and General Counsel of NBC
since October 1989.
Item 11. Executive Compensation.
-----------------------
The following table sets forth certain information with respect to
compensation paid to the Chief Executive Officer and the most highly compensated
executive officers as to whom the total annual salary and bonus earned exceeded
$100,000 for the fiscal year ended December 31, 1995.
- 31 -
<PAGE>
<TABLE><CAPTION>
Summary Compensation Table
- ---------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
Shares
Other Under- All
Annual Restricted lying Other
Principal Compen- Stock Options Compen-
Name Position Year Salary Bonus(1) sation(2) Awards(3) Granted sation(4)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James G. Babb Chairman, 1995 $377,769$5,750,000 $37,623 $ 0 0 $4,500
President 1994 331,154 225,000 22,819 0 90,000 1,848
and Chief 1993 294,615 200,000 23,014 0 0 0
Executive
Officer
Felix W. Oziemblewski Vice 1995 138,192 60,000 4,533 0 0 4,500
President- 1994 127,819 55,000 5,542 0 8,000 1,200
Chief 1993 121,554 60,000 8,781 0 0 0
Financial
Officer and
Treasurer
Douglas E. Gealy Vice 1995 170,481 65,000 4,915 0 0 4,500
President- 1994 146,538 60,000 4,660 0 12,000 1,558
General 1993 133,077 65,000 5,101 0 0 0
Manager
WCMH-TV
Linda W. Sullivan Vice 1995 146,385 60,000 4,347 0 0 4,500
President- 1994 124,808 50,000 4,386 0 12,000 1,200
General 1993 111,539 57,500 5,138 0 0 0
Manager
WJAR-TV
Adam G. Polacek Vice 1995 147,349 35,000 0 0 0 1,925
President- 1994 49,053 10,000 0 0 15,000 0
General 1993 N/A N/A N/A N/A N/A N/A
Manager
WNCN-TV(5)
</TABLE>
(1) Amounts represent incentive compensation awards except that in 1995, the
amount for Mr. Babb also includes an accelerated bonus of $5,500,000
made pursuant to an agreement between Outlet Communications, Inc and Mr.
Baab. Also, the amounts for 1993 include one-time bonuses of $25,000
for Mr. Babb and $15,000 each for Mr. Oziemblewski, Mr. Gealy and Ms.
Sullivan, paid upon completion of a successful debt refinancing.
(2) Amounts listed represent gross-up payments for tax liabilities. Excludes
perquisites and other benefits, unless the aggregate amount of these items
exceeds the lesser of either $50,000 or 10 percent of the total annual
salary and bonus reported for the named executive officer.
- 32 -
(Continued on next page)
<PAGE>
(3) As of December 31, 1995, total restricted stock awards of 71,500 shares had
been made pursuant to Outlet Communications' 1992 Stock Incentive Plan. The
value of the restricted stock awards shown in the table, if any, is based
on the market value of the shares on the date of grant of the award, less
the purchase price ($1.00 per share). The shares subject to such awards
vest in three equal annual installments commencing in August 1993. As of
December 31, 1995, Mr. Babb had purchased 30,000 shares, Mr. Oziemblewski
and Mr. Gealy had each purchased 6,666 shares and Ms. Sullivan had
purchased 3,333 shares in accordance with the terms of the original grant.
Mr. Polacek has not received any restricted stock awards. As of December
31, 1995, the market value of outstanding restricted stock awards held by
Mr. Babb, Mr. Oziemblewski, Mr. Gealy and Ms. Sullivan, less the purchase
price ($1.00 per share), was $-0-, $154,198, $154,198 and $308,349 for
unpurchased shares, respectively. No restricted stock awards were made in
1995.
(4) Amounts represent Outlet Broadcasting's contribution to the Outlet
Broadcasting, Inc. 401(k) and Profit Sharing Plan.
(5) Mr. Polacek joined Outlet Broadcasting in August 1994.
- 33 -
<PAGE>
Stock Options
Options reflected in the Summary Compensation Table were granted under the
Outlet Communications 1992 Stock Incentive Plan (the "Plan") as approved by
stockholders on June 25, 1992, amended April 27, 1993 and May 2, 1995. The Plan
authorizes grants of either non-qualified or incentive stock options, or awards
of restricted shares, to key employees. The aggregate number of shares of
Common Stock available for awards under the Plan is 600,000 shares. The purpose
of the Plan is to encourage stock ownership by executives and thereby increase
the executives' personal interest in Outlet Broadcasting's continued success and
progress. The Plan is administered by the Compensation Committee of the Board
of Directors, which determines the terms of options granted, the exercise price
and exercisability thereof. The Plan was terminated in connection with the NBC
merger and all options were accelerated and cancelled upon payment of the
difference between $47.25 and the exercise price of each such option.
There were no options granted in the last fiscal year to the executive
officers named in the Summary Compensation Table.
The following table summarizes options exercised during 1995 and shows
fiscal year-end option values for the executive officers named in the Summary
Compensation Table.
Fiscal Year-end Option Values
- -------------------------------------------------------------------------
Number
of Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Value Year-End Year-End(2)
on Exer- Realized Exer- Unexer- Exer- Unexer-
Name cise (1) cisable cisable cisable cisable
___________________________________________________________________________
James G. Babb 120,000 $4,882,500 0 0 $ 0 $ 0
Felix W. Oziemblewski 0 0 12,667 5,333 524,010 167,990
Douglas E. Gealy 0 0 14,000 8,000 566,000 252,000
Linda W. Sullivan 0 0 10,667 8,000 419,348 252,000
Adam G. Polacek 0 0 5,000 10,000 198,125 396,250
(1) Value is based on average of the bid and ask prices on the
date of exercise less the exercise price.
(2) Value is based on the last sales price per share ($47.25) on
December 29, 1995, as reported on the NASDAQ National Market
System, less the applicable option price.
- 34 -
<PAGE>
Retirement Plans
Outlet Broadcasting maintains a non-contributory qualified retirement
plan (the "Retirement Plan") for the benefit of its employees, including the
individuals named in the Summary Compensation Table. As of August 31, 1994 (the
"Curtailment Date"), Outlet Broadcasting curtailed the Retirement Plan and
suspended the accrual of further benefits for all employees. The following
table shows the estimated annual benefits payable upon retirement to persons in
specified salary and bonus levels and years of credited service.
Compen-
sation Years of Service
- ------------------------------------------------------------------
15 20 25 30 35
__________________________________________________________________
$125,000 $ 28,125 $ 37,500 $ 46,875 $ 56,250 $ 65,625
150,000 33,750 45,000 56,250 67,500 78,750
175,000 39,375 52,500 65,625 78,750 91,875
200,000 45,000 60,000 75,000 90,000 105,000
225,000 50,625 67,500 84,375 101,250 118,125
250,000 56,250 75,000 93,750 112,500 120,000*
300,000 67,500 90,000 112,500 120,000* 120,000*
400,000 90,000 120,000 120,000* 120,000* 120,000*
450,000 101,250 120,000* 120,000* 120,000* 120,000*
500,000 112,500 120,000* 120,000* 120,000* 120,000*
600,000 120,000* 120,000* 120,000* 120,000* 120,000*
_________________________________________________________________
* Maximum annual benefit permitted under Section 415 of the
Internal Revenue Code.
Note - The estimated annual benefits shown in the above table may
be further limited due to the provisions of section 401(a)(17) of
the Internal Revenue Code.
The amounts payable shown in the preceding table are based on the
following assumptions: (i) the individual shall have retired at the normal
retirement age of 65, (ii) "compensation" is the average of the covered
compensation paid to such individual during the three calendar years in which
salary is the highest, (iii) covered compensation is salary and bonuses paid to
Retirement Plan participants through the Curtailment Date (which amounts are
included in the Salary and Bonus columns of the Summary Compensation Table), and
(iv) benefits are paid in the form of a straight-life annuity.
- 35 -
<PAGE>
In addition to the Retirement Plan, the individuals named in the Summary
Compensation Table also participate in a non-qualified supplemental retirement
plan (the "Supplemental Plan") which provides a supplemental benefit based on a
percentage of final average compensation and years of service, less benefits
paid under the Retirement Plan and Social Security benefits. The following
table shows the estimated annual benefits payable under the Supplemental Plan to
persons in the specified salary and bonus levels and years of credited service.
Compen-
sation Years of Service
- ------------------------------------------------------------------
15 20 25 30 35
__________________________________________________________________
$125,000 $ 21,875 $ 25,000 $ 15,625 $ 6,250 $ 0
150,000 26,250 30,000 18,750 7,500 0
175,000 30,625 35,000 21,875 8,750 0
200,000 35,000 40,000 25,000 10,000 0
225,000 39,375 45,000 28,125 11,250 0
250,000 43,750 50,000 31,250 12,500 5,000
300,000 52,500 60,000 37,500 30,000 30,000
400,000 70,000 80,000 80,000 80,000 80,000
450,000 78,750 105,000 105,000 105,000 105,000
500,000 87,500 130,000 130,000 130,000 130,000
600,000 120,000 180,000 180,000 180,000 180,000
_________________________________________________________________
The amounts payable shown in the above table are based on the following
assumptions: (i) the individual shall have retired at the normal age of 65,
(ii) "compensation" is the average salary paid to such individual during the
three calendar years in which salary is the highest in the five years prior to
retirement, plus the average Executive Incentive Compensation award for the
highest three years during the ten years prior to retirement, (iii) benefits are
paid in the form of a straight-line annuity, (iv) estimated annual payments are
after deduction for Retirement Plan benefits, but before any deduction for
Social Security benefits. Covered compensation under the Supplemental Plan is
also included in the Salary and Bonus columns of the Summary Compensation Table.
As of December 31, 1995, for purposes of computing benefits under the
Retirement Plan and the Supplemental Plan, Mr. Babb has 3.4 years of service,
Mr. Oziemblewski has 25.9 years, Ms. Sullivan has 9.4 years, Mr. Gealy has 3.2
years and Mr. Polacek has -0- years.
On September 1, 1994 Outlet Broadcasting adopted the Outlet Broadcasting,
Inc. 401(k) and Profit Sharing Plan (the "401(k) Plan"). This plan is a
qualified 401(k) deferred compensation plan whose purpose is to enable eligible
employees to save for retirement. Eligible employees are those employees who
are not covered by a collective bargaining agreement, unless the agreement
allows for participation in the 401(k) Plan, and who have completed one year of
service and have attained age 21.
- 36 -
<PAGE>
Eligible employees may contribute up to the lesser of 15% of taxable
compensation in each calendar year, excluding the taxable value of stock
options, fringe benefits or moving and other expense reimbursements, or $9,240.
All employee contributions are allocated to the employee's individual account
and, at the employee's election, are invested in money market, fixed income or
equity funds. Outlet Broadcasting will make matching contributions in an amount
equal to 25% of the employee contributions but subject to a maximum employee
contribution of 6% of eligible compensation. Outlet Broadcasting's matching
contributions vest with the employee at the rate of 20% for each year of
service. Outlet Broadcasting may also make annual discretionary profit sharing
contributions in an amount to be determined by the Board of Directors at the end
of each calendar year. The maximum contributions allowed are limited by
regulations promulgated under the Internal Revenue Code.
Employment Contracts
Mr. James G. Babb entered into an employment agreement as Chairman,
President and Chief Executive Officer, effective January 1, 1993, for a term of
five years, as amended. The agreement provides for a base salary of $385,000,
as adjusted. The agreement also provides that Mr. Babb will be a participant in
the Executive Incentive Compensation Plan and that he will be eligible to
receive awards of stock options under Outlet Communications' stock option plans.
Mr. Babb was further eligible to receive additional compensation in the
event of a merger or sale of assets pursuant to which Outlet Communications'
stockholders receive value in excess of $9 per share. Such provision specifies
that Mr. Babb is to receive on the closing date of such merger or sale an amount
in cash equal to 2% of the aggregate amount by which the per share cash price
paid in a merger or sale exceeds $9.00 per share, up to $12.00 per share, and 3%
of the aggregate amount by which the per share cash price paid exceeds $12.00
per share. Based on the total number of shares of Outlet Communications Common
Stock outstanding at the time of merger with NBC, Mr. Babb would have been
entitled to receive at closing a total of approximately $7,514,868 under this
provision. On December 14, 1995, the Board of Directors, with the approval of
NBC, authorized the unconditional acceleration of all of Mr. Babb's stock
options and the unconditional payment to him of $5,500,000. Such payment of
$5,500,000 was made prior to December 31, 1995, was not conditioned upon the
closing of the merger, and reduced the amount to which he would have been
entitled in the event of the merger as described above.
In the event of termination without cause, Outlet Broadcasting will pay
Mr. Babb his compensation for twelve months or the remaining portion of his
employment period, whichever is greater. On February 2, 1996, upon the
consummation of the merger of Outlet Communications with NBC, Mr. Babb's
employment contract was terminated and Mr. Babb received compensation in the
amount of $1,110,230 for the remaining portion of his employment period.
- 37 -
<PAGE>
Mr. Douglas E. Gealy entered into an employment agreement as Vice
President-General Manager of WCMH-TV in May 1993 which remains in effect until
April 30, 1996. The contract provides for a base salary of $175,000 per annum,
as adjusted, and also provides that the employee will be a participant in the
Executive Incentive Compensation Plan. Ms. Sullivan entered into an employment
agreement as Vice President-General Manager of WJAR-TV, effective January 1,
1995, which remains in effect until December 31, 1996. The agreement provides
for a base salary of $150,000 and also provides that the employee will be a
participant in the Executive Incentive Compensation Plan. The employment
contract of Mr. Oziemblewski with Outlet Broadcasting expired as of March 31,
1992. The contract provides, however, that if employment is terminated other
than for cause, death or disability within a five-year period following the term
of the contract, Outlet Broadcasting will pay a minimum of one year base salary
as severance payment. At December 31, 1995 this amounted to $140,000. In the
event of a merger of Outlet Communications or Outlet Broadcasting, or
acquisition of 50% of their voting securities, or any other change in control,
the contracts are deemed to have been assigned to the successor entity.
Compensation Committee Interlocks and Insider Participation
Mr. Koppelman served as Chairman and Messrs. Butler, Richardson and Walsh
and Ms. Baldrige served as members of the Compensation Committee of the Board.
No member of the Compensation Committee is a current or former officer or
employee of Outlet Broadcasting or any of its subsidiaries. All members of the
Compensation Committee except Ms. Baldrige were designated by Wesray pursuant to
the Stockholders' Agreement described below under "Certain Relationships and
Related Transactions-Stockholders' Agreement."
Messrs. Richardson and Walsh are stockholders and Messrs. Koppelman,
Richardson and Walsh are directors of Harding Service, which provided management
consulting services to Outlet Broadcasting pursuant to an agreement entered into
in July 1986. Under the agreement, Harding Service agreed to provide Outlet
Broadcasting with general management, corporate finance, marketing and business
investment advice until July 1996. Such advice included reviewing capital and
operating budgets, capital appropriations, executive compensation and employee
incentive programs, business strategies, budgeting and forecasting, and general
corporate planning and financial oversight. Harding Service provides management
consulting services to several other entities affiliated with Wesray. In
consideration of the consulting services, Outlet Broadcasting agreed to pay
consulting services fees equal to 0.333% of annual gross revenues to Harding
Service, which fees totalled $264,095 in 1995. This agreement was entered into
when Outlet Communications was privately held and may not be on terms as
favorable to Outlet Broadcasting as could have been obtained from an
unaffiliated party. As a condition of the closing of the merger of Outlet
Communications with NBC, the agreement with Harding Service was cancelled as of
February 2, 1996.
- 38 -
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners
-----------------------------------------------
and Management.
---------------
All of the issued and outstanding shares of capital stock of Outlet
Broadcasting are owned by Outlet Communications.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
Stockholders' Agreement Outlet Communications, Outlet Broadcasting, and each of
Outlet Communications' original stockholders (including MBL Life Assurance
Corp., successor to Mutual Benefit) and certain of their successors and assigns
were parties to a stockholders' agreement (the "Stockholders' Agreement"). The
Stockholders' Agreement required that the stockholders party to the
Stockholders' Agreement vote their shares to fix the number of directors of
Outlet Communications at 14 and elect as directors five persons designated by
certain management stockholders (the "Management Stockholders") and nine persons
designated by the stockholders affiliated with Wesray (the "Wesray
Stockholders"). The following persons were parties to the Stockholders'
Agreement: Hugh J. Byrnes, Richard D. Ferrier, Maria E. Ferrier, The Hartington
Trust, Keith Hightower, John D. Howard, Julius Koppelman, Frank H. Pearl and
selected trust, Frank E. Richardson, E. Burke Ross, Jr., William E. Simon,
Manfred L. Steyn, Henrik N. Vanderlip, The OCI Trust, (Wesray Stockholders),
Reginald Butts, Steve J. Caminis, Charles G. Conklin, Estate of David E.
Henderson and related trusts, Frederick R. Griffiths, Thomas J. Mosher, Felix W.
Oziemblewski, Gerald T. Plemmons, Josephine Renola, Garland R. Robinson, John D.
Sawhill, Gerald Scher, Mara L. Snodgrass, Solomon M. Yas, Joseph A. Young
(Management Stockholders) and MBL Life Assurance Corp. MBL Life Assurance Corp.
is the transferee of certain assets formerly held by Mutual Benefit, including
the holdings of Mutual Benefit in Outlet Communications' Common Stock. Mutual
Benefit was placed in rehabilitation by the New Jersey Commissioner of
Insurance on July 16, 1991.
The Stockholders' Agreement also provided that each stockholder and MBL Life
Assurance Corp. may not agree to sell any securities to a buyer who would as a
result of such purchase own more than 50% of the outstanding Common Stock of
Outlet Communications unless prior to such sale the buyer agreed to be bound by
the Stockholders' Agreement and afford each stockholder the opportunity to sell
a pro rata portion of his shares on the same terms and conditions.
The Stockholders' Agreement provided that it would terminate on the earlier of
(i) December 9, 1996; (ii) the date that the Wesray Stockholders, Management
Stockholders and MBL Life Assurance Corp. own an aggregate of less than 50% of
Outlet Communications issued and outstanding Common Stock; and (iii) the date of
an event of bankruptcy or insolvency of Outlet Communications or Outlet
Broadcasting or foreclosure or similar actions or proceedings by the senior bank
lender. Upon consummation of the merger of Outlet Communications with NBC, on
February 2, 1996, the Stockholders' Agreement was terminated.
- 39 -
<PAGE>
Management Consulting Agreement In July 1986, Outlet Broadcasting entered into
an agreement for management consulting services with Harding Service, of which
Mr. Richardson and Mr. Walsh are stockholders and Messrs. Koppelman, Richardson
and Walsh are directors. For a description of the agreement with Harding
Service, see "Compensation Committee Interlocks and Insider Participation."
Transactions with the Law Firm of Hinckley, Allen & Snyder The law firm of
Hinckley, Allen & Snyder of which Mr. Stephen J. Carlotti, a former director of
Outlet Broadcasting, is Managing Partner, provided legal services to Outlet
Broadcasting during fiscal year 1995.
Future Transactions with Affiliates
It is the policy of Outlet Broadcasting with respect to future
transactions with persons or entities affiliated with officers, directors,
employees, or stockholders of Outlet Broadcasting which relate to the operation
of the business of Outlet Broadcasting, that any such transactions shall be on
terms no less favorable to Outlet Broadcasting than could have reasonably been
obtained in arms-length transactions with independent third parties.
- 40 -
<PAGE>
PART IV
Item 14. Exhibit, Financial Statement Schedules, and Reports on
------------------------------------------------------
Form 8-K.
---------
(a). (1) Financial Statements and Schedules
The following Consolidated Financial Statements of Outlet Broadcasting,
Inc., appear on pages F-1 through F-23 hereof.
Consolidated Balance Sheets as of December 31, 1995, and
1994.
Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements -- December 31,
1995.
(2) The following Financial Statement Schedules of Outlet
Broadcasting, Inc. are included herein.
For the years ended December 31, 1995, 1994 and 1993:
Page Herein Schedule
- ----------- --------
S-1 Schedule II -- Valuation and Qualifying
Accounts
All supporting schedules other than the above have been omitted because they are
not required or the information to be set forth therein is included in the
financial statements or in the notes thereto.
(b). Reports on Form 8-K.
A report on Form 8-K dated February 2, 1996 was filed regarding (i)
change in control of Outlet Broadcasting upon the merger of Outlet
Communications into a subsidiary of NBC on February 2, 1996, (ii) the
termination of Outlet Broadcasting's Credit and Guaranty Agreement with a bank
upon full payment of Outlet Broadcasting's obligations and liabilities to such
bank by NBC and General Electric Company and (iii) Outlet Broadcasting's intent
to offer to repurchase its outstanding 10 7/8% Senior Subordinated Notes at 101%
of principal amount plus accrued interest.
(c). Exhibits (an exhibit index immediately preceding the exhibits
indicates the page number where each exhibit can be found).
- 41 -
<PAGE>
Outlet Broadcasting will furnish, upon request, any exhibit listed herein
upon the payment of a fee not to exceed reasonable expenses incurred by Outlet
Broadcasting in furnishing such exhibit.
3. (a) Certificate of Incorporation*, as amended,
December 17, 1987;**and September 19, 1989;***
(b) Amended and Restated By-Laws, dated February 2,
1996;************
4. Indenture, dated as of July 8, 1993 between Outlet
Broadcasting, Inc. and Bankers Trust Company, as
Trustee, governing Outlet Broadcasting, Inc. 10 7/8%
Senior Subordinated Notes Due 2003;***
10. Material contracts:
(a) Agreement for Management Consulting Services, dated
July 31, 1986, by and between Harding Service
Corporation and Outlet Communications, Inc.;*(1)
(b)(i) Stockholders' Agreement, dated December 10, 1986, by
and among Outlet Communications, Inc.; Outlet
Broadcasting, Inc. and the persons named therein
(the Stockholders' Agreement);***
(b)(ii) Amendment No. 1, dated as of December 1, 1987, to
the Stockholders' Agreement;***
(b)(iii) Agreement dated July 26, 1988, by and among Outlet
Communications, Inc.; Outlet Broadcasting, Inc.
and the persons named therein amending the
Stockholders' Agreement;***
(c) Credit and Guaranty Agreement dated as of June 28,
1993 among Outlet Broadcasting, Inc. and Outlet
Communications, Inc. and Fleet National Bank;***
(d) Supplemental Retirement Plan;***(1)
(e) 1992 Stock Incentive Plan, as amended and
restated;***as amended May 2, 1995***********(1)
(f)(i) Employment Agreement, dated April 1, 1989, among
Felix W. Oziemblewski and Outlet Broadcasting, Inc.
and Outlet Communications, Inc.;****(1)
(f)(ii) Employment Agreement, dated January 1, 1995, among
Linda Sullivan and Outlet Broadcasting, Inc.
and Outlet Communications, Inc.;********(1)
(f)(iii) Employment Agreement, dated May 1, 1993 among
Douglas E. Gealy and Outlet Broadcasting, Inc. and
Outlet Communications, Inc.***(1)
(f)(iv) Employment Agreement, dated January 1, 1993, between
James G. Babb and Outlet Communications, Inc.;******
as amended December 17, 1993;*******(1)
(f)(v) Employment Agreement, dated January 1, 1995, among
Adam G. Polacek and Outlet Broadcasting, Inc.
and Outlet Communications, Inc.;********(1)
(f)(vi) Employment Agreement, dated January 1, 1995 among
Steven Soldinger and Outlet Broadcasting, Inc. and
Outlet Communications, Inc.********(1)
(f)(vii) Agreement dated December 27, 1995 between
Outlet Communications, Inc. and James G.
Babb************(1)
(g) Lease Agreement dated as of September 27, 1982
between WBNS-TV and Outlet Broadcasting, Inc.
regarding tower facility of WCMH;***
- 42 -
<PAGE>
(h) Station Affiliation Agreement, dated as of
September 1, 1994, between WB Communications and
Outlet Broadcasting;********
(i) Time Brokerage Agreement dated as of March 18,
1994 among Outlet Broadcasting, Inc. and Fant
Broadcasting Company of Ohio, Inc. and Outlet
Communications, Inc.********
(j) Press Release, dated March 21, 1995, announcing
the retention of a financial advisor to explore
strategic alternatives.********
(k) Merger Agreement dated as of June 30, 1995, among
Renaissance Communications, Corp., Renaissance
Communications Acquisition Corp., and Outlet
Communications, Inc.*********
(l) Merger Agreement dated as of August 2, 1995, among
National Broadcasting Company, Inc., CO Acquisition
Corporation and Outlet Communications, Inc.**********
(m) Time Brokerage Agreement dated as of December 14,
1994, among Outlet Broadcasting, Inc. and BAF
Enterprises, Inc. and Fant Broadcasting Company
of Ohio, Inc.************
22. Subsidiaries of the Registrant:
Outlet Productions, Inc.; Biltout, Inc.; and WATL-TV
Pro Wrestling, Inc.
__________________
* Incorporated by reference from the Registration
Statement on Form S-1, Registration No. 33-9442, declared
effective by the Securities and Exchange Commission on January 21,
1987.
** Incorporated by reference from Current Report on
Form 10-K for the year ended December 31, 1987.
*** Incorporated by reference from Outlet Broadcasting,
Inc. Registration Statement on Form S-1, Registration No. 33-62292, declared
effective by the Securities and Exchange Commission on July 8, 1993.
**** Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1989.
***** Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1990.
****** Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1992.
******* Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1993.
- 43 -
<PAGE>
******** Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1994.
********* Incorporated by reference from Current Report on
Form 8-K dated June 30, 1995.
********** Incorporated by reference from Current Report on
Form 8-K dated August 2, 1995.
*********** Incorporated by reference from the Definitive 14A Proxy Statement
filed by Outlet Communications, Inc. on March 30, 1995.
************ Filed herewith.
________________________________________________
(1) Management contract or compensatory plan or arrangement.
- 44 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
behalf by the undersigned, thereunto duly authorized.
OUTLET BROADCASTING, INC.
/s/ John Rohrbeck
-------------------------------
By: John Rohrbeck
President
Dated: March 29, 1996
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 Title Date
--------- ----- ----
Principal Executive
Officer:
/s/ John Rohrbeck President March 29, 1996
- ---------------------------
John Rohrbeck
Principal Financial and
Accounting Officer:
/s/ Warren Jenson Vice President and March 29, 1996
- ----------------------------
Warren Jenson Treasurer and
Director
- 45 -
<PAGE>
Directors:
/s/ Robert C. Wright Director March 29, 1996
- -------------------------
Robert C. Wright
/s/ Edward L. Scanlon Director March 29, 1996
- -------------------------
Edward L. Scanlon
/s/ Richard Cotton Director March 29, 1996
- -------------------------
Richard Cotton
- 46 -
<PAGE>
Report of Independent Auditors
Board of Directors
Outlet Broadcasting, Inc.
We have audited the accompanying consolidated balance sheets of Outlet
Broadcasting, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholder's equity, and cash flows
for each of the three years in the period ended December 31, 1995. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and the schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Outlet
Broadcasting, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Notes 5 and 10 to the financial statements, in 1993 the Company
changed its method of accounting for income taxes and postretirement benefits
other than pensions.
ERNST & YOUNG LLP
Providence, Rhode Island
February 19, 1996
F-1
<PAGE>
Outlet Broadcasting, Inc.
Consolidated Balance Sheets
December 31
1995 1994
---------------------------
Assets
Current Assets
Cash and cash equivalents $ 889,000 $ 7,840,000
Trade accounts receivable, less allowance
for doubtful accounts of $450,000 in
1995 and $321,000 in 1994 16,573,000 13,640,000
Film contract rights 3,148,000 3,350,000
Other current assets 1,154,000 1,171,000
---------------------------
Total Current Assets 21,764,764 26,001,000
Other Assets
Film contract rights 346,000 1,012,000
Deferred financing costs and other 3,480,000 3,399,000
---------------------------
3,826,000 4,411,000
Property and Equipment
Land 1,899,000 1,899,000
Buildings 11,633,000 10,967,000
Fixtures and equipment 45,672,000 36,766,000
---------------------------
59,204,000 49,632,000
Less accumulated depreciation 29,728,000 27,115,000
---------------------------
29,476,000 22,517,000
Intangible Assets 74,479,000 76,999,000
---------------------------
$129,545,000 $129,928,000
=============================
F-2
<PAGE>
December 31
1995 1994
---------------------------
Liabilities and Stockholder's Equity
Current Liabilities
Trade accounts payable $ 1,492,000 $ 801,000
Accrued expenses 11,522,000 10,394,000
Film contracts payable 3,814,000 4, 174,000
Deferred revenue 833,000 833,000
Federal and state income taxes 1,537,000 2,724,000
Current portion of long-term debt 5,000,000 4,500,000
---------------------------
Total Current Liabilities 24,198,000 23,426,000
Long-Term Debt
Loan payable 10,000,000 15,000,000
Notes payable 60,000,000 60,000,000
---------------------------
70,000,000 75,000,000
Other Liabilities
Film contracts payable 1,007,000 1,019,000
Unfunded pensions 2,242,000 2,355,000
Deferred revenue 3,056,000 3,889,000
Deferred income taxes 3,564,000 4,403,000
Other 3,057,000 3,432,000
---------------------------
12,926,000 15,098,000
Stockholder's Equity
Capital stock 10,000 10,000
Capital surplus 35,605,000 32,532,000
Accumulated deficit (12,699,000) (16,138,000)
Pension liability adjustment (495,000) -
----------------------------
22,421,000 16,404,000
----------------------------
$129,545,000 $129,928,000
============================
See accompanying notes.
F-3
<PAGE>
Outlet Broadcasting, Inc.
Consolidated Statements of Income
Year ended December 31
1995 1994 1993
-------------------------------------
Net revenue $66,210,000 $59,442,000 $46,952,000
Operating expenses:
Technical, programming and news 23,784,000 20,113,000 18,035,000
Selling, general and administrative 16,792,000 13,774,000 11,641,000
Depreciation 3,347,000 2,775,000 2,488,000
Amortization of intangibles 2,520,000 2,605,000 2,360,000
----------------------------------
46,443,000 39,267,000 34,524,000
-----------------------------------
Operating income 19,767,000 20,175,000 12,428,000
Interest expense:
Loan and notes payable (8,505,000) (8,467,000) (7,392,000)
Note payable to shareholder (4,016,000)
Other income (expense):
Interest income 382,000 141,000 239,000
Other income 1,246,000 276,000 1,694,000
Other expense (1,118,000) (896,000) (611,000)
------------------------------------
Total interest and other income
(expense) (7,995,000) (8,946,000)(10,086,000)
Income before income taxes,
extraordinary loss and cumulative
effect of change in accounting
principle 11,772,000 11,229,000 2,342,000
Income taxes 3,600,000 660,000 316,000
----------------------------------
Income before extraordinary loss and
cumulative effect of change in
accounting principle 8,172,000 10,569,000 2,026,000
Extraordinary loss, net (4,733,000) (1,826,000)
Cumulative effect of change in
method of accounting for income taxes 4,434,000
-----------------------------------
Net income $ 3,439,000 $10,569,000 $ 4,634,000
====================================
F-4
<PAGE>
Outlet Broadcasting, Inc.
Consolidated Statements of Income (continued)
Year ended December 31
1995 1994 1993
----------------------------
Income per share:
Before extraordinary loss and
cumulative effect of change in
accounting principle $8.17 $10.57 $2.03
Extraordinary loss, net (4.73) ( 1.83)
Cumulative effect of change in
method of accounting for income
taxes 4.43
----------------------------
Net income per share $3.44 $10.57 $4.63
----------------------------
See accompanying notes.
F-5
<PAGE>
<TABLE><CAPTION>
Outlet Broadcasting, Inc.
Consolidated Statements of Stockholder's Equity
Class A Common Stock
-------------------------- Pension
Number of Par Capital Accumulated Liability
Shares Value Surplus Deficit Adjustment Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 1,000,000 $10,000 $32,444,000 $(31,341,000) $ 1,113,000
Contribution of capital 38,000 38,000
Net income 4,634,000 4,634,000
--------------------------------------------------------------------------------------
Balances at December 31, 1993 1,000,000 10,000 32,482,000 (26,707,000) 5,785,000
Contribution of capital 50,000 50,000
Net income 10,569,000 10,569,000
--------------------------------------------------------------------------------------
Balances at December 31, 1994 1,000,000 10,000 32,532,000 (16,138,000) 16,404,000
Contribution of capital 3,073,000 3,073,000
Net income 3,439,000 3,439,000
Pension liability adjustment $(495,000) (495,000)
--------------------------------------------------------------------------------------
Balances at December 31, 1995 1,000,000 $10,000 $35,605,000 $(12,699,000) $(495,000) $22,421,000
======================================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
Outlet Broadcasting, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
1995 1994 1993
-----------------------------------------
Operations:
Net income $ 3,439,000 $10,569,000 $4,634,000
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 5,867,000 5,380,000 4,848,000
Amortization of other assets 365,000 365,000 272,000
Accretion of debt discount 649,000
Change in accounting principle (4,434,000)
Extraordinary loss--net 1,826,000
Increase (decrease) in deferred
taxes 1,150,000 (151,000) 1,186,000
Increase in accounts receivable (2,933,000) (2,800,000) (1,010,000)
Amortization of film contract
rights and valuation adjustments 6,540,000 5,662,000 5,633,000
Increase in prepaid film contract
rights (5,672,000) (4,149,000) (4,672,000)
(Increase) decrease in other
current assets (17,000) (369,000) 395,000
Increase (decrease) in accounts
payable and accrued expenses 2,435,000 2,148,000 (3,575,000)
Decrease in film contracts payable (372,000) (1,773,000) (409,000)
(Decrease) increase in deferred
revenue (833,000) 4,722,000
(Decrease) increase in income
taxes payable (1,187,000) 524,000 (984,000)
Other (872,000) (662,000) (487,000)
-----------------------------------------
Net Cash Provided by Operations 7,944,000 19,466,000 3,872,000
F-7
<PAGE>
Outlet Broadcasting, Inc.
Consolidated Statements of Cash Flows (continued)
Year ended December 31
1995 1994 1993
---------------------------------------
Investing:
Capital expenditures--net of disposals (10,307,000) (3,385,000) (5,907,000)
Investment in time brokerage
agreements (556,000) (1,055,000)
Acquisition of broadcast station (5,478,000)
Other (14,000)
---------------------------------------
Net Cash Used by Investing (10,863,000) (9,932,000) (5,907,000)
Financing:
Issuance of notes payable 60,000,000
Proceeds from issuance of term loan 25,000,000
Payment of loan payable (4,500,000) (3,500,000) (2,000,000)
Payment of long-term debt (44,150,000)
Redemption of note payable to
shareholder (43,946,000)
Contribution of capital 468,000 50,000 38,000
Debt refinancing costs (3,151,000)
Premium on debt refinancing (2,207,000)
---------------------------------------
Net Cash Used by Financing (4,032,000) (3,450,000) (10,416,000)
---------------------------------------
Net (decrease) increase in cash and
cash equivalents (6,951,000) 6,084,000 (12,451,000)
Cash and cash equivalents at
beginning of year 7,840,000 1,756,000 14,207,000
---------------------------------------
Cash and Cash Equivalents at End
of Year $ 889,000 $ 7,840,000 $ 1,756,000
=======================================
See accompanying notes.
F-8
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements
December 31, 1995
1. Basis of Presentation
Outlet Broadcasting, Inc. (the Company) is a wholly-owned subsidiary of Outlet
Communications, Inc. (the Parent Company). The consolidated financial statements
include the accounts of Outlet Broadcasting, Inc. and its wholly-owned
subsidiaries. All material intercompany accounts are eliminated.
The Company's operations consist of three owned television stations and one
television station operated under a time brokerage agreement. The owned stations
include two NBC network-affiliated VHF television stations and one NBC network-
affiliated UHF television station. The two VHF television stations are WJAR,
which serves the Providence, Rhode Island-New Bedford, Massachusetts area and
WCMH, which serves the Columbus, Ohio area. The UHF television station is WNCN,
which services the Raleigh-Durham (Fayetteville, Goldsboro and Rocky Mount),
North Carolina market area. The Company also operates UHF television station
WWHO, Chillicothe, Ohio, under a time brokerage agreement with that station's
licensee.
2. Merger With National Broadcasting Company, Inc.
On August 2, 1995, the Parent Company executed a definitive merger agreement
with the National Broadcasting Company, Inc. ("NBC") providing for a transaction
in which NBC would acquire the Parent Company and the Parent Company's
stockholders would receive $47.25 per common share in cash. The merger agreement
was approved by the Parent Company's Board of Directors and by the holders of a
majority of the Parent Company's outstanding common stock. The transaction
closed on February 2, 1996. (See Note 9)
F-9
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
3. Significant Accounting Policies
Revenues
Broadcasting stations derive revenue from the sale of program time and spot
announcements to local, regional and national advertisers, and from compensation
received from carrying network programs and commercials. Advertising revenue and
network compensation are recognized in the period during which the program time
and spot announcements are broadcast. Revenue is also derived from the
production of film and taping of advertising materials. Production revenue is
recognized in the period when the service is provided.
Deferred revenue represents a one-time payment received upon renewal of the
Company's affiliation with NBC and is being amortized into revenue over the term
of the affiliation. The amount of deferred revenue to be amortized over the
ensuing period of twelve months is included in current liabilities.
Film Contract Rights
Film contract rights are recorded when the license period begins and the program
is available for showing. The costs of film contract rights are amortized on
accelerated methods over the contract period or as the program is used,
whichever provides the greater amortization on an accumulated basis. The costs
of programs expected to be used within one year are classified as a current
asset. Payments for film contracts are made pursuant to contractual terms over
periods that are generally shorter than the lives of the rights.
Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated on the
straight-line basis over the estimated useful lives of the property and
equipment varying from 3 to 40 years.
Intangible Assets
Intangible assets primarily include network affiliation agreements, station
licenses and goodwill, and are being amortized using the straight-line method
up to 40 years.
F-10
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
Income Per Share
Income per share is computed by dividing net income by the weighted average
number of shares of common stock - 1,000,000 shares.
Cash Equivalents
Cash equivalents include highly liquid investments with a maturity of three
months or less when purchased.
Advertising
The Company expenses advertising costs as incurred. Advertising expense was
$1,447,000, $1,139,000, and $775,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
Use of Estimates
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 amounts could differ from those estimates.
Concentration of Credit Risk
The Company operates television stations which serve the following markets:
Columbus and Chillicothe, Ohio; Providence, Rhode Island--New Bedford,
Massachusetts and Raleigh--Durham (Fayetteville, Goldsboro and Rocky Mount),
North Carolina. The Company grants credit to customers, substantially all of
whom are either local advertisers within these markets or national advertising
agencies.
F-11
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
Recently Issued Accounting Standards
The Company has estimated that the impact of adopting recently issued
accounting standards with delayed effective dates on the Company's financial
statements will not be material.
4. Acquisition and Time Brokerage Agreements
In March 1994, the Company entered into a time brokerage agreement ("TBA") with
the licensee of UHF television station WWHO, Chillicothe, Ohio. Under the
agreement, the Company will serve as a broker for the sale of WWHO's advertising
time and provide it with certain programming and operating capabilities. The
Company's obligations commenced April 18, 1994 and, since that date, results of
operations for WWHO are included with those of the Company. The Company made an
initial investment in the TBA of $1,055,000 which included an option, valued at
$475,000, to purchase the station. The total investment is being amortized over
the initial ten-year term of the TBA. In addition, the Company agreed to
reimburse the licensee for certain annual operating expenses and debt service
which totaled $603,000 and $392,000 during 1995 and 1994, respectively. The
Company has also agreed to pay the licensee specified percentages of net
operating income (as defined in the TBA) after the Company recovers its
aggregate investment, excluding the option. There were no such payments required
in 1995 and 1994. The TBA will automatically renew for two additional periods of
five years unless canceled by the Company.
In December 1994, the Company entered into a TBA with the licensee of UHF
television station WLWC (formerly WFDG), New Bedford, Massachusetts; the terms
of which are similar to the TBA described above. This station has not yet
commenced operations. Under the TBA, the Company is required to spend up to $4
million for construction of improvements to the station of which $1,151,000 has
been expended as of December 31, 1995. The Company is also required to make an
initial investment in the TBA of $1,172,500, which includes an option, valued at
$512,500, to purchase the station. As of December 31, 1995, the Company has
made the payment associated with the purchase option.
F-12
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
4. Acquisition and Time Brokerage Agreements (continued)
On August 10, 1994, the Company purchased the assets and broadcast license of
television station WNCN for an aggregate price of $5,478,000. WNCN is licensed
to Goldsboro, NC, and broadcasts in the Raleigh--Durham (Fayetteville, Goldsboro
and Rocky Mount), North Carolina market area. Funds for the acquisition were
provided by the Company's internal operations. The transaction was accounted for
using the purchase method of accounting. Results of operations for WNCN are
included with those of the Company subsequent to the date of acquisition. Pro
forma net revenue, net income and net income per share would not have been
significantly different from the actual historical results.
5. Income Taxes
The components of income tax expense (benefit) for the years ended December 31
are as follows:
1995 1994 1993
--------------------------------
(Dollars in thousands)
Current:
Federal $ 255 $531 $ (870)
State 450 280
--------------------------------
705 811 (870)
Deferred:
Federal 2,790 (70) 1,265
State 105 (81) (79)
--------------------------------
2,895 (151) 1,186
--------------------------------
3,600 660 316
Extraordinary items:
Federal (1,870) (940)
State (250)
--------------------------------
(2,120) 0 (940)
--------------------------------
$1,480 $660 $ (624)
================================
Income taxes paid $1,186 $287 $ 114
================================
F-13
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
Income tax expense (benefit) computed using the federal statutory rate is
reconciled to the reported income tax provisions before extraordinary credits as
follows:
Year ended December 31
1995 1994 1993
--------------------------------
(Dollars in thousands)
Statutory tax expense $ 4,002 $ 3,930 $ 796
State income taxes (net of
federal income tax benefit) 748 129 (52)
Amortization of intangible assets 500 529 500
Adjust prior year tax estimate 1,435 311 (1,040)
Change in valuation reserve (3,148) (4,256) 93
Alternative minimum tax 115
Other 63 17 (96)
--------------------------------
$ 600 $ 660 $ 316
The Company's income tax liability for both federal and state purposes in 1995
was reduced by the tax benefit derived from the exercise of incentive stock
options and subsequent sale of the related common stock and the exercise of non-
qualified stock options, all related to the Parent Company. The benefit totaled
approximately $1,989,000 for the year ended December 31, 1995 and was credited
to capital surplus; thereby increasing the deferred tax asset and the related
valuation reserve by $1,220,000.
In 1995, the Company's net operating loss carryover was increased by $3,470,000
to reflect additional amortization expense related to debt financing fees
incurred in 1986 and 1987.
Pursuant to tax regulations released in 1994, the Company allocated to equity
certain proceeds received from a prior year's issuance of debt and related
common stock purchase warrants, thereby increasing the Company's net operating
loss carryover by $13,301,000 and increasing the deferred tax asset and the
related valuation reserve by $4,745,000.
Effective January 1, 1993, the Company adopted Financial Accounting Standards
Board (FASB) Statement No. 109, "Accounting for Income Taxes" and adjusted
previously recorded deferred taxes. The Company has reflected the effect of
adopting Statement 109 as a change in accounting principle at the beginning of
1993. The cumulative effect of the change increased net income for the year
ended December 31, 1993 by $4,434,000 or $4.43 per share.
F-14
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
Deferred income taxes represent the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, at currently enacted
rates. Significant components of the Company's deferred tax liabilities and
assets as of December 31, 1995 and 1994, are as follows:
1995 1994
-------------------
(Dollars in thousands)
Deferred tax liabilities:
Amortization of network affiliation agreements
and FCC licenses $11,700 $12,058
Amortization of film contracts 890 1,173
Depreciation 2,748 1,400
Other 1,789 7
-------------------
Total deferred tax liabilities 17,127 14,638
Deferred tax assets:
Net operating loss carryover 10,832 9,244
Accrued expenses not currently deductible for
tax purposes 1,106 768
Unfunded pensions 2,161 2,282
Deferred revenue 1,672 2,030
Other 1,741 1,788
-------------------
Total deferred tax assets 17,512 16,112
Valuation reserve for deferred tax assets (3,949) (5,877)
-------------------
Net deferred tax assets 13,563 10,235
-------------------
Net deferred tax liability $ 3,564 $ 4,403
===================
F-15
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
The Company has tax loss carryforwards in the amount of $28,336,000 which expire
as follows:
Year
----
2005 $ 5,787
2006 14,072
2007 5,310
2008 2,430
2010 737
--------------
$28,336
==============
6. Long-term Debt
Long-term debt consists of the following:
December 31
1995 1994
-------------------------
(Dollars in thousands)
Senior loan payable to bank, principal and interest
payable in quarterly installments to
September 30, 1998, interest is based on LIBOR
plus 2.5% (8.375% at December 31, 1995)
secured by substantially all of the assets of the
Company $15,000 $19,500
10 7/8% Senior Subordinated Notes, due July 15,
2003, interest payable semiannually on
January 15 and July 15 60,000 60,000
-----------------------
75,000 79,500
Less current portion 5,000 4,500
-----------------------
$70,000 $75,000
=======================
F-16
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-term Debt (continued)
On June 28, 1993, the Company entered into a Credit and Guaranty Agreement (the
Agreement) with a bank under which the bank agreed to provide a secured senior
credit facility consisting of a term loan in the principal amount of $25,000,000
and revolving loans in the maximum principal amount outstanding of $5,000,000.
The term loan is payable in quarterly installments through September 30, 1998.
Amounts outstanding on the revolving loan would be payable in three fluctuating
quarterly installments no later than June 30, 1999. The Agreement provides for
payment of a commitment fee equal to 1/2% of the unused portion of the revolving
loan. The Agreement also provides for principal payments based on the
immediately preceding fiscal year's excess cash flow, as defined in the
Agreement, commencing July 1, 1995; however, the principal payment due July 1,
1995 was waived. On February 2, 1996, in connection with the closing of the
Parent Company's merger with NBC, all of the obligations under the Agreement
were paid in full and the Agreement was terminated. Annual maturities of long-
term debt during each of the next five years would have been as follows (dollars
in thousands): 1996-$5,000; 1997-$5,500; 1998-$4,500; 1999 and 2000-none.
On July 15, 1993, in a public offering, the Company issued 10 7/8% Senior
Subordinated Notes due 2003 in the principal amount of $60,000,000. The
estimated fair value of fixed rate debt, $60,600,000 at December 31, 1995, was
determined using an offering price for repurchase of the debt.
The loan and notes payable contain certain covenants that, among other things,
limit the ability of the Company to incur debt, pay cash dividends on or
repurchase capital stock (as defined in the Agreement), enter into certain
transactions with affiliates, acquire and/or dispose of certain assets and
engage in mergers and consolidations. The obligations were entered into in order
for the Company to undertake a refinancing of its outstanding long-term debt,
which was completed during 1993. As a result of the refinancing, the Company
incurred one-time debt extinguishment costs in the amount of $1,826,000, net of
income taxes, reported as an extraordinary loss during the year ended December
31, 1993.
F-17
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-term Debt (continued)
During 1993, the Company repaid in full its Junior Subordinated Note payable to
The Mutual Benefit Life Insurance Company. Interest on the note was payable
semiannually based on the note's principal amount of $50,000,000, with payments
commencing on February 1, 1992, and continuing until maturity on February 1,
1997, at 12.5% per annum. The note was recorded at a discounted value at an
effective interest rate of 17.2%, which was being amortized over the term of the
note. The Mutual Benefit Life Insurance Company was a shareholder of the Parent
Company through February 2, 1996.
Cash payments for interest during the years ended December 31, 1995, 1994 and
1993 were $8,108,000, $8,096,000, and $13,071,000, respectively.
7. Lease Obligations and Commitments
The Company has several operating leases involving equipment. As of December 31,
1995, the future minimum payments under noncancelable operating leases with
initial or remaining terms of one year or more were as follows:
(Dollars
(in thousands)
--------------
1996 $ 463
1997 339
1998 335
1999 311
2000 262
Thereafter 643
------
$2,353
======
Rent expense for all operating leases was approximately $703,000, $604,000, and
$692,000, for the years ended December 31, 1995, 1994 and 1993, respectively.
The Company has commitments to acquire approximately $10,641,000 of film
contract rights at December 31, 1995. The Company has also agreed to reimburse
the licensee of television station WWHO for certain annual operating and debt
service expenses over the duration of the TBA. The reimbursement for 1996 is
estimated at $611,000 and, in subsequent years, may approximate that amount.
F-18
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
7. Lease Obligations and Commitments (continued)
At December 31, 1995, the Company remains contingently liable on approximately
$11,380,000 of store leases expiring on various dates through 2007, applicable
to a retail division, which was sold as of the fiscal year ended January 31,
1983. Substantially all of the leases have been assumed by others, and
management believes that future payments, if any, would not be material to the
Company's financial statements. In connection with the sale of television
stations to third parties, the Company also remains contingently liable on
approximately $4,044,000 of building and tower leases related to radio and
television stations sold in March 1990.
8. Extraordinary Losses
The extraordinary loss in 1995 represents costs incurred by the Company in
connection with the Parent Company's merger with NBC, including a $5,500,000
payment to the Chairman of the Board. Other costs, directly related to the
change in the control of the Parent Company, will be recognized as of the
closing date of the Parent Company's merger with NBC.
The extraordinary loss in 1993 represents debt extinguishment costs as described
in Note 6.
9. Commissions
Net revenue for the years ended December 31, 1995, 1994, and 1993 are net of
agency and national representative commissions of approximately $13,018,000,
$11,547,000, and $9,140,000, respectively.
10. Employee Benefit Plans
The Company has both qualified and nonqualified noncontributory pension plans
covering all employees age 21 or over with one year of service, excluding
certain collective bargaining groups and certain employees who did not qualify
for participation in the pension plan which was suspended in 1994 (see below).
Pension costs are actuarially computed. The Company's policy is to fund amounts
as are necessary on an actuarial basis to provide for benefits in accordance
with the requirements of ERISA.
F-19
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
10. Employee Benefit Plans (continued)
Benefits are based on (i) the three consecutive years in which compensation
affords the highest average, and (ii) total years of service. The Company
suspended a non-union qualified pension plan as of September 1, 1994. The
Company's actuary determined the curtailment loss associated with the suspended
benefits to be $220,000.
Net pension costs for the indicated years ended December 31 consist of:
1995 1994 1993
---------------------------------
(Dollars in thousands)
Service costs--benefits earned
during the period $ 28 $ 215 $ 305
Interest cost on projected
benefit obligations 1,552 1,583 1,613
Actual return on assets (1,266) (1,341) (1,311)
Net amortization and other (22) 108 73
---------------------------------
$ 292 $ 565 $ 680
=================================
Assumptions used in accounting for the pension plans are as follows at
December 31:
1995 1994 1993
---------------------------------
Discount rate 7% - 7.25% 7.5% 7.5%
Average rate of increase in
compensation levels 6% 6% 6%
Expected long-term rate of return
on assets 5.5% - 9% 5.5% - 8.5% 5.5%-8.5%
The following table sets forth the funded status of the plans measured as of
December 31:
1995 1994
-------------------------
(Dollars in thousands)
Vested benefit obligations $(20,883) $(20,051)
=========================
Accumulated benefit obligations $(21,580) $(20,281)
=========================
F-20
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
10. Employee Benefit Plans (continued)
1995 1994
---------------------
(Dollars in thousands)
Projected benefit obligations $(21,580) $(20,281)
Plan assets at fair value, primarily cash
equivalents and listed stocks and bonds
16,844 15,326
---------------------
Projected benefit obligation in excess of
plan assets (4,736) (4,955)
Unrecognized net actuarial gain (804) (876)
Unrecognized prior service cost 141 159
Unrecognized net transition obligation 939 1,313
Adjustment for minimum liability (638) (774)
---------------------
Accrued pension liability $ (5,098) $ (5,133)
=====================
On September 1, 1994, the Company established the Outlet Broadcasting Inc.
401(k) and Profit Sharing Plan (the Plan), which qualifies under Section 401(k)
of the Internal Revenue Code, for the benefit of substantially all employees not
covered by a collective bargaining agreement unless the agreement allows for
participation in the Plan. The Plan allows the employees to contribute up to 15%
of their regular earnings. The Company contributes, for the personal account of
each employee, 25% of the first 6%. Plan expense in 1995 and 1994 was
approximately $213,000 and $67,000, respectively. In addition, the Company may
make discretionary profit sharing contributions annually.
The Company provides postretirement medical reimbursement benefits to elected
corporate officers who have met certain service requirements. Most of the
eligible participants are currently retired. As of January 1, 1993, the Company
adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" which requires the
cost of providing postretirement medical reimbursement benefits to be accrued
over the eligible employees' service period. As permitted by the new standard,
the Company elected to recognize its accumulated postretirement benefit
obligation at January 1, 1993, on a delayed basis. Postretirement benefit costs
are estimated by management.
F-21
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
10. Employee Benefit Plans (continued)
The following table provides information on the status of the medical
reimbursement benefit plan as of December 31:
1995 1994
-------------------------
(Dollars in thousands)
Accumulated postretirement benefit obligation:
Retirees $(603) $(682)
Fully eligible plan participants (76) (71)
Other active plan participants (38) (28)
-------------------------
Total (717) (781)
Unrecognized transition obligation 493 522
-------------------------
Accrued postretirement benefit cost $(224) $(259)
=========================
Net periodic postretirement benefit cost for the indicated years ended
December 31, consists of the following:
1995 1994
-------------------------
(Dollars in thousands)
Service cost - benefits attributed to service
during the period $10 $10
Interest cost on accumulated postretirement
benefit obligation 58 60
Amortization of unrecognized transition
obligation 29 29
-------------------------
Net periodic postretirement benefit cost $97 $99
=========================
The Company's policy is to fund postretirement benefits as claims are paid. The
accumulated postretirement benefit obligation was determined using a discount
rate of 8% and a health care cost trend rate of 6%, declining to 5% in the year
2000 and thereafter. The effect of a 1% annual increase in these assumed cost
trend rates would increase the accumulated postretirement benefit obligation by
approximately $83,000; the annual costs would not be materially affected.
F-22
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
11. Intangible Assets
Intangible assets consist of the following at December 31:
1995 1994
-------------------------
(Dollars in thousands)
Network affiliation agreements $34,917 $34,917
Station licenses and goodwill 62,231 62,231
-------------------------
97,148 97,148
-------------------------
Less accumulated amortization 22,669 20,149
-------------------------
$74,479 $76,999
=========================
12. Accrued Expenses
Accrued expenses consist of the following at December 31:
1995 1994
-------------------------
(Dollars in thousands)
Accrued interest $ 3,046 $ 3,043
Accrued pensions 2,856 2,778
Accrued property taxes 472 471
Accrued salaries, wages and benefits 2,062 2,120
Accrued license fees, commissions and
promotion costs 569 668
Accrued liabilities for claims and contingencies 503 596
Accrued merger costs 838
Other 1,176 718
-------------------------
$11,522 $10,394
=========================
F-23
<PAGE>
Outlet Broadcasting, Inc.
Notes to Consolidated Financial Statements (continued)
13. Capitalization
The capitalization of the Company at December 31, 1995 and 1994 was as follows:
Description Issued and Outstanding
- ---------------------------------------------------- --------------------------
Preferred stock, no par value--authorized 1,000,000
shares -
Class A common stock, $.01 par value--authorized
3,000,000 shares 1,000,000
Class B common stock, $.01 par value--authorized
1,000,000 shares -
14. Litigation
During 1995, the Parent Company entered into, and subsequently terminated, a
merger agreement with a third party. In connection with the termination of this
merger agreement, the Parent Company was obligated to pay a fee of $6.5 million.
NBC paid this fee on behalf of the Parent Company.
During 1993, a representative body of the television broadcast industry reached
an agreement with the American Society of Composers, Authors and Publishers
(ASCAP) as to the total industry's obligation for the payment of music
performance rights fees to that organization. The agreement provided that each
television station's performance rights fees payable to ASCAP would generally
approximate what the stations had paid to date. Accordingly, the Company
reversed an accrued liability of $2,100,000 which provided for the Company's
potential additional exposure in this matter.
The Company is also subject to litigation arising from its normal business
operations. Any liability which may result therefrom, to the extent not provided
by insurance or accruals, would not have a material effect on the Company's
financial position.
15. Fourth Quarter Adjustments (Unaudited)
During the fourth quarter of 1995, the Company recognized an extraordinary item
relating to its merger with NBC (Note 8), lump sum charges of $1,453,000
representing valuation write downs of certain film contracts, reversal of
accruals for music license fees and other items no longer required aggregating
approximately $800,000 and a change in the estimated effective tax rate.
F-24
<PAGE>
OUTLET BROADCASTING, INC.
VALUATION AND QUALIFYING ACCOUNTS Schedule II
(Dollars in thousands)
Balance at Additions Balance
beginning charged at end
of period to expense Deductions of period
--------- ---------- ---------- ---------
Year ended
December 31, 1993
Allowance for
doubtful accounts $300 $275 $275 $300
==== ==== ==== ====
Year ended
December 31, 1994
Allowance for
doubtful accounts $300 $154 $133 $321
==== ==== ==== ====
Year ended
December 31, 1995
Allowance for
doubtful accounts $321 $438 $309 $450
==== ==== ==== ====
S-1
- 71 -
<PAGE>
EXHIBIT INDEX
Page
----
3. (a) Certificate of Incorporation*, as amended
December 17, 1987;**and September 19, 1989***
(b) Amended and Restated By-Laws, dated February 2,
1996;************ 75
4. Indenture, dated as of July 8, 1993 between
Outlet Broadcasting, Inc. and Bankers Trust
Company, as Trustee, governing Outlet
Broadcasting, Inc. 10 7/8% Senior Subordinated
Notes Due 2003;***
10. Material contracts:
(a) Agreement for Management Consulting Services,
dated July 31, 1986, by and between Harding
Service Corporation and Outlet Communications,
Inc.;*(1)
(b)(i) Stockholders' Agreement, dated December 10, 1986,
by and among Outlet Communications, Inc.; Outlet
Broadcasting, Inc. and the persons named therein
(the Stockholders' Agreement);***
(b)(ii) Amendment No. 1, dated as of December 1, 1987, to
the Stockholders' Agreement;***
(b)(iii) Agreement dated July 26, 1988, by and among Outlet
Communications, Inc.; Outlet Broadcasting, Inc.
and the persons named therein amending the
Stockholders' Agreement;***
(c) Credit and Guaranty Agreement dated as of June 28,
1993 among Outlet Broadcasting, Inc. and Outlet
Communications, Inc. and Fleet National Bank;***
(d) Supplemental Retirement Plan;***(1)
(e) 1992 Stock Incentive Plan, as amended and
restated;***as amended May 2, 1995***********(1)
(f)(i) Employment Agreement, dated April 1, 1989, among
Felix W. Oziemblewski and Outlet Broadcasting, Inc.
and Outlet Communications, Inc.;****(1)
(f)(ii) Employment Agreement, dated January 1, 1995, among
Linda Sullivan and Outlet Broadcasting, Inc.
and Outlet Communications, Inc.;********(1)
(f)(iii) Employment Agreement, dated May 1, 1993 among
Douglas E. Gealy and Outlet Broadcasting, Inc. and
Outlet Communications, Inc.***(1)
(f)(iv) Employment Agreement, dated January 1, 1993,
between James G. Babb and Outlet Communications,
Inc.;****** as amended December 17, 1993;*******(1)
(f)(v) Employment Agreement, dated January 1, 1995,
among Adam G. Polacek and Outlet Broadcasting, Inc.
and Outlet Communications, Inc.;********(1)
(f)(vi) Employment Agreement, dated January 1, 1995 among
Steven Soldinger and Outlet Broadcasting, Inc. and
Outlet Communications, Inc.********(1)
(f)(vii) Agreement dated December 27, 1995 between
Outlet Communications, Inc. and James G.
Babb************(1) 90
(g) Lease Agreement dated as of September 27, 1982
between WBNS-TV and Outlet Broadcasting, Inc.
regarding tower facility of WCMH;***
- 72 -
<PAGE>
Page
----
(h) Station Affiliation Agreement, dated as of
September 1, 1994, between WB Communications and
Outlet Broadcasting;********
(i) Time Brokerage Agreement dated as of March 18,
1994 among Outlet Broadcasting, Inc. and Fant
Broadcasting Company of Ohio, Inc. and Outlet
Communications, Inc.********
(j) Press Release, dated March 21, 1995, announcing
the retention of a financial advisor to explore
strategic alternatives.********
(k) Merger Agreement dated as of June 30, 1995,
among Renaissance Communications, Corp.,
Renaissance Communications Acquisition Corp.,
and Outlet Communications, Inc.*********
(l) Merger Agreement dated as of August 2, 1995,
among National Broadcasting Company, Inc.,
CO Acquisition Corporation and Outlet
Communications,Inc.**********
(m) Time Brokerage Agreement dated as of December 14,
1994, among Outlet Broadcasting, Inc. and BAF
Enterprises, Inc. and Fant Broadcasting Company
of Ohio, Inc.************ 95
22. Subsidiaries of the Registrant:
Outlet Productions, Inc.; Biltout, Inc.; and WATL-TV
Pro Wrestling, Inc.
__________________
* Incorporated by reference from the Registration
Statement on Form S-1, Registration No. 33-9442, declared
effective by the Securities and Exchange Commission on January 21,
1987.
** Incorporated by reference from Current Report on
Form 10-K for the year ended December 31, 1987.
*** Incorporated by reference from Outlet Broadcasting,
Inc. Registration Statement on Form S-1, Registration No. 33-62292, declared
effective by the Securities and Exchange Commission on July 8, 1993.
**** Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1989.
***** Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1990.
****** Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1992.
- 73 -
<PAGE>
Page
----
******* Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1993.
******** Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1994.
********* Incorporated by reference from Current Report on
Form 8-K dated June 30, 1995.
********** Incorporated by reference from Current Report on
Form 8-K dated August 2, 1995.
*********** Incorporated by reference from the Definitive 14A
Proxy Statement filed by Outlet Communications, Inc. on
March 30, 1995.
************ Filed herewith.
________________________________________________
(1) Management contract or compensatory plan or arrangement.
- 74 -
BY-LAWS
of
OUTLET BROADCASTING, INC.
AMENDED AND RESTATED
February 2, 1996
ARTICLE I
ARTICLES OF INCORPORATION AND PROVISIONS OF LAW
-----------------------------------------------
These amended and restated by-laws, the powers of the
Corporation and of its directors and shareholders and all matters
concerning the conduct and regulation of the business of the
Corporation shall be subject to such provisions in regard
thereto, if any, as are provided by law. All references herein
to the Articles of Incorporation shall be construed to mean the
Articles of Incorporation of the Corporation as from time to time
amended.
ARTICLE II
OFFICES
-------
SECTION 2.1. Principal Office. The principal office
----------------
of the Corporation shall be located at 23 Kenney Drive, Cranston,
Rhode Island 02903 or such other place within or without the
State of Rhode Island as may be determined by the Board of
Directors from time to time.
SECTION 2.2. Other Offices. The Corporation may also
-------------
have an office or offices at such other place or places either
within or without the State of Rhode Island as the Board of
Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE III
MEETINGS OF SHAREHOLDERS
------------------------
SECTION 3.1. Place of Meetings. All meetings of the
-----------------
shareholders of the Corporation shall be held at the principal
office of the Corporation or at such other place, within or
without the State of Rhode Island, as shall be fixed by the Board
of Directors and specified in the respective notices or waivers
of notice of said meetings.
SECTION 3.2. Annual Meetings. The annual meeting of
---------------
the shareholders for the election of directors and for the
transaction or such other business as may come before the meeting
shall be held at 10:00 a.m., local time, on the fourth Thursday
<PAGE>
2
in April in each year, if not a legal holiday, and, if a legal
holiday, then on the next succeeding business day not a legal
holiday. If such annual meeting is omitted by oversight or
otherwise on the day herein provided therefor, a special meeting
may be held in place thereof, and any business transacted or
elections held at such special meeting shall have the same effect
as if transacted or held at the annual meeting. The purposes for
which an annual meeting is to be held, in addition to those
prescribed by law or these by-laws, may be specified by a
majority of the Board of Directors, the President or a
shareholder or shareholders hold of record at least ten percent
(10%) in voting power of the outstanding shares of the
Corporation entitled to vote at such meeting.
SECTION 3.3. Special Meetings. A special meeting of
----------------
the shareholders for any purpose or purposes, unless otherwise
prescribed by statute, may be called at any time by the
President, by order of the Board of Directors or by a shareholder
or shareholders holding of record at least ten percent (10%) in
voting power of the outstanding shares of the Corporation
entitled to vote at such meeting.
SECTION 3.4. Notice of Meetings. Notice of each
------------------
meeting of the shareholders shall be given to each shareholder of
record entitled to vote at such meeting at least ten (10) days
but not more than sixty (60) days before the day on which the
meeting is to be held. Such notice shall be given by delivering
a written or printed notice hereof personally or by mail. If
mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed
to the shareholder at the post office address of such shareholder
as it appears upon the stock record books of the Corporation, or
at such other address as such shareholder shall have provided to
the Corporation for such purpose. No publication of any notice
of a meeting of shareholders shall be required. Every such
notice shall state the time and place of the meeting, and, in
case of a special meeting, shall state the purpose or purposes
thereof. Notice of any meeting of shareholders shall not be
required to be given to any shareholder who shall attend such
meeting in person or by proxy or who shall waive notice thereof
in the manner hereinafter provided. Notice of any adjourned
meeting of the shareholders shall not be required to be given.
SECTION 3.5. Quorum. At each meeting of the
------
shareholder a majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum for the transaction of business. In
the absence of a quorum, a majority of the shares so represented
at such meeting or, in the absence of all the shareholders
entitled to vote, an officer entitled to preside or to act as
secretary at such meeting, may adjourn the meeting from time to
time without further notice. At any such adjourned meeting at
which a quorum shall be present or represented, any business may
be transacted which might have been transacted at the meeting as
<PAGE>
3
originally noticed. The absence from any meeting of shareholders
holding sufficient number of shares required for action on any
given matter or matters which properly come before the meeting,
if shareholders holding a sufficient number of shares required
for action on such other matter or matters shall be present. The
shareholders present or represented at any duly organized meeting
may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
SECTION 3.6. Voting. Each shareholder of the
------
Corporation shall, whether the voting is by one or more classes
voting as a class, be entitled to one vote in person or by proxy
for each share of the Corporation registered in the name of such
shareholder on the books of the Corporation. The Corporation
shall not vote directly or indirectly any shares held in its own
name. Any vote of shares may be given by the shareholder
entitled to vote such shares in person or by proxy appointed by
instrument in writing. At all meetings of the shareholders at
which a quorum is present, all matters (except where other
provision is made by law, the articles of incorporation or these
by-laws) shall be decided by the affirmative vote of holders of a
majority of the shares present in person or represented by proxy
and entitled to vote thereon.
ARTICLE IV
BOARD OF DIRECTORS
------------------
SECTION 4.1. General Powers. The property, affairs
--------------
and business of the Corporation shall be managed by the Board of
Directors and the Board shall have, and may exercise, all of the
powers of the Corporation, except such as are conferred by the
by-laws upon the shareholders.
SECTION 4.2. Number, Qualification and Term of Office.
----------------------------------------
The number of directors to constitute the Board of Directors
shall be four (4) (except in the event a director resigns or is
removed from his position, the Corporation may be managed by
number less than four (4) until such replacement for the resigned
or removed director is elected and assumes his responsibilities
as a director). The directors shall be elected by the
shareholders at each annual meeting of shareholders, or at any
special meeting held in place thereof, except as provided in this
Article. Each director shall hold office until the next annual
election of directors and until his successor shall have been
duly elected and qualified, or until the death, resignation or
removal of such director in the manner herein provided. No
director need be a shareholder.
SECTION 4.3. Election of Directors. Subject to any
---------------------
provisions in the articles of incorporation providing for
cumulative voting, at each meeting of the shareholders for the
<PAGE>
4
election of directors at which a quorum is present, the persons
receiving the greatest number of votes shall be the directors,
and each shareholder entitled to vote at such election shall have
the right to vote, in person or by proxy, for as many nominees as
the number of directors fixed as constituting the Board of
Directors and to cast for each such nominee as many votes as the
number of shares which such shareholder is entitled to vote,
without the right to cumulate such votes.
SECTION 4.4. Quorum and Manner of Acting. A majority
---------------------------
of the total number of directors at the time in office shall
constitute a quorum for the transaction of business at any
meeting. In the absence of a quorum, a majority of the directors
present may adjourn any meeting from time to time without further
notice until a quorum be had. The directors shall act only as a
Board, and the individual directors shall have no power as such.
SECTION 4.5. Place of Meetings. The Board of
-----------------
Directors may hold its meetings at any place within or without
the State of Rhode Island as it may from time to time determine
or shall be specified or fixed in the respective notices or
waivers of notice thereof.
SECTION 4.6. Annual Meeting. The Board of Directors
--------------
shall meet for the purpose of organization, the election of
officers and the transaction of other business, as soon as
practicable after each annual election of directors on the same
day and at the same place at which such election of directors was
held. Notice of such meeting need not be given. Such meeting
may be held at any other time or place which shall be specified
in a notice given as hereinafter provided for special meetings of
the Board of Directors or in a consent and waiver of notice
thereof signed by all the directors.
SECTION 4.7. Regular Meetings. Regular meetings of
----------------
the Board of Directors shall be held at such place and at such
times as the Board shall from time to time by vote determine. If
any day fixed for a regular meeting shall be a legal holiday at
the place where the meeting is to be held, then the meeting which
would otherwise be held on that day shall be held at the same
hour on the next succeeding business day not a legal holiday.
Notice of regular meetings need not be given.
SECTION 4.8. Special Meetings; Notice. Special
------------------------
meetings of the Board of Directors shall be held whenever called
by the President or by not less than twenty-five percent (25%) of
the members of the Board of Directors. Notice of each such
meeting shall be given by, or at the order of, the Secretary or
the person calling the meeting to each director by mailing the
same addressed to the director's residence or usual place of
business, or personally delivered or by telegraph, cable, fax or
telephone, at least five (5) days, in the case of mailing, or one
day, in every other case, before the day on which the meeting is
<PAGE>
5
to be held. Every such notice shall state the time and place of
the meeting but need not state the purpose thereof except as
otherwise in these by-laws expressly provided.
SECTION 4.9. Presumption of Assent. A director of the
---------------------
Corporation who is present at a meeting of the Board of Directors
at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as
the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Secretary of
the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in
favor of such action.
SECTION 4.10. Telephone Meetings. Meetings of the
------------------
Board of Directors, regular or special, may be held by means of a
telephone conference circuit and connection to such circuit shall
constitute presence at such meeting.
SECTION 4.11. Removal of Directors. Any director may
--------------------
be removed, either with or without cause, at any time, by the
affirmative vote of the holders of record of a majority of the
issued and outstanding shares entitled to vote for the election
of directors of the Corporation given at a special meeting of the
shareholders called and held for the purpose.
SECTION 4.12. Resignation. Any director of the
-----------
Corporation may resign at any time by giving written notice to
the Board of Directors or to the Secretary of the Corporation.
The resignation of any director shall take effect at the time
specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
SECTION 4.13. Vacancies. Subject to any provisions of
---------
the articles of incorporation providing for cumulative voting,
any vacancy in the Board of Directors caused by death,
resignation, removal, disqualification, an increase in the number
of directors, or any other cause, may be filled by a majority
vote of the remaining directors then in office, though less than
a quorum, at any regular meeting or special meeting, including
the meeting at which any such vacancy may arise, or by the
shareholders of the Corporation at the meeting at which any such
vacancy may arise, or the next annual meeting or any special
meeting, and each director so elected shall hold office until the
next annual election of directors, and until a successor shall
have been duly elected and qualified, or until the death or
resignation or removal of such director in the manner herein
provided.
<PAGE>
6
ARTICLE V
COMMITTEES
----------
V.A. Executive Committee
-------------------
SECTION 5.1. Appointment. The Board of Directors may
-----------
designate two or more of its members to constitute an Executive
Committee. The designation of such committee and the delegation
thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed
by law.
SECTION 5.2. Authority. The Executive Committee, when
---------
the Board of Directors is not in session, shall have and may
exercise all of the authority of the Board of Directors except to
the extent, if any, that such authority shall be limited by the
resolution appointing the Executive Committee and except also
that the Executive Committee shall not have the authority of the
Board of Directors in reference to amending the articles of
incorporation, adopting a plan of merger or consolidation,
recommending to the shareholders the sale, lease or other
disposition of all or substantially all of the property and
assets of the Corporation otherwise than in the usual and regular
course of its business, recommending to the shareholders a
voluntary dissolution of the Corporation or a revocation thereof,
increasing the number of directors constituting the Board of
Directors, filling any vacancies on the Board of Directors,
removing or electing any officer of the Corporation or amending
the by-laws of the Corporation.
SECTION 5.3. Tenure and Qualifications. Each member
-------------------------
of the Executive Committee shall hold office until the next
regular annual meeting of the Board of Directors following
designation and until a successor is designated as a member of
the Executive Committee and is elected and qualified or until the
death or resignation or removal of such member in the manner
herein provided.
SECTION 5.4. Meetings. Regular meetings of the
--------
Executive Committee may be held without notice at such times and
places as the Executive Committee may fix from time to time by
resolution. Special meetings of the Executive Committee may be
called by any member thereof upon not less than one (1) days'
notice (or in the case of mailing, five (5) days' notice) stating
the place, date and hour of the meeting, which notice may be
written or oral, and if mailed, shall be deemed to be delivered
when deposited in the United States mail addressed to the member
of the Executive Committee at such member's business address.
Any member of the Executive Committee may waive notice of any
meeting and no notice of any meeting need be given to any member
thereof who attends in person. The notice of a meeting of the
Executive Committee need not state the business proposed to be
transacted at the meeting.
<PAGE>
7
SECTION 5.5. Telephone Meetings. Meetings of the
------------------
Executive Committee may be held by means of a telephone
conference circuit and connection to such circuit shall
constitute attendance at such meeting.
SECTION 5.6. Quorum. A majority of the members of the
------
Executive Committee shall constitute a quorum for the transaction
of business at any meeting thereof, and action of the Executive
Committee shall be authorized by the affirmative vote of a
majority of the members present at a meeting at which a quorum is
present.
SECTION 5.7. Vacancies. Any vacancy in the Executive
---------
Committee may be filled by a resolution adopted by a majority of
the full Board of Directors.
SECTION 5.8. Resignations and Removal. Any member of
------------------------
the Executive Committee may be removed at any time with or
without cause by the Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at
any time by giving written notice to the President or Secretary
of the Corporation, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
SECTION 5.9. Procedure. The Executive Committee may
---------
elect a presiding officer from its members and may fix its own
rules of procedure which shall not be inconsistent with these
by-laws. It shall keep regular minutes of its proceedings and
report the same to the Board of Directors for its information at
the meeting thereof held next after the proceedings shall have
been taken.
V.B. Other Committees
----------------
SECTION 5.10. Appointment and Powers. The Board of
----------------------
Directors, may designate two or more of its members to constitute
such other committees as deemed advisable to serve for such time
and to exercise such powers and functions, as the Board of
Directors shall direct. The Board of Directors may designate one
or more of its members as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of
the committee.
SECTION 5.11. Meetings. Each such committee may adopt
--------
rules governing the method of calling and time and place of
holding its meetings and the conduct of the proceedings thereat
but, in the absence of such rules, the meetings of such committee
shall be called by any member of such committee by notice to each
member of the time and place of holding the same, sent by mail,
first class postage prepaid, at least five days before the time
fixed for said meeting, or by prepaid telegram or cablegram, or
by facsimile at least one day before the time fixed for said
meeting, or given personally at least one day before the time
<PAGE>
8
fixed for said meeting; such notice to be addressed to such
member at his residence or usual place of business. A chairman
selected by the directors shall preside at all meetings of such
committee, but, in the chairman's absence from any meeting,
another member shall be chosen by the members present to preside.
An appointee of the chairman of the meeting shall serve as
secretary of each meeting of such committee.
SECTION 5.12. Quorum and Manner of Acting. To
---------------------------
constitute a quorum of any such committee for the transaction of
business at any meeting, a majority of the members shall be
present and the act of a majority of such quorum shall constitute
the act of such committee. Such committee shall keep a record of
its acts and proceedings and shall report thereon to the Board of
Directors.
SECTION 5.13. Removal. Any member of any such
-------
committee, may be removed with or without cause by resolution of
the Board of Directors, adopted by at least a majority of the
entire Board.
SECTION 5.14. Vacancies. Vacancies in any such
---------
committee shall be filled in the same manner as for original
appointment to membership.
ARTICLE VI
WAIVER OF NOTICE; WRITTEN CONSENT
---------------------------------
SECTION 6.1. Waiver of Notice. Notice of the time,
----------------
place and purpose of any meeting of the shareholders, Board of
Directors, or Executive Committee may be waived in writing by any
shareholder or director either before or after such meeting.
Attendance in person, or in case of a meeting of the
shareholders, by proxy, at a meeting of the shareholders, Board
of Directors or Executive Committee shall be deemed to constitute
a waiver of notice thereof.
SECTION 6.2. Written Consent of Shareholders.
-------------------------------
(a) Any action required or permitted to be taken at a
meeting of shareholders may be taken without a meeting if all of
the shareholders entitled to vote thereon, or their proxies,
shall consent in writing to such action.
(b) To the extent authorized by the articles of
incorporation, any action required or permitted to be taken at a
meeting of shareholders may be taken without a meeting upon the
written consent of the shareholders entitled to vote thereon, or
their proxies, to the extent and in the manner permitted by
Section 7-1.1-30.3 of the Rhode Island Business Corporation Act,
as amended from time to time.
<PAGE>
9
SECTION 6.3. Written Consent of Directors. Unless
----------------------------
otherwise restricted by the articles of incorporation or these
by-laws, any action required or permitted to be taken at any
meeting of the Board of Directors or Executive Committee may be
taken without a meeting if a consent in writing, setting forth
the action so to be taken, shall be signed before or after such
action by all of the directors, or all of the members of the
Executive Committee, as the case may be. Such written consent
shall be filed with the records of the Corporation.
ARTICLE VII
OFFICERS
--------
SECTION 7.1. Number. The officers of the Corporation
------
shall be a President, one or more Vice Presidents, a Secretary, a
Vice President and Treasurer, and such other officers as the
Board of Directors may from time to time appoint, including one
or more Assistant Secretaries and one or more Assistant
Treasurers. One person may hold the offices and perform the
duties of any two or more of said officers.
SECTION 7.2. Election, Qualification and Term of
-----------------------------------
Office. Each officer shall be elected annually by the Board of
- ------
Directors, or from time to time to fill any vacancy, and shall
hold office until a successor shall have been duly elected and
qualified, or until the death, resignation or removal of such
officer in the manner hereinafter provided.
SECTION 7.3. Removal. Any officer may be removed by
-------
the vote of a majority of the whole Board of Directors at a
special meeting called for the purpose, whenever in the judgment
of the Board of Directors the best interests of the Corporation
will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the officer so
removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
SECTION 7.4. Resignation. Any officer may resign at
-----------
any time by giving written notice to the Board of Directors or to
the President or the Secretary. Any such resignation shall take
effect at the date of receipt of such notice or at any later time
specified therein; and unless otherwise specified therein the
acceptance of such resignation shall not be necessary to make it
effective.
SECTION 7.5. Vacancies. A vacancy in any office
---------
because of death, resignation, removal, disfiguration or any
other cause shall be filled for the unexpired portion of the term
by the Board of Directors at any regular or special meeting.
SECTION 7.6. The President. The President shall have
-------------
supervision and control over, and responsibility for, all aspects
<PAGE>
10
of the business, activities and affairs of the Corporation and
its subsidiaries, and as such shall report only to the Board of
Directors of the Corporation, and the powers and authority of the
President shall be superior to those of any other officer or
employee of the Corporation or of any subsidiary thereof.
SECTION 7.7. The Vice Presidents. The Vice President,
-------------------
or, if there shall be more than one, the Vice Presidents in the
order determined by the Board of Directors, shall, in the absence
or disability of the President, perform the duties and exercise
the powers of the President, and shall perform such other duties
and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 7.8. The Secretary. The Secretary shall
-------------
record or cause to be recorded in books provided for the purpose
all the proceedings of the meetings of the Corporation, including
the shareholders, the Board of Directors, the Executive Committee
and all committees of which a secretary shall not have been
appointed; shall see that all notices are duly given in
accordance with the provisions of these by-laws and as required
by law; shall be custodian of the records (other than financial)
and of the seal of the Corporation; and, in general, shall
perform all duties incident to the office of Secretary and such
other duties as may, from time to time, be assigned by the Board
of Directors or the President.
SECTION 7.9. The Assistant Secretaries. At the
-------------------------
request, or in absence or disability, of the Secretary, the
Assistant Secretary designated by the Secretary or the Board of
Directors shall perform all the duties of the Secretary and, when
so acting, shall have all the powers of the Secretary. The
Assistant Secretaries shall perform such other duties as from
time to time may be assigned to them by the Board of Directors,
the President or the Secretary.
SECTION 7.10. The Vice President and Treasurer. The
--------------------------------
Vice President and Treasurer shall have charge and custody of,
and be responsible for, all funds and securities of the
Corporation, and deposit all such funds to the credit of the
Corporation in such banks, trust companies or other depositories
as shall be selected in accordance with the provisions of these
by-laws; disburse the funds of the Corporation under the general
control of the Board of Directors, based upon proper vouchers for
such disbursements; receive, and give receipts for, moneys due
and payable to the Corporation from any source whatsoever, render
a statement of the condition of the finances of the Corporation
at all regular meetings of the Board of Directors, and a full
financial report at the annual meeting of the shareholders, if
called upon to do so; and render such further statements to the
Board of Directors and the President as they may respectively
require concerning all transaction; as Vice President and
Treasurer or the financial condition of the Corporation. The
Vice President and Treasurer shall also have charge of the books
<PAGE>
11
and records of account of the Corporation, which shall be kept at
such office or offices of the Corporation as the Board of
Directors shall from time to time designate; be responsible for
the keeping of correct and adequate records of the assets,
liabilities, business and transactions of the Corporation; at all
reasonable times exhibit the books and records of account to any
of the directors of the Corporation upon application at the
office of the Corporation where such books and records are kept;
be responsible for the preparation and filing of all reports and
returns relating to or based upon the books and records of the
Corporation kept under the direction of the Vice President and
Treasurer; and, in general, perform all the duties incident to
the office of Vice President and Treasurer and such other duties
as from time to time may be assigned by the Board of Directors or
the President.
SECTION 7.11. The Assistant Treasurers. At the
------------------------
request, or in the absence or disability, of the Treasurer, the
Assistant Treasurer designated by the Treasurer or the Board of
Directors shall perform all the duties of the Treasurer, and when
so acting, shall have all the powers of the Treasurer. The
Assistant Treasurers shall perform such other duties as from time
to time may be assigned to them by the Board of Directors, the
President or the Treasurer.
SECTION 7.12. General Powers. Each officer shall,
--------------
subject to these by-laws, have, in addition to the duties and
powers herein set forth, such duties and powers as are commonly
incident to the respective office, and such duties and powers as
the Board of Directors shall from time to time designate.
SECTION 7.13. Non-Official Vice Presidents. The
----------------------------
President shall have the power, without the consent of the Board
of Directors, to confer upon persons employed by the Corporation
the title of "Vice President", supplemented by language
descriptive of such employee's duty or function. Such
appointments shall not be for more than a period of one year at a
time, and persons holding such appointments shall not be
corporate officers, and shall have no power to bind the
Corporation. The President may at any time revoke such
appointment.
SECTION 7.14. Bonding. Any officer, employee, agent
-------
or factor shall give such bond with such surety or sureties for
the faithful performance of his or her duties as the Board of
Directors may, from time to time, require.
<PAGE>
12
ARTICLE VIII
INDEMNIFICATION OF
DIRECTORS AND OFFICERS
----------------------
Each person who at any time is, or shall have been, a
director or officer of the Corporation, and is threatened to be
made a party, to any threatened, pending or completed action,
claim, litigation, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that he or
she is, or was, a director, officer, employee or agent of the
Corporation, or is or has served at the request of the
Corporation, as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any such
action, suit or proceeding to the full extent permitted under
Section 7-1.1-4.1 of the Rhode Island Business Corporation Act,
as from time to time amended. The foregoing right of
indemnification shall in no way be exclusive of any other rights
of indemnification to which such director, officer, employee or
agent may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors or otherwise, and shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE IX
EXECUTION OF DOCUMENTS
----------------------
SECTION 9.1. Contract, etc.; How Executed. Unless the
----------------------------
Board of Directors shall otherwise determine, the President, any
Vice President, the Secretary or the Treasurer may enter into any
contract or execute any contract or other instrument, the
execution of which is not otherwise specifically provided for, in
the name and on behalf of the Corporation. The Board of
Directors, except as in these by-laws otherwise provided, may
authorize any other or additional officer or officers, agent or
agents, of the Corporation to enter into any contract or execute
and deliver any contract or other instrument in the name and on
behalf of the Corporation, and such authority may be general or
confined to specific instances. Unless authorized so to do by
these by-laws or by the Board of Directors, no officer, agent or
employee shall have any power or authority to bind the
Corporation by any contract or engagement, or to pledge its
credit, or to render it liable pecuniarily for any purpose or to
any amount.
SECTION 9.2. Checks, Drafts, etc. All checks, drafts,
--------------------
bills of exchange or other orders for the payment of money,
obligations, notes, or other evidences of indebtedness, bills of
<PAGE>
13
lading, warehouse receipts and insurance certificates of the
Corporation, shall be signed or endorsed by such officer or
officers, employee or employees, of the Corporation as shall from
time to time be determined by resolution of the Board of
Directors.
ARTICLE X
BOOKS AND RECORDS
-----------------
SECTION 10.1. Place. The books and records of the
-----
Corporation, including the stock record books, shall be kept at
such places within or without the State of Rhode Island, as may
from time to time be determined by the Board of Directors.
SECTION 10.2. Addresses of Shareholders. Each
-------------------------
shareholder shall designate to the Secretary of the Corporation
an address at which notices of meetings and all other corporate
notices may be served upon or mailed, and if any shareholder
shall fail to designate such address, corporate notices may be
served by mail directed to the shareholder's last known post
office address, or by transmitting a notice thereof to such
address by telegraph, cable, or telephone.
ARTICLE XI
SHARES AND THEIR TRANSFER
-------------------------
SECTION 11.1. Certificates for Shares. Every owner of
-----------------------
shares of the Corporation shall be entitled to have a certificate
certifying the number of shares owned by such owner in the
Corporation and designating the class of shares to which such
shares belong, which shall otherwise be in such form, in
conformity to law, as the Board of Directors shall prescribe.
Each such certificate shall be signed by such officer or officers
as the Board of Directors may prescribe, or, if not so
prescribed, by the President or a Vice President and the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer of the Corporation.
SECTION 11.2. Record. A record shall be kept of the
------
name of the person, firm or corporation owning the shares of the
Corporation issued, the number of shares represented by each
certificate, and the date thereof, and, in the case of
cancellation, the date of cancellation. The person in whose name
shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
SECTION 11.3. Transfer of Shares. Transfers of shares
------------------
of the Corporation shall be made only on the books of the
Corporation by the registered holder thereof, or by such holder's
attorney thereunto authorized, and on the surrender of the
<PAGE>
14
certificate or certificates for such shares properly endorsed or
accompanied by a properly executed stock power.
SECTION 11.4. Closing of Transfer Books; Record Dates.
---------------------------------------
Insofar as permitted by law, the Board of Directors, may direct
that the stock transfer books of the Corporation be closed for a
period not exceeding sixty (60) days preceding the date of any
meriting of shareholders or the date for the payment of any
dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of shares of the Corporation
shall go into effect, or for a period not exceeding fifty (50)
days in connection with obtaining the consent of shareholders for
any purpose; provided, however, that in lieu of closing the stock
transfer books as aforesaid, the Board of Directors may, insofar
as permitted by law, fix in advance a date, not exceeding fifty
(50) days preceding the date of any meeting of shareholders, or
the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or
exchange of shares of the Corporation shall go into effect, or a
date in connection with obtaining such consent, as a record date
for the determination of the shareholders entitled to notice of,
and to vote at, any such meeting or any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any
change, conversion or exchange of shares of the Corporation, or
to give such consent, and in each such case shareholders and only
such shareholders as shall be shareholders of record on the date
so fixed shall be entitled to notice of, and to vote at, such
meeting and any adjournment thereof, or to receive payment of
such dividend, or to receive such allotment of rights, or to
exercise such rights or to give such consent, as the case may be,
notwithstanding any transfer of any shares on the books of the
Corporation after any such record date fixed as aforesaid.
SECTION 11.5. Lost, Destroyed or Mutilated
----------------------------
Certificates. In case of the alleged loss or destruction or the
- ------------
mutilation of a certificate representing shares of the
Corporation, a new certificate may be issued in place thereof, in
the manner and upon such terms as the Board of Directors may
prescribe.
ARTICLE XII
SEAL
----
The Board of Directors may provide for a corporate
seal, which shall be in the form of a circle and shall bear the
name of the Corporation and the state and year of incorporation.
<PAGE>
15
ARTICLE XIII
FISCAL YEAR
-----------
Except as from time to time otherwise provided by the
Board of Directors, the fiscal year of the Corporation shall be
the year or other fiscal period ending on the last day of
December in each year.
ARTICLE XIV
AMENDMENTS
----------
All by-laws of the Corporation shall be subject to
alteration or repeal, and new by-laws may be adopted either by
the vote of a majority of the outstanding shares of the
Corporation entitled to vote in respect thereof, or by the vote
of the Board of Directors, provided that in each case notice of
the proposed alteration or repeal or of the proposed new by-laws
shall be included in the notice of the meeting at which such
alteration, repeal or adoption is acted upon, and provided
further, that any such action by the Board of Directors may be
changed by the shareholders, except that no such change shall
affect the validity of any actions theretofore taken pursuant to
the by-laws as altered, repealed or adopted by the Board of
Directors.
AGREEMENT
This Agreement made and entered into this 27th day of December, 1995, by
and between Outlet Communications, Inc., a Delaware corporation ("Outlet") and
James G. Babb of Charlotte, North Carolina ("Employee").
W I T N E S S E T H:
WHEREAS, Outlet and Employee entered into an Employment Agreement dated
January 1, 1993, as amended (the "Employment Agreement"); and
WHEREAS, Outlet entered into a Merger Agreement with National Broadcasting
Company, Inc., a Delaware corporation ("NBC") and CO Acquisition Corporation,
a Delaware corporation, dated August 2, 1995 (the "Merger Agreement"); and
WHEREAS, Employee has requested that Outlet accelerate unconditionally the
vesting of certain stock options heretofore granted to him by Outlet and the
unconditional payment to him of certain monies which would otherwise be due to
him under the Employment Agreement upon consummation of the merger contemplated
by the Merger Agreement (the "Acceleration Actions"); and
WHEREAS, Outlet is willing to take the Acceleration Actions subject to
Employee entering into this Agreement; and
WHEREAS, pursuant to Section 5.02 of the Merger Agreement the consent of
NBC is required for Outlet to take the Acceleration Actions; and
WHEREAS, NBC is willing to give its consent provided that Employee and
Outlet enter into this Agreement.
95
<PAGE>
NOW, THEREFORE, in consideration of the promises and agreements herein
contained, and in consideration of the Acceleration Actions, and for other good
and valuable consideration, the receipt whereof and sufficiency of which are
hereby acknowledged, Outlet and Employee, intending to be legally bound agree as
follows:
1. Outlet and Employee have agreed upon the basis for Outlet's
withholding of federal, state and local taxes with respect to the payments and
benefits to be provided in respect of Employee under the Employment Agreement
and pursuant to the Acceleration Actions. If the Internal Revenue Service, or
any other federal, state or local taxing authority (a "Taxing Authority") should
assert that Outlet has not fully satisfied its tax withholding obligations with
respect to any payments or benefits in respect of Employee payable under the
Employment Agreement or arising out of the Acceleration Actions (the
"Withholding Obligations"), including, without limitation, any withholding
pursuant to subtitle C or D of the Internal Revenue Code of 1986, as amended,
and Outlet, in accordance with this Agreement, ultimately makes any payment to
satisfy all or a portion of such asserted Withholding Obligations, Employee
shall promptly, and in any event within sixty (60) days after receiving notice
of such payment by Outlet, make a cash payment to Outlet in an amount equal to
the portion of such payment by Outlet which represents taxes required to be
withheld in respect of Employee with respect to any payments or benefits
payable pursuant to the Employee Agreement or the Acceleration Actions together
with the portion which represents interest thereon
96
<PAGE>
up to the date on which Outlet first receives a revenue agent's report or other
formal written notice from such Taxing Authority asserting a claim for unpaid
Withholding Obligations excluding, however, any portion which represents
interest with respect to periods on or after receipt of such formal notice or
penalties for failure to withhold.
2. If Outlet shall receive any notice (including, without limitation, a
revenue agent's report) from a Taxing Authority that Outlet has not fully
satisfied the Withholding Obligations, Outlet shall promptly provide Employee
with a copy of the notice from such Taxing Authority and thereafter Employee
shall have the right to participate in any negotiations or proceedings with
respect to the Withholding Obligations at Employee's sole cost and expense.
Employee agrees to cooperate with Outlet in any such proceeding and to provide
such information as Outlet shall from time to time reasonably require. Outlet
shall make available to Employee all notices relating to or regarding the
Withholding Obligations or matters related thereto from any Taxing Authority and
shall permit Employee and his counsel to participate in any formal or informal
proceedings before such Taxing Authority. All decisions as to how to respond to
the Taxing Authority's assertion of Withholding Obligations, including without
limitation whether or not to challenge such assertion through administrative or
legal proceedings and whether or not to settle with the Taxing Authority, shall
be entirely within the discretion of Outlet; provided,
however, that neither Outlet nor any Affiliate shall, without the consent of
Employee, take a position or settle a claim with respect
97
<PAGE>
to the Withholding Obligations that is inconsistent with the position Outlet or
such Affiliate takes in any contemporaneous dispute with the same Taxing
Authority with respect to any other item of income or deduction arising out of
the payments and benefits in respect of Employee; nor shall Outlet, without the
consent of Employee, settle any claim for Withholding Obligations if such
settlement is a condition to, or in any way a part of, the settlement of any
claim with such Taxing Authority involving an Affiliate, unless such claim
involves substantially the same issue. For purposes of the Agreement the term
"Affiliate" means any person directly or indirectly controlling, or controlled
by, or under direct or indirect common control with Outlet.
3. All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, mailed or transmitted, and shall be effective upon receipt,
if delivered personally, mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to Outlet:
Outlet Communications, Inc.
Attention: Chief Executive Officer
23 Kenney Drive
Cranston, Rhode Island 02920
Fax No.: (401) 455-9227
with copies to:
98
<PAGE>
National Broadcasting Company, Inc.
30 Rockefeller Center
New York, New York 10112
Attention: Senior Vice President and
Chief Financial Officer
Fax No.: (212) 246-5430
(b) If to the Employee:
James G. Babb
901 Edgehill Road
Charlotte, North Carolina 28207
Fax No.: (704) 347-5280
4. This Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective successors and assigns.
5. This Agreement shall be construed and enforced in accordance with the
laws of the State of Delaware without regard to its choice of law provisions.
6. This Agreement may be executed in several counterparts, each of which
shall be deemed to be original, but all of which taken together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, Outlet and Employee have caused this Agreement to be
executed as of the date first above written.
Outlet Communications, Inc.
By:/s/ James G. Babb
------------------------------
Chairman, President & CEO
----------------------------------
James G. Babb
99
TIME BROKERAGE AGREEMENT
------------------------
Dated as of December 14, 1994
Among
Outlet Broadcasting, Inc.
and
BAF Enterprises, Inc.
and
Fant Broadcasting Company of Ohio, Inc.
(as to paragraph 4.7 and 5.2 only)
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
PROGRAMMING AGREEMENT
- ---------------------
1.1 Brokered Programming. . . . . . . . . . . . . . 1
1.2 Licensee Programming. . . . . . . . . . . . . . 2
1.3 Preemption. . . . . . . . . . . . . . . . . . . 2
ARTICLE II
OPERATIONS
- ----------
2.1 Compliance with FCC Regulations . . . . . . . . 2
2.2 Provision of Programming. . . . . . . . . . . . 3
2.3 Station Staffing. . . . . . . . . . . . . . . . 3
2.4 Station Construction . . . . . . . . . . . . . . 3
2.5 Station Maintenance. . . . . . . . . . . . . . . 4
2.6 New Technology............ . . . . . . . . . . . 4
ARTICLE III
CONSIDERATION
- -------------
3.1 Fee . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Adjustments . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
TERM AND SECURITY FOR PERFORMANCE
- ---------------------------------
4.1 Initial Term . . . . . . . . . . . . . . . . . . 6
4.2 Renewal Term. . . . . . . . . . . . . . . . . . 6
4.3 Cancellation . . . . . . . . . . . . . . . . . . 6
4.4 Termination for Refusal To Transmit
Programs . . . . . . . . . . . . . . . . . . . . 6
4.5 Termination for Default and Nonperformance. . . 7
4.6 Liquidated Damages. . . . . . . . . . . . . . . 7
4.7 Security for Performance. . . . . . . . . . . . 9
4.8 Specific Performance. . . . . . . . . . . . . . 10
4.9 Survival of Option and Right of
First Refusal . . . . . . . . . . . . . . . . . 11
ARTICLE V
ASSIGNABILITY, OPTION TO PURCHASE,
- ----------------------------------
RIGHT OF FIRST REFUSAL
- ----------------------
5.1 Assignability . . . . . . . . . . . . . . . . . 11
5.2 Option To Purchase . . . . . . . . . . . . . . . 11
5.3 Right of First Refusal . . . . . . . . . . . . . 13
ARTICLE VI
REGULATORY MATTERS
- ------------------
6.1 Renegotiation Upon FCC Action or Other
Regulatory Changes . . . . . . . . . . . . . . . 13
6.2 FCC Matters . . . . . . . . . . . . . . . . . . 14
<PAGE>
ARTICLE VII
BROADCAST EQUIPMENT AND RELATED ASSETS
- --------------------------------------
7.1 Equipment and Assets . . . . . . . . . . . . . . 14
ARTICLE VIII
REPRESENTATIONS, WARRANTIES, AND COVENANTS
- ------------------------------------------
8.1 Licensee's Representations and Warranties . . . 15
8.2 Broker's Representations and Warranties . . . . 17
8.3 Licensee's Affirmative Covenant . . . . . . . . 17
8.4 Broker's Affirmative Covenant . . . . . . . . . 18
8.5 Licensee's Negative Covenants . . . . . . . . . 18
ARTICLE IX
MISCELLANEOUS
- -------------
9.1 Force Majeure . . . . . . . . . . . . . . . . . 19
9.2 Trademarks . . . . . . . . . . . . . . . . . . . 20
9.3 Notice . . . . . . . . . . . . . . . . . . . . . 20
9.4 Duty to Consult . . . . . . . . . . . . . . . . 21
9.5 Press Releases . . . . . . . . . . . . . . . . . 21
9.6 Severability . . . . . . . . . . . . . . . . . . 21
9.7 Entire Agreement . . . . . . . . . . . . . . . . 21
9.8 Survival . . . . . . . . . . . . . . . . . . . . 21
9.9 Payment of Expenses . . . . . . . . . . . . . . 21
9.10 Further Assurances . . . . . . . . . . . . . . . 21
9.11 Counterparts . . . . . . . . . . . . . . . . . . 22
9.12 Headings . . . . . . . . . . . . . . . . . . . . 22
9.13 Dealings with Third Parties . . . . . . . . . . 22
9.14 Indemnification . . . . . . . . . . . . . . . . 22
9.15 Governing Law . . . . . . . . . . . . . . . . . 23
-ii-
<PAGE>
TIME BROKERAGE AGREEMENT
------------------------
This TIME BROKERAGE AGREEMENT (the "Agreement") is made as
of December ___, 1994, among Outlet Broadcasting, Inc., a Rhode
Island corporation ("Broker"), and BAF Enterprises, Inc., an
Alabama corporation ("Licensee"), and with respect to paragraph
4.7 and 5.2, Fant Broadcasting Company of Ohio, Inc. ("Fant
Ohio"), an Alabama corporation.
W I T N E S S E T H:
-------------------
WHEREAS, Broker is in the business of producing and
transmitting news, sports, informational, public service and
entertainment programming and associated advertising on
Television Station WJAR(TV), Providence, Rhode Island; and
WHEREAS, Licensee, as of the date of this Agreement noted
above, has an agreement (the "Purchase Agreement") with Barnstead
Broadcasting Corporation and William Barnstead to purchase the
assets (the "Station Assets") consisting of land, buildings,
tangible personal property and intangible personal property,
including the Federal Communications Commission construction
permit (the "Construction Permit") for the television station to
be constructed and operated with the call letters WFDG(TV) in New
Bedford, Massachusetts (the "Station"); and
WHEREAS, Broker desires to utilize its currently held assets
as well as assets it will construct and acquire to provide
programming to be transmitted on the Station at such time as the
station commences broadcasting, pursuant to the provisions hereof
and pursuant to applicable regulations and policies of the
Federal Communications Commission ("FCC"); and
WHEREAS, Licensee desires to accept and transmit programming
supplied by Broker on the Station while maintaining control over
the Station and continuing to broadcast Licensee's own public
interest programming;
NOW, THEREFORE, in consideration of these premises and the
mutual promises, undertakings, covenants and agreements of the
parties contained in this Agreement, the parties hereto do hereby
agree as follows:
ARTICLE I
PROGRAMMING AGREEMENT
---------------------
1.1 Brokered Programming. Upon completion of the Station
---------------------
as hereinafter provided and commencement of broadcasting thereon,
Broker hereby agrees to provide for transmission by the Station
-1-
<PAGE>
of news, sports, informational and entertainment programming and
associated advertising, promotional, and public service
programming and announcement matter sufficient to program the
Station on a daily basis throughout the year ("Brokered
Programming"), subject to paragraphs 1.2 and 1.3 herein. All
Brokered Programming and its transmission by the Station shall be
subject to the supervision and control of Licensee.
1.2 Licensee Programming. Licensee will retain sole
---------------------
responsibility for ascertainment of the needs of its community of
license and service area, including specifically the children
therein. The parties agree that the Brokered Programming will
include programming which responds to these ascertained needs and
concerns, including children's programming; provided, however,
Licensee shall have the right and obligation to broadcast such
additional noncommercial programming, either produced or
purchased by Licensee, as it determines appropriate to respond to
the ascertained issues of community concern ("Licensee
Programming"). Such Licensee Programming shall be broadcast at
times agreed to by Broker and Licensee, provided, however, that
in the absence of such agreement, Licensee may delete or preempt
in its sole discretion any Brokered Programming for the purpose
of transmitting such Licensee Programming. Broker recognizes
that Licensee may have certain programming obligations under
paragraph 6 of the Purchase Agreement. Licensee agrees to use
all or a portion of the two (2) hours reserved to Licensee in
paragraph 3.2(a) to satisfy such obligation. For purposes of
this Agreement, "noncommercial" shall mean any programming for
which no consideration of any kind is received by Licensee.
1.3 Preemption. Licensee may preempt or delete any
----------
Brokered Programming which Licensee believes to be
unsatisfactory, unsuitable or contrary to the public interest,
and to substitute programming which, in Licensee's opinion, is of
greater local or national importance.
ARTICLE II
OPERATIONS
----------
2.1 Compliance with FCC Regulations. Licensee will retain
--------------------------------
responsibility for the employ of such personnel as is necessary
to assure compliance with all FCC regulations, including all
technical regulations governing the operation of the Station and
all programming content requirements, including maintenance of a
main studio and providing a meaningful managerial and staff
presence at the main studio, ascertainment of and programming in
response to community needs and concerns and the needs and
concerns of children, satisfaction of the limits on commercial
matter in children's programming, political programming laws and
regulations, sponsorship identification rules, lottery and
-2-
<PAGE>
contest regulations, maintenance of the Station's public and
political files, compiling appropriate quarterly issues programs
lists, children's programming lists, employment records and all
other FCC requirements and duties.
2.2 Provision of Programming. Subject to Licensee's
--------------------------
control and supervision, Broker shall provide the programming
specified in paragraph 1.1 hereof and shall be responsible for
implementing its transmission by the Station, utilizing assets
owned by Broker to the extent necessary. To the extent Broker
reasonably requests the use of tangible station assets owned by
Licensee to enable Broker to fulfill its obligations under this
Agreement, Licensee shall make the use of such assets reasonably
available to Broker at no cost. To the extent Licensee requests
the use of assets owned by Broker to produce or broadcast the
programming specified in paragraphs 1.2 and 1.3 hereof, or to
fulfill Licensee's obligations pursuant to paragraph 2.1 hereof,
Broker shall make the use of such assets available to Licensee
pursuant to an Equipment Lease to be executed in the form set out
in Exhibit A.
2.3 Station Staffing. Licensee shall have sole discretion
----------------
to make and effectuate all staffing and personnel decisions for
the Station, including the sole responsibility to determine
appropriate levels of staffing to fulfill Licensee's duties under
paragraph 2.1 herein. Broker shall have no control or right of
review whatsoever over any decision by Licensee to hire or
dismiss any Licensee employee. Whenever any individuals, whether
employed by Licensee or Broker, are on the Station's premises,
they shall be subject to the supervision and direction of
Licensee's General Manager or other supervisory personnel.
2.4 Station Construction. Within thirty (30) days after
--------------------
the Commencement Date (as hereinafter defined), Broker will
prepare a plan (the "Plan") for the construction of necessary
improvements to the Station and the provision of equipment and
other assets necessary for the Station to commence Program Test
Authority for an amount not to exceed $4,000,000 within twelve
(12) months following the Commencement Date. Upon approval of
the Plan by Licensee, which approval shall not be unreasonably
withheld, Broker, in consultation with Licensee, shall cause such
construction to be commenced by contractors and others in the
employ of Broker but who nevertheless shall have authority to
enter upon the land on which the Station is located. Such
contractors shall have appropriate insurance which such insurance
shall be approved by both the Licensee and Broker and shall name
Licensee and Broker as additional insureds. Further, the parties
hereto understand and acknowledge that Licensee has offered to
purchase a transmitter suitable for the Station which is now
owned by Broker. After May 1, 1995 Broker will sell and Licensee
will purchase such transmitter for the sum of $250,000. It shall
-3-
<PAGE>
be the obligation of Licensee to secure all permits necessary in
order for Broker to undertake such construction in accordance
with the approved Plan. If, for any reason such permits cannot
be obtained within a time period which will permit Broker to
complete such construction prior to the expiration of Licensee's
Construction Permit, Broker shall so notify Licensee and Broker
shall not be obligated to commence construction unless and until
Licensee has secured an extension of such construction permit so
that Broker may complete such construction within the time
permitted under said construction permit.
Upon completion of the improvements included in within Plan,
Broker and Licensee shall enter into a lease for such
improvements and equipment substantially in the form of Exhibit
A; provided, however, that at the expiration or earlier
termination of said lease, Licensee shall have the option to
purchase such equipment and improvements at 100% of the cost
incurred by Broker in the construction or acquisition thereof,
without deduction or offset for any reason, including reasonable
wear and tear less any portion of the Capital Expenditures (as
that term is defined in Exhibit B) recovered by Broker prior to
that time.
2.5 Station Maintenance. Licensee shall retain ultimate
-------------------
operational control over the Station and shall retain full
responsibility for ensuring compliance with all FCC technical
rules. Licensee hereby delegates to Broker, under the
supervision and ultimate control of Licensee's Chief Operator,
the duty to maintain in good working order the Station's
equipment used in connection with the broadcast of the Station's
program material. Broker shall bear full and exclusive
responsibility for all capital expenditures that may be necessary
to maintain the Station's equipment in good working order;
provided, however, that Broker's obligation to bear exclusive
- -------------------
responsibility for all necessary capital expenditures for the
maintenance and improvement of the transmission facilities
licensed to the Station under this paragraph 2.5 as well as
Paragraph 2.4 shall be limited to the Initial Term and renewal
terms and shall also be limited in the amount set forth in
Section 1.2 of Exhibit B, exclusive of any recovery of proceeds
from policies insuring the Station's equipment, received by
Broker for the account of Licensee or directly by Licensee.
2.6 New Technology. The parties agree that any future FCC
--------------
frequency allocations associated with the operation of the
Station are included under the provisions of this Agreement.
Specifically, if an HDTV simulcast channel is allocated to the
Station, Broker will have the exclusive right to build the
transmission facility and the parties agree to bargain in good
faith to enter into an appropriate agreement with Licensee for
the provision of programming by Broker for that facility on terms
consistent with this Agreement.
-4-
<PAGE>
ARTICLE III
CONSIDERATION
-------------
3.1 Fee. Beginning on the Station Operating Commencement
---
Date, as defined below, Broker shall pay to Licensee a monthly
fee calculated according to the provisions set forth in Section 3
of Exhibit B. In further consideration of the programming
transaction contemplated under this Agreement as well as the
right to renew the Agreement as provided in paragraph 4.2, Broker
shall pay to Licensee within thirty (30) days after receipt by
Broker of Final Termination of the Litigation, as hereinafter
defined, the sum of Six Hundred Sixty Thousand Dollars
($660,000.00) ("Initial Payment") in cash or by certified or
cashier's check. Cumulative Return, as defined in Exhibit B,
shall be shared in accordance with the provisions of Exhibit B.
The "Station Operating Commencement Date" shall be the date
Station has met all local and regulatory requirements to begin
program tests as permitted by the FCC. Licensee and Barnstead
Broadcasting Corporation are parties plaintiff in a proceeding
against Offshore Broadcasting Corporation now pending in the
United States Court of Appeals for the District of Columbia,
Circuit No. 94-7235 (the "Litigation"). The suit involves an
appeal by Offshore Broadcasting Corporation from a decision of
the United States District Court of the District of Columbia
(Civil Action No. 94-2167) enjoining the said Offshore
Broadcasting Corporation from filing an objection with the FCC to
the transfer by Barnstead Broadcasting Corporation of its FCC
construction permit for the Station to Licensee. For purposes of
this Agreement, Final Termination of Litigation shall mean the
last to occur of (a) the time when the injunction heretofore
granted by the United States District Court in the Litigation
shall have become permanent and final with no party having a
right to appeal or with the time for the taking of any appeal
having expired without such appeal having been taken, or (b) the
time that the order of the Federal Communications Commission
approving the transfer of the Construction Permit from Barnstead
Broadcasting Corporation to Licensee shall have become final with
no possibility of appeal therefrom with no right on the part of
any person to have such order reconsidered.
3.2 Adjustments.
-----------
(a) Effective on the Station Operating Commencement Date,
Licensee may broadcast up to two hours of Licensee Programming
per week pursuant to paragraph 1.2 without any adjustment to the
fee set out in paragraph 3.1. If during the term of the
Agreement, the Station shall fail to carry Brokered Programming
for all but the two hours per week specified in this paragraph
3.2, the fee payable to Licensee by Broker shall be reduced by
the then-current market rate of the advertising time scheduled
during any deleted or preempted Brokered Programming.
-5-
<PAGE>
(b) Notwithstanding the provisions of subparagraph 3.2(a),
the fee payable to Licensee by Broker shall not be reduced if
Licensee determines, in its good faith judgment, that Licensee
Programming, as defined in paragraph 1.2, of more than two hours
per week is necessary to meet FCC requirements or to meet
Licensee's obligations as an FCC licensee.
ARTICLE IV
TERM AND SECURITY FOR PERFORMANCE
---------------------------------
4.1 Initial Term. The Initial Term of this Agreement shall
------------
commence on the date Licensee acquires the Station Assets in
accordance with the Purchase Agreement (the "Commencement Date")
and shall expire on the final day of the ten-year period
following the Station Operating Commencement Date, unless
otherwise renewed.
4.2 Renewal Term. This Agreement shall automatically renew
------------
for two additional periods of five years each ("Renewal Terms"),
unless Broker provides written notice of nonrenewal within 180
days prior to the expiration of the Initial Term.
4.3 Cancellation. Licensee shall have the unlimited right
------------
to cancel this Agreement at any time upon provision of twelve
months' written notice to Broker, such advance notice being
necessary in view of the substantial financial commitments Broker
will be required to incur in order to provide high quality
programming for transmission on the Station; provided, however,
------------------
that upon cancellation of this Agreement by Licensee under this
paragraph, there shall be a final accounting of monies due but
unpaid under this Agreement; and provided further that Broker
-----------------
shall be entitled to Liquidated Damages under paragraph 4.6
herein.
4.4 Termination for Refusal To Transmit Programs. Effective
--------------------------------------------
on the Station Operating Commencement Date in the event that
Licensee refuses to transmit programming under this agreement
(except as a result of Broker's default under any of its
obligations herein or except as provided in paragraph 9.1) for
either twenty-four (24) consecutive hours or one-half hour in
each day in any period of thirty (30) consecutive days, Broker
shall have the right, exercisable at any time within sixty (60)
days after the end of such period, to terminate this Agreement as
of any date within 120 days of the date Broker notifies Licensee
of its election to terminate this Agreement. If such termination
shall occur pursuant to this paragraph, such termination shall
extinguish and cancel this Agreement without further liability of
Broker to Licensee; provided, however, that, upon termination of
------------------
this Agreement by Broker under this paragraph, there shall be a
-6-
<PAGE>
final accounting of monies due but unpaid under this Agreement;
and provided further that Broker shall be entitled to Liquidated
----------------
Damages, as defined in paragraph 4.6 herein.
4.5 Termination for Default and Nonperformance. Except as
------------------------------------------
is provided in paragraph 4.4, should either party be in breach of
this Agreement for the nonperformance of a material obligation,
this Agreement may be terminated by the non-defaulting party if
such breach shall continue with respect to monetary defaults for
a period of five (5) days and, with respect to non-monetary
defaults, for a period of fifteen (15) days following the receipt
of written notice from the non-defaulting party ("Cure Period"),
which notice shall indicate the nature of such default; provided,
---------
however, that there shall be a final accounting of monies due
- --------
but unpaid under this Agreement and provided further that if such
----------------
termination is due to the default of Licensee, Broker shall be
entitled to Liquidated Damages, as defined in paragraph 4.6
herein. The Cure Period shall be extended as necessary for those
non-monetary defaults which cannot be cured within fifteen (15)
days, provided that the defaulting party is diligently working
with all reasonable haste to remedy such default.
4.6 Liquidated Damages.
------------------
(a) Licensee acknowledges that Broker has committed to make
a substantial advance payment in order to enter into this
Agreement; that Broker will acquire certain assets associated
uniquely with the Station's operation and will enter into various
long-term agreements with program suppliers and other third
parties to produce programming for the Station at substantial
expense and risk; that Broker will recruit, hire and maintain a
staff of employees dedicated to acquiring and producing quality
programming to be broadcast on the Station; and that Broker will
make substantial investments in additional hard assets to produce
quality programming for the Station. Licensee also acknowledges
that Broker will make substantial investments, both in tangible
and intangible terms, to promote the Station under this
Agreement, to create a unique image for the Station, and to
develop a competitive position in the market for the Station and
that such efforts on the part of Broker will add substantial
value to the Station. Licensee and Broker hereby acknowledge and
agree that any measure of actual damages cannot compensate Broker
for the loss of Licensee's performance under this Agreement and
that the true measure of damages to Broker for a cancellation,
termination, or material breach of this Agreement by Licensee or
by Broker pursuant to paragraphs 4.3, 4.4, or 4.5 is incapable of
accurate estimation with reasonable certainty. Licensee and
Broker therefore agree that it is a fair and reasonable forecast
of just compensation for the harm caused to be measured by
liquidated damages, as defined in subparagraph (b) of this
paragraph, to be paid to Broker upon the cancellation,
termination or breach of this Agreement by Licensee.
-7-
<PAGE>
(b) "Liquidated Damages" shall mean an amount equal to
funds expended and/or committed to be expended by Broker (except
(i) with respect to items (2) through (8) below, such
expenditures and/or commitments as are consistent with industry
practices and (ii) to the extent not theretofore recovered by
Broker from Gross Revenues as defined by Exhibit B prior to the
cancellation, termination, or breach) in each of the following
categories:
(1) the Initial Payment;
(2) the full value of all service contracts and programming
agreements assumed and entered into by Broker for purposes
of providing programming and advertising to be broadcast on
the Station, which Broker owns at the time of cancellation,
termination or breach, less any consideration received by
Broker as a consequence of its good faith efforts to sell or
assign such agreements;
(3) the full value of all severance and employee benefit
packages that Broker, in its discretion, shall provide to
employees whose services would not be required in the
absence of this Agreement;
(4) the full value of any contracts with third parties,
which could not be performed owing to cancellation or
termination, for services to be rendered in connection with
programming provided to the Station including, without
limitation, producers, advertising salespeople, technicians,
engineers, and any other independent contractors whose
services would not be required in the absence of this
Agreement;
(5) the full value of all expenses incurred to promote the
Station and position the Station in the marketplace;
(6) the full value of all assets acquired or constructed by
Broker pursuant to Paragraph 2.3 and all Capital
Expenditures (as defined in Exhibit B) incurred subsequently
in connection with this Agreement, less any consideration
received by Broker as a consequence of its good faith
efforts to sell any such assets;
(7) all corporate, legal, administrative, professional and
brokerage expenses relating in any way to this Agreement;
and
(8) the good will and intangible value associated with
Broker's efforts under this Agreement to create a unique
image and competitive market position for the Station,
-8-
<PAGE>
giving due consideration to the fact that the option and
right of first refusal contained in paragraphs 5.2 and 5.3
shall survive cancellation or termination of this Agreement.
(c) Should Licensee cancel, terminate or materially breach
this Agreement, Broker shall submit its computation of Liquidated
Damages under the categories set forth above to a "Big Six"
accounting firm mutually acceptable to the parties for
independent auditing and verification. Within thirty (30) days
of verification, Licensee agrees to tender payment of all
verified amounts to Broker; provided, however, that if Licensee
objects to any particular enumerated component of the Liquidated
Damages, as verified, it shall notify Broker of such objection
within fifteen (15) days of verification. If thereafter Broker
and Licensee cannot agree as to the amount of the objectionable
component, either party shall have the right to elect to
arbitrate such dispute provided it gives written notice of its
election to arbitrate by the thirtieth (30th) day following the
date of Licensee's objection to Broker's verification. All
arbitration proceedings shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association and shall be in Providence, Rhode Island. In any
proceeding, the arbitrators shall be bound by the provisions of
this Agreement. The prevailing party in any arbitration
proceeding shall be entitled to enforce such award in any court
of competent jurisdiction. Notwithstanding that Licensee may
question a particular component of the Liquidated Damages and
either party may elect arbitration of the dispute, the remainder
of the items comprising the Liquidated Damages shall be paid by
Licensee to Broker within thirty (30) days of accounting
verification, as specified above. No payment shall be required
as to any contested component until the earlier of (i) Broker and
Licensee reaching an agreement on the amount or (ii) entering of
the arbitration award.
(d) If any category of Liquidated Damages is held to be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remainder of the categories of Liquidated
Damages shall not be affected thereby, and the parties agree to
use their best efforts to negotiate a replacement category that
is neither invalid, illegal nor unenforceable.
4.7 Security for Performance. Licensee's performance under
------------------------
this Agreement shall be secured by a mortgage security interest
in all of Licensee's and Station's assets. The form of the
Security Agreement is attached as Exhibit C. In addition,
Licensee's performance under this Agreement shall be secured by
the non recourse personal guarantee of Anthony J. Fant as a
pledgor of the Licensee stock that he holds. If additional
individuals or entities shall acquire stock of Licensee,
Licensee's performance under this Agreement shall be further
-9-
<PAGE>
secured by personal guarantees of such shareholders as pledgors
of the Licensee stock that they hold. The pledge agreement(s)
shall provide that the Broker shall not take any action which
would constitute or result in an assignment of license or change
of control of Licensee without first obtaining FCC approval if
such assignment or change of control would require that approval.
In addition, the pledge agreement(s) shall provide that (i)
voting rights will remain with the Licensee, even in the event of
its default; (ii) in the event of default, there will be either a
private or public sale of the stock; and (iii) prior to the
exercise of stockholder rights by the purchaser at such sale, the
prior consent of the FCC will be obtained. The forms of the
Personal Guaranty and Pledge Agreement are attached,
respectively, as Exhibits D and E. As additional security for
Licensee's obligations hereunder and in order to induce Broker to
enter into this agreement, Fant (Ohio), a sister corporation of
Licensee, all of the capital stock of which is owned by Anthony
J. Fant, hereby agrees that all sums due to it pursuant to that
certain Time Brokerage Agreement ("Ohio TBA") between Outlet
Broadcasting, Inc. and the Fant Broadcasting Company of Ohio,
Inc. dated March 18, 1994 with respect to WWAT (TV) (now WWHO
(TV)) in Chillicothe, OH, shall stand pledged for full and
faithful performance of the Licensee of all its obligations
hereunder including the obligation to pay liquidated damages.
Fant shall grant to broker on or before the commencement date a
security interest in any such sums due to it pursuant to said
time brokerage agreement in order to carry out the provisions of
this paragraph 4.7. In order to induce Broker to enter into this
Agreement Fant (Ohio) hereby agrees that if Licensee's
Construction Permit or Station License is revoked by the Federal
Communications Commission on the basis that the approval of the
assignment of the Station Construction Permit to Licensee was
improvident for any reason and if such revocation becomes final,
the amount (unless otherwise paid by Licensee) of Capital
Expenditures as defined in Exhibit B not theretofore recovered by
Broker pursuant to the provisions of Exhibit B, such amount to be
reduced by the proceeds of any sale of, or the fair market value
if not theretofore sold, of, assets subject to the Lease referred
to in paragraph 2.3 shall be deemed part of and added to,
Broker's Initial Payment as that term is defined. Final order
for this purpose means an order from which no appeal lies, or
which the time for appeal has lapsed without an appeal having
been taken.
4.8 Specific Performance. The rights to be transferred
---------------------
pursuant to the terms of this Agreement are unique and not
readily available on the open market. For that reason and
others, Broker will be damaged seriously and irreparably injured
should this transaction not be performed through no fault of its
own, but for reasons attributable to Licensee. Accordingly, the
Broker, in addition to all other legal remedies, shall have the
-10-
<PAGE>
right to enforce this Agreement by a decree of specific
performance.
4.9 Survival of Option and Right of First Refusal. In the
------------------------- --------------------
event that this Agreement shall be terminated pursuant to
paragraph 4.5 because of Broker's default, the option to purchase
and right of first refusal conveyed to Broker pursuant to Article
V shall not survive such termination. Such option and right of
first refusal shall survive cancellation pursuant to paragraph
4.3, any other termination other than pursuant to paragraph 4.5
because of Broker's default, or a transfer of control of Licensee
or the assignment of the Station's FCC authorizations to any
party other than Broker for a period of ten (10) years following
such termination or the consummation of such transfer or such
assignment, and such option and right of first refusal shall
remain in full force and effect.
ARTICLE V
ASSIGNABILITY, OPTION TO PURCHASE,
---------------------------------
RIGHT OF FIRST REFUSAL
----------------------
5.1 Assignability. This Agreement shall inure to the
-------------
benefit of and be binding upon Licensee, Broker and their
respective successors and assigns; provided, however, that
-------------------
Licensee shall not assign or transfer its rights, benefits,
duties or obligations under this Agreement without the prior
written consent of Broker, unless such assignment or transfer is
to a single-purpose corporation of which Licensee or Anthony J.
Fant owns at least fifty percent (50%), in value and voting
power, of all issued and outstanding stock, and in accordance
with the provisions of paragraph 4.7, all such stock is pledged
to secure the obligations of Licensee's successor under this
Agreement. This Agreement shall not terminate upon the sale of
the Station to a successor licensee or upon a transfer of control
of Licensee, but shall be assigned to or assumed by any
subsequent owner of the Station.
5.2 Option To Purchase.
(a) Broker agrees to pay Licensee Five Hundred Twelve
Thousand Five Hundred dollars ($512,500.00), Three Hundred
Thousand of which such amount shall be paid on the Commencement
Date and the balance of which shall be paid when Licensee
certifies to Broker's reasonable satisfaction, that Licensee has
secured all permits necessary for Broker to commence construction
in accordance with the approved Plan. If Licensee is unable to
so certify by the first to occur of (i) eighteen months from the
Commencement Date or (ii) the expiration of Station Construction
Permit, then Broker shall have the right to terminate this
Agreement and to an immediate repayment of the Three Hundred
-11-
<PAGE>
Thousand Dollars. If Licensee does not make such payment, Fant
(Ohio) as an inducement to Broker to make the payment on the
Commencement Date agrees that any amounts not so repaid by
Licensee shall be deemed part of and added to the Initial Payment
as that term is defined in the Ohio TBA. In consideration of
such payment, if and at such time as (i) Broker's acquisition of
the Station would not be prohibited by then existent FCC rules or
policies and FCC action, if any, allowing such acquisition shall
no longer be subject to administrative or judicial
reconsideration or review, or (ii) Broker shall furnish evidence
reasonably satisfactory to Licensee that a waiver of the FCC's
rules or policies is likely to permit Broker to own the Station,
Broker may, subject to prior FCC approval, purchase the Station
and all associated assets, including real estate, tangible and
intangible personal property, including the FCC license from
Licensee for a purchase price of an appraised value not to exceed
Three Million Two Hundred Fifty Thousand Dollars ($3,250,000.00)
("Exercise Price"), which will be paid in cash at the closing on
the acquisition of the Station ("Station Closing"). The
appraisal shall be at Broker's expense and shall be undertaken by
a duly qualified appraiser selected by Licensee from a list of
five such appraisers submitted by Broker. Such selection shall
be made within ten days of the submission of the list by Broker.
(b) During the first five (5) years following the
Commencement Date, Broker may exercise the option specified in
this paragraph 5.2 by delivering to Licensee a written notice of
exercise no earlier than fifteen (15) days following either of
the events specified in (a) (i) or (a) (ii) of this paragraph 5.2
and no later than two (2) years following either of the events
specified in (a) (i) or (a) (ii) of this paragraph 5.2. During
the remainder of the term of this Agreement, as renewed, Broker
may exercise the option specified in this paragraph 5.2 by
delivering to Licensee a written notice of exercise no earlier
than fifteen (15) days following either of the events specified
in (a) (i) or (a) (ii) of this paragraph 5.2 and no later than
one (1) year following either of the events specified in (a) (i)
or (a) (ii) of this paragraph 5.2. Within thirty (30) days
following delivery of such notice, Broker and Licensee shall
enter into a detailed asset purchase agreement with respect to
the Station, containing customary and reasonable terms and
conditions, and shall jointly file such application or
applications as may be required to obtain the consent of the FCC
for the assignment of the Station's license or licenses from
Licensee to Broker.
(c) Broker's rights under this option to purchase shall be
fully assignable to any third party (i) that is qualified under
the Communications Act of 1934, as amended, and the FCC's rules
and policies to hold the Station's license, and (ii) that
presents audited financial statements demonstrating a net worth
-12-
<PAGE>
of at least Five Million Dollars ($5,000,000.00) for its
preceding fiscal year.
5.3 Right of First Refusal.
----------------------
(a) In the event Licensee receives and wishes to accept a
bona fide offer to sell or transfer control of the Station,
- ----------
however styled, with a party other than Broker, Licensee shall
provide Broker with written notice of that offer and all material
terms and conditions of that offer, including, without
limitation, the identity of the offering party. If that offer is
evidenced by any writing(s), Licensee shall provide Broker with
true copies of such writings together with the written notice
required by this subparagraph. Upon receipt of such notice,
Broker shall have the right, exercisable by giving notice in
writing thereof to Licensee within thirty (30) business days
after receipt of notice by Broker, to match such offer and,
within thirty (30) days of such notice to Licensee, to enter into
an asset or stock purchase agreement with Licensee at the same
price and with equivalent material terms and conditions;
provided, however, that Broker's right to first refusal shall be
- ------------------
exercisable by Broker only if (i) Broker's acquisition of the
Station would not be prohibited by then existent FCC rules or
policies and FCC action, if any, allowing such acquisition shall
no longer be subject to administrative or judicial
reconsideration or review, or (ii) Broker shall, with its notice
matching the offer, furnish evidence reasonably satisfactory to
Licensee that a waiver of the FCC's rules is likely to permit
Broker to own the Station.
(b) Broker's rights under this right of first refusal shall
be fully assignable to any third party (i) that is qualified
under the Communications Act of 1934, as amended, and the FCC's
rules and policies to hold the Station's license, and (ii) that
presents audited financial statements demonstrating a net worth
of at least Five Million Dollars ($5,000,000.00) for its
preceding fiscal year.
ARTICLE VI
REGULATORY MATTERS
------------------
6.1 Renegotiation Upon FCC Action or Other Regulatory
-------------------------------------------------------
Changes. If the FCC determines that this Agreement is
- -------
inconsistent with Licensee's licensee obligations or is otherwise
contrary to FCC policies, rules and regulations, or if
regulatory, legislative, or judicial action subsequent to the
Commencement Date alters the permissibility of this Agreement
under the FCC's Rules or the Communications Act of 1934, as
amended, the parties shall renegotiate this Agreement in good
faith and recast this Agreement in terms that are likely to cure
-13-
<PAGE>
the defects perceived by the FCC or the changes caused by
regulatory, legislative, or judicial action and return a balance
of benefits to both parties comparable to the balance of benefits
provided by the Agreement in its current terms. If, after such
good faith negotiations, either party determines that recasting
the Agreement to meet the defects perceived by the FCC is
impossible without materially changing the relationships
contemplated by the parties, either party may terminate this
Agreement without further liability upon thirty (30) days' prior
written notice. If termination shall occur pursuant to this
paragraph, such termination shall extinguish and cancel this
Agreement without further liability on the part of either party
to the other; provided, however, that there shall be a final
------------------
accounting of monies due but unpaid under this Agreement, and
provided further, that 6.1 Broker shall be entitled to Liquidated
- ----------------
Damages, as defined in paragraph 4.6 herein.
6.2 FCC Matters.
-----------
(a) The parties agree that this Agreement shall be filed
with the FCC and placed in the public inspection file of the
Station; provided, however, that all monetary amounts shall be
------------------
redacted from such publicly available copies.
(b) Should a change in FCC policy or rules make it
necessary to obtain FCC consent for the implementation,
continuation or further effectuation of any element of this
Agreement, both parties hereto shall use their best efforts
diligently to prepare, file and prosecute before the FCC all
petitions, waiver requests, construction permit applications,
amendments, rulemaking comments and other related documents
necessary to secure and/or retain FCC approval of all aspects of
this Agreement. Broker and Licensee shall bear in equal measure
the reasonable cost of preparation of any such documents,
provided that each party has approved such expenditures.
Notwithstanding anything in this Agreement to the contrary, it is
understood that no filing shall be made with the FCC with respect
to this Agreement unless both parties hereto have reviewed said
filing and consented to its submission.
ARTICLE VII
BROADCAST EQUIPMENT AND RELATED ASSETS
--------------------------------------
7.1 Equipment and Assets. Licensee represents and warrants
--------------------
to Broker that on the Commencement Date Licensee will own the
land and buildings described in Exhibit 2 to the Purchase
Agreement together with the FCC Construction Permit described in
Exhibit 1 to the Purchase Agreement free and clear of all debts,
liabilities, obligations, liens, and encumbrances of any kind,
character, and description, whether accrued, absolute, contingent
-14-
<PAGE>
or otherwise, except as otherwise approved by Broker and except
for the program obligation to the said William Barnstead pursuant
to paragraph 6 of the Purchase Agreement. Licensee affirmatively
covenants to Broker that such real estate shall not be disposed
of without the prior written consent of Broker.
7.2 During the Initial Term of this agreement and during
any and all renewal terms the parties shall maintain in full
force and effect by advance payment of premium comprehensive
casualty, property damage, broadcaster's errors and omissions,
business interruption and liability insurance with an insurance
company in an amount reasonably acceptable to the other (and with
an umbrella of not less than $5,000,000) insuring against any
liability that may occur upon any loss or damage to any assets
which are required for the operation of the Station, any
occurrence on or about the Station and the real estate associated
therewith, and any items which party has indemnified the other
pursuant to the provisions of paragraph 9.14 hereof. Broker and
Licensee shall be specified as insured under the policy required
under this section 7.2. Each party will supply the other with a
certificate of insurance illustrating compliance with its
respective obligations hereunder on the Commencement Date and
each and every renewal date for the insurance policy maintained
by such party. Each party will provide the other party thirty
(30) days' prior notice of the expiration of said policy and
immediate notice of any cancellation of said policy. Any
insurance required by this paragraph may be effective under
blanket policies and each party shall request the waiver of
subrogation for coverage provided by the other party pursuant to
this paragraph. Any repair or replacement as a result of loss
covered by such insurance shall be considered a Station Operating
Expense as that term is defined in Schedule B to the extent that
the cost of repair or replacement is in excess of a) the
insurance proceeds less b) the cost reasonably incurred by the
Licensee in collecting such proceeds.
ARTICLE VIII
REPRESENTATIONS, WARRANTIES, AND COVENANTS
------------------------------------------
8.1 Licensee's Representations and Warranties. On the date
-----------------------------------------
hereof and on the Commencement Date Licensee represents and
warrants to Broker as follows:
(a) Organization. Licensee is a corporation duly
------------
organized, validly existing and in good standing under the laws
of the State of Alabama and has full power and authority to
acquire and own the property, licenses and permits associated
with the Station, to carry out all of the transactions
contemplated by this Agreement and on the Commencement Date will
-15-
<PAGE>
be duly qualified to conduct business in the Commonwealth of
Massachusetts.
(b) Compliance with Law. Licensee has complied with and
--------------------
will continue to comply with all laws, rules and regulations
governing the business, ownership and operations of the Station
that are material in any way to this Agreement. All attendant
contracts and undertakings, as well as the carrying out of this
Agreement, do not result in any violation of or are not in
conflict with Licensee's Articles of Incorporation and By-laws,
or any existing judgment, decree, other, statute, law, rule or
regulation of any governmental authority applicable to Licensee.
(c) Corporate Authority. All requisite corporate
---------------------
resolutions and other authorizations necessary for the execution,
delivery, performance and satisfaction of this Agreement by
Licensee have been duly adopted and complied with.
(d) Misrepresentation of Material Fact. No document or
------------------------------------
contract disclosed to Broker pursuant to this Agreement and which
in any way affects any of the properties, assets or proposed
business of Licensee as related to this Agreement, and no
certificate or statement furnished by Licensee or on behalf of it
in connection with the transactions contemplated herein contains
or will contain any untrue statement of a material fact or omits
to state a material fact necessary in order to make the
statements contained herein not misleading.
(e) Authorizations and Good Standing. Licensee is fully
---------------------------------
qualified under the Communications Act of 1934, as amended, and
the FCC's rules and policies to be the licensee of the Station.
On the Commencement Date, Licensee's Construction Permit or
license and all related authorizations for the Station are in
full force and effect and unimpaired by any acts or omissions of
Licensee, its employees or agents; and there is no complaint,
condition, event, defect or occurrence existing or, to the
knowledge of Licensee, threatened against said authorization(s)
that would materially threaten their retention or renewability by
Licensee, except for the Litigation.
(f) Capitalization and Share Ownership. Licensee's
---------------------------------------
authorized capital consists of 1000 shares of common stock, $1.00
par value, of which 1000 shares are issued and outstanding. All
of said shares of issued and outstanding common stock are owned
of record by Anthony J. Fant, a resident of Alabama. No other
class of capital stock is authorized by Licensee's articles of
incorporation.
(g) Litigation. Except for the Litigation, there is no
----------
litigation at law or in equity, no arbitration proceeding, and no
proceeding before or by any court, commission, agency, or other
-16-
<PAGE>
administrative or regulatory body or authority, or, to the best
of Licensee's knowledge, threatened or anticipated, which would
have a material adverse affect upon the Station. To the extent
that any such event shall exist on the Commencement Date,
Licensee agrees that any and all costs, judgments, and
liabilities which have or shall become due and payable shall be
the sole and exclusive financial responsibility of Licensee and
shall be deducted from Licensee's share of Net Operating Cash
Income, as defined in Exhibit B.
(h) Taxes. All federal, state, county and local tax
-----
returns, reports and declarations of estimated tax or estimated
tax deposit forms required to be filed in connection with the
Station's operations, real estate, or payroll have been duly and
timely filed. All taxes which have become due pursuant to such
returns or pursuant to any assessment received by them have been
paid as have all installments of estimated taxes. All taxes,
levies, and other assessments which the Station is required by
law to withhold or to collect have been duly withheld and
collected and have been paid over to the proper governmental
authorities.
8.2 Broker's Representations and Warranties. Broker
-------------------------------------------
represents and warrants to Licensee as follows:
(a) Organization. Broker is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State
of Rhode Island and has full power and authority to own its
property and to carry out all of the transactions contemplated by
this Agreement.
(b) Corporate Authority. All requisite corporate
---------------------
resolutions and other authorizations necessary for the execution,
delivery, performance and satisfaction of this Agreement by
Broker have been duly adopted and complied with.
(c) Misrepresentation of Material Fact. No document or
------------------------------------
contract disclosed to Licensee pursuant to this Agreement and
which in any way affects any of the properties, assets or
proposed business of Licensee as relates to this Agreement, and
no certificate or statement furnished by Broker or on behalf of
it in connection with the transactions contemplated herein
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
contained herein not misleading.
8.3 Licensee's Affirmative Covenant. Licensee covenants
--------------------------------
and agrees that it will comply fully with all applicable federal,
state and local laws, rules and regulations (including, without
limitation, all FCC rules, policies and regulations) and
pertinent provisions of all contracts, permits and pertinent
agreements to which it is a party or is otherwise bound.
-17-
<PAGE>
8.4 Broker's Affirmative Covenant. Broker covenants and
------------------------------
agrees that it will fully comply with all applicable federal,
state and local laws, rules and regulations (including, without
limitation, all FCC rules, policies and regulations) in the
provision of the Brokered Programming to Licensee.
8.5 Licensee's Negative Covenants. In further
----------------------------------
consideration of the Initial Payment and Option Payment, Licensee
covenants and agrees as follows:
(a) Indebtedness. Licensee shall not incur, create, assume
------------
or become or be liable in any manner with respect to, or permit
to exist any further indebtedness or liability, whether direct or
indirect or contingent, except indebtedness with respect to trade
obligations and other ordinary accruals in the normal course of
business not yet due and payable or not more than ninety (90)
days in arrears measured from the date of such payment is due or
with respect to which Licensee is contesting in good faith the
amount or validity thereof by appropriate proceedings, and
indebtedness in the respect of endorsements of negotiable
instruments for collection in the ordinary course of business.
(b) Liens. Licensee shall not create, incur, assume, or
-----
suffer or permit to exist any additional mortgage, pledge, lien,
charge, or other encumbrance of any nature whatsoever on any of
the assets or ownership interests now or hereafter owned, issued,
or outstanding other than (i) liens securing payment of taxes
either not yet due or the validity of which are being contested
in good faith by appropriate proceedings as to which it will set
aside on its books adequate reserves, (ii) deposits under the
worker's compensation, employment insurance or social security
laws, or to secure statutory obligations or surety or appeal
bonds or secure indemnity, performance, or other similar bonds
arising in the ordinary course of business, (iii) liens imposed
by laws such as carriers, warehousemen or mechanics liens
incurred by it in good faith in the ordinary course of business,
(iv) liens arising out of a pre-judgment attachment, judgment or
award against it with respect to which it shall be currently
prosecuting an appeal, a stay of execution pending such appeal
having been secured, (v) liens in favor of Broker, and (vi)
restrictions, easements, reservations, exceptions, encroachments,
and minor irregularities in title which do not interfere with the
occupation and use and enjoyment by Licensee of such properties
and assets in the normal course of its business or materially
impair the value of such properties and assets for the purpose of
such business.
(c) Sales and Leaseback. Licensee shall not enter into any
-------------------
arrangements, directly or indirectly, with any person whereby it
shall sell or transfer any property, real, personal, or mixed, to
-18-
<PAGE>
be used in its business or hereafter acquired and thereafter rent
or leasing such property.
(d) Fundamental Changes. Licensee shall not permit or
--------------------
suffer any amendment of its charter or documents which could
materially effect its financial condition or the rights of Broker
under this Agreement; or issue any additional shares of capital
stock unless such shares shall have been pledged to Broker as
required under that certain guarantee of even date herewith, or
in any way alter its capital structure.
(e) Mergers, Acquisitions, Sales of Assets. Licensee shall
--------------------------------------
not merge into, or consolidate with any person or permit any
other person to merge into or consolidate with it; effect any
asset sale or acquire (directly or indirectly) any additional
station, any business unit or all or substantially all of the
assets or properties of or ownership interest in any person
without the prior express approval of Broker; or change its
corporate structure or organization from that set forth herein.
(f) Change in Business. Licensee shall not engage directly
------------------
or indirectly in any business other than that of operating the
Station.
(g) Accounts Receivable. Licensee shall not sell, assign,
-------------------
discount, or dispose in any way of any accounts receivable,
promissory notes, or trade acceptances held by it with or without
recourse except for collection (including endorsement) in the
ordinary course of business.
(h) Compliance. Licensee shall not (i) fail to make any
----------
contributions to pension plans required by Section 412 in the
Internal Revenue Code of 1986, (ii) fail to make payments
required by Title Four of the Employees Retirement Income and
Security Act of 1974, as amended or (iii) fail to correct a
prohibited transaction with an employee benefit plan with respect
to which it is liable for tax imposed by Section 4975 of the
Code.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Force Majeure. Notwithstanding anything contained in
-------------
this Agreement to the contrary, neither party shall be liable to
the other for failure to perform any obligation under this
Agreement (nor shall any charges or payments be made in respect
thereof) if prevented from doing so by reason of fires, strikes,
labor unrest, embargoes, civil commotion, rationing or other
orders or requirements, acts of civil or military authorities,
acts of God or other contingencies, including equipment failures,
-19-
<PAGE>
beyond the reasonable control of the parties, and all
requirements as to notice and other performance required
hereunder within a specified period shall be automatically
extended to accommodate the period of pendency of such
contingency which shall interfere with such performance.
9.2 Trademarks. For the term of this Agreement, Licensee
----------
hereby grants Broker an unlimited license to use any and all
trademarks, service marks, patents, trade names, jingles,
slogans, logotypes and other intangible rights owned and used or
held for use by Licensee in conjunction with the Station.
Licensee agrees to execute such additional documentation as may
be necessary or desirable to effectuate the license granted under
this paragraph.
9.3 Notice. All notices, requests, demands and other
------
communications that are required or may be given pursuant to the
terms of this Agreement shall be in writing and shall be deemed
given when delivered by hand, overnight courier, or sent by
facsimile transmission or on the third day after mailing if
mailed by registered mail, postage prepaid, return-receipt
requested, as follows:
(a) If to Licensee, to:
BAF Enterprises, Inc.
2729 11th Avenue South
Birmingham, Alabama 35205-1751
Attention: Anthony J. Fant
with a copy to
Fletcher Heald & Hildreth
1300 North 17th Street
Arlington, Virginia 22209
Attention: Howard M. Weiss
(b) If to Broker, to:
Outlet Broadcasting, Inc.
23 Kenney Drive
Cranston, Rhode Island 02920
Attention: James G. Babb
with a copy to:
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, Rhode Island 02903
Attention: Stephen J. Carlotti
-20-
<PAGE>
or to such other address as any party shall have designated by
notice in Writing to the other parties.
9.4 Duty to Consult. Each party agrees that it will use
----------------
its best efforts not to take any action that will unreasonably
interfere, threaten or frustrate the other party's purposes or
business activities, and that it will keep the other party
informed of, and coordinate with the other party regarding, any
of its activities that may have a material effect on such party.
9.5 Press Releases. Except as may be required by law or
--------------
any governmental agency, no announcement to the press or to any
third party of the transactions contemplated herein shall be made
by either party unless the same shall be approved in advance in
writing by both Broker and Licensee.
9.6 Severability. Subject to paragraph 6.1, if any
------------
provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remainder of this Agreement shall not be affected thereby, and
the parties agree to use their best efforts to negotiate a
replacement article that is neither invalid, illegal nor
unenforceable.
9.7 Entire Agreement. This Agreement constitutes the
-----------------
entire agreement of the parties with respect to its subject
matter and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to its subject
matter. This Agreement may be modified only by an agreement in
writing executed by all of the parties hereto.
9.8 Survival. All representations, warranties, covenants
--------
and agreements made herein by the parties hereto or in any
certificate to be delivered hereunder or made in writing in
connection with the transactions contemplated herein shall
survive the execution and delivery of this Agreement. All such
representations, warranties, covenants and agreements shall
survive for three years past the date on which this Agreement
terminates.
9.9 Payment of Expenses. Except as otherwise provided,
--------------------
Licensee and Broker shall pay their own expenses incident to the
preparation and carrying out of this Agreement, including all
fees and expenses of their respective counsel.
9.10 Further Assurances. From time to time after the date
------------------
of execution hereof, the parties shall take such further action
and execute such further documents, assurances and certificates
as either party reasonably may request of the other to effectuate
the purposes of this Agreement.
-21-
<PAGE>
9.11 Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument, and shall become effective when each of the parties
hereto shall have delivered to it this Agreement duly executed by
the other party hereto.
9.12 Headings. The headings in this Agreement are for the
--------
sole purpose of convenience of reference and shall not in any way
limit or affect the meaning or interpretation of any of the terms
or provisions of this Agreement.
9.13 Dealings with Third Parties. Neither party is nor
-----------------------------
shall hold itself out to be vested with any power or right to
bind contractually or act on behalf of the other as its
contracting broker, agent or otherwise for committing, selling,
conveying or transferring any of the other party's assets or
property, contracting for or in the name of the other party,
making any contractually binding representations contractually
binding such party.
9.14 Indemnification.
---------------
(a) Each party shall forever, to the fullest extent
permitted by law, protect, save, defend and keep the other party
harmless and indemnify-said other party against, all claims,
demands, causes of action, loss, investigations, proceedings,
demands, penalties, fines, expenses and judgments, including
reasonable attorneys' fees and costs, arising directly or
indirectly out of the negligence or willful misconduct of the
other party, its agents or employees in connection with the
performance of this Agreement.
(b) Broker shall forever, to the fullest extent permitted
by law, protect, save, defend and keep Licensee and its officers,
directors, employees, and agents and each of them harmless and
indemnify them from and against any and all loss, damage,
liability, or expense, including reasonable attorney's fees,
resulting from any claim of libel, slander, defamation, copyright
infringement, idea misappropriation, invasion of right of privacy
or publicity, or any other claim against Licensee arising out of
Broker's programming on the Station, provided that Licensee shall
give Broker prompt notice of any claim and shall cooperate in
good faith with Broker in attempts to resolve and settle any such
claims. The foregoing shall not apply to the use of any new
matters that Licensee may insert in or adjacent to Broker's
programming.
(c) Licensee shall forever, to the fullest extent permitted
by law, protect, save, defend, and keep Broker and its officers,
-22-
<PAGE>
directors, employees, and agents and each of them harmless and
indemnify them from and against any and all loss, damage,
liability, or expense, including reasonable attorney's fees,
resulting from any claim of libel, slander, defamation, copyright
infringement, idea misappropriation, invasion of right of privacy
or publicity, or any other claim against Broker arising out of
Licensee's programming on the Station, provided that Broker shall
give Licensee prompt notice of any claim and shall cooperate in
good faith with Broker in attempts to resolve and settle any such
claims.
9.15 Governing Law. This Agreement shall be construed under
-------------
and in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of
conflict of laws.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the date first above written.
BAF ENTERPRISES, INC.
By /s/ Anthony Fant
---------------------------------
President
OUTLET BROADCASTING, INC.
By /s/ James G. Babb
---------------------------------
Fant Broadcasting Company of Ohio, Inc.
(with respect to paragraph 4.7 and 5.2
only)
By /s/ Anthony Fant
--------------------------------
-23-
<PAGE>
FIRST AMENDMENT
TO
TIME BROKERAGE AGREEMENT
This First Amendment to Time Brokerage Agreement made and
entered into as of this _____ day May, 1995 by and between Outlet
Broadcasting, Inc., a Rhode Island corporation ("Broker") and BAF
Enterprises, Inc., an Alabama corporation ("Licensee") and Fant
Broadcasting Company of Ohio, Inc. ("Fant Ohio"), an Alabama
corporation.
W I T N E S S E T H
WHEREAS, on December 14, 1994, Broker, Licensee and Fant
Ohio entered into a Time Brokerage Agreement; and
WHEREAS, Licensee and Broker are desirous of amending said
Agreement and certain particulars; and
WHEREAS, Fant Ohio is willing to consent to such
Amendment.
NOW, THEREFORE, in consideration of the premises and
mutual promises, undertakings, covenants and agreements of the
parties contained in this Agreement, the parties hereto do hereby
agree as follows:
-1-
<PAGE>
1. Section 3.1 of the Agreement is amended to read as
follows:
"3.1 Fee. Beginning on the Station Operating
---
Commencement Date, as defined below, Broker shall pay
the Licensee a monthly fee calculated according to the
provisions set forth in Section 3 of Exhibit B and
shall further pay to the Licensee the sum of Six
Hundred Sixty Thousand Dollars ($660,000) (the
"Initial Payment") in cash or by certified or
cashier's check. Cumulative Return, as defined in
Exhibit B shall be shared in accordance with the
provisions of Exhibit B. The term "Station Operating
Commencement Date" shall be the date the Station has
met all local and regulatory requirements to begin
program tests as permitted by the FCC."
2. Except as modified herein, the said Time Brokerage
Agreement is hereby ratified, confirmed and approved.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
BAF Enterprises, Inc.
By:___________________________
President
Outlet Broadcasting, Inc.
By:___________________________
FANT BROADCASTING COMPANY OF OHIO, INC.
By:________________________________
-2-
<PAGE>
EXHIBIT TO TIME BROKERAGE AGREEMENT
BETWEEN BAF ENTERPRISES, INC. ("LICENSEE")
AND OUTLET BROADCASTING, INC. ("BROKER")
1. Defined Terms. For purposes of this Schedule C the
--------------
following terms, unless the context otherwise requires, shall
have the following meanings:
1.1 "Accounting Period" shall mean the period from the
Initial Calculation Date to the First Interim Calculation Date
and thereafter each period beginning with the Initial Calculation
Date and ending on the next Interim Calculation Date, or Final
Calculation Date, whichever shall occur first.
1.2 "Capital Expenditures" shall mean the sum of (a)
the cost of completing the Plan but not more than $4,000,000, and
(b) all amounts expended by Broker, in addition to those
contemplated by the Plan in connection with the purchase of
equipment used to provide for all of the operational needs of
Station WFDG-TV which would be classified as a capital
expenditure in accordance with U.S. Generally Accepted Accounting
Principles.
<PAGE>
1.3 "Cumulative Return" shall mean for any Accounting
period (a) the Net Operating Income or Net Operating Loss, as the
case may be, less (b) the Initial Payment, if then made, less (c)
Capital Expenditures.
1.4 "Direct Expenses" shall mean for any Accounting
Period the actual expenses incurred by Broker in operating and
carrying out its obligations under this Agreement with respect to
WFDG-TV. Such expenses shall include, without limitation, cost
of the provision of programming, whether purchased from third
parties or produced by Broker, promotional costs, the cost of all
sales of time, representative fees and commissions, salaries and
fringe benefits for personnel employed by Broker at WJAR, data
services, insurance, bad debts, supplies, utilities and other
like items, but shall exclude amounts related to the provision of
general station management, real property rents, general building
maintenance, depreciation of any type and accounting.
1.5 "Final Calculation Date" shall mean the date on
which this Agreement shall terminate.
1.6 "First Interim Calculation Date" shall mean the
December 31st of the year during which the Station Operating
Commencement Date Occurs.
-2-
<PAGE>
1.7 "Gross Operating Income" shall mean for any
Accounting Period, the positive difference, if any, between Net
Revenue and the sum of (a) Direct Expenses, (b) Operating Lease
Payments, (c) Station Operating Expense and (d) Station
Maintenance Expenses.
1.8 "Gross Revenue" shall mean the sum of (x) amounts
billed where payment is expected in cash and (y) the fair market
value of all other property received by Broker during an
Accounting Period arising from the sale of advertising time by
Broker pursuant to Section 2.2 of this Agreement.
1.9 "Initial Calculation Date" shall mean the date of
this Agreement.
1.10 "Interim Calculation Date" shall mean the First
Interim Calculation Date and each December 31 thereafter during
the term of this Agreement, or the Final Calculation Date,
whichever date shall occur first.
1.11 "Net Revenue" shall mean for any Accounting Period
the Gross Revenue less agency fees and representative fees
incurred during such Accounting Period by Broker.
-3-
<PAGE>
1.12 "Net Operating Income" or "Net Operating Loss"
shall mean for any Accounting Period the positive or negative
difference, if any, between Net Revenue and the sum of (a) Direct
Expenses (b) Operating Lease Payments, (c) Station Operating
Expense, (d) Station Maintenance Expenses, and (e) Management
Fee.
1.13 "Management Fee" shall mean for any Accounting
Period equal to (10) percent of Gross Operating Income.
1.14 "Operating Lease Payments" shall mean all payments
made by Licensee to Broker pursuant to that certain lease of
personal property between Broker and Licensee of even date
herewith attached as Exhibit A.
1.15 "Station Budgeted Discretionary Operating
Expenses" shall mean the amounts contained in the Station
Operating Budget for salaries and related expenses (including
fringe benefits and travel and entertainment) for those personnel
required by Licensee to operate the Stations in the manner
required by this Agreement, and general and administrative
expenses payable to related third parties.
1.16 "Station Maintenance Expenses" shall mean all
expenses other than Capital Expenditures incurred by the Broker
-4-
<PAGE>
to maintain in good operating repair and condition the property
of Licensee.
1.17 "Station Operating Budget" shall mean the estimate
of the Station Operating Expense which is prepared by Licensee
pursuant to Section 2 of this Exhibit B for each twelve month
period during the term of this Agreement, except that the first
such period shall commence on the Initial Calculation Date and
shall end on December 31, 1995.
1.18 "Station Operating Expense" shall mean for any
Accounting Period the expenses actually incurred by Licensee for
the operation of WFDG-TV pursuant to Section 1.2, 1.3, 2.3 and
2.4 of this Agreement, which shall include the amount actually
incurred with respect to Station Budgeted Discretionary Operating
Expenses, but not in excess of the amount contained in the
Station Operating Budget with respect thereto, rents for studios
and transmission facilities, all payments to utilities and
unrelated suppliers for utilities, supplies and services
reasonably necessary in the operation of WFDG-TV by Licensee, all
real and personal property taxes and sales taxes paid by
Licensee, administrative expenses insurance premiums, the cost of
any repair or replacement covered by insurance in an amount not
to exceed the cost thereof in excess of the difference between
the (a) insurance proceeds and (b) the costs of collecting such
-5-
<PAGE>
proceeds, but excluding therefrom any income taxes, accounting
expenses, corporate franchise taxes, salaries and other items not
explicitly set forth herein.
1.19 "Station Operating Expense Estimated Payment"
shall mean an amount paid once each month by Broker to Licensee
which shall equal one-twelfth of the Station Operating Budget for
each twelve month period during the term of this Agreement
provided, however, that for the Accounting Period between the
Initial Calculation Date and December 31, 1995, such payment
shall be agreed upon between Licensee and Broker.
2. Station Operating Expenses. Licensee has prepared a
--------------------------
Station Operating Budget for the period between the Initial
Calculation Date and December 31, 1995 as set forth in Schedule
B-1 hereto. Within 30 days after the expiration of such period
and each twelve months thereafter during the term of this
Agreement, Licensee shall deliver to Broker a detailed statement
of the Station Operating Expenses incurred and paid by Licensee
for such period. If such amount shall be less than the Station
Operating Expense Estimated Payment made by Broker for such
period, the difference shall be deducted from the next Station
Operating Expense Estimated Payment thereafter made by Broker
pursuant to this Agreement. If the amount shown on such
statement shall be greater than the Station Operating Expense
-6-
<PAGE>
Payment made by Broker for such period, then Broker shall pay the
Licensee the difference within 30 days. At least 60 days prior
to each December 31st occurring during the term of this
Agreement, Licensee shall deliver to Broker a Station Operating
Budget which Broker shall have the right to review and request
documentation with respect thereto. Licensee agrees that Station
Budgeted Discretionary Operating Expense Budget for the Interim
Accounting Period commencing on January 1, 1996 shall not exceed
$120,000. Thereafter, unless approved by Broker, which approval
will not be unreasonably withheld, Station Operating Budget shall
contain an amount for Station Budgeted Discretionary Operating
Expenses greater than the product of (a) 1.05 and (b) the amount
actually contained in the Station Operating Budget for the then
Accounting Period.
3. Monthly Payments By Broker. Commencing on the
-----------------------------
Initial Calculation Date for the portion of the calendar month
then remaining and thereafter monthly within five days of the
first business day of each month thereafter during the term of
this Agreement, Broker shall pay to Licensee the sum of (a) the
Operating Lease Payment and (b) the Station Operating Expense
Estimated Payment for such month, subject, however, to reduction
in the case of the Station Operating Expense Estimated Payment in
accordance with the provisions of Section 2 of this Exhibit B.
-7-
<PAGE>
4. Payments to Licensee. Within sixty days after the
--------------------
First Interim Calculation Date, and each Interim Calculation Date
thereafter, or the Final Calculation Date, whichever shall occur
first, Broker shall make a determination of the Cumulative Return
in accordance with the terms of this Agreement for the Accounting
Period ending on such Interim or Final Calculation Date and shall
submit the determination to Licensee. With such schedule, Broker
shall pay to Licensee with respect to such Accounting Period the
sum, if any, of (a) 25 percent of the positive Cumulative Return
of $500,000 or less, (b) 30 percent of the positive Cumulative
Return in excess of $500,000 but not more than $1 million, (c) 35
percent of the positive Cumulative Return in excess of $1 million
but not more than $1.5 million, (d) 40 percent of the positive
Cumulative Return in excess of $1.5 million but not more than $2
million, (e) 45 percent of the positive Cumulative Return in
excess of $2 million but not more than $2.5 million and (f) 50
percent of the positive Cumulative Return in excess of $2.5
million, reduced, however, by (g) the sum of all prior payments
pursuant to this paragraph 4.
5. Accounting. Within 30 days of the time of the
----------
rendering of any statement of Station Operating Expenses or Net
Operating Income or Net Operating Loss (a "Statement") required
under this Agreement, if either party shall question the amount
or propriety of any item appearing in such Statement or excluded
-8-
<PAGE>
therefrom and if thereafter Broker and Licensee cannot agree as
to the amount or propriety of such item, the dispute may be
determined by arbitration as hereinafter provided. Notice of
arbitration shall be given within seventy-five days of the
delivery of the Statement, unless a party has elected to audit as
hereinafter provided. Notwithstanding that a party may question
any item, the amount due as shown on such Statement shall
nevertheless be paid (except for the portion if any which is then
subject to ongoing arbitration or litigation). Unless a party
shall take written exception to any item contained in any such
Statement within 30 days after delivery of the same, such
Statement shall be considered as final and accepted by the party
to whom delivered. Either party will upon request by the other
within 45 days make available for inspection books of original
entry and documentation relating to any of the items of income,
capital expenditures or expense reflected in any such Statement.
Each party shall have the right at its sole cost and expense to
audit any such Statement. Written notice of intention to audit
shall be received by the other party within 45 days of the
furnishing of any Statement. Said audit shall be commenced
within 30 days of the delivery of notice of intention and once
commenced must be pursued until completed at the office of the
party which is subject to the audit during the hours of 9:00 A.M.
to 4:30 P.M. during the normal business work week. Results of
each audit shall be made available to all parties. In the event
-9-
<PAGE>
of a discrepancy resulting in underpayment or overpayment of more
than 5 percent of that which was actually paid, the party subject
to the audit shall pay the cost thereof. In any other event, the
party requesting the audit shall pay the cost. Should the
parties be unable to reconcile the amount contained in any such
audit, either party shall have the right to elect to arbitrate
such dispute provided it gives written notice of its election to
arbitrate within 30 days of the date after delivery of the audit
results. The failure to give written notice within such 30 day
period shall be deemed a waiver of any right to arbitrate the
amounts disclosed on the audit. If as a result of the audit
there shall be any adjustments with respect to any amounts due or
heretofore paid pursuant to this agreement, such amount shall be
paid within 10 days. If such amount is not paid within 10 days,
it shall bear interest at the maximum rate permitted by law. All
arbitration proceedings shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association and shall be held in Providence, Rhode Island. In
any proceeding, the arbitrators shall be bound by the provisions
of this Agreement. The prevailing party in any arbitration
proceeding shall be entitled to enforce such award in any court
of competent jurisdiction.
-10-
<PAGE>
MORTGAGE DEED AND AGREEMENT
---------------------------
KNOW ALL MEN BY THESE PRESENTS THAT:
------------------------------------
BAF ENTERPRISES, INC., an Alabama corporation having a
mailing address at 1 Independence Plaza, Suite 70, Birmingham,
Alabama 35209 (the "Mortgagor"), for consideration paid, hereby
grants, bargains, sells, conveys, transfers and assigns to OUTLET
BROADCASTING, INC., a Rhode Island corporation having a principal
place of business at 23 Kenney Drive, Cranston, Rhode Island
02920 (the "Mortgagee"), its successors and assigns forever, WITH
MORTGAGE COVENANTS, that certain tract or parcel of land, with
any Buildings (as hereinafter defined) and improvements now or
hereafter erected thereon, located in Freetown, Massachusetts,
and more particularly described in Exhibit A which is attached
---------
hereto and hereby made a part hereof, which tract or parcel of
land, with any Buildings and improvements now or hereafter
erected thereon, is hereinafter referred to and included in the
definition of the "Mortgaged Property" together with all and
singular the tenements, hereditaments, easements, rights of way,
Fixtures (as hereinafter defined), Personalty (as hereinafter
defined) and appurtenances thereunto appertaining.
TO HAVE AND TO HOLD the Mortgaged Property, and such tene-
ments, hereditaments, easements, rights of way, Fixtures, Per-
sonalty and appurtenances unto and to the use of the Mortgagee,
and the successors and assigns of the Mortgagee forever.
PROVIDED, NEVERTHELESS, and this conveyance is made upon the
express condition that, if the Mortgagor shall pay and perform
all of the Obligations (as hereinafter defined) and shall pay,
perform and observe all of the other covenants, agreements and
conditions set forth in this Mortgage and Agreement, the
Brokerage Agreement (as hereinafter defined) and any Security
Document (as hereinafter defined) on the part of Mortgagor to be
paid, performed or observed, then this Mortgage and Agreement,
shall become and be absolutely void to all intents and purposes
whatsoever.
And, in consideration of the transactions contemplated by the
Brokerage Agreement and other valuable consideration the receipt
or sufficiency of which is hereby acknowledged, the Mortgagor
covenants and agrees with the Mortgagee as follows:
ARTICLE I
Definitions
-----------
As used herein, the following terms shall have the following
meanings:
<PAGE>
(a) Brokerage Agreement: That certain Time Brokerage
--------------------
Agreement dated December 14, 1994, as heretofore and hereafter
amended, by and between Mortgagor and Mortgagee.
(b) Buildings: All buildings, improvements, alterations or
---------
appurtenances now standing or at any time hereafter constructed
upon or constituting any part of the Mortgaged Property.
(c) Event of Default: Any happening or occurrence described
----------------
in Article V hereof.
(d) Fixtures: The items of property now or at any time
--------
hereafter affixed or attached to or placed upon the Buildings
and/or used in conjunction therewith including plumbing, heating
and lighting apparatus, mantels, floor coverings, furniture,
furnishings, draperies, screens, storm windows and doors,
awnings, shrubbery, plants, boilers, tanks, machinery, stoves,
gas and electric ranges, wall cabinets, appliances, furnaces,
dynamos, motors, elevators and elevator machinery, radiators,
blinds and all laundry, refrigerating, gas, electric, ventilat-
ing, air-refrigerating, air-conditioning, incinerating and
sprinkling and other fire prevention or extinguishing equipment
of whatsoever kind and nature and any replacements, accessions
and additions thereto, proceeds thereof and substitutions
therefor.
(e) Hazardous Waste: Any "oil," "hazardous material,"
----------------
"hazardous wastes" or "hazardous substances" as defined in the
Hazardous Waste Laws, including, without limitation (whether or
not included in the definition contained in the Hazardous Waste
Laws), PCB's, asbestos, radon and other chemicals which would be
materially dangerous to the environment or to human beings.
(f) Hazardous Waste Laws: The Massachusetts Oil and
----------------------
Hazardous Material Release Prevention and Response Act, M.G.L.
Chapter 21E, as amended, the Massachusetts Hazardous Waste
Management Act, M.G.L. Chapter 21C, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended, and any and all other federal,
-- ---
state or local laws governing the existence, release, generation,
storage or disposal of any hazardous or toxic materials, and the
regulations adopted pursuant thereto.
(g) Impositions: All (i) real estate and personal property
-----------
taxes and other taxes and assessments, water and sewer rates and
charges, and all other governmental charges and any interest or
costs or penalties with respect thereto, and charges for any
easement or agreement maintained for the benefit of the Mortgaged
Property, general and special, ordinary and extraordinary, fore-
seen and unforeseen, of any kind and nature whatsoever which at
any time prior to or after the execution hereof may be assessed,
2
<PAGE>
levied or imposed upon or which affect the Mortgaged Property or
the rent or income received therefrom, or any use or occupancy
thereof, and (ii) other taxes, assessments, fees and governmental
charges levied, imposed or assessed upon or against Mortgagor or
any of Mortgagor's properties which shall constitute a lien on
the Mortgaged Property.
(h) Mortgaged Property: The property described in Exhibit A
------------------ ---------
(including, where the context permits, the Buildings, Personalty
and Fixtures), together with all of Mortgagor's right, title and
interest in and to any award or awards heretofore made or here-
after to be made by any municipal, state or federal authorities
or boards to the extent that the same are payable to or receiv-
able by Mortgagor or any prior or subsequent owners of the Mort-
gaged Property, including any award or awards for any change or
changes of grade of streets affecting the Buildings; and all
estate, right, title, interest, claim or demand whatsoever of the
Mortgagor, either at law or in equity, in possession or expect-
ancy of, in and to the property described in Exhibit A hereof.
(i) Mortgagee: Outlet Broadcasting, Inc. and its successors
---------
and assigns from time to time.
(j) Mortgagor: BAF Enterprises, Inc. or its permitted
---------
successors and assigns in whom the ownership of the Mortgaged
Property, or any part thereof, is then vested.
(k) Obligations: All amounts, payments and premiums due or
-----------
to become due and all other obligations of Mortgagor to Mortgagee
under and with respect to this Mortgage and Agreement, the
Brokerage Agreement and any Security Document.
(l) Permitted Encumbrance: Shall mean any mortgage, lien,
----------------------
restriction or encumbrance described on Exhibit B which is
----------
attached hereto.
(m) Personalty: All furniture, furnishings, equipment,
----------
machinery and all other tangible personal property now or here-
after owned by Mortgagor and located in, upon or about the Mort-
gaged Property and the Buildings or used in any way in connection
with the use, operation or occupancy of the Mortgaged Property,
together with all accessions, replacements and substitutions
thereto or therefor and the proceeds thereof (except the Fixtures
and except for motor vehicles) and all General Intangibles (as
defined in the applicable Uniform Commercial Code) pertaining in
any way to the Mortgaged Property and any such tangible personal
property including any franchises, permits or licenses for the
use, operation or occupancy of the Mortgaged Property and any
books and records relating to such use, operation or occupancy
and all money, instruments and other property of the Mortgagor
from time to time in the possession of Mortgagee.
3
<PAGE>
(n) Security Agreement: The security agreement, contained
-------------------
in this Mortgage and Agreement, wherein and whereby Mortgagor
grants a security interest in the Personalty and the Fixtures to
Mortgagee.
(o) Security Document: This Mortgage and Agreement, any
-----------------
other agreement or guarantee or other instrument or document
whatsoever by which the Mortgagor shall be bound to pay or pro-
vide collateral security for the payment of the Indebtedness and
other documents and agreements within the definition of "Security
Documents" contained in the Brokerage Agreement, all of which are
by this reference fully incorporated herein.
ARTICLE II
Representations and Warranties
------------------------------
Mortgagor represents and warrants to Mortgagee as follows:
2.1. Organization, Power, etc. Mortgagor (a) is a
--------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of its creation, (b) has the power
and authority to own its properties and to carry on its business
as now being conducted, and (c) is in compliance with all laws,
regulations, ordinances and orders of public authorities
applicable to it.
2.2. Validity of Loan Instruments. (a) The execution,
------------------------------
delivery and performance by Mortgagor of the Brokerage Agreement,
and/or any Security Document, and the transactions contemplated
by the Brokerage Agreement (i) are within the powers of
Mortgagor, (ii) have been duly authorized by all requisite
action, (iii) have received all necessary governmental approval,
and (iv) will not violate any provision of law or any order of
any court or agency of government, the instrument, agreement or
document pursuant to which Mortgagor was created, or any
indenture, agreement or other instrument to which Mortgagor is a
party or by which it or any of its property is bound, or conflict
with, result in a breach of or constitute (with due notice and/or
lapse of time) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of
its property or assets, except as contemplated by the provisions
of any Security Document; and (b) the Brokerage Agreement and
any Security Document, when executed and delivered by Mortgagor,
will constitute the legal, valid and binding obligations of
Mortgagor in accordance with their respective terms.
2.3. Mortgaged Property and Other Property. Mortgagor has
--------------------------------------
good and marketable title in and to the Mortgaged Property, free
and clear of any liens, charges, encumbrances, security interests
and adverse claims whatsoever except the Permitted Encumbrances,
4
<PAGE>
and the Mortgagor shall warrant and defend the same to the Mort-
gagee forever against the lawful claims and demands of all per-
sons.
2.4. Taxes. Mortgagor has filed all federal, state, county
-----
and municipal income tax returns required to have been filed by
it and has paid all taxes which have become due pursuant to such
returns or pursuant to any assessments received by it, and Mort-
gagor does not know of any basis for additional assessment in
respect of such taxes.
2.5. Litigation. Except for the case of Bourgois, et als
---------- ------------------
vs. Kramer, et als, CA 95-00460 pending in the Bristol County
- -------------------
Massachusetts Superior Court (the "Bourgois Litigation"), there
is not now pending against or affecting Mortgagor or the
Mortgaged Property nor, to the knowledge of Mortgagor, is there
threatened, any action, suit or proceeding at law or in equity or
by or before any administrative agency which if adversely
determined would materially impair or affect the Mortgaged
Property or Mortgagor's financial condition or operations.
ARTICLE III
Affirmative Covenants
---------------------
Until the Indebtedness shall have been paid in full, Mort-
gagor hereby covenants and agrees as follows:
3.1. Legal Existence. Mortgagor will preserve and keep in
----------------
full force and effect its legal existence, rights, franchises and
trade names.
3.2. Compliance with Laws. Mortgagor will promptly and
---------------------
faithfully comply with, conform to and obey all present and
future laws, ordinances, rules, regulations and requirements of
every duly constituted governmental authority or agency and of
every board of fire underwriters having jurisdiction, or similar
body exercising similar functions, which may be applicable to it
or to the Mortgaged Property, or any part thereof, or to the use
or manner of use, occupancy, possession, operation, maintenance,
alteration, repair or reconstruction of the Mortgaged Property,
or any part thereof, whether or not such law, ordinance, rule,
order, regulation or requirement shall necessitate structural
changes or improvements or interfere with the use or enjoyment of
the Mortgaged Property.
3.3. Payment of Impositions. Mortgagor will duly pay and
----------------------
discharge, or cause to be paid and discharged, the Impositions,
such Impositions or installments thereof, to be paid not later
than the day any fine, penalty, interest or cost may be added
thereto or imposed by law for the non-payment thereof; provided,
however, that if, by law, any Imposition may at the option of the
taxpayer or other person obligated to pay it be paid in install
5
<PAGE>
ments without interest or penalties accruing on the unpaid bal-
ance of such Imposition, Mortgagor may exercise the option to pay
the same in such installments.
3.4. Repair. Mortgagor will keep the Mortgaged Property in
------
good order and condition and make all necessary or appropriate
repairs, replacements and renewals thereof and additions and
betterments and improvements thereof, interior and exterior,
structural and non-structural, ordinary and extraordinary, fore-
seen and unforeseen, and use its best efforts to prevent any act
or thing which might impair the value or usefulness of the Mort-
gaged Property or any part thereof.
3.5. Insurance. Mortgagor will at all times keep the
---------
Building, Fixtures and Personalty insured for the benefit of
Mortgagee including without limitation against loss by fire and
such other hazards, casualties and contingencies as are normally
and usually covered by extended coverage policies in effect in
the locality where the Mortgaged Property is situated and such
other risks for which coverage may become available as may be
customarily required by Mortgagee, from time to time with respect
to similar properties, in amounts and with insurers of recognized
responsibility, and which are acceptable to Mortgagee; cause each
insurance policy issued in connection therewith to provide (and
the insurer issuing such policy to certify to Mortgagee) that (i)
loss payments will be payable to Mortgagee, (ii) the interest of
Mortgagee shall be insured regardless of any breach or violation
by Mortgagor of any warranties, declarations or conditions in
such policy; (iii) if any such insurance policy be subject to
cancellation or be endorsed or sought to be endorsed to effect a
change in coverage for any reason whatsoever, such insurer will
promptly notify Mortgagee and such cancellation or change shall
not be effective as to Mortgagee for ten (10) days after receipt
by Mortgagee of such notice; and (iv) Mortgagee may, but shall
not be obligated to, make premium payments to prevent such can-
cellation if for non-payment of premiums, and that such payments
shall be accepted by the insurer. At Mortgagee's option, Mort-
gagor shall furnish to Mortgagee duplicate executed copies of
each then existing policy (provided the same are obtainable at
nominal charge to Mortgagor, and if not, duplicate copies along
with certificates therefor), and copies of each renewal policy
not less than thirty (30) days prior to the expiration of the
original policy or the preceding renewal policy (as the case may
be), together with receipts or other evidence that the premiums
thereon have been paid. Mortgagee may (but shall not be required
to) act as attorney for the Mortgagor with full power of substi-
tution, in its own name or in the name of the Mortgagor, to
obtain any insurance to be maintained pursuant to this section,
adjust or settle any loss with respect thereto or endorse any
draft or other instrument issued by any insurer in payment of any
loss or any dividend or return of premium thereon or to assign
any policy of insurance maintained pursuant to this section to
any successor or assign of the Mortgagee.
6
<PAGE>
3.6. Disposition of Proceeds. In the event that the Mort-
-----------------------
gagee shall realize any amount on account of insurance maintained
pursuant to the preceding section, the Mortgagee may, at its
election, pay or apply such amount in any one or more of the
following ways and in such order as Mortgagee may determine: (a)
apply such amount on account of any obligation of the Mortgagor
pursuant to this Mortgage and Agreement, any Security Document
and/or the Brokerage Agreement, or (b) apply such amount toward
payment of obligations incurred by the Mortgagor or the Mortgagee
in the repair or replacement of damage to the Mortgaged Property;
provided, however, that if and so long as all of the following
conditions are and remain satisfied: (i) no Event of Default
exists; (ii) the Mortgagor elects to repair same in accordance
herewith the Mortgagee shall apply such proceeds first as stated
in clause (a) of this section until paid in full, then as stated
in clause (b) of this section until exhausted or paid in full.
3.7. Performance of Other Agreements. Mortgagor will duly
--------------------------------
and punctually perform all material covenants and agreements
expressed as binding upon it under any Permitted Encumbrance.
3.8. Inspection. Mortgagor will permit Mortgagee or any
----------
duly authorized agent of the Mortgagee, at all reasonable times,
to inspect the Mortgaged Property.
3.9. Hold Harmless. Mortgagor will defend at its own cost
-------------
and hold Mortgagee harmless from any action, proceeding or claim
affecting the Mortgaged Property, or the value of the Brokerage
Agreement or any Security Document.
3.10. Books and Records. Mortgagor will maintain full and
------------------
complete books of account and other records reflecting the
results of its construction and/or operation of the Mortgaged
Property, in accordance with generally accepted accounting prin-
ciples and furnish, or cause to be furnished to Mortgagee, on
reasonable request by Mortgagee true copies thereof.
3.11. Contest of Tax Assessments, etc. After prior written
--------------------------------
notice to Mortgagee, in the case of any material item, Mortgagor,
at its own expense, may contest by appropriate legal proceedings,
promptly initiated and conducted in good faith and with due dili-
gence, the amount or validity or application, in whole or in
part, of (a) any of the requirements referred to in Subsection
3.2, or (b) any Imposition; provided that (i) in the case of any
unpaid Imposition, such proceedings shall suspend the collection
therefrom from Mortgagor and from the Mortgaged Property, (ii)
neither the Mortgaged Property nor any part thereof or interest
thereunder will be in danger of being sold, forfeited, termi-
nated, cancelled or lost, and (iii) Mortgagor shall have fur-
nished such security as may be required in the proceedings or as
may be reasonably requested by Mortgagee.
7
<PAGE>
3.12. Payment and Performance of Obligations. Mortgagor
----------------------------------------
will pay, keep and perform promptly each and every material term,
covenant and condition of the Brokerage Agreement and any
Security Document on the part of Mortgagor to be kept and
performed.
3.13. Use. Mortgagor will operate the Mortgaged Property in
---
accordance with the Brokerage Agreement and each Security
Document.
3.14. Recorded Instruments. Mortgagor will promptly
---------------------
perform and observe, or cause to be performed or observed, all of
the terms, covenants and conditions of all instruments of record
affecting the Mortgaged Property on the part of Mortgagor to be
performed or observed, noncompliance with which shall affect the
security of this Mortgage and Agreement or impose any duty or
obligation upon Mortgagor, and Mortgagor shall do or cause to be
done all things necessary to preserve intact and unimpaired any
and all easements, appurtenances and other interests and rights
in favor of or constituting any portion of the Mortgaged Prop-
erty.
ARTICLE IV
Negative Covenants
------------------
Until the Obligations shall have been paid in full, Mortgagor
covenants and agrees as follows:
4.1. Use, Violation, etc. Mortgagor will not use the Mort-
-------------------
gaged Property or any part thereof or allow the same to be used
or occupied for any purpose other than as set forth in Subsection
3.13. of this Mortgage and Agreement and directly related pur-
poses or for any unlawful purpose or in violation of any certi-
ficate of occupancy or other permit or certificate, or any law,
ordinance or regulation, or suffer any act to be done or any
condition to exist on the Mortgaged Property or any part thereof,
or any article to be brought thereon, which may be dangerous,
unless safeguarded as required by law, or which may, in law,
constitute a nuisance, public or private, or which may make void
or voidable any insurance then in force with respect thereto.
Mortgagee acknowledges that the Bourgois Litigation involves a
claim concerning the legality of Mortgagor's Building Permit and
that Mortgagor makes no covenant with respect thereto.
4.2. Alterations, Demolition, Waste, etc. Mortgagor will
------------------------------------
not commit or knowingly permit any waste of the Mortgaged Prop-
erty or any part thereof or make or permit to be made any altera-
tions or additions to the Mortgaged Property which would have the
effect of materially diminishing the value thereof or make or
permit to be made any other alteration or addition to the Mort-
8
<PAGE>
gaged Property, of a material nature, without the prior written
consent of Mortgagee or cause or permit any Fixtures to be
removed at any time from the Mortgaged Property and/or Buildings,
without the prior written consent of Mortgagee, unless actually
replaced by an article of equal value and suitability, owned by
it, free and clear of any lien or security interest except such
liens as may be approved in writing by Mortgagee.
ARTICLE V
Events of Default
-----------------
The Mortgagor shall be in default under this Mortgage and
Agreement and an "Event of Default", shall be deemed to have
occurred under this Mortgage and Agreement upon the occurrence or
happening, from time to time, of any one or more (i) the Events
of Default described in the Brokerage Agreement and/or any
Security Document and (ii) any of the following:
5.1. Destruction of Improvements. Any of the Buildings are
---------------------------
demolished or removed or demolition or removal thereof is immi-
nent, eminent domain proceedings excepted.
5.2. Transfer of the Mortgaged Property. There shall occur
-----------------------------------
any transfer, assignment or encumbrance of all or any part of the
Mortgaged Property without the prior written consent of the Mort-
gagee.
5.3. Default Under Other Liens. Mortgagor shall default in
--------------------------
the material performance of any agreement, covenant or condition
contained in any Permitted Encumbrance, or any other mortgage,
lien or encumbrance on the Mortgaged Property (without hereby
implying Mortgagee's consent to any such other lien prohibited
under this Mortgage and Agreement).
ARTICLE VI
Default and Foreclosure
-----------------------
If any Event of Default shall occur and be continuing, Mort-
gagee may, at its option, exercise any one or more or all of the
following remedies:
6.1(a). Acceleration. Declare the unpaid portion of the
------------
Indebtedness to be immediately due and payable, without further
notice or demand (each of which hereby is expressly waived by
Mortgagor), whereupon the same shall become immediately due and
payable.
6.1(b). Entry on Mortgaged Property. Enter upon all or any
---------------------------
part of the Mortgaged Property and take possession thereof.
9
<PAGE>
6.1(c). Operation of Mortgaged Property. Hold, lease,
---------------------------------
operate or otherwise use or permit the use of the Mortgaged Prop-
erty, or any portion thereof, in such manner for such time and
upon such terms as Mortgagee may deem to be in its best interest
(making such repairs, alterations, additions and improvements
thereto, from time to time, as Mortgagee shall deem necessary or
desirable).
6.1(d). Foreclosure of Mortgaged Property. Sell the Mort-
----------------------------------
gaged Property, in whole or in part, under the judgment or decree
of a court of competent jurisdiction.
6.1(d)(1). Sale of Mortgaged Property. Sell, together or in
--------------------------
parcels, the Mortgaged Property or any type thereof and the bene-
fit and equity of redemption of Mortgagor therein pursuant to and
in accordance with the statutory power of sale set forth in
General Laws of Massachusetts, Chapter 183, Section 21.
6.1(d)(2). Sale of Personalty and Fixtures. Sell the Per-
--------------------------------
sonalty and/or the Fixtures, in whole or in part, at one or more
public or private sales, in such manner, at such time or times
and upon such terms as Mortgagee may determine or as provided by
law. The requirement of reasonable notice shall be met if notice
is mailed, proper postage prepaid, to Mortgagor or other person
entitled thereto at least five (5) days before the time of sale
or disposition of the Personalty and/or Fixtures.
6.1(e). Appointment of Receiver. Upon, or at any time
------------------------
after, the commencement of proceedings to sell the Mortgaged
Property at public auction or the commencement of any judicial
proceedings to enforce its rights, Mortgagee, to the extent per-
mitted by law, may, without notice or demand and without regard
to the adequacy of any security for the Obligations or the
solvency or insolvency of any person liable for the payment
thereof, have appointed a receiver or receivers of the Mortgaged
Property, with such powers as the court making such appointment
shall confer.
6.1(f). Other Remedies. Exercise any other remedy now or
--------------
hereafter existing in equity, at law, by virtue of statute or
otherwise.
6.2. Strict Performance. Any failure by Mortgagee to insist
------------------
upon strict performance by Mortgagor of any of the terms and
provisions of any Security Document or of the Brokerage Agreement
shall not be deemed to be a waiver of any of the terms or
provisions thereof, and Mortgagee may thereafter insist upon
strict performance by Mortgagor of any and all of them.
6.3. No Conditions Precedent to Exercise of Remedies.
-----------------------------------------------------
Neither Mortgagor nor any other person now or hereafter obligated
for payment of all or any part of the Obligations shall be
10
<PAGE>
relieved of such obligation by reason of the failure of Mortgagee
to comply with any request of Mortgagor or of any other person so
obligated to take action to foreclose under this Mortgage and
Agreement or otherwise enforce any provisions of any Security
Document or the Brokerage Agreement, or by reason of the release,
regardless of consideration, of all or any part of the security
held for the Obligations, or by reason of any agreement or
stipulation between any subsequent owner of the Mortgaged
Property and Mortgagee extending the time of payment or modifying
the terms of any Security Document or the Brokerage Agreement
without first having obtained the consent of Mortgagor or such
other person; and in the latter event Mortgagor and all such
other persons shall continue to be liable to make payment
according to the terms of any such extension or modification
agreement, unless expressly released and discharged in writing by
Mortgagee.
6.4. Release of Collateral. Mortgagee may release, regard-
---------------------
less of consideration, any part of the security held for the
payment of the Obligations without, as to the remainder of the
security, in any way impairing or affecting the lien or liens of
any Security Document or their priority over any subordinate
lien.
6.5. Other Collateral. For payment of the Obligations,
-----------------
Mortgagee may resort to any other security therefor held by Mort-
gagee in such order and manner as Mortgagee may elect.
6.6. Waiver of Redemption, Notice, Marshalling, etc. Mort-
-----------------------------------------------
gagor hereby waives and releases:
(a) all benefit that might accrue to Mortgagor by virtue of
any present or future law exempting the Mortgaged Property, or
any part of the proceeds arising from any sale thereof, from
attachment, levy or sale on execution, or providing for any
appraisement, valuation, stay of execution, exemption from civil
process, redemption or extension of time for payment, and
(b) except as specifically required herein or therein, all
notices of Mortgagor's default or of Mortgagee's election to
exercise, or Mortgagee's actual exercise, of any option or remedy
under the Brokerage Agreement or any Security Document, and
(c) any right to have any Mortgaged Property marshalled.
6.7. Discontinuance of Proceedings. In case Mortgagee shall
-----------------------------
have proceeded to enforce any right under the Brokerage Agreement
or any Security Document and such proceedings shall have been
discontinued or abandoned for any reason, then in every such case
Mortgagor and Mortgagee shall be restored to their former
positions and the rights, remedies and powers of Mortgagee shall
continue as if no such proceedings had been taken.
11
<PAGE>
6.8. Application of Proceeds. The proceeds of any sale of
-----------------------
all or any portion of the Mortgaged Property and the earnings of
any holding, leasing, operation or other use of the Mortgaged
Property shall be applied by Mortgagee in the following order:
(a) first, to the payment of the costs and expenses of tak-
ing possession of the Mortgaged Property and of holding, using,
leasing, repairing, improving and selling the same;
(b) second, to the payment of reasonable attorneys' fees and
other legal expenses; and
(c) third, to the payment of the balance of the Obligations
whether such obligations or indebtedness shall than be matured or
unmatured (without assessment of any prepayment charge or
premium).
Mortgagee shall account to Mortgagor for any surplus.
ARTICLE VII
Condemnation
------------
Mortgagor hereby assigns, transfers and sets over to Mort-
gagee all rights of Mortgagor to any award or payment in respect
of (i) any taking of all or a portion of the Mortgaged Property
as a result of, or by agreement in anticipation of, the exercise
of the right of condemnation or eminent domain; (ii) any such
taking of any appurtenances to the Mortgaged Property or of
vaults, areas or projections outside the boundaries of the Mort-
gaged Property, or rights in, under or above the alleys, streets
or avenues adjoining the Mortgaged Property, or rights and bene-
fits of light, air, view or access to said alleys, streets, or
avenues, or for the taking of space or rights therein, below the
level of, or above the Mortgaged Property; and (iii) any damage
to the Mortgaged Property due to governmental action, but not re-
sulting in a taking of any portion of the Mortgaged Property such
as, without limitation, the changing of the grade of any street
adjacent to the Mortgaged Property. Mortgagor hereby agrees to
file and prosecute its claim or claims for any such award or
payment in good faith and with due diligence and cause the same
to be collected and paid over to Mortgagee, and hereby irrevoc-
ably authorizes and empowers Mortgagee, in the name of Mortgagor
or otherwise, to collect and receipt for any such award or pay-
ment and to file and prosecute such claims. All proceeds
received by Mortgagee with respect to a taking of the Mortgaged
Property or with respect to damage to the Mortgaged Property from
governmental action not resulting in a taking of the Mortgaged
Property, shall be applied as follows, in the order of priority
indicated:
12
<PAGE>
(a) to reimburse Mortgagee for all costs and expenses,
including reasonable attorneys' fees, incurred in connection with
collecting the said proceeds;
(b) to the payment of the balance of the Obligations whether
such obligations or indebtedness shall then be matured or
unmatured (without assessment of any prepayment charge or
premium) and/or, if Mortgagor so requests, in Mortgagee's
complete discretion, pursuant to the Brokerage Agreement, as if
such proceeds were advances thereunder, to the restoration,
replacement and rebuilding of the Mortgaged Property; and
thereafter
(c) to the Mortgagor or to such other person as may be
entitled to receive the same.
ARTICLE VIII
Security Agreement
------------------
8.1. Security Interest. This Mortgage and Agreement shall
-----------------
be construed as a mortgage of both real property and personal
property and it shall also constitute and serve as a "Security
Agreement" within the meaning of and shall create a security
interest under the Massachusetts Uniform Commercial Code with
respect to the Personalty and the Fixtures, such security
interest in the Personalty being in addition to Mortgagee's
rights of set-off.
8.2. Financing Statements. Mortgagor shall execute and
---------------------
deliver to Mortgagee, in form satisfactory to Mortgagee, such
"Financing Statements" and such further assurances as Mortgagee
may, from time to time, consider reasonably necessary to create,
perfect and preserve Mortgagee's liens upon the Personalty and
Fixtures, and Mortgagee, at the expense of Mortgagor, may or
shall cause such statements and assurances to be recorded and re-
recorded, filed and re-filed, at such times and places as may be
required or permitted by law to so create, perfect and preserve
such liens.
8.3. Uniform Commercial Code. Mortgagee shall have all the
-----------------------
rights with respect to the Personalty and the Fixtures afforded
to it by the Massachusetts Uniform Commercial Code, in addition
to, but not in limitation of, the other rights afforded Mortgagee
by any Security Document and/or the Brokerage Agreement.
ARTICLE IX
Hazardous Waste
---------------
9.1 Mortgagor hereby warrants and represents to Mortgagee
that (a) Mortgagor has never released, generated, stored or
13
<PAGE>
disposed of any Hazardous Waste on the Mortgaged Property, (b)
Mortgagor is not aware of the existence, release or threat of
release of any Hazardous Waste on or from the Mortgaged Property
or on or from any property adjacent to the Mortgaged Property,
and (c) Mortgagor has not received any notice, order, claim or
demand from the United States Environmental Protection Agency
("EPA") or any state or local governmental agency, authority or
body having jurisdiction over Hazardous Waste or the storage or
removal thereof (collectively, a "State Agency") with respect to
the existence, release or threat of release of any Hazardous
Waste. Mortgagee represents that it has no reason to believe
that any Hazardous Waste, other than asbestos is located on the
Premises.
9.2 Mortgagor shall not release, generate, store or dispose
of any Hazardous Waste on the Mortgaged Property or on any
property adjacent to the Mortgaged Property.
9.3 Mortgagor shall immediately notify Mortgagee in writing
of (a) any and all enforcement, clean-up, removal or other action
instituted or threatened by the EPA or any State Agency pursuant
to any Hazardous Waste Laws, and (b) any and all claims made or
threatened by any third party against Mortgagor or the Mortgaged
Property or any part thereof, relating to the existence of, or
damage, loss or injury from, any Hazardous Waste; and Mortgagee,
to the extent permitted by applicable law, shall have the right
to join and participate in, as a party if it so elects, any
proceedings or actions initiated in connection with any such
claim and to have all of its costs and expenses, including,
without limitation, reasonable attorney's fees, in connection
therewith paid by Mortgagor.
9.4 In the event that any Hazardous Waste is found on or in
the Mortgaged Property, Mortgagor shall immediately contain and
remove the same in compliance with all Hazardous Waste Laws.
9.5 Mortgagor agrees to indemnify and hold Mortgagee
harmless from and against any and all claims, liabilities, costs
and expenses incurred by Mortgagee, including, without
limitation, costs of litigation and reasonable attorney's fees,
arising from the release, existence or removal of, any Hazardous
Waste on or in the Mortgaged Property or on any properties
adjacent to the Mortgaged Property. THIS RIGHT OF
INDEMNIFICATION SHALL SURVIVE THE PAYMENT AND PERFORMANCE IN FULL
OF THE OBLIGATIONS, NOTWITHSTANDING ANY DISCHARGE OF THIS
MORTGAGE.
9.6 Mortgagee, at its election and in its sole discretion,
at any time and from time to time, whether or not an Event of
Default shall have occurred hereunder, may cause one or more
environmental site assessments of the Mortgaged Property to be
undertaken. Environmental site assessments may include, without
14
<PAGE>
limitation, a detailed visual inspection of the Mortgaged
Property and any part thereof, as well as the taking of soil
samples, water samples and such other investigation or analysis
as is necessary or appropriate for a complete assessment of
whether any Hazardous Waste exists on or in the Mortgaged
Property or any part thereof and the compliance of the Mortgaged
Property with all Hazardous Waste Laws. If Mortgagee causes any
such environmental site assessment to be undertaken because
Mortgagee has reason to suspect Hazardous Waste may be present on
the Mortgaged Property or any part thereof, or, if Mortgagee
causes the same to be undertaken without such reason but such
environmental site assessment discloses Hazardous Waste is so
present, or, if Mortgagee causes such environmental site
assessment to be undertaken in contemplation of foreclosure of
this Mortgage, Mortgagor shall pay the cost thereof to Mortgagee
on demand of Mortgagee, and until paid the cost thereof shall be
added to the unpaid principal of the Obligations, shall bear
interest at the rate of 12% per annum, and the payment thereof,
together with such interest, shall be secured by the lien of this
Mortgage and the other Security Instruments.
9.7 Mortgagee, at its election and in its sole discretion,
may (but shall not be obligated to) cure any failure on the part
of Mortgagor or any lessee or other user of the Mortgaged
Property or any part thereof (any such lessee or other user
being, in this Article IX, hereinafter referred to as a "User")
to comply with the Hazardous Waste Laws; such cure may include,
without limitation, the following actions:
(a) arranging for the cleanup or containment of
Hazardous Waste found in, on or near the Mortgaged
Property and paying for such cleanup and
containment costs and other costs associated
therewith;
(b) paying on behalf of Mortgagor or any User, any
fines or penalties imposed on Mortgagor or any User
by the EPA or any State Agency in connection with
Hazardous Waste; and
(c) making any other payment or performing any other
act which may prevent a release of Hazardous Waste,
facilitate the cleanup thereof, or prevent a lien
from attaching to the Mortgaged Property.
Any partial exercise by Mortgagee of the remedies
hereinabove set forth or any partial undertaking on the part of
Mortgagee to cure the failure of Mortgagor or any User to comply
with the Hazardous Waste Laws, shall not obligate Mortgagee to
complete any action taken or require Mortgagee to expend further
sums to cure Mortgagor's or any User's noncompliance; and the
exercise of any such remedies shall not place upon the Mortgagee
15
<PAGE>
any responsibility for the operation, control, care, management
or repair of the Mortgaged Property, or make the Mortgagee the
"owner" or "operator" of the Mortgaged Property or a "responsible
party" within the meaning of any of the Hazardous Waste Laws.
Any amounts paid or costs incurred by the Mortgagee in the
exercise of any of its rights under this subsection 9.7, together
with interest thereon at the rate of 12% per annum from the date
of payment, shall be paid by Mortgagor on demand of Mortgagee,
and until paid shall be added to the unpaid principal of the
Obligations, shall bear interest at the rate of 12% per annum,
and the payment thereof, together with such interest, shall be
secured by the lien of this Mortgage and by the other Security
Instruments. Mortgagee, by making any such payment or incurring
any such costs, shall be subrogated to any rights of Mortgagor or
any User to seek reimbursement from any third parties, including,
without limitation, any predecessor in interest to Mortgagor's
title to the Mortgaged Property or any part thereof.
ARTICLE X
Miscellaneous
-------------
10.1. Survival of Warranties and Covenants. The warranties,
------------------------------------
representations, covenants and agreements set forth in any Secur-
ity Document and/or Brokerage Agreement shall survive the
execution and delivery of the Brokerage Agreement and the
consummation of the transactions contemplated thereby and this
Mortgage and Agreement, and shall continue in full force and
effect until the Obligations shall have been paid in full.
10.2. Further Assurances. Mortgagor, upon the request of
------------------
Mortgagee, will execute, acknowledge and deliver such further
instruments (including, without limitation, a declaration of no
set-off and an estoppel certificate) and do such further acts as
may be necessary, desirable or proper to carry out more effec-
tively the purposes of any Security Document and/or the Brokerage
Agreement and to subject to the liens thereof any property
intended by the terms thereof, to be covered thereby and any
renewals, additions, substitutions, replacements or betterments
thereto.
10.3. Recording and Filing. Mortgagor, at its expense, will
--------------------
cause any Security Document and all supplements thereto at all
times to be recorded and filed and re-recorded and re-filed in
such manner and in such places as Mortgagee shall reasonably
request, and will pay all such recording, filing, re-recording
and re-filing taxes, fees and other charges.
10.4. No Representations by Mortgagee. By accepting or
---------------------------------
approving anything required to be observed, performed or ful-
filled, or to be given to Mortgagee, pursuant to any Security
Document and/or the Brokerage Agreement, including (but not
16
<PAGE>
limited to) any officer's certificate, balance sheet, statement
of profit and loss or other financial statement, survey,
appraisal or insurance policy, Mortgagee shall not be deemed to
have warranted or represented the sufficiency, legality, effec-
tiveness or legal effect of the same, or of any term, provision
or condition thereof, and such acceptance or approval thereof
shall not be or constitute any warranty or representation with
respect thereto by Mortgagee.
10.5. Notice. All notices, demands, requests and other
------
communications required under any Security Document, the Loan
Agreement and/or the Note shall be in writing and shall be deemed
to have been properly given when mailed if sent by U.S., first
class certified or registered mail, proper postage prepaid,
addressed to the party for whom it is intended at its address as
follows:
To Mortgagor: BAF Enterprises, Inc.
1 Independence Plaza
Suite 70
Birmingham, Alabama 35209
To Mortgagee: Outlet Broadcasting, Inc.
23 Kenney Drive
Cranston, Rhode Island 02920
Any party may designate a change of address by written
notice to the other, given at least 10 days before such change of
address is to become effective. Notwithstanding the foregoing
routine mailings may be mailed by first class United States mail
proper postage prepaid.
10.6. Covenants Running with the Land. All covenants con-
--------------------------------
tained in any Security Document shall run with the Mortgaged
Property.
10.7. Successors and Assigns. All of the terms of any
-----------------------
Security Document shall apply to and be binding upon, and inure
to the benefit of, the successors and assigns of Mortgagor and
Mortgagee, respectively, and all persons claiming under or
through them.
10.8. Severability. In case any one or more of the pro-
------------
visions of this Mortgage and Agreement shall be invalid, illegal
or unenforceable in any respect, the validity of the remaining
provisions shall be in no way affected, prejudiced or disturbed
thereby.
10.9. Tax on Indebtedness or Mortgage. In the event of the
-------------------------------
passage, after the date of this Mortgage and Agreement, of any
law, or if any court of competent jurisdiction renders a final
17
<PAGE>
decision, deducting from the value of land for the purposes of
taxation, any lien thereon, or imposing upon Mortgagee the obli-
gation to pay the whole, or any part, of the taxes or assessments
or charges or liens herein required to be paid by Mortgagor, or
changing in any way the laws relating to the taxation of mort-
gages or debts so as to affect this Mortgage and Agreement or the
Obligations, the entire unpaid balance of the Obligations shall,
at the option of Mortgagee, after thirty (30) days' written
notice to Mortgagor, become due and payable; provided, however,
that if, in the opinion of Mortgagee's counsel, it shall be
lawful for Mortgagor to pay such taxes, assessments, or charges,
or to reimburse Mortgagee therefor, then there shall be no such
acceleration of the time for payment of the unpaid balance of the
Obligations if a mutually satisfactory agreement for reimburse-
ment, in writing, is executed by Mortgagor and delivered to Mort-
gagee within the aforesaid period.
10.10. Remedies Cumulative and Concurrent. The rights and
-----------------------------------
remedies of Mortgagee as provided in the Brokerage Agreement and
in each Security Document shall be cumulative and concurrent and
may be pursued separately, successively or together against
Mortgagor or against other obligors or against the Mortgaged
Property, or any one or more of them at the sole discretion of
Mortgagee, and may be exercised as often as occasion therefor
shall arise. The failure to exercise any such right or remedy
shall in no event be construed as a waiver or release thereof.
10.11. THIS MORTGAGE IS UPON THE STATUTORY CONDITION FOR ANY
BREACH OF WHICH THE MORTGAGEE SHALL HAVE THE STATUTORY POWER OF
SALE.
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage and
Agreement to be executed (in one or more counterparts) as a
sealed instrument and Mortgagee has caused this Mortgage and
Agreement to be signed on its behalf as secured party, both as of
the _____ day of May, 1995.
BAF ENTERPRISES, INC.
By:
Title:
STATE OF ___________
COUNTY OF __________
In _________ on the ___ day of May, 1995, before me
personally appeared __________________ to me known and known by
me to be the ___________ of BAF Enterprises, Inc. and said
18
<PAGE>
individual acknowledged this instrument as so executed, to be
said individual's free act and deed in said capacity and the free
act and deed of said BAF Enterprises, Inc.
_______________________________
Notary Public
My Commission Expires:
19
<PAGE>
STOCK PLEDGE AGREEMENT
----------------------
1. To induce Outlet Broadcasting, Inc. (the "Secured
Party"), which term shall include its successors and assigns and
the holder from time to time of this Stock Pledge Agreement (the
"Agreement"), to enter into a Time Brokerage Agreement, dated
this date, with BAF Enterprises, Inc. an Alabama corporation
("BAF"), Anthony J. Fant (the "Guarantor") has delivered a
Guaranty, dated this date, to the Secured Party (the "Guaranty").
In consideration thereof, the Guarantor does hereby grant a
security interest in, and pledge, assign, transfer and deliver to
the Secured Party, and to its successors and assigns, as general
collateral security for the payment and performance of
Guarantor's obligations and liabilities under the Guaranty, and
for any and all indebtedness, obligations or liabilities of every
kind and nature of the Guarantor to the Secured Party with
respect to the Guaranty, or otherwise, or in any other manner
whatsoever or any extension or renewal thereof, (all of the
foregoing hereinafter being collectively referred to as the
"Obligations"), the stock certificates attached hereto as Exhibit
-------
A and incorporated herein by reference, which Exhibit A has
- - ---------
attached to it a stock power for each stock certificate, duly
signed by the guarantor as transferor (all of the aforesaid stock
certificates and powers being hereinafter collectively referred
to as the "Collateral").
2. The Guarantor warrants and represents to the Secured
Party that (i) he is the lawful owner of the Collateral free and
clear of all liens and encumbrances or other interests of third
parties, (ii) he has the full power and lawful right to pledge
the Collateral to the Secured Party, (iii) the Collateral is
registered in his name on the stock transfer books and records of
BAF (the "Corporation"), (iv) he will warrant and defend the
title to the Collateral against the claims and demands of any
person, firm, corporation, trust, partnership or other entity,
(v) the Collateral constitutes 100% of the presently issued and
outstanding shares of the Corporation, and (vi) there are no
restrictions on the transferability of the Collateral to the
Secured Party or with respect to the foreclosure and transfer
thereof by the Secured Party or, if there are any such
restrictions, any and all restrictions on the transferability
have been duly waived with respect to this assignment, transfer,
pledge, and the grant of a security interest to the Secured Party
and with respect to the foreclosure and transfer thereof by the
Secured Party.
<PAGE>
3. Prior to any default in the payment or performance of
the Obligations, the Guarantor shall have all rights, powers,
privileges and preferences pertaining to the Collateral subject
to the terms of this Agreement. Upon any default in the payment
or performance of the Obligations or in any of the terms of this
Agreement, the Secured Party shall have the right, at its option,
to exercise all such rights, powers, privileges and preferences
pertaining to the Collateral and to cause the Collateral to be
registered in the Secured Party's name or in the name of its
nominee. To effectuate the provisions hereof, the Guarantor
hereby irrevocably appoints and constitutes the Secured Party as
his true and lawful attorney with full power of substitution to
complete and fill in any blank endorsements, to file the same and
to take such further action as the Secured Party may deem
necessary to exercise, as a stockholder, all of his right, title
and position in the Corporation. The aforesaid power of attorney
shall be deemed irrevocable and coupled with an interest. The
Guarantor further agrees that any transfer of the Collateral
under the provisions of this paragraph shall not be deemed a sale
or disposition under the provisions of Article 9 of the Uniform
Commercial Code, nor an acceptance of such Collateral in
satisfaction of the Obligations or any portion thereof.
4. Upon any such default, the Secured Party shall further
have all the rights and remedies of a secured party afforded by
the Uniform Commercial Code or afforded by other applicable law.
Requirement of reasonable notice with respect to any sale or
disposition shall be met if such notice is mailed, postage
prepaid, to the Guarantor at the address set forth in the
Guaranty at least five (5) days before the time of the sale or
other disposition. Expenses of retaking, holding, preparing for
sale, selling, or the like shall include the Secured Party's
reasonable attorneys' fees and other costs and legal expenses.
5. Until such time as the Obligations have been paid or
performed in full, the Guarantor shall not suffer or cause or
permit any other or further shares of the Corporation to be
issued unless such shares are pledged with the Secured Party as
additional Collateral for the Obligations, nor shall the
Guarantor encumber the Collateral, or any part thereof, with any
lien, security interest, or encumbrance junior to the interest
granted to the Secured Party hereby, nor shall the Guarantor
permit the Corporation to be dissolved.
6. The Guarantor agrees that upon any assignment or
transfer of the Agreement, the Secured Party may deliver to the
assignee or transferee the Collateral, which assignee or
transferee shall thereupon become vested with all powers and
rights given to the Secured Party in respect thereto and the
Secured Party shall be thereafter forever relieved and fully
discharged from any liability or responsibility in connection
-2-
<PAGE>
therewith. In no event shall the Secured Party be liable with
respect to the Collateral, except for the safekeeping thereof.
7. All of the agreements, obligations, undertakings,
representations and warranties herein made by the Guarantor shall
inure to the benefit of the Secured Party, its successors and
assigns. The Guarantor further agrees to execute such other
instruments as the Secured Party may deem necessary or desirable
to effectuate the purposes of this Agreement, including but not
limited to UCC financing statements.
8. This Agreement has been executed and delivered as an
Ohio agreement and shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
9. The Guarantor irrevocably
(i) agrees that any suit, action, or other legal
proceeding arising out of this Agreement may be
brought in the courts of record of the State of
Ohio or the courts of the United States located
in the Commonwealth of Massachusetts;
(ii) consents to the jurisdiction of such court in
any such suit, action or proceeding; and
(iii) waives any objection which it may have to the
laying of venue of such suit, action or
proceeding in any of such courts and waives any
right to a trial by jury in any of such courts.
10. In case any one or more the provisions contained
herein should be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
11. Notwithstanding anything to the contrary contained in
this Agreement (including but not limited to paragraph 3, above):
(i) the Secured Party will not take action pursuant
to this Agreement which would constitute or
result in any assignment of license or change
of control of BAF, if such assignment of
license or change of control would require
(under then-existent law) prior approval of the
Federal Communications Commission ("FCC")
without first obtaining such prior approval.
After a default has occurred and is continuing,
the Debtor agrees to take any and all actions
that the Secured Party may reasonably request
-3-
<PAGE>
in order to obtain any FCC approvals which are
necessary or appropriate to enable the Secured
Party to exercise and fully enjoy all rights
and benefits granted to the Secured Party by
this Agreement, including specifically, without
limitation, the use of BAF's and Guarantor's
reasonable efforts, at BAF's and Guarantor's
cost and expense, to assist the Secured Party
in obtaining any prior approvals from FCC as
are necessary for performance of any action or
transaction contemplated by this Agreement.
Specifically, and without limitation, BAF and
Guarantor will, after a default has occurred
and is continuing, and upon the Secured Party's
request, prepare, sign and file with the FCC
all relevant portions of any application for
assignment of license or transfer of control as
may be necessary or appropriate under FCC rules
and regulations.
(ii) Voting rights shall remain with the Guarantor,
even in the event of default by Guarantor. In
the event of default, there shall be either a
private or public sale of the Collateral. No
sale of Collateral will become effective unless
and until the prior consent thereto of the FCC
has been obtained if such consent will then be
required by the Communications Act of 1934, as
amended, (or any successor statute) and/or the
Rules, Regulations and/or policies of the FCC.
Executed as a sealed instrument as of the ______ day of
December, 1994.
WITNESS:
________________________ _________________________
Anthony J. Fant
Paragraph 11, acknowledged and agreed:
BAF Enterprises, Inc.
By_______________________
Title:___________________
-4-
<PAGE>
GUARANTY
THIS GUARANTY, dated as of the 14th day of December, 1994, is
by Anthony J. Fant, of Birmingham, Alabama, (the "Guarantor") in
favor of Outlet Broadcasting, Inc. ("Outlet").
WHEREAS, BAF Broadcasting, Inc. an Alabama corporation
("BAF") has a contract to purchase a construction permit for
WFDG(TV) New Bedford, Massachusetts and has entered in a Time
Brokerage Agreement, dated this date, as hereafter amended, with
Outlet (the "Agreement");
WHEREAS, the Guarantor owns all of the shares of the
outstanding capital stock of BAF and the execution and delivery
by the Guarantor of this Guaranty is a condition precedent to,
and an inducement for, Outlet's execution and delivery of the
Agreement; and
WHEREAS, the Guarantor expects to derive substantial benefits
from BAF as a result of the Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Guarantor hereby represents
and agrees as follows:
1. GUARANTY OF PERFORMANCE. Effective upon the acquisition
by BAF of the construction permit for the said WFDG(TV), the
Guarantor hereby guarantees to Outlet the full and punctual
performance when due (including but not limited to payment) of
all liabilities, agreements and other obligations of BAF to
Outlet, whether direct or indirect, absolute or contingent, due
or to become due, secured or unsecured, now existing or hereafter
arising or acquired, relating to or arising out of or under the
Agreement (collectively, the "Obligations"). This Guaranty is an
irrevocable, absolute, unconditional and continuing guaranty of
the full and punctual performance of the Obligations and is in no
way conditioned upon any requirement that Outlet first attempt to
resort to any other means of obtaining payment or performance.
In the event that an Event of Default (as such term is defined in
Section 8, below) shall have occurred, the obligations of the
- ----------
Guarantor hereunder shall become immediately due, without demand
or notice of any nature, all of which are expressly waived by the
Guarantor. Performance by the Guarantor hereunder may be
required by Outlet on any number of occasions.
2. GUARANTOR AGREEMENT TO PAY. The Guarantor further agrees
to pay to Outlet, on demand, all costs and expenses (including
<PAGE>
court costs and legal fees and expenses) incurred or expended by
Outlet in connection with this Guaranty and the enforcement
thereof, together with interest on amounts recoverable under this
Guaranty from the time of notice by Outlet to Guarantor that such
amounts are due until payment, at the rate per annum equal to
12%, provided that if such interest exceeds the maximum amount
permitted to be paid under applicable law, then such interest
shall be reduced to such maximum permitted amount.
3. LIMITED GUARANTY. The liability of the Guarantor
hereunder shall be limited in recourse to Guarantor's rights,
title and interests in the capital stock of BAF.
4. WAIVERS BY GUARANTOR; HOLDER'S FREEDOM TO ACT. The
Guarantor agrees that the Obligations will be paid and performed
strictly in accordance with their respective terms regardless of
any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of Outlet
with respect thereto. The Guarantor waives presentment, demand,
protest, notice of acceptance, notice of Obligations incurred and
all other notices of any kind, all defenses which may be
available by virtue of any valuation, stay, moratorium law or
other similar law now or hereafter in effect, any right to
require the marshalling of assets of BAF, and all suretyship
defenses generally.
5. UNENFORCEABILITY OF OBLIGATIONS. If for any reason BAF
ceases to have any legal existence or has no legal obligation to
discharge any of the Obligations, or if any of the Obligations
have become irrecoverable from BAF by operation of law or for any
other reason, this Guaranty shall nevertheless be binding on the
Guarantor to the same extent as if the Guarantor at all times had
been the principal obligor on all such Obligations.
6. SUBROGATION AND SUBORDINATION. Until the performance in
full of all Obligations and any and all obligations of BAF to
Outlet (and the expiration of any applicable preference periods
under the Federal Bankruptcy Code without there having occurred
any reorganization), the Guarantor shall not exercise any rights
against BAF arising as a result of any payment by the Guarantor
hereunder, by way of subrogation or otherwise, and will not prove
any claim in competition with Outlet or its affiliates in respect
of any payment hereunder in bankruptcy or insolvency proceedings
of any nature; the Guarantor will not claim any set-off or
counterclaim against BAF in respect of any liability of the
Guarantor to BAF; and the Guarantor waives any benefit of and any
rights to participate in any collateral which may be held by
Outlet or any such affiliate. The payment of any amounts due
with respect to any indebtedness of BAF now or hereafter held by
-2-
<PAGE>
the Guarantor is hereby subordinated to the prior payment in full
of the Obligations. The Guarantor agrees that after the
occurrence of any default by BAF, including without limitation an
Event of Default (as such term is defined in Section 8, below),
---------
in the payment or performance of the Obligations, the Guarantor
will not demand, sue for or otherwise attempt to collect any such
indebtedness of BAF to the Guarantor until the Obligations shall
have been paid in full. If, notwithstanding the foregoing
sentence, the Guarantor shall collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by the Guarantor as trustee for
Outlet, and be paid over to Outlet, on account of the Obligations
without affecting in any manner the liability of the Guarantor
under the other provisions of this Guaranty. In the event the
Guarantor is or becomes an "insider" (as defined from time to
time in Section 101 of the Federal Bankruptcy Code) with respect
to BAF, any and all rights of the Guarantor, (a) of
reimbursement, indemnification and exoneration against BAF, (b)
of contribution against BAF (if the Guaranty is secured) and/or
any other guarantor and (c) of subrogation to the rights of
Outlet or any similar rights under the Obligations, whether such
rights arise under an express or implied contract or operation of
law, are hereby expressly waived, it being the intention of the
parties hereto that the Guarantor shall not be deemed a
"creditor" (as defined in Section 101 of the Federal Bankruptcy
Code) of BAF by reason of the existence of this Guaranty, this
waiver being given to induce Outlet to enter into the Agreement.
7. FURTHER ASSURANCES. The Guarantor also agrees to do all
such things and execute all such documents, including financing
statements, as Outlet may consider necessary or desirable to give
full effect to this Guaranty and to perfect and preserve the
rights and powers of Outlet hereunder.
8. DEFAULTS. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under the
provisions of this Guaranty (individually, an "Event of Default"
and collectively, the "Events of Default"):
(a) The failure of the Guarantor to pay or perform any
of the Obligations as and when due in accordance with the
provisions of this Guaranty; or
(b) Any representation or warranty made in this
Guaranty or in any other document furnished in connection with
this guaranty, shall prove to have been false or misleading in
any material respect; or
-3-
<PAGE>
(c) The failure of the Guarantor to perform, observe,
or comply with any covenant, condition or agreement contained in
this Guaranty, which default shall remain unremedied for thirty
(30) days after written notice thereof to the Guarantor by
Outlet; or
(d) A default shall occur under any of the Obligations,
and such default is not cured within any applicable grace period
provided therein; or
(e) The Guarantor or BAF shall (i) be the subject of,
or apply for or consent to, the appointment of a receiver,
trustee or liquidator of itself or any property, (ii) admit in
writing the inability to pay debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent, (v) file, consent,
acquiesce, take action in or be the subject of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation proceeding involving it or any property, or (vii) be
the subject of, or by any act indicate its consent to, approval
of or acquiescence in, any order, judgment or decree by any court
of competent jurisdiction or any governmental authority enjoining
or otherwise prohibiting the operation of a material portion of
BAF's business or the use or disposition of a material portion of
the Guarantor's or BAF's assets; or
(f) The entry of a final judgment for the payment of
money or otherwise that would have a material adverse affect on
the financial condition of the Guarantor or BAF; or
(g) If BAF should merge, consolidate, combine,
liquidate, dissolve or otherwise terminate its existence; or
(h) If there shall be a transfer of all or
substantially all of the Guarantor's or BAF's assets, without
Outlet's prior written consent; or
(i) The attachment or garnishment of all or
substantially all of the property, goods or credits of the
Guarantor or BAF which remains unpaid, unstayed, undismissed or
unbonded for a period of thirty (30) days; or if any foreclosure
is instituted (by judicial proceedings, by publication of notice
pursuant to a power of sale or otherwise) against a material
portion of the Guarantor's or BAF's property under any mortgage,
deed of trust or security agreement granted and is not dismissed
or terminated for a period of fifteen (15) days; or
(j) If the Guarantor fails to promptly notify Outlet,
in writing, within twenty (20) days of the occurrence of any
-4-
<PAGE>
event or condition of which the Guarantor is aware which
constitutes an Event of Default, or which, with the giving of
notice or passage of time or both, would constitute an Event of
Default, and together with such notice, furnish a written
statement to Outlet which shall set forth the details of any
action the Guarantor proposed to take with respect thereto; or
(k) Death of the Guarantor.
11. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding
upon the Guarantor, his heirs, executors, administrators,
successors and assigns, and shall inure to the benefit of and be
enforceable by Outlet, its successors, transferees and assigns.
Without limiting the generality of the foregoing sentence, Outlet
may assign or otherwise transfer any agreement held by them
evidencing, security or otherwise executed in connection with the
Obligations, to any other person or entity permitted under the
Agreement.
12. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by the
Guarantor therefrom shall be effective, unless the same shall be
in writing and signed by Outlet. No failure on the part of
Outlet to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
13. NOTICES. All notices and other communications called
for hereunder shall be made in writing and, shall be deemed to
have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telefascimile
notice, when transmitted, answer back received, addressed as
follows: (a) if to the Guarantor, at the address set forth
below, (b) if to Outlet, at the address set forth below or (c) at
such address as either party may designate in writing.
Outlet Broadcasting, Inc.
23 Kenney Drive
Cranston, RI 02920-4489
Attn: Mr. James G. Babb, President
Telefascimile: (401) 455-9216
Anthony J. Fant
1 Independence Plaza
Suite 70
Birmingham, Alabama 35209
Telefascimile:
-5-
<PAGE>
14. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty
is intended to take effect as a sealed instrument and shall be
enforced, governed by and construed in accordance with, the laws
of the Commonwealth of Massachusetts, without application of its
conflicts of law rules. The Guarantor agrees that any suit for
the enforcement of this Guaranty may be brought in the courts of
Massachusetts or any federal court sitting therein, and consents
to the non-exclusive jurisdiction of such court and to service or
process in any such suit being made upon the Guarantor by mail at
the address specified in Section 13 hereof. The Guarantor hereby
----------
waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit was
brought in an inconvenient court. THE GUARANTOR HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF ANY DISPUTE BETWEEN
THE PARTIES WITH RESPECT TO THIS GUARANTY.
15. SECURITY. This Guaranty is secured by a Stock Pledge
Agreement, dated this date, by Guarantor to Outlet.
16. MISCELLANEOUS. This Guaranty constitutes the entire
agreement of the Guarantor with respect to the matters set forth
herein. The rights and remedies herein provided are cumulative
and not exclusive of any remedies provided by law or any other
agreement, and this Guaranty shall be in addition to any other
guaranty of the Obligations. The invalidity or unenforceability
of any one or more sections of this Guaranty shall not affect the
validity or enforceability of its remaining provisions. Captions
are for the ease of reference only and shall not affect the
meaning of the relevant provisions. The meanings of all defined
terms used in this Guaranty shall be equally applicable to the
singular and plural forms of the terms defined.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be executed and delivered as of the date appearing on page one.
______________________________
Anthony J. Fant
-6-
<PAGE>
LEASE AGREEMENT
Lease Agreement made this _____ day of ____________, 19___
between the Lessor and Lessee set forth at Schedule A, attached
----------
hereto.
1. Lease Agreement. Lessor hereby leases to Lessee, and
Lessee hereby rents from Lessor, all the machinery, equipment and
other personal property ("Equipment") described in the Equipment
Lease Schedule(s) which is attached hereto ("Schedules"), upon
the terms and conditions set forth in this Lease, as supplemented
by the terms and conditions set forth in the appropriate Schedule
identifying such items of Equipment. All of the terms and
conditions of this Lease shall govern the rights and obligations
of Lessor and Lessee, except as specifically modified in writing.
Whenever reference is made herein to "this Lease", it shall be
deemed to include each of the various Schedules identifying all
items of Equipment, all of which constitute one undivided lease
of the Equipment and the terms and conditions of which are
incorporated herein by reference.
2. Term. The obligations under this Lease shall commence
upon the written acceptance thereof by Lessor and shall end upon
full performance and observance of each and every term, condition
and covenant set forth in this Lease, each Schedule thereto and
any extensions thereof. The rental term of the Equipment listed
in each Schedule shall commence on the date that the first rental
payment is due and shall terminate on the date set forth at
Schedule A.
- ----------
3. Rental Payments. The rent for the Equipment described
in each Schedule shall be the amount stated in such Schedule and
shall be due and payable on the dates set forth therein. Such
rent shall be payable at the office of Lessor or its assigns (or
at such other place as Lessor may from time to time designate in
writing). The receipt of any check or other item on account of
any rental payment shall not be considered as payment thereof
until such check or other item is honored when presented for
payment.
4. Delivery and Installation. Lessee has selected each
item of Equipment designated in the appropriate Schedule. If
Equipment is to be ordered by Lessor, in reliance upon Lessee's
selection, such Equipment will then be ordered by Lessor from
such supplier or Lessor will accept an assignment of any existing
purchase order therefor. Lessor shall have no liability for any
delivery or failure by the supplier to fill the purchase order or
meet the conditions thereof. Except where Lessor has
specifically agreed in a particular schedule to assume the
-1-
<PAGE>
obligation with respect thereto, Lessee, at its expense, shall
pay all transportation, packing, taxes, duties, installation,
testing and other charges in connection with the delivery,
installation and use of the Equipment. In the event that the cost
of any item of Equipment described in a particular Schedule is
higher or lower than the price set forth in Lessor's purchase
order therefor, then the monthly rental shall be changed
accordingly to fully reflect any such adjustment.
5. Warranties. LESSOR, NOT BEING THE MANUFACTURER OF THE
EQUIPMENT NOR THE MANUFACTURER'S AGENT, MAKES NO EXPRESS OR
IMPLIED WARRANTY OF ANY KIND WHATSOEVER WITH RESPECT TO THE
EQUIPMENT, INCLUDING BUT NOT LIMITED TO: THE MERCHANTABILITY OF
THE EQUIPMENT OR ITS FITNESS FOR ANY PARTICULAR PURPOSE; THE
DESIGN OR CONDITION OF THE EQUIPMENT; THE QUALITY OR CAPACITY OF
THE EQUIPMENT; THE WORKMANSHIP IN THE EQUIPMENT; COMPLIANCE OF
THE EQUIPMENT WITH THE REQUIREMENTS OF ANY LAW, RULE,
SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT
INFRINGEMENT; OR LATENT DEFECTS. Lessee will be subrogated to
Lessor's claims, if any, against the manufacturer or supplier of
the Equipment for breach of any warranty or representation and,
upon written request from Lessee, Lessor shall take all
reasonable action requested by Lessee to enforce any such
warranty, express or implied, issued on or applicable to any of
the Equipment which is enforceable by Lessor in its own name;
provided, however, that (a) Lessee is not in default under this
- -------- -------
Lease and (b) Lessor shall not be obligated to resort to
litigation to enforce any such warranty unless Lessee shall pay
all expenses in connection therewith. Notwithstanding the
foregoing, Lessee's obligations to pay the rentals or otherwise
under this Lease shall be and are absolute and unconditional. All
proceeds of any such warranty recovery from the manufacturer or
supplier of the Equipment shall first be used to repair the
affected Equipment.
6. Title to and Location of Equipment. Title to each item
of Equipment leased hereunder shall remain with the Lessor at all
times and the Lessee shall have no right, title or interest
therein, except as expressly set forth in this Lease. Lessee, at
is expense, shall protect and defend Lessor's title to the
Equipment and shall keep the Equipment free and clear from any
and all claims, liens, encumbrances and legal processes of
Lessee's creditors and other persons. Lessor assumes no
liability and makes no representation as to the treatment by
Lessee of this Lease, the Equipment or the rental payments for
financial statement or tax purposes.
All items of Equipment shall at all times be and remain
personal property notwithstanding that any such Equipment may now
or hereafter be affixed to realty. The Equipment shall be
delivered to the location specified in the Schedule with respect
-2-
<PAGE>
thereto and shall not thereafter be removed from such location
without the written consent of Lessor. The Lessor shall be
permitted to display notice of its ownership of the Equipment by
affixing to each item of Equipment an identifying stencil or
plate or any other indicia of ownership and Lessee shall not
alter, deface, cover or remove such ownership identification.
7. Use of Equipment, Inspection and Reports. Lessee may
possess and use the Equipment in accordance with this Lease,
provided that any such use is in conformity with all applicable
laws, any insurance policies and any warranties of the
manufacturer with respect to the Equipment. Lessor shall have
the right to inspect the Equipment at the premises of the Lessee
or wherever the Equipment may be located. Lessee shall promptly
notify Lessor of all details arising out of any change in
location of the Equipment, any alleged encumbrances thereon or
any accident allegedly resulting from the use or operation
thereof.
8. Further Assurances. Lessee shall execute and deliver to
Lessor, upon Lessor's request, such instruments and assurances as
Lessor deems necessary for the confirmation or perfection of this
Lease and Lessor's rights hereunder. In furtherance thereof,
Lessor may file or record this Lease or a financing statement
with respect thereto so as to give notice to any interested
parties. Any such filing or recording shall not be deemed
evidence of any intent to create a security interest under the
Uniform Commercial Code.
9. Risk of Loss. All risk of loss, damage, theft or
destruction to each item of Equipment shall be borne by the
Lessee. No such loss, damage, theft or destruction of the
Equipment, in whole or in part, shall impair the obligations of
Lessee under this Lease, all of which shall continue in full
force and effect; and Lessee, at Lessor's option, shall either
(a) place the affected Equipment in good repair, condition and
working order, or (b) replace the same with like Equipment in
good repair, condition and working order, or (c) pay the Lessor
an amount equal to all unpaid rent due and to become due under
this Lease with respect to the affected Equipment, less the net
amount of the recovery, if any, actually received by Lessor from
insurance or otherwise for such loss, damage. theft or
destruction. After compliance with the foregoing to Lessor's
satisfaction, and provided Lessee is not in default under this
Lease, Lessee shall be subrogated to Lessor's rights with respect
to any insurance policies or claims for reimbursement by others
with respect to such loss, damage, theft or destruction.
10. Maintenance and Repairs. Lessee shall, at its expense,
maintain each item of Equipment, and all additions, attachments
and accessories with respect thereto, in good mechanical
-3-
<PAGE>
condition and running order, but shall not be responsible for
normal wear and tear or depreciation resulting from the
authorized use thereof. Without the prior written consent of
Lessor, Lessee shall make no repair, alteration or attachment
with respect to any item of Equipment which interferes with the
normal and satisfactory operation or maintenance thereof, or
creates a safety hazard, or which might result in the creation of
a mechanic's or materialman's lien with respect thereto. All
additions, attachments, accessories and repairs at any time made
or placed upon the Equipment shall become part of the Equipment
and shall be the property of Lessor.
11. Insurance. Lessee will, at its own expense, insure the
Equipment at all times against all hazards requested by Lessor,
including but not limited to fire, theft and extended coverage
insurance, and such policies shall be payable to Lessor as its
interest may appear. Such policies of insurance shall be
reasonably satisfactory to Lessor as to form, amount and insurer,
and shall provide for at least ten (10) days' written notice of
cancellation to Lessor. Lessee shall furnish certificates,
policies or endorsements to Lessor as proof of such insurance.
Lessor may act as attorney for Lessee in making, adjusting or
settling any claims under any insurance policies insuring the
Equipment. Lessee assigns to Lessor all of its right, title and
interest to any insurance policies insuring the Equipment,
including but not limited to all rights to receive the proceeds
of insurance not in excess of the unpaid obligations under this
Lease, and directs any insurer to pay all such proceeds directly
to Lessor and authorizes Lessor to endorse Lessee's name on any
draft for such proceeds.
Lessee shall, at its expense, carry public liability
insurance with respect to the Equipment and the use thereof, in
such amounts and with such insurers as are reasonably
satisfactory to Lessor, and such insurance policies shall also
name Lessor as an insured thereunder. The proceeds of any public
liability or property damage insurance shall be payable first to
Lessor to the extent of its liability, if any, and the balance to
Lessee. The proceeds of any fire, theft and extended coverage
insurance with respect to the Equipment shall be payable solely
to Lessor and shall be applied by Lessor toward the payment of
Lessee's obligations hereunder and any balance of the proceeds
shall be the property of Lessor, provided that at Lessor's option
such proceeds may be used for the repair or replacement of the
affected Equipment.
12. Taxes. Lessee shall keep the Equipment free and clear
of all levies, liens and encumbrances and, as additional rent
during the term of this Lease, shall pay all assessments, license
fees, taxes (including sales, use, excise, personal property, ad
valorem, stamp, documentary and other taxes) and all other
-4-
<PAGE>
governmental charges, fees, fines or penalties whatsoever,
whether payable by Lessor or Lessee, on or relating to the
Equipment or the use, registration, rental, shipment,
transportation, delivery, ownership or operation thereof, and on
or relating to this Lease and any Schedules and Lessee shall file
all returns required therefor and furnish copies thereof to
Lessor at its request; provided, however, that the foregoing
-------- -------
shall not include any federal or state income or franchise taxes
of Lessor.
13. Lessor's Performance of Lessee's Obligations. If Lessee
shall fail to duly and promptly perform any of its obligations
under this Lease with respect to the Equipment, Lessor may (at
its option) perform any act or make any payment which Lessor
deems necessary for the maintenance and preservation of the
Equipment and Lessor's title thereto, including payments for
satisfaction of liens, repairs, taxes, levies and insurance. All
sums so paid or incurred by Lessor, together with interest as
provided below, and any reasonable legal fees incurred by Lessor
in connection therewith shall be additional rent under this Lease
and payable by Lessee to Lessor on demand. The performance of
any act or payment by Lessor as aforesaid shall not be deemed a
waiver or release of any obligation or default on the part of
Lessee.
14. Late Charges. Should Lessee fail to duly pay any part
of any rental payment or other sum to be paid to Lessor under
this Lease, then Lessee shall pay interest on such delinquent
payment from the due date until paid at the lower of 1% per month
or the highest legal contract rate of interest.
15. Indemnification. Lessee assumes liability for, and
hereby agrees to indemnify, protect and keep harmless Lessor, its
agents, employees, officers, directors, successors and assigns
from and against any and all liabilities, obligations, losses
damages, injuries, claims, demands, penalties, actions, costs and
expenses, including but not limited to reasonable attorney's
fees, of whatsoever kind and nature, arising out of the use,
condition (including but not limited to latent and other defects
and whether or not discoverable by Lessee or Lessor), operation,
ownership, selection, delivery, leasing or return of any item of
Equipment, regardless of where, how and by whom operated, or any
failure on the part of Lessee to perform or comply with any
conditions of this Lease. The indemnities and assumptions of
liabilities and obligations herein provided for shall continue in
full force and effect notwithstanding the expiration or other
termination of this Lease. Lessee is an independent contractor
and nothing contained in this Lease shall authorize Lessee or any
other person to operate any item of Equipment so as to incur or
impose any liability or obligation for or on behalf of Lessor.
-5-
<PAGE>
16. No Offset. This Lease is a net lease and all rental
payments shall be paid by Lessee irrespective of any set-off,
counterclaim, recoupment, defense or other right which Lessee may
have against Lessor, the supplier of the Equipment or any other
party.
17. Purchase Option. Lessee shall have the option to
purchase or otherwise acquire title or ownership for any item of
Equipment at any time during the term of this Lease for a price
equal to one hundred percent (100%) of the cost of such
Equipment, including any construction or installation costs
thereof paid for by Lessor, without any deduction or offset for
any reason, including reasonable wear and tear, reduced however
by any portion of the Capital Expenditures as that term is
defined in Exhibit B to that certain Time Brokerage Agreement
between Lessor and Lessee and dated December 14, 1994 recovered
by Lessor prior to the time such option is exercised by Lessee.
Upon the exercise of the option and the tender of the purchase
price by Lessee, Lessor shall deliver to Lessee full possession
of the Equipment free and clear of all liens and encumbrances and
shall cause to be discharged any security interest.
18. Renewal. There shall be no renewal of this Lease
without the written agreement of Lessor. If Lessor fails to
return any item of Equipment at the end of the original lease
term or any renewal thereof, then (without any waiver of Lessor's
rights) the Lease thereof shall automatically be renewed from
month to month with rent payable monthly at the monthly rate
applicable during the original term.
19. Advance Rentals and Security. Any advance rentals paid
by Lessee to Lessor shall be applied to rental payments coming
due under this Lease in the inverse order of maturity. Lessee's
obligations under this Lease are secured by any of its property
with respect to which Lessor may be granted a security interest
in any other agreement or document.
20. Assignment by Lessee. Without Lessor's prior written
consent, Lessee may not, by operation of law or otherwise, (a)
assign, transfer, pledge, hypothecate or otherwise dispose of
this Lease or any interest therein or (b) sublet or lend the
Equipment or permit same to be used by anyone other than Lessee
or Lessee's employees.
21. Assignment by Lessee. For the purpose of providing
funds for financing the purchase of the Equipment, or for any
other purpose, Lessee agrees (a) that Lessor may assign, sell or
encumber all or any other part of this Lease, the Equipment and
the rental payments hereunder and (b) in the event of any such
assignment of rental payments hereunder and written notice
thereof to Lessee, to unconditionally pay directly to any such
-6-
<PAGE>
assignee all rentals and other sums due or to become due under
this Lease. THE RIGHTS OF ANY SUCH ASSIGNEE SHALL NOT BE SUBJECT
TO ANY DEFENSE, COUNTERCLAIM OR SETOFF WHICH LESSEE MAY HAVE
AGAINST THE LESSOR. Notwithstanding the foregoing, any such
assignment (a) shall be subject to Lessee's right to possess and
use the Equipment so long as Lessee is not in default under this
Lease and (b) shall not release any of Lessor's obligations
hereunder or any claim which Lessee has against Lessor.
22. Return of Equipment. Upon payment in full of all rental
payments for any item of Equipment described in any Schedule,
Lessee shall at its expense deliver such items of Equipment to
Lessor's premises set forth at Schedule A or any place or places
-----------
within a radius of 100 miles of Lessor's premises, designated by
Lessor in writing, for such disposition as Lessor may determine.
In the event of default by Lessee under this Lease, Lessee shall
return all Equipment to Lessor in the same manner. All Equipment
so delivered by Lessee to Lessor shall be in the same condition
as when delivered to Lessor, reasonable wear and tear resulting
from authorized use thereof alone excepted.
23. Events of Default. Lessee shall be in default under
this Lease upon the happening of any of the following events or
conditions ("Events of Default"):
(a) Default by Lessee in payment of any installment or any
rent other indebtedness or obligation now or hereafter owed by
Lessee to Lessor under this Lease or otherwise and the
continuance of such default for ten (10) consecutive days; or (b)
default in the performance of any obligation, covenant or
liability contained in this Lease or any other agreement or
document with Lessor, and the continuance of such default for ten
(10) consecutive days after written notice thereof by Lessor to
Lessee; or (c) any warranty, representation or statement made or
furnished to Lessor by or on behalf of Lessee proves to have been
false in any material respect when made or furnished; or (d)
loss, theft, damage, destruction or the attempted sale or
encumbrance by Lessee of any of the Equipment, or the making of
any levy, seizure or attachment thereof or thereon; or (e)
dissolution, termination of existence, discontinuance of its
business, insolvency, business failure, or appointment of a
receiver of any part of the property of, or assignment for the
benefit or creditors by Lessee or the commencement of any
proceedings under any bankruptcy, reorganization or arrangement
laws by or against Lessee.
24. Remedies of Lessee. Upon the occurrence of any Event of
Default and at any time thereafter (subject to any applicable
grace provisions), Lessor may without any further notice exercise
one or more of the following remedies, as Lessor in its sole
discretion shall elect: (a) declare all unpaid rentals under this
-7-
<PAGE>
Lease to be immediately due and payable; (b) terminate this Lease
as to any or all items of Equipment; (c) take possession of the
Equipment wherever found, and for this purpose enter upon any
premises of Lessee and remove the Equipment, without any
liability for suit, action or other proceeding by the Lessee and
remove the same; (d) cause Lessee at its expense to promptly
return the Equipment to Lessor and in the condition set forth
above; (e) use, hold, sell, lease or otherwise dispose of the
Equipment or any item thereof on the premises of Lessee or any
other location without affecting the obligations of Lessee as
provided in this Lease; (f) sell or lease the Equipment or any
part thereof, at public auction or by private sale or lease at
such time or times and upon such terms as Lessor may determine,
free and clear of any rights of Lessee and, if notice thereof is
required by law, any notice in writing of any such sale or lease
by Lessor to Lessee not less than ten (10) days prior to the date
thereof shall constitute reasonable notice thereof to Lessee; (g)
proceed by appropriate action either by law or in equity to
enforce performance by Lessee of the applicable covenants of this
Lease or to recover damages for the breach thereof; or (h)
exercise any and all rights accruing to a Lessor under any
applicable law upon a default by a Lessee. In addition, Lessor
shall be entitled to recover immediately as liquidated damages,
and not as a penalty, a sum equal to the aggregate of the
following: (a) all unpaid rentals or other sums which are due and
payable for any items of Equipment up to the date of redelivery
to or repossession by Lessor; (b) any expenses paid or incurred
by Lessor in connection with the repossession, holding, repair
and subsequent sale, lease or other disposition of the Equipment,
including but not limited to attorney's fees and legal expenses;
(c) all unpaid rentals due and to become due under this Lease for
any item of Equipment which Lessee fails to return to Lessor as
provided above or converts or destroys, or which Lessor is unable
to repossess; and (d) an amount equal to the difference between
(i) all unpaid rentals for any item of Equipment returned to or
repossessed by Lessor from the date thereof to the end of the
respective rental period therefor and (ii) the present fair
market rental value of each such item or item of Equipment for
such unexpired rental period (the "Unexpired Rental Value");
provided, however, that the Unexpired Rental Value of each item
- -------- -------
of Equipment shall be deemed to be an amount equal to the
proceeds of any sale thereof by Lessor or lease thereof by Lessor
for a period substantially similar to the unexpired rental period
therefor. Should Lessor, however, estimate its actual damages to
exceed the foregoing, Lessor may, at its option, recover its
actual damages in lieu of or in addition thereto. Lessor shall
not be obligated to sell, lease or otherwise dispose of any item
of repossessed Equipment hereunder if it would impair the sale,
lease or other disposition of similar equipment in the ordinary
course of Lessor's business or which was previously repossessed
by Lessor from any party. None of the remedies under this Lease
-8-
<PAGE>
are intended to be exclusive, but each shall be cumulative and in
addition to any other remedy referred to herein or otherwise
available to Lessor in law or in equity. Any repossession or
subsequent sale or lease by Lessor of any item of Equipment shall
not bar an action for a deficiency as herein provided and the
bringing of an action or the entry of judgment against the Lessee
shall not bar the Lessor's right to repossess any or all items of
Equipment. LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND TO A
JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION Of THE
EQUIPMENT BY LESSOR IN THE EVENT Of A DEFAULT HEREUNDER BY
LESSEE.
25. Severability. Any provision of this Lease which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
and unenforceable, without invalidating the remaining provisions
hereof. To the extent permitted by applicable law, Lessee hereby
waives any provision of law which prohibits or renders
unenforceable any provisions hereof in any respect.
26. Notices. All notices, reports, and other documents
provided for herein shall be deemed to have been given or made
when mailed, postage prepaid, or sent by telefacsimile, addressed
to Lessor or Lessee at their respective addresses set forth above
at Schedule A or such other addresses as either of the parties
----------
hereto may designate in writing to the other from time to time
for such purpose.
27. Amendments and Waivers. This instrument and Schedule A
----------
and the Schedules attached hereto constitute the entire agreement
---------
between Lessor and Lessee with respect to the Equipment and the
subject matter of this Lease. No term or provision of this Lease
may be changed, waived, amended or terminated, except by a
written agreement signed by both Lessor and Lessee, except that
Lessor may insert the serial number of any item of Equipment on
the appropriate Schedule after delivery thereof. No express or
implied waiver by Lessor of any Event of Default hereunder shall
in any way be, or be construed to be, a waiver of any future or
subsequent Event of Default whether similar in kind or otherwise.
28. Construction. This Lease shall in all respects be
governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts. The titles of the sections of
this Lease are for convenience only and shall not define or limit
any of the terms or provisions hereof. Time is of the essence of
this Lease in each and all of its provisions.
29. Parties. The provisions of this Lease shall be binding
upon, and inure to the benefit of, the assigns, representatives
and successors of the Lessor and Lessee.
-9-
<PAGE>
LESSEE HEREBY ACKNOWLEDGES RECEIPT OF AN EXECUTED AND TRUE
COPY OF THIS LEASE AND THAT IT IS NON-CANCELABLE fOR THE ORIGINAL
RENTAL TERM.
IN WITNESS WHEREOF, the Lessor and Lessee have each caused
this Lease to be duly executed.
SEAL LESSEE
ATTEST OR WITNESS: BAF ENTERPRISES, INC.
(Name of Lessee)
__________________________ By:_______________________________
(Secretary, if Corporate Title:
Lessee, Otherwise Witness)
(Must be Signed by Authorized
Corporate Officer, Partner or
Proprietor)
LESSOR
Accepted this ____ day of March, 1994.
OUTLET BROADCASTING, INC.
By________________________________
Title:
-10-
<PAGE>
Schedule A
----------
1. Lessor: Outlet Broadcasting, Inc.
------
23 Kenney Drive
Cranston, RI 02920-4489
Attn: Mr. James G. Babb
Facsimile (401) 455-9216
2. Lessee: BAF ENTERPRISES, INC.
------
_________________________
_________________________
Attn: Mr. ______________
Facsimile: ______________
3. Termination of Rental: __________________, 19__.
4. Location for Return of Equipment:__________________________
___________________________________________________________.
-11-
<PAGE>
Equipment Lease Schedule
------------------------
Monthly Payment
No. Units Description Location Rental Date
- --------- ----------- -------- ------ ----
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 889
<SECURITIES> 0
<RECEIVABLES> 16,573
<ALLOWANCES> 450
<INVENTORY> 0
<CURRENT-ASSETS> 21,764
<PP&E> 29,476
<DEPRECIATION> 29,728
<TOTAL-ASSETS> 129,545
<CURRENT-LIABILITIES> 24,198
<BONDS> 70,000
10
0
<COMMON> 0
<OTHER-SE> 22,411
<TOTAL-LIABILITY-AND-EQUITY> 129,545
<SALES> 0
<TOTAL-REVENUES> 66,210
<CGS> 0
<TOTAL-COSTS> 46,443
<OTHER-EXPENSES> 1,118
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,505
<INCOME-PRETAX> 11,772
<INCOME-TAX> 3,600
<INCOME-CONTINUING> 8,172
<DISCONTINUED> 0
<EXTRAORDINARY> (4,733)
<CHANGES> 0
<NET-INCOME> 3,439
<EPS-PRIMARY> 3.44
<EPS-DILUTED> 3.44
</TABLE>
