SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-10342
BHC COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2104168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
767 Fifth Avenue, New York, New York 10153
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 421-0200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each Exchange
on which registered
Class A Common Stock
$0.01 par value American Stock Exchange
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, as of February 28, 1995, was
approximately $486,000,000.
As of February 28, 1995, there were 6,541,955 shares of the
registrant's Class A Common Stock and 18,000,000 shares of the
registrant's Class B Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The documents incorporated by reference into this Form 10-K
and the Parts hereof into which such documents are incorporated are
listed below:
Document Part
Those portions of the registrant's annual
report to stockholders for the fiscal year
ended December 31, 1994 (the "Annual Report")
that are specifically identified herein as
incorporated by reference into this Form
10-K. II
Those portions of the registrant's proxy
statement for the registrant's 1995 Annual
Meeting (the "Proxy Statement") that are
specifically identified herein as incorporated
by reference into this Form 10-K. III
<PAGE>
PART I
ITEM 1. BUSINESS.
General
BHC Communications, Inc. ("BHC"), the majority owned (73.1% at
February 28, 1995) television broadcasting subsidiary of Chris-Craft
Industries, Inc. ("Chris-Craft"), was organized in Delaware in 1977
under the name "BHC, Inc." and changed its name to BHC Communications,
Inc. on August 4, 1989. BHC's principal business is television
broadcasting, conducted through its wholly owned subsidiaries, Chris-
Craft Television, Inc. ("CCTV") and Pinelands, Inc. ("Pinelands"), and
its majority owned (56.1% at February 28, 1995) subsidiary, United
Television, Inc. ("UTV").
At February 28, 1995, BHC, solely through subsidiaries, had 948
full-time employees and 102 part-time employees.
Television Broadcasting
BHC operates six very high frequency ("VHF") television stations
and two ultra high frequency ("UHF") television stations, together
constituting Chris-Craft's Television Division. Commercial television
broadcasting in the United States is conducted on 68 channels numbered
2 through 69. Channels 2 through 13 are in the VHF band, and channels
14 through 69 are in the UHF band. In general, UHF stations are at a
disadvantage relative to VHF stations, because UHF frequencies are
more difficult for households to receive. This disadvantage is
eliminated when a viewer receives the UHF station through a cable
system.
Commercial broadcast television stations may be either affiliated
with one of the three national networks (ABC, NBC and CBS) or may be
independent. In addition, Fox Broadcasting Company ("Fox") has
established itself as a national network by entering into affiliation
agreements with independent stations in many television markets. The
United Paramount Network ("UPN"), a fifth broadcast television network
jointly formed by BHC and the Paramount Television Group, a unit of
Viacom Inc. ("Paramount"), began broadcasting a total of four hours of
original prime time programming over two nights per week, in January
1995. As of February 28, 1995, UPN had 114 affiliates reaching more
than 83% of all U.S. households, including all of BHC's and
Paramount's independent stations, and UPN continues to seek additional
affiliates to expand its household reach. Because of UPN's
substantial start-up and expansion costs, and the intense competition
that characterizes the broadcast television network business, UPN is
not expected to become profitable in the near future.
The following table sets forth certain information with respect
to BHC's stations and their respective markets:
Total
Commercial
DMA TV Stations Commercial
Station and House- DMA Operating in Cable
Location (a) Channel Holds (b) Rank (b) Market (c) Penetration (d)
KCOP
Los Angeles 13 4,936,180 2nd 7VHF
10UHF 60%
WWOR (e)
Secaucus 9 6,716,020 1st 6VHF
14UHF 65%
KPTV
Portland 12 919,540 25th 4VHF
2UHF 58%
KMSP
Minneapolis/
St. Paul 9 1,410,630 14th 4VHF
3UHF 48%
KTVX
Salt Lake City 4 638,450 37th 4VHF
2UHF 52%
KMOL
San Antonio 4 627,920 39th 3VHF
3UHF 64%
KBHK
San Francisco 44 2,250,600 5th 4VHF
10UHF 68%
KUTP
Phoenix 45 1,132,600 19th 4VHF
4UHF 54%
_______________
(a) KCOP and KPTV are owned by CCTV; WWOR is owned by Pinelands; the
remaining stations are owned by UTV. All stations are UPN
affiliates (independent), except for KTVX, an ABC affiliate, and
KMOL, an NBC affiliate.
(b) Designated Market Area ("DMA") is an exclusive geographic area
consisting of all counties in which the home-market commercial
stations received a preponderance of total viewing hours. The
ranking shown is the nationwide rank, in terms of television
households in DMA, of the market served by the station. Source:
Nielsen Media Research television households universe estimates.
(c) Additional channels have been allocated by the Federal
Communications Commission ("FCC") for activation as commercial
television stations in certain of these markets. Also,
additional stations may be located within the respective DMAs of
BHC stations but outside the greater metropolitan television
markets in which BHC stations operate.
(d) Cable penetration refers to the percentage of DMA television
viewing households receiving cable television service, as
estimated by Nielsen Media Research.
(e) WWOR broadcasts across a tri-state area including the entire New
York City metropolitan area. Its broadcast signal is also
carried as a "superstation" on numerous cable television systems
throughout the United States.
Television stations derive their revenues primarily from selling
advertising time. The television advertising sales market consists
primarily of national network advertising, national spot advertising
and local spot advertising. An advertiser wishing to reach a
nationwide audience usually purchases advertising time directly from
the national networks, from "superstations" (i.e., broadcast stations
carried by cable operators in areas outside their broadcast coverage
area) or from "unwired" networks (groups of otherwise unrelated
stations whose advertising time is combined for national sale). A
national advertiser wishing to reach a particular regional or local
audience usually buys advertising time from local stations through
national advertising sales representative firms having contractual
arrangements with local stations to solicit such advertising. Local
businesses generally purchase advertising from the stations' local
sales staffs.
Television stations compete for television advertising revenue
primarily with other television stations serving the same DMA. There
are 211 DMAs in the United States. DMAs are ranked annually by the
estimated number of households owning a television set within the DMA.
Advertising rates that a television station can command vary in part
with the size, in terms of television households, of the DMA served by
the station.
Within a DMA, the relative advertising rates charged by competing
stations depend primarily on three factors: the stations' program
ratings (number of television households or persons within those
households tuned to a program as a percentage of total television
households or persons within those households in the viewing area);
the time of day the advertising will run; and the demographic
qualities of a program's viewers (primarily age and sex). Ratings
data for television markets are measured by A.C. Nielsen Co.
("Nielsen"). This rating service uses two terms to quantify a
station's audience: rating points and share points. A rating point
represents one percent of all television households in the entire DMA,
and a share point represents one percent of all television households
within the DMA actually using at least one television set at the time
of measurement.
Because the major networks regularly provide first-run
programming during prime time viewing hours (in general, 8:00 P.M. to
11:00 P.M. Eastern time), their affiliates generally (but do not
always) achieve higher audience shares during those hours than
independent stations. However, independent stations generally have
substantially more advertising time ("inventory") for sale than
network affiliates, because the networks use almost all of their
affiliates' inventory during network shows. Independent stations'
smaller audiences and greater inventory during prime time hours
generally result in lower advertising rates charged and more
advertising time sold during those hours, whereas affiliates' larger
audiences and limited inventory generally allow affiliates to charge
higher advertising rates for prime time programming. By selling more
advertising time, an independent station typically achieves a share of
advertising revenues in its market greater than its audience ratings.
On the other hand, because a nonaffiliated station broadcasts more
syndicated programming than a network-affiliated station, total
programming costs for an independent station are generally higher than
those of a network affiliate in the same market.
These differences between operating as an independent and as a
major-network affiliate have been reduced by the growth of the Fox
network, which currently provides 15 weekly hours of programming
during prime time and additional programming in other periods to many
independents, and would be reduced further if UPN or another such
network venture should successfully provide an expanded schedule of
programming to other independents. Another feature of competition
between major-network affiliates and independents is created by the
FCC's "prime time access rule," which effectively prevents affiliates
of the major networks in the country's fifty largest markets from
broadcasting more than three hours of network or "off network"
entertainment and/or sports between 7 and 11 p.m., Eastern time.
("Off network" shows are reruns of network programs that are
distributed to stations on a syndicated basis.) One effect of this
rule is to facilitate the purchase of the rights to popular "off
network" shows by independent stations (including those affiliated
with Fox or UPN). Recently, however, the FCC has begun a proceeding
to consider whether to retain, eliminate or modify this rule. BHC is
unable to predict the outcome of these proceedings.
Programming
BHC's independent stations depend heavily on independent third
parties for programming, as do BHC's network affiliates for their non-
network broadcasts. Recognizing the need to have a more direct
influence on the quality of programming available to its stations, and
desiring to participate in potential profits through national
syndication of programming, BHC has joined in the formation of UPN,
and has begun to invest directly in the development of original
programming. The aggregate amount invested through December 31, 1994
was not significant to BHC's financial position. BHC's television
stations also produce programming directed to meet the needs and
interests of the area served, such as local news and events, public
affairs programming, children's programming and sports.
Programs obtained from independent sources consist principally of
syndicated television shows, many of which have been shown previously
on a network, and syndicated feature films, which were either made for
network television or have been exhibited previously in motion picture
theaters (most of which films have been shown previously on network
and cable television). Syndicated programs are sold to individual
stations to be broadcast one or more times. Independent television
stations generally have large numbers of syndication contracts; each
contract is a license for a particular series or program that usually
prohibits licensing the same programming to other television stations
in the same market. A single syndication source may provide a number
of different series or programs.
Licenses for syndicated programs are often offered for cash sale
(i.e., without any barter element) to stations; however, some are
offered on a barter or cash plus barter basis. In the case of a cash
sale, the station purchases the right to broadcast the program, or a
series of programs, and sells advertising time during the broadcast.
The cash price of such programming varies, depending on the perceived
desirability of the program and whether it comes with commercials that
must be broadcast (i.e., on a cash plus barter basis). Bartered
programming is offered to stations without charge, but comes with a
greater number of commercials that must be broadcast, and therefore
with less time available for sale by the station. Recently, the
amount of bartered and cash plus barter programming broadcast both
industry-wide and by BHC's stations has increased substantially.
BHC television stations are frequently required to make
substantial financial commitments to obtain syndicated programming
while such programming is still being broadcast by a network and
before it is available for broadcast by BHC stations or even before it
has been produced. Generally, syndication contracts require the
station to acquire an entire program series, before the number of
episodes of original showings that will be produced has been
determined. While analyses of network audiences are used in
estimating the value and potential profitability of such programming,
there is no assurance that a successful network program will continue
to be successful or profitable when broadcast after network airing.
For many years, the FCC has restricted the ability of television
networks to acquire financial interests in the production of
television shows by independent sources, or to participate in the
syndication of television programs, either on a first-run or an off-
network basis. These rules were based in part on concern that
networks engaged in syndication would have economic incentives to
discriminate against independent stations (such as those owned by BHC)
in making programs available in the syndication market, either by
warehousing them or favoring the network's owned or affiliated
stations. Late in 1992, the United States Court of Appeals for the
Seventh Circuit remanded the rules to the FCC with instructions to
revisit the need for them. In 1993, the FCC adopted new rules which
allow networks to acquire financial interests and passive syndication
rights in off-network programs, but bar them from actively syndicating
such programs in the United States or delaying the entry into
syndication of any long-running prime time network-owned series beyond
the fourth year after its network debut. The new rules also bar
networks from acquiring domestic financial interests or syndication
rights in first-run programs, unless the network is the sole producer
of the program, and prohibit networks from active domestic syndication
of all first-run programs. However, these rules are scheduled to
expire in November 1995, unless the FCC issues an order to the
contrary. The new rules and the projected "sunset" were upheld by the
United States Court of Appeals for the Seventh Circuit on July 12,
1994. The FCC will conduct a review of whether the rules should be
retained (with the burden of proof assigned to the proponents of
retention) beginning in May 1995. BHC cannot predict the outcome of
the proceedings in court or before the FCC.
Pursuant to generally accepted accounting principles, commitments
for programming not available for broadcast are not recorded as
liabilities until the programming becomes available for broadcast, at
which time the related contract right is also recorded as an asset.
BHC television stations had prepaid broadcast rights, unamortized film
contract rights for programming available for telecasting and deposits
on film contracts for programming not available for telecasting
aggregating $148,473,000 as of December 31, 1994. The stations were
committed for film and sports rights contracts aggregating
$146,400,000 for programming not available for broadcasting as of that
date. License periods for particular programs or films generally run
from one to five years. Long-term contracts for the broadcast of
syndicated television series generally provide for an initial telecast
and subsequent reruns for a period of years, with full payment to be
made by the station over a period of time shorter than the rerun
period. See Notes 1(C) and 7 of Notes to Consolidated Financial
Statements.
KTVX and KMOL are primary affiliates of their respective
networks. Network programs are produced either by the networks
themselves or by independent production companies and are transmitted
by the networks to their affiliated stations for broadcast.
In general, major network primary affiliation agreements are
automatically renewed for two-year periods, unless advance written
notice of termination is given by either the affiliate or the network.
The agreement gives the affiliate the right to broadcast all programs
transmitted by the network. The affiliate must run in its entirety,
together with all network commercials, any network programming the
affiliate elects to broadcast, and is allowed to broadcast a limited
number of commercials it has sold. For each hour of programming
broadcast by the affiliate, the network generally pays the affiliate a
fee, specified in the agreement (although subject to change by the
network), which varies in amount depending on the time of day during
which the program is broadcast and other factors. Prime time
programming generally earns the highest fee. A network may, and
sometimes does, designate certain programs to be provided with no
compensation to the station.
An affiliate may accept or reject a program offered by a network
and instead broadcast programming from another source. Rejection of a
program gives the network the right to offer that program to another
station in the area.
In May 1994, the Fox network persuaded the owner of some (and
prospective owners of other) VHF stations that were located in large
markets and were then affiliated with major networks to switch (or
agree to switch) those affiliations to Fox. The sharply increased
competition among networks for station affiliates (as the displaced
networks have sought alternate outlets) has resulted in the
negotiation of some major-network affiliation agreements with terms as
long as ten years and with guaranteed compensation to the affiliate at
increased levels. However, no new uniform pattern exists.
United Paramount Network
In January 1995, UPN began broadcasting four hours of original
prime time programming per week, consisting of Star Trek: Voyager, a
one-hour science fiction adventure, and two half-hour comedies on
Monday nights and two one-hour dramas on Tuesday nights. The network
also broadcasts two hours of previously exhibited movies on Saturday
afternoons and has announced plans to broadcast one hour of original
children's programming on Sunday mornings, commencing in September
1995. UPN intends, over the next several years, to expand its prime
time programming to five nights per week, as well as to begin
broadcasting in other day parts.
UPN licenses its current programming, except for Star Trek:
Voyager, on the same bases as are customary in the industry and seeks
license or ownership rights for all other programming from all
available sources (including Paramount) on arms-length terms.
UPN's primary affiliate station agreements have three year terms
and provide commercial time to the stations as consideration for
broadcasting the network's programming.
BHC currently owns 100% of UPN, and Paramount has an option
exercisable through January 15, 1997 to acquire an interest in the
network equal to that of BHC. The option price is equivalent to
approximately one-half of BHC's aggregate cash contributions to UPN
through the exercise date, plus interest. Payment may be deferred
through the option expiration date. BHC expenditures for UPN are
expected to be substantial. See Management's Discussion and Analysis
of Financial Condition and Results of Operations and Note 7 of Notes
to Consolidated Financial Statements.
Sources of Revenue
The principal source of revenues for BHC stations is the sale of
advertising time to national and local advertisers. Such time sales
are represented by spot announcements purchased to run between
programs and program segments and by program sponsorship. The
relative contributions of national and local advertising to BHC's
gross revenues vary from time to time. During the year ended December
31, 1994, national advertising contributed 35%, and local advertising
contributed 56%, of total gross revenues. Most advertising contracts
are short-term. Like that of the television broadcasting business,
generally, BHC's business is seasonal. In terms of revenues,
generally the fourth quarter is strongest, followed by the second,
third and first.
Advertising is generally placed with BHC stations through
advertising agencies, which are allowed a commission generally equal
to 15% of the price of advertising placed. National advertising time
is usually sold through an independent national sales representative,
which also receives a commission, while local advertising time is sold
by each station's sales staff. Practices with respect to sale of
advertising time do not differ markedly between BHC's network and non-
network stations, although the network-affiliated stations have less
inventory to sell.
Government Regulation
Television broadcasting operations are subject to the
jurisdiction of the FCC under the Communications Act of 1934, as
amended (the "Communications Act"). The Communications Act empowers
the FCC, among other things, to issue, revoke or modify broadcast
licenses, to assign frequencies, to determine the locations of
stations, to regulate the broadcasting equipment used by stations, to
establish areas to be served, to adopt such regulations as may be
necessary to carry out the provisions of the Communications Act and to
impose certain penalties for violation of its regulations. BHC
television stations are subject to a wide range of technical,
reporting and operational requirements imposed by the Communications
Act or by FCC rules and policies.
The Communications Act provides that a license may be granted to
any applicant if the public interest, convenience and necessity will
be served thereby, subject to certain limitations, including the
requirement that the FCC allocate licenses, frequencies, hours of
operation and power in a manner that will provide a fair, efficient
and equitable distribution of service throughout the United States.
Television licenses generally are issued for five-year terms. Upon
application, and in the absence of a conflicting application that
would require the FCC to hold a hearing, or adverse questions as to
the licensee's qualifications, television licenses have usually been
renewed for additional terms without a hearing by the FCC. An
existing license automatically continues in effect once a timely
renewal application has been filed until a final FCC decision is
issued.
KMSP's license renewal was granted on April 15, 1993, and is due
to expire on April 1, 1998. KTVX's license renewal was granted on
September 29, 1993, and is due to expire on October 1, 1998. KUTP's
license renewal was granted on March 28, 1994, and is due to expire on
October 1, 1998. KCOP's license renewal was granted on April 18,
1994, and is due to expire on December 1, 1998. KMOL, WWOR, KBHK and
KPTV have each filed timely renewal applications, which are pending.
In all four cases, no competing applications have been filed, and the
deadlines for filing such applications have expired. The license
renewals of KMOL and WWOR have been opposed by petitions challenging
each station's compliance with FCC requirements concerning equal
employment opportunity. In each case, the station has vigorously
opposed the petition or petitions, and BHC believes that those
petitions are without merit. No petitions to deny either KBHK or the
KPTV renewal application have been filed, and the deadlines for filing
such petitions have expired. Pursuant to FCC requirements, each
station's application has reported instances in which the station has
exceeded the commercial limits applicable to children's programs. In
the case of KBHK, these instances have been substantial; the FCC has
recently granted renewals in such cases, subject to forfeitures of as
much as $80,000.
Under existing FCC regulations governing multiple ownership of
broadcast stations, a license to operate a television station
generally will not be granted to any party (or parties under common
control) if such party directly or indirectly owns, operates, controls
or has an attributable interest in another television or radio station
serving the same market or area. The FCC, however, is favorably
disposed to grant waivers of this rule for radio station-television
station combinations in the top 25 television markets, in which there
will be at least 30 separately owned, operated and controlled
broadcast licenses, and in certain other circumstances.
FCC regulations further provide that a broadcast license will not
be granted if that grant would result in a concentration of control of
radio and television broadcasting in a manner inconsistent with the
public interest, convenience or necessity. FCC rules generally deem
such concentration of control to exist if any party, or any of its
officers, directors or stockholders, directly or indirectly, owns,
operates, controls or has an attributable interest in more than 12
television stations, or in television stations capable of reaching, in
the aggregate, a maximum of 25% of the national audience. This
percentage is determined by the DMA market rankings of the percentage
of the nation's television households considered within each market.
Because of certain limitations of the UHF signal, however, the FCC
will attribute only 50% of a market's DMA reach to owners of UHF
stations for the purpose of calculating the audience reach limits.
Applying the 50% reach attribution rule to UHF stations KBHK and KUTP,
the eight BHC stations are deemed to reach approximately 18% of the
nation's television households. To facilitate minority group
participation in radio and television broadcasting, the FCC will allow
entities with attributable ownership interests in stations controlled
by minority group members to exceed the ownership limits.
The FCC's multiple ownership rules require the attribution of the
licenses held by a broadcasting company to its officers, directors and
certain of its stockholders, so there would ordinarily be a violation
of FCC regulations where an officer, director or such a stockholder
and a television broadcasting company together hold interests in more
than the permitted number of stations or more than one station that
serves the same area. In the case of a corporation controlling or
operating television stations, such as BHC, there is attribution only
to stockholders who own 5% or more of the voting stock, except for
institutional investors, including mutual funds, insurance companies
and banks acting in a fiduciary capacity, which may own up to 10% of
the voting stock without being subject to such attribution, provided
that such entities exercise no control over the management or policies
of the broadcasting company.
The FCC has recently begun a proceeding to consider
liberalization of the various TV ownership restrictions described
above, as well as changes (not all of which would be liberalizing in
effect) in the rules for attributing the licenses held by an
enterprise to various parties. BHC is unable to predict the outcome
of these proceedings.
The Communications Act and FCC regulations prohibit the holder of
an attributable interest in a television station from having an
attributable interest in a cable television system located within the
predicted coverage area of that station. FCC regulations also
prohibit the holder of an attributable interest in a television
station from having an attributable interest in a daily newspaper
located within the predicted coverage area of that station.
The Communications Act limits the amount of capital stock that
aliens may own in a television station licensee or any corporation
directly or indirectly controlling such licensee. No more than 20% of
a licensee's capital stock and, if the FCC so determines, no more than
25% of the capital stock of a company controlling a licensee, may be
owned or voted by aliens or their representatives. Should alien
ownership exceed this limit, the FCC may revoke or refuse to grant or
renew a television station license or approve the assignment or
transfer of such license. BHC believes the ownership of its stock by
aliens to be below the applicable limit.
The Communications Act prohibits the assignment of a broadcast
license or the transfer of control of a licensee without the prior
approval of the FCC. Legislation was introduced in the past that
would impose a transfer fee on sales of broadcast properties.
Although that legislation was not adopted, similar proposals, or a
general spectrum licensing fee, may be advanced and adopted in the
future. Recent legislation has imposed annual regulatory fees
applicable to BHC's stations, currently ranging as high as $18,000 per
station.
The foregoing does not purport to be a complete summary of all
the provisions of the Communications Act or regulations and policies
of the FCC thereunder. Reference is made to the Communications Act,
such regulations and the public notices promulgated by the FCC for
further information.
Other Federal agencies, including principally the Federal Trade
Commission, also impose a variety of requirements that affect the
business and operations of broadcast stations. Proposals for
additional or revised requirements are considered by the FCC, other
Federal agencies or Congress from time to time. BHC cannot predict
what new or revised Federal requirements may result from such
consideration or what impact, if any, such requirements might have
upon the operation of BHC television stations.
Competition
BHC television stations compete for advertising revenue in their
respective markets, primarily with other broadcast television stations
and cable television channels, and compete with other advertising
media, as well. Such competition is intense.
In addition to programming, management ability and experience,
technical factors and television network affiliations are important in
determining competitive position. Competitive success of a television
station depends primarily on public response to the programs broadcast
by the station in relation to competing entertainment, and the results
of this competition affect the advertising revenues earned by the
station from the sale of advertising time.
Audience ratings provided by Nielsen have a direct bearing on the
competitive position of television stations. In general, network
programs achieve higher ratings than independent station programs.
There are at least five other commercial television stations in
each market served by a BHC station. BHC believes that the three VHF
network-affiliated stations and the two other independent VHF stations
in New York City generally attract a larger viewing audience than does
WWOR, and that WWOR generally attracts a viewing audience larger than
the audience attracted by the UHF stations in the New York City
market. In Los Angeles, the three VHF network-affiliated stations and
two independent VHF stations generally attract a larger viewing
audience than does KCOP, and KCOP generally attracts a viewing
audience larger than the other independent VHF station and the ten UHF
stations in Los Angeles. In Portland, the three VHF network-
affiliated stations generally attract a larger audience than does
KPTV, which generally attracts a larger audience than the other
independent stations, both of which are UHF stations. BHC believes
that, in Minneapolis/St. Paul, KMSP generally attracts a smaller
viewing audience than the three VHF network-affiliated stations, but a
larger viewing audience than the other independent stations, all of
which are UHF stations. In Salt Lake City, KTVX generally ranks first
of the six television stations in terms of audience share. In San
Antonio, KMOL generally ranks third of the six stations in terms of
audience share. KBHK generally ranks fifth in terms of audience
share, behind the one independent and three network-affiliated VHF
television stations, of the 14 commercial television stations in San
Francisco. KUTP generally ranks sixth in terms of audience share, of
the eight commercial stations in the Phoenix market.
BHC stations may face increased competition in the future from
additional television stations that may enter their respective
markets. See note (c) to the table under Television Broadcasting.
Cable television has become a major competitor of television
broadcasting stations. Because cable television systems operate in
each market served by a BHC station, the stations are affected by
rules governing cable operations. If a station is not widely
accessible by cable in those markets having strong cable penetration,
it may lose effective access to a significant portion of the local
audience. Even if a television station is carried on a local cable
system, an unfavorable channel position on the cable system may
adversely affect the station's audience ratings and, in some
circumstances, a television set's ability to receive the station being
carried on an unfavorable channel position. Some cable system
operators may be inclined to place broadcast stations in unfavorable
channel locations.
FCC regulations requiring cable television stations to carry or
reserve channels for retransmission of local broadcast signals have
twice been invalidated in Federal court. In October 1992, Congress
enacted legislation designed to provide television broadcast stations
the right to be carried on cable television stations (and to be
carried on specific cable channel positions), or (at the broadcaster's
election) to prohibit cable carriage of the television broadcast
station without its consent. This legislation is currently being
challenged in the Federal courts, and BHC cannot predict the outcome.
While Federal law now generally prohibits local telephone companies
from providing video programming to subscribers in their service
areas, this restriction has been held constitutionally invalid by six
Federal district courts, and two such rulings have been affirmed by
the United States Courts of Appeals for the Fourth and Ninth Circuits.
Legislation eliminating or relaxing this ban has also been proposed.
One version of such legislation was adopted by the House of
Representatives in 1994. BHC is unable to predict the outcome of
these developments.
"Syndicated exclusivity" rules allow television stations to
prevent local cable operators from importing distant television
programming that duplicates syndicated programming in which local
stations have acquired exclusive rights. In conjunction with these
rules, network nonduplication rules protect the exclusivity of network
broadcast programming within the local video marketplace. The FCC is
also reviewing its "territorial exclusivity" rule, which limits the
area in which a broadcaster can obtain exclusive rights to video
programming. BHC believes that the competitive position of BHC
stations would likely be enhanced by an expansion of broadcasters'
permitted zones of exclusivity.
Alternative technologies could increase competition in the areas
served by BHC stations and, consequently, could adversely affect their
profitability. Two direct broadcast satellite ("DBS") systems began
service in 1994. An additional challenge is now posed by multichannel
multipoint distribution services ("MMDS"). Two four-channel MMDS
licenses have been granted in most television markets. MMDS operation
can provide commercial programming on a paid basis. A similar service
can also be offered using the instructional television fixed service
("ITFS"). The FCC now allows the educational entities that hold ITFS
licenses to lease their "excess" capacity for commercial purposes.
The multichannel capacity of ITFS could be combined with either an
existing single channel MDS or a new MMDS to increase the number of
available channels offered by an individual operator. The emergence
of home satellite dish antennas has also made it possible for
individuals to receive a host of video programming options via
satellite transmission.
Technological developments in television transmission have
created the possibility that one or more of the broadcast and
nonbroadcast television media will provide enhanced or "high
definition" pictures and sound to the public of a quality that is
technically superior to that of the pictures and sound currently
available. It is not yet clear when and to what extent technology of
this kind will be available to the various television media; whether
and how television broadcast stations will be able to avail themselves
of these improvements; whether all television broadcast stations will
be afforded sufficient spectrum to do so; what channels will be
assigned to each of them to permit them to do so; whether viewing
audiences will make choices among services upon the basis of such
differences; or, if they would, whether significant additional expense
would be required for television stations to provide such services.
Many segments of the television industry are intensively studying
enhanced and "high definition" television technology, and both
Congress and the FCC have initiated proceedings and studies on its
potential and its application to television service in the United
States.
The broadcasting industry is continuously faced with
technological changes, competing entertainment and communications
media and governmental restrictions or actions of Federal regulatory
bodies, including the FCC. These technological changes may include
the introduction of digital compression by cable systems that would
significantly increase the number and availability of cable program
services with which BHC stations compete for audience and revenue, the
establishment of interactive video services, and the offering of
multimedia services that include data networks and other computer
technologies. Such factors have affected, and will continue to
affect, the revenue growth and profitability of BHC.
ITEM 2. PROPERTIES.
KCOP owns its studios and offices in two buildings in Los Angeles
containing a total of approximately 54,000 square feet located on
adjacent sites having a total area of approximately 1.93 acres.
KCOP's transmitter is located atop Mt. Wilson on property utilized
pursuant to a permit issued by the United States Forest Service.
KPTV owns its studios and offices in a building in Portland,
Oregon, containing approximately 33,520 square feet located on a site
of approximately 1.09 acres. Its transmitter is located on its own
property at a separate site containing approximately 16.18 acres.
WWOR owns office and studio facilities in Secaucus, New Jersey,
containing approximately 110,000 square feet on approximately 3.5
acres and leases additional office space in New York City. Along with
almost all of the television stations licensed to the New York market,
WWOR's transmitter is located on top of the World Trade Center in New
York City pursuant to a lease agreement which expires in 2004, unless
terminated by WWOR in 1999.
Physical facilities consisting of offices and studio facilities
are owned by UTV in Minneapolis, San Antonio and Phoenix and are
leased in Salt Lake City and San Francisco. The Salt Lake City lease
agreement expires in 1999 and is renewable, at an increased rental,
for two five-year periods. The San Francisco lease expires in 2007.
The Minneapolis facility includes approximately 49,700 square
feet of space on a 5.63-acre site. The Salt Lake City facility is
approximately 30,400 square feet on a 2.53-acre site. The San Antonio
facility is approximately 41,000 square feet on a .92-acre site. The
San Francisco facility is approximately 27,700 square feet in downtown
San Francisco. The Phoenix facility is approximately 26,400 square
feet on a 3.03-acre site. Smaller buildings containing transmission
equipment are owned by UTV at sites separate from the studio
facilities.
UTV owns a 55-acre tract in Shoreview, Minnesota, of which 40
acres are used by KMSP for transmitter facilities and tower.
KTVX's transmitter facilities and tower are located at a site on
Mt. Nelson, close to Salt Lake City, under a lease that expires in
2004. KTVX also maintains back-up transmitter facilities and tower at
a site on nearby Mt. Vision under a lease that expires in 2002 and is
renewable, at no increase in rental, for a 50-year period.
KMOL's transmitter facilities are located at a site near San
Antonio on land and on a tower owned by Texas Tall Tower Corporation,
a corporation owned in equal shares by UTV and another television
station that also transmits from the same tower.
KBHK's transmitter is located on Mt. Sutro, as part of the Sutro
Tower complex, which also houses equipment for other San Francisco
television stations and many of its FM radio stations. The lease for
the Mt. Sutro facilities expires in February 2005 and is renewable for
two five-year periods.
KUTP's transmitter facilities and tower are located on a site
within South Mountain Park, a communications park owned by the City of
Phoenix, which also contains transmitter facilities and towers for the
other television stations in Phoenix as well as facilities for several
FM radio stations. The license for this space expires in 2012.
BHC believes its properties are adequate for their present uses.
ITEM 3. LEGAL PROCEEDINGS.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of BHC, as of February 28, 1995, are as
follows:
Positions with BHC;
principal occupation; Has served
and age as of as officer
Name February 28, 1995 since
Herbert J. Siegel Chairman of the Board and
President; Chairman of the
Board and President,
Chris-Craft; 66 1977
John C. Siegel Senior Vice President;
Senior Vice President,
Chris-Craft; 42 1981
William D. Siegel Senior Vice President;
Senior Vice President,
Chris-Craft; 40 1981
Joelen K.Merkel Vice President and
Treasurer; Vice President
and Treasurer, Chris-
Craft; 43 1980
Brian C.Kelly General Counsel and
Secretary; General Counsel
and Secretary, Chris-
Craft; 43 1992
Chris-Craft, through its majority ownership of BHC, is principally
engaged in television broadcasting. The principal occupation of each of
the individuals for the past five years is stated in the foregoing
table, except that prior to being elected General Counsel and Secretary
of BHC on December 14, 1992, Brian C. Kelly served as President of
Finevest Foods, Inc. ("Finevest") from July 1992 through December 13,
1992, served as Executive Vice President, General Counsel and Secretary
of Finevest from March 1992 until July 1992 and served as Vice
President, General Counsel and Secretary of Finevest until February
1992. Finevest filed a Chapter 11 bankruptcy petition on February 11,
1991, and emerged from bankruptcy on July 9, 1992 pursuant to a
confirmed reorganization plan. All officers hold office until the
meeting of the Board following the next annual meeting of stockholders
or until removed by the Board.
Evan C Thompson, age 52, is Executive Vice President of Chris-
Craft. Although not an officer of BHC, as President of UTV and Chris-
Craft's Television Division for more than the past five years, Mr.
Thompson may be considered an executive officer of BHC, within the
Securities and Exchange Commission definition of the term.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information appearing in the Annual Report under the caption
STOCK PRICE, DIVIDEND AND RELATED INFORMATION is incorporated herein by this
reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information appearing in the Annual Report under the caption
SELECTED FINANCIAL DATA is incorporated herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information appearing in the Annual Report under the caption
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements, Notes thereto, Report of
Independent Accountants thereon and Quarterly Financial Information
(unaudited) appearing in the Annual Report are incorporated herein by
this reference. Except as specifically set forth herein and elsewhere
in this Form 10-K, no information appearing in the Annual Report is
incorporated by reference into this report nor is the Annual Report
deemed to be filed, as part of this report or otherwise, pursuant to the
Securities Exchange Act of 1934.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information appearing in the Proxy Statement under the caption
ELECTION OF DIRECTORS -- Nominees of the Board of Directors is incorporated
herein by this reference. Information relating to BHC's executive
officers is set forth in Part I under the caption EXECUTIVE OFFICERS OF THE
REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing in the Proxy Statement under the caption
ELECTION OF DIRECTORS -- Executive Compensation is incorporated herein by
this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The information appearing in the Proxy Statement under the caption
ELECTION OF DIRECTORS -- Voting Securities of Certain Beneficial Owners and
Management is incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information appearing in the Proxy Statement under the caption
ELECTION OF DIRECTORS -- Certain Relationships and Related Transactions is
incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. The financial statements and quarterly financial
information incorporated by reference from the Annual
Report pursuant to Item 8.
2. Exhibits listed in the Exhibit Index, including the
compensatory plans listed below:
Chris-Craft's Benefit Equalization Plan
Employment Agreement dated as of January 1, 1994
between Herbert J. Siegel and Chris-Craft
Employment Agreement dated as of January 1, 1994
between Evan C Thompson and Chris-Craft
(b) No reports on Form 8-K were filed by the registrant during the
last quarter of the period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 29, 1995
BHC COMMUNICATIONS, INC.
(Registrant)
By: WILLIAM D. SIEGEL
William D. Siegel
Senior Vice President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature and Title Date
HERBERT J. SIEGEL March 29, 1995
Herbert J. Siegel
Chairman, President
and Director (principal
executive officer)
WILLIAM D. SIEGEL March 29, 1995
William D. Siegel
Senior Vice President
and Director (principal
financial officer)
JOELEN K. MERKEL March 29, 1995
Joelen K. Merkel
Vice President, Treasurer
and Director (principal
accounting officer)
JOHN L. EASTMAN March 29, 1995
John L. Eastman
Director
BARRY S. GREENE March 29, 1995
Barry S. Greene
Director
LAURENCE M. KASHDIN March 29, 1995
Laurence M. Kashdin
Director
MORGAN L. MILLER March 29, 1995
Morgan L. Miller
Director
JOHN C. SIEGEL March 29, 1995
John C. Siegel
Director
VIN WEBER March 29, 1995
Vin Weber
Director
<PAGE>
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Accountants
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements of Income - For the Years
Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows - For the Years
Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Shareholders' Investment - For
the Years Ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
<PAGE>
EXHIBIT INDEX
Incorporated by Exhibit
Reference to: No. Exhibit
Exhibit 3(a) [1] 3.1 Restated Certificate
of Incorporation
Exhibit 3(b) [1] 3.2 Restated By-laws
Exhibit 10(c) [1] 10.1 Management Agreement
between registrant
and Chris-Craft
dated July 21, 1989
Exhibit 19 [4] 10.2 Amendment No. 1
thereto dated
October 31, 1991
Exhibit 10(H)(2) [5] 10.3 Amendment No. 2
thereto dated March
24, 1994
Exhibit 10(E) [2] 10.4 Form of Agreement
under Chris-Craft's
Executive Deferred
Income Plan
Exhibit 10(B) [5] 10.5 Employment Agreement
dated January 1,
1994 between Chris-
Craft and Herbert J.
Siegel
Exhibit 10(C) [5] 10.6 Split-Dollar
Agreement dated
January 6, 1994
between registrant
and William D.
Siegel
Exhibit 10(D) [5] 10.7 Split-Dollar
Agreement dated
January 6, 1994
between registrant
and John C. Siegel
Exhibit 10(F) [5] 10.8 Employment Agreement
dated January 1,
1994 between Chris-
Craft and Evan C
Thompson
Exhibit 11(H) [3] 10.9 Chris-Craft's
Exhibit 10(B)(1) [6] Benefit
Exhibit 10.3 [7] Equalization Plan,
as amended
* 10.10 Option Agreement
dated July 19, 1994
between BHC Network
Partner, Inc. and
PCI Network Partner,
Inc.
* 13 Portions of the
Annual Report
incorporated by
reference
* 21 Subsidiaries of
registrant
* 27 Financial Data
Schedule
_______________________
* Filed herewith.
[1] Registrant's Registration Statement on Form S-1 (Regis. No. 33-
31091).
[2] Chris-Craft's Annual Report on Form 10-K for the year ended
August 31, 1983 (File No.
1-2999).
[3] Chris-Craft's Registration Statement on Form S-1 (Regis. No. 2-
65906).
[4] Registrant's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1991.
[5] Chris-Craft's Annual Report on Form 10-K for the year ended
December 31, 1993.
[6] Chris-Craft's Annual Report on Form 10-K for the year ended
December 31, 1989.
[7] Chris-Craft's Annual Report on Form 10-K for the year ended
December 31, 1994.
Exhibit 21
The following were the registrant's subsidiaries as of December
31, 1994, other than subsidiaries that, if considered in the aggregate
as a single subsidiary, would not constitute a significant subsidiary
at such date:
Jurisdiction
of
Name of Subsidiary Incorporation
BHC Network Partner, Inc. Delaware
Chris-Craft Television, Inc. Delaware
BHC Network Partner II, Inc. Delaware
KCOP Television, Inc. California
Oregon Television, Inc. Oregon
Pinelands, Inc. Delaware
United Television, Inc. Delaware
UTV of San Francisco, Inc. California
UTV of San Antonio, Inc. Texas
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCORPORATED BY REFERENCE INTO
REGISTRANT'S ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED 31 DECEMBER 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<CASH> 222201
<SECURITIES> 1274244
<RECEIVABLES> 103423
<ALLOWANCES> 6742
<INVENTORY> 0
<CURRENT-ASSETS> 1729347
<PP&E> 126932
<DEPRECIATION> 77917
<TOTAL-ASSETS> 2188463
<CURRENT-LIABILITIES> 208312
<BONDS> 0
0
0
<COMMON> 249
<OTHER-SE> 1789635
<TOTAL-LIABILITY-AND-EQUITY> 2188463
<SALES> 0
<TOTAL-REVENUES> 457533
<CGS> 0
<TOTAL-COSTS> 344551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 166649
<INCOME-TAX> 57900
<INCOME-CONTINUING> 92877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92877
<EPS-PRIMARY> 3.71
<EPS-DILUTED> 3.71
</TABLE>
STOCK PRICE, DIVIDEND AND RELATED INFORMATION
BHC Class A common stock is traded on the American Stock Exchange. The high
and low sales prices of these shares are shown below for the periods indicated.
At February 24, 1995, there were 7,253 holders of record of Class A common
stock. All BHC Class B common shares, which in general are nontransferable, are
held by Chris-Craft Industries, Inc., and, accordingly, there is no trading
market for such shares.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1994
High ............... 81-3/4 78-1/4 81-3/4 80-1/4
Low ................ 73-5/8 72-1/2 75-3/4 70-1/8
1993
High ............... 69-3/8 74 80 82-3/4
Low ................ 59-1/4 67-3/8 70-3/8 75-3/4
BHC paid a special cash dividend of $2.00 per share in January 1993 and has
declared a special cash dividend of $1.00 per share payable in April 1995.
However, BHC has no plan to pay dividends on a regular basis.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS FIRST SECOND THIRD FOURTH
EXCEPT PER SHARE DATA) QUARTER QUARTER QUARTER QUARTER YEAR
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Operating revenues ..................... $ 95,968 $119,832 $107,259 $134,474 $457,533
Operating income ....................... 15,134 34,647 23,020 40,181 112,982
Income associated with
Time Warner Inc. securities .......... -- -- -- -- --
Income before income
taxes and minority interest .......... 28,582 49,506 39,160 49,401 166,649
Net income ............................. 13,668 24,691 32,609 21,909 92,877
Net income per share ................... $ .54 $ .99 $ 1.31 $ 0.88 $ 3.71
YEAR ENDED DECEMBER 31, 1993
Operating revenues ..................... $ 89,581 $113,199 $100,216 $109,003 $411,999
Operating income ....................... 8,796 25,044 24,480 20,942 79,262
Income associated with
Time Warner Inc.
securities ........................... 108,413 132,986 $ 12,340 $ 2,883 $256,622
Income before income
taxes and minority interest .......... 124,965 168,207 48,816 49,236 391,224
Net income ............................. 75,918 92,639 24,516 31,213 224,286
Net income per share ................... $ 2.92 $ 3.58 $ .95 $ 1.21 $ 8.67
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
February 14, 1995
Price Waterhouse LLP (LOGO)
1177 Avenue of the Americas
New York, NY 10036
To the Board of Directors and
Shareholders of BHC Communications, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, shareholders' investment and cash
flows present fairly, in all material respects, the financial position of BHC
Communications, Inc. and its subsidiaries at December 31, 1994 and 1993, and the
results of their operations andtheir cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
<PAGE>
CONSOLIDATED BALANCE SHEETS
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) DECEMBER 31,
1994 1993
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ............................. $ 222,201 $ 35,371
Marketable securities (substantially all U.S.
Government securities) .............................. 1,274,244 1,471,158
Accounts receivable,
less allowance for
doubtful accounts of
$6,742 and $5,944 ................................... 96,681 85,376
Film contract and prepaid
broadcast rights .................................... 89,245 98,882
Prepaid expenses and
other current assets ................................ 46,976 54,518
Total current assets .................................. 1,729,347 1,745,305
Film Contract Rights,
including deposits, less
estimated portion to be used
within one year ....................................... 59,228 87,197
Property and Equipment, at cost:
Land, buildings and improvements ...................... 35,465 35,373
Equipment ............................................. 91,467 86,249
126,932 121,802
Less--Accumulated depreciation ...................... 77,917 69,767
49,015 52,035
Intangible Assets .......................................... 333,074 342,395
Other Assets ............................................... 17,799 14,606
$ 2,188,463 $ 2,241,538
<PAGE>
DECEMBER 31,
1994 1993
LIABILITIES AND SHAREHOLDERS'S INVESTMENT
Current Liabilities:
Film contracts payable within one year ................ $ 81,696 $ 112,798
Accounts payable and accrued expenses ................. 70,834 81,834
Income taxes payable .................................. 55,782 69,340
Total current liabilities ........................... 208,312 263,972
Film Contracts Payable after One Year ...................... 89,048 95,699
Other Long-Term Liabilities ................................ 05,655 15,563
Minority Interest .......................................... 95,564 87,483
Commitments and Contingencies (Note 7)
Shareholders' Investment:
Class A common stock-- par value $.01 per share;
authorized 200,000,000
shares; outstanding 6,877,518 and
7,723,418 shares .................................. 69 77
Class B common stock--
par value $.01 per share;
authorized 200,000,000 shares;
outstanding 18,000,000 shares ..................... 180 180
Capital surplus ....................................... 29,611 98,182
Retained earnings ..................................... 1,779,409 1,686,532
Treasury stock--125,030
and 122,991 Class A
common shares, at cost ............................ (6,254) (6,150)
Reduction to reflect
marketable securities
at market value ................................... (13,131) --
$ 1,789,884 1,778,821
$ 2,188,463 2,241,538
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA) YEAR ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
Operating Revenues ............................ $457,533 $411,999 $307,883
Operating Expenses:
Television expenses ...................... 232,635 230,088 208,031
Selling, general and administrative ...... 111,916 102,649 77,490
344,551 332,737 285,521
Operating income ..................... 112,982 79,262 22,362
Other Income:
Interest and other income, net ........... 53,667 55,340 36,374
Income associated with
Time Warner Inc. securities, net ..... -- 256,622 94,059
53,667 311,962 130,433
Income before provision
for income taxes
and minority interest .............. 166,649 391,224 152,795
Provision for Income Taxes .................... 57,900 146,900 36,100
Income before minority interest ...... 108,749 244,324 116,695
Minority Interest ............................. 15,872 20,038 7,400
Net income ........................... $ 92,877 $224,286 $109,295
Net Income per Share .......................... 3.71 8.67 4.09
Weighted Average Common
Shares Outstanding ....................... 25,007 25,882 26,734
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) YEAR ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income ................................ $ 92,877 $ 224,286 $ 109,295
Adjustments to reconcile net
income to net cash
provided from (used in)
operating activities:
Film contract amortization ............ 101,869 102,768 117,659
Film contract payments ................ (117,928) (147,557) (103,174)
Prepaid broadcast rights .............. 8,166 (34,426) --
Depreciation and other
amortization ........................ 20,355 20,430 12,667
Gain on disposition of
Time Warner Inc. securities ......... -- (219,373) (8,082)
Minority interest ..................... 15,872 20,038 7,400
Other ................................. 8,144 (12,441) (38,184)
Changes in assets and
liabilities (in 1992,
net of amounts acquired):
Accounts receivable ............... (11,305) (7,996) 11,128
Other assets ...................... 305 (7,628) 8,917
Accounts payable and
other liabilities ............... 4,932 1,384 (14,200)
Income taxes ...................... 4,996 4,688 877
Net cash provided
from (used in) operating
activities .................... 128,283 (55,827) 104,303
Cash Flows from Investing Activities:
Disposition of marketable securities ...... 1,097,409 947,015 394,462
Purchase of marketable securities ......... (941,400) (927,268) --
Capital expenditures, net ................. (8,242) (10,835) (10,587)
Purchase of Pinelands, Inc.,
net of cash acquired .................... -- -- (279,422)
Other ..................................... (6,867) (4,515) --
Net cash provided from
investing activities ........... 140,900 4,397 104,453
Cash Flows from Financing Activities:
Purchase of treasury stock ................ (73,449) (25,428) (86,479)
Capital transactions of subsidiary ........ (8,904) (8,760) (4,345)
Payment of special dividend ............... -- (51,893) --
Net cash used in
financing activities ........... (82,353) (86,081) (90,824)
Net Increase (Decrease) in
Cash and Cash Equivalents ................. (186,830) (137,511) 117,932
Cash and Cash Equivalents
at Beginning of Year ...................... 35,371 172,882 54,950
Cash and Cash Equivalents
at End of Year ............................ $ 222,201 $ 35,371 $ 172,882
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
TREASURY
OUTSTANDING SHARES SHARES DOLLAR AMOUNT (IN THOUSANDS)
CLASS A CLASS B CLASS A CLASS A CLASS B CAPITAL RETAINED TREASURY MARKET
COMMON COMMON COMMON COMMON COMMON SURPLUS EARNINGS STOCK VALUATION
ACCOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1991 ... 9,647,665 18,000,000 (118,008) $96 $180 $221,428 $1,405,057 $(5,901) --
Net income .......... -- -- -- -- -- -- 109,295 -- --
Dividend on
common stock--
$2.00 per share ... -- -- -- -- -- -- (52,106) -- --
Acquisition of
treasury stock .... -- -- (1,474,857) -- -- -- -- (86,479) --
Retirement of
treasury stock .... (1,474,857) -- 1,474,857 (14) -- (86,465) -- 86,479 --
Capital transactions
of subsidiary ..... -- -- (1,812) -- -- (1,029) -- (93) --
BALANCE AT
DECEMBER 31, 1992 ... 8,172,808 18,000,000 (119,820) 82 180 133,934 1,462,246 (5,994) --
Net income .......... -- -- -- -- -- -- 224,286 -- --
Acquisition of
treasury stock .... -- -- (449,390) -- -- -- -- (33,307) --
Retirement of
treasury stock .... (449,390) -- 449,390 (5) -- (33,302) -- 33,307 --
Capital transactions
of subsidiary ..... -- -- (3,171) -- -- (2,450) -- (156) --
BALANCE AT
DECEMBER 31, 1993 ... 7,723,418 18,000,000 (122,991) 77 180 98,182 1,686,532 (6,150) --
Net income .......... -- -- -- -- -- -- 92,877 -- --
Acquisition of
treasury stock .... -- -- (845,900) -- -- -- -- (65,818) --
Retirement of
treasury stock .... (845,900) -- 845,900 (8) -- (65,810) -- 65,818 --
Capital transactions
of subsidiary ..... -- -- (2,039) -- -- (2,761) -- (104) --
Marketable securities
valuation adjustment -- -- -- -- -- -- -- -- (13,131)
BALANCE AT
DECEMBER 31, 1994 ... 6,877,518 18,000,000 (125,030) $69 $180 $29,611 $1,779,409 $(6,254) $(13,131)
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
BHC Communications, Inc. and its subsidiaries. BHC is a majority owned (72.7% at
December 31, 1994 and 70.3% at December 31, 1993) subsidiary of Chris-Craft
Industries, Inc. BHC's primary business is television broadcasting, conducted
through wholly owned subsidiaries, which operate three television stations
(including WWOR, acquired August 1992 in the transaction described below), and
through majority owned (55.2% at December 31, 1994 and 54.3% at December 31,
1993) United Television, Inc. (UTV), which operates five television stations.
The interest of UTV shareholders other than BHC in the net income and net assets
of UTV is set forth as minority interest in the accompanying Consolidated
Statements of Income and Consolidated Balance Sheets, respectively. Intercompany
accounts and transactions have been eliminated.
In August 1992, BHC completed the acquisition of Pinelands, Inc., owner and
operator of television station WWOR, which broadcasts into a tri-state area
including New York City. The $313 million acquisition, funded from BHC's
internal cash balances, has been accounted for as a purchase and the excess of
purchase price over the fair value of net assets acquired, totalling
$305,897,000, is being amortized on a straight-line basis over 40 years. The
following unaudited pro forma consolidated financial information for 1992 has
been prepared as if the acquisition had occurred at the beginning of that year.
Such pro forma information does not purport to be indicative of the results of
operations that actually would have been obtained if the acquisition had
occurred on the date indicated or that may be obtained in the future (in
thousands except per share amounts):
Operating revenues ...................................... $399,803
Net income .............................................. $97,714
Net income per share .................................... $3.66
(B) FINANCIAL INSTRUMENTS
Cash and cash equivalents totalled $222,201,000 at December 31, 1994 and
$35,371,000 at December 31, 1993. Cash equivalents are money market securities
having maturities at time of purchase not exceeding three months. The fair value
of cash equivalents approximates carrying value, reflecting their short
maturities.
Effective January 1, 1994, BHC adopted Statement of Financial Accounting
Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and
Equity Securities". Prior to that date, marketable securities were carried at
the lower of cost or market at the balance sheet date. Under SFAS 115, all of
BHC's marketable securities have been categorized as available for sale, and are
carried at fair market value. Since marketable securities are available for
current operations, all are included in current assets at December 31, 1994, as
follows:
(IN THOUSANDS) FAIR VALUE COST
U.S. Government securities ............... $1,216,167 $1,239,691
Other .................................... 58,077 59,631
$1,274,244 $1,299,322
Of the U.S. Government securities, 68% mature within one year, 87% within
two years, and all within five years.
The net unrealized holding loss at December 31, 1994 of $25,078,000
($13,131,000, net of deferred income taxes and minority interest) consists of
gross unrealized gains of $526,000 and gross unrealized losses of $25,604,000.
Proceeds from the sale of marketable securities totalled $1,097,409,000 in 1994,
and realized
<PAGE>
gains and losses were $1,193,000 and $7,734,000, respectively. The cost of
securities sold is based on specific identification.
Marketable securities at December 31, 1993 include U.S. Government
securities totalling $1,372,602,000. The aggregate fair value of marketable
securities at that date was $1,472,122,000.
(C) FILM CONTRACTS
BHC's television stations own film contract rights which allow generally for
limited showings of films and syndicated programs. Film contract rights and
related liabilities are recorded when the films become available for
telecasting.
Contracts are amortized over the estimated number of showings using
primarily accelerated methods as films are used, based on management's estimates
of the flow of revenue and ultimate total cost for each contract. The estimated
costs of recorded film contract rights to be charged to income within one year
are included in current assets; payments on such contracts due within one year
are included in current liabilities. The approximate future maturities of film
contracts payable after one year at December 31, 1994 are $39,849,000,
$29,816,000, $12,865,000 and $6,518,000 in 1996, 1997, 1998 and thereafter,
respectively. The net present value at December 31, 1994 of such payments, based
on an 8.5% discount rate, was approximately $73,001,000. See Note 7.
(D) DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is generally provided on the
straight-line method over the estimated useful lives of the assets, except that
leasehold improvements are amortized over the lives of the respective leases, if
shorter.
(E) INTANGIBLE ASSETS
Intangible assets reflect the excess of the purchase prices of businesses
acquired over net tangible assets at dates of acquisition. Amounts primarily
relate to WWOR and are being amortized on a straight-line basis over 40 year
periods. Accumulated amortization of intangible assets totalled $38,011,000 at
December 31, 1994 and $28,690,000 at December 31, 1993.
(F) REVENUE RECOGNITION AND
BARTER TRANSACTIONS
Revenue is recognized upon broadcast of television advertising. The
estimated fair value of goods or services received in barter (nonmonetary)
transactions is recognized as revenue when the air time is used by the
advertiser.
(G) SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for income taxes totalled $52,900,000 in 1994, $142,074,000 in
1993 and $34,033,000 in 1992.
2. INTERESTS IN WARNER
COMMUNICATIONS INC. AND
TIME WARNER INC.:
From 1984 to 1989, BHC was the largest shareholder of Warner Communications
Inc., and Warner held a significant minority interest in BHC. Pursuant to the
merger of Warner and Time Warner Inc., BHC in 1989 sold for cash 63% of its
interest in Warner, and in 1990 exchanged its remaining Warner shares primarily
for Time Warner convertible preferred stock. BHC recorded pretax gains of
$1,894,188,000 on such transactions.
During 1993, Time Warner redeemed its convertible preferred shares held by
BHCfor cash and convertible subordinated debentures. Such debentures
subsequently were partially redeemed by Time Warner,
<PAGE>
and the balance was sold. Income associated with Time Warner securities is
included in the accompanying Consolidated Statements of Income as follows (in
thousands):
YEAR ENDED
DECEMBER 31,
1993 1992
Gain on disposition,
after expense of $2,905
in 1993 ................................... $219,373 $8,082
Dividend income ............................. 14,672 $85,977
Interest income ............................. 22,577 --
$256,622 $94,059
Expense deducted from the 1993 gain on disposition consists of Chris-Craft
compensation expense reimbursed by BHC pursuant to its management agreement with
Chris-Craft.
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following (in
thousands):
DECEMBER 31,
1994 1993
Accounts payable ............................... $8,799 $6,656
Payable for securities purchased ............... 248 15,151
Accrued expenses --
Deferred barter revenue ................... 32,601 33,252
Payroll and compensation .................. 15,042 7,853
Other ..................................... 14,144 18,922
$70,834 $81,834
4. SHAREHOLDERS' INVESTMENT:
In January 1990, immediately prior to BHC becoming a public company, BHC's
outstanding shares consisted of 12,000,000 shares of Class A common stock (all
held by Warner and representing 40% of BHC's then outstanding equity) and
18,000,000 shares of Class B common stock (all held by Chris-Craft and
representing 60% of BHC's then outstanding equity). Pursuant to the 1990 merger
of Warner and Time Warner, the BHC Class A common shares held by Warner were
distributed to former Warner shareholders, including BHC subsidiaries. Through
December 31, 1994, BHC purchased 4,529,677 Class A common shares at an aggregate
cost of $265,218,000, so that BHC common shares outstanding for accounting
purposes totalled 24,752,488 at December 31, 1994, after reflecting as treasury
stock BHC's interest in its Class A common shares held by UTV. At December 31,
1994, purchases of 970,323 shares of Class A common stock were authorized.
Each share of Class B common stock entitles the holder to ten votes (Class
A common stock entitles the holder to one vote per share), is convertible at all
times into Class A common stock on a share-for-share basis, is not transferable
except to specified persons and in general carries the same per share dividend
and liquidation rights as a share of Class A common stock, except that the Board
of Directors may in its discretion declare greater cash dividends per share on
the Class A common stock than on the Class B common stock.
5. RETIREMENT PLANS:
Chris-Craft and UTV maintain noncontributory defined benefit pension plans
covering substantially all their employees. Benefits accrue annually based on
compensation paid to participants each year. The funding policy is to contribute
annually to the plans amounts
<PAGE>
sufficient to fund current service costs and to amortize any unfunded accrued
liability over periods not to exceed 30 years. BHC pension expense, including
amounts accrued in Chris-Craft and UTV nonqualified plans for retirement
benefits in excess of statutory limitations, totalled $2,021,000 in 1994,
$1,654,000 in 1993 and $1,528,000 in 1992.
It is not practicable to determine which assets of the Chris-Craft pension
plan relate to BHC. The estimated funded status of the Chris-Craft and UTV plans
in which BHC participates was as follows (in thousands):
DECEMBER 31,
1994 1993
Actuarial present value of:
Vested benefit obligation ................ $(23,261) $(20,366)
Nonvested benefit obligation ............. (1,558) (1,412)
Accumulated benefit obligation ...... (24,819) (21,778)
Effect of projected
compensation increases ................... (7,655) (7,709)
Projected benefit obligation......... (32,474) (29,487)
Fair value of plan assets (primarily
listed securities and temporary
investments) ............................. 19,774 18,779
Excess .............................. (12,700) (10,708)
Unrecognized net asset at date
of initial application of
SFAS No. 87, being amortized
over 15 years ............................ (283) (333)
Unrecognized net loss from
past experience being
amortized over 15 years .................. 2,637 2,621
Pension liability ........................ $(10,346) $(8,420)
Assumptions used in accounting for pension plans are as follows:
Discount rate at end of year ................................... 7.25%*
Rate of increase in future compensation levels ................. 4.50%*
Expected long-term rate of return on assets .................... 7.75%
* 7.75% and 5.00%, respectively, in 1992.
The aggregate BHC expense of other retirement plans in which its employees
participate, primarily stock purchase and profit sharing plans of Chris-Craft
and UTV and related accruals in the nonqualified retirement plans mentioned
above, totalled $4,877,000 in 1994, $4,977,000 in 1993 and $3,373,000 in 1992.
6.INCOME TAXES:
Effective January 1, 1993, BHC adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes", under which
deferred income tax amounts reflect the expected future tax consequences arising
from temporary differences in the bases of assets and liabilities for financial
accounting and income tax purposes. The cumulative effect of adoption of SFAS
109, the amount of which is immaterial, is included in the 1993 provision for
income taxes.
Income taxes are provided in the accompanying Consolidated Statements of
Income as follows:
IN THOUSANDS YEAR ENDED DECEMBER 31,
1994 1993 1992
Current (including 1993
effect of adoption):
Federal ......................... $148,625 $127,450 $26,568
State ........................... (8,600) 15,975 7,650
40,025 143,425 34,218
Deferred:
Federal ......................... 16,275 1,450 1,732
State ........................... 1,600 2,025 150
17,875 3,475 1,882
$57,900 $146,900 $36,100
<PAGE>
State income taxes in 1994 reflect a $20,000,000 reversal of amounts
accrued in prior years, following the favorable resolution of routine audits.
Differences between income taxes at the federal statutory income tax rate
and total income taxes provided are as follows:
IN THOUSANDS YEAR ENDED DECEMBER 31,
1994 1993 1992
Taxes at federal statutory
rate .......................... $58,327 $136,928 $51,950
State income taxes, net ......... (4,559) 11,692 5,148
Amortization of intangible
assets ........................ 2,801 2,847 1,463
Dividend exclusion .............. (447) (3,984) (20,574)
Enacted rate change
(to 35% from 34%) ............. -- (1,129) --
Other ........................... 1,778 546 (1,887)
$57,900 $146,900 $36,100
Deferred tax assets and deferred tax liabilities reflect the tax effect of
the following differences between financial statement carrying amounts and tax
bases of assets and liabilities:
IN THOUSANDS DECEMBER 31,
1994 1993
Accrued liabilities not deductible until paid ...... $14,400 $25,786
Allowance for doubtful accounts .................... 2,671 2,526
Film contract rights ............................... 6,870 14,399
SFAS 115 adjustment ................................ 9,950 --
Other .............................................. 2,048 1,115
Deferred tax assets ........................... 35,939 43,826
Property and equipment ............................. (3,698) (3,840)
Other .............................................. (653) (335)
Deferred tax liabilities ...................... (4,351) (4,175)
Net deferred tax assets ....................... $31,588 $39,651
7. COMMITMENTS AND CONTINGENCIES:
The aggregate amount payable by BHC's television stations under contracts
for programming not currently available for telecasting and, accordingly, not
included in film contracts payable and the related contract rights in the
accompanying Consolidated Balance Sheet, totalled $154,800,000 at December 31,
1994 (including $45,400,000 applicable to UTV).
In July 1994, BHC and Viacom Inc.'s Paramount Television Group formed the
United Paramount Network, a fifth broadcast television network which premiered
January 1995. BHC currently owns 100% of UPN, and Paramount has an option
exercisable through January 15, 1997 to acquire an interest in UPN equal to that
of BHC. The option price is equivalent to approximately one-half of BHC's
aggregate cash contributions to UPN through the exercise date, plus interest;
payment may be deferred through the option expiration date. The cost of
developing UPN will be significant, and BHC has agreed to make minimum UPN
expenditures of at least $150,000,000 through 1996. Network expenditures and
related operating losses are expected to significantly exceed such amount for
that period, and to remain substantial thereafter.
BHC is a party to various pending legal proceedings arising in the ordinary
course of business. In the opinion of management, after taking into account the
opinion of counsel with respect thereto, the ultimate resolution of these
matters should not have a material effect on BHC's consolidated financial
position or results of operations.
<PAGE>
8. RELATED PARTY TRANSACTIONS:
Included in selling, general and administrative expenses are management
fees BHC paid Chris-Craft of $11,000,000 in 1994, $8,000,000 in 1993 and
$5,000,000 in 1992, and management and directors' fees UTV paid Chris-Craft
totalling $570,000 in 1994, $549,000 in 1993 and $534,000 in 1992.
The management contract between BHC and Chris-Craft additionally provides
for the reimbursement by BHC to Chris-Craft of expenses incurred by Chris-Craft
specifically relating to BHC, including compensation payable by Chris-Craft to
its employees with respect to any extraordinary financial results of BHC. In
connection with the 1993 disposition of Time Warner securities, which resulted
in gains before income taxes and minority interest of approximately $219
million, BHC reimbursed Chris-Craft $2,905,000 for compensation expense payable
by Chris-Craft with respect to such disposition.
<PAGE>
SELECTED FINANCIAL DATA
BHC COMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Operating revenues ..................... $457,533 $411,999 $307,883 $262,568 $278,080
Operating income ....................... $112,982 $79,262 $22,362 $517 $25,690
Interest and other income, net ......... 53,667 55,340 36,374 57,311 71,867
Income associated with
Time Warner and, in 1990,
Warner securities .................... -- 256,622 94,059 87,657 685,215
Income taxes ........................... (57,900) (146,900) (36,100) (34,900) (277,600)
Minority interest ...................... (15,872) (20,038) (7,400) (2,470) (23,981)
Net income ........................... $92,877 $224,286 $109,295 $108,115 $481,191
Net income per share ................... $3.71 $8.67 $4.09 $3.89 $16.56
Cash and current marketable
securities ........................... 1,496,445 1,506,529 966,582 931,350 814,748
Film contract rights ................... 148,473 186,079 187,518 165,029 161,634
Noncurrent marketable
securities ........................... -- -- 450,022 732,740 690,898
Total assets ........................... 2,188,463 2,241,538 2,135,038 2,012,203 1,872,967
Long-term debt ......................... -- -- -- -- --
Shareholders' investment ............... $1,789,884 $1,778,821 $1,590,448 $1,620,860 $1,495,031
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
BHC's core operating cash flow is generated primarily by its television
broadcasting business. Television broadcasting cash flow generally parallels the
earnings of BHC's television stations, adjusted to reflect (i) the difference
between film contract payments and related film contract amortization and (ii)
the effect of significant prepayments for other broadcast rights. The
relationship between film contract payments and related amortization may vary
greatly between periods (payments exceeded amortization by $16.1 million in 1994
and $44.8 million in 1993, but amortization exceeded payments by $14.5 million
in 1992), and is dependent upon the mix of programs aired and payment terms of
the stations' contracts. In 1993, a BHC station made a $34.4 million broadcast
right prepayment, of which $8.2 million was amortized in 1994 and the balance
will be amortized through 1997. Station earnings rose strongly in 1994 and
station cash flow was more than double the corresponding 1993 amount.
BHC's cash flow additionally reflects earnings associated with its cash and
marketable securities. Prior to their disposition in 1993, substantial dividend
income was realized on BHC's large holdings of Time Warner Inc. convertible
preferred shares. Proceeds from the Time Warner dispositions were placed mostly
in money market instruments, primarily U.S. Government obligations, having lower
yields than the securities disposed.
Consolidated cash and marketable securities totalled $1.50 billion at
December 31, 1994 compared to $1.51 billion at December 31, 1993. Operating cash
flow in 1994 of $128.3 million was mostly offset by treasury stock purchases of
$73.4 million and a $25.1 million reduction in the carrying value of marketable
securities to reflect their fair value. BHC's 1993 operating cash flow deficit
of $55.8 million primarily reflects (i) income taxes on the disposition of BHC's
Time Warner convertible preferred stock, the related gain on which is excluded
from operating cash flow, (ii) the $44.8 million excess of film payments over
related amortization and (iii) the $34.4 million broadcast right prepayment.
A special cash dividend of $2.00 per share on BHC's Class A and Class B
common stock, totalling $51.9 million, was paid in January 1993. In February
1995, the Board of Directors declared a special cash dividend of $1.00 per
share, payable in April 1995. However, BHC has no plan to pay dividends on a
regular basis.
Since April 1990, BHC's Board of Directors has authorized the purchase of
up to 5,500,000 Class A common shares. Through December 31, 1994, 4,529,677
shares were purchased for a total cost of $265.2 million, including $65.8
million applicable to shares purchased in 1994.
BHC intends to expand its operations in the media, entertainment and
communications industries and to explore business opportunities in other
industries. BHC currently has no outstanding debt, and believes it is capable of
raising significant additional capital to augment its already substantial
financial resources, if desired, to fund such additional expansion.
In July 1994, BHC and Viacom Inc.'s Paramount Television Group formed the
United Paramount Network, a fifth broadcast television network which premiered
January 1995. BHC currently owns 100% of UPN, and Paramount has an option
through January 15, 1997 to acquire an interest in UPN equal to that of BHC. The
option price is equivalent to approximately one-half of BHC's aggregate cash
contributions to UPN through the exercise date, plus interest; payment may be
deferred through the option expiration date. BHC expenditures related to UPN
totalled $6.8 million in
<PAGE>
1994. The cost of developing UPN will be significant, and BHC has agreed to make
minimum UPN expenditures of at least $150 million through 1996. UPN expenditures
and related operating losses are expected to significantly exceed such amount
for that period, and to remain substantial thereafter.
BHC's television stations make commitments for programming that will not be
available for telecasting until future dates. At December 31, 1994, commitments
for such programming totalled approximately $154.8 million, including $45.4
million applicable to UTV. BHC capital expenditures generally have not been
material in relation to its financial position, and the related capital
expenditure commitments at December 31, 1994 (including any related to UPN) were
not material. BHC expects that its expenditures for UPN, future film contract
commitments and capital requirements for its present business will be satisfied
primarily from operations, marketable securities or cash balances.
RESULTS OF OPERATIONS
1994 VERSUS 1993
BHC's core television station business achieved record operating results in
1994. The substantial increase in station earnings, together with a reversal of
previously accrued income taxes, brought 1994 net income to $92,877,000, or
$3.71 per share, 32% greater than 1993 income of $70,299,000, or $2.72 per
share, excluding income associated with BHC's former holdings of Time Warner
securities. Net income in 1993, including Time Warner income, was $224,286,000,
or $8.67 per share.
A strong national economy and heavy political spending fueled demand for
television advertising in 1994. BHC's television station group posted a strong
11% increase in operating revenues, to a record $457,533,000 from $411,999,000
in 1993. After a 2% decline in their programming expenses, television station
earnings increased 44%, easily surpassing 1993's record. Operating income in
1994 rose 43%, to a record $112,982,000 from 1993's $79,262,000, even after
increases of approximately $12,000,000 in other operating expenses, primarily
the management fee paid Chris-Craft and program development expense.
Interest and other income declined to $53,667,000 from $55,340,000 in 1993.
A significant increase in interest income, reflecting the placement of Time
Warner proceeds in money market instruments, was offset by the UPN loss. The
1993 amount also reflects marketable securities gains.
State income taxes totalling $20,000,000, accrued in 1989 and 1990, were
reversed into income during 1994 following the favorable resolution of routine
audits. Such reversal was the primary factor in the reduction in BHC's effective
income tax rate to 35% in 1994 from 38% in 1993.
Earnings per share amounts vary favorably to related dollar amounts as
purchases by BHC of its Class A common stock have reduced the average number of
common shares outstanding from 26,734,000 in 1992 to 25,882,000 in 1993 and
25,007,000 in 1994.
1993 VERSUS 1992
BHC 1993 net income increased 105% to $224,286,000, or $8.67 per share,
from $109,295,000, or $4.09 per share, in 1992. The significant earnings
increase reflected record results at BHC's television broadcasting business and
substantial gains on disposition of BHC's remaining Time Warner securities.
Reflecting a full year's operations at WWOR and generally improved demand
for television advertising at BHC's other seven stations, operating revenues
rose 34% in 1993, to $411,999,000 from $307,883,000.
<PAGE>
Station earnings rose 126%, surpassing $100,000,000 for the first time, as BHC
stations other than WWOR achieved a 104% increase in their aggregate earnings.
Those stations recorded an 8% increase in their operating revenues and a 10%
reduction in their programming expenses. After goodwill amortization (mostly
relating to the acquisition of WWOR), program development expense (reduced $3.1
million from 1992), and corporate office expense of BHC and UTV (increased $4.1
million from 1992, primarily reflecting a $3 million increase in the management
fee paid Chris-Craft), operating income totalled $79,262,000, more than triple
1992's $22,362,000.
The 1993 reduction in programming expenses primarily reflects a significant
decline in program amortization. Such decline is attributable to (i) airing
certain syndicated programs for periods longer than originally estimated,
reflecting their sustained success, (ii) the acquisition of fewer replacement
programs, (iii) final determination that certain contract costs would be less
than previously estimated, and (iv) generally lower costs of programming.
Income associated with BHC's former holdings of Time Warner securities
increased to $256,622,000 in 1993, from $94,059,000 in 1992, as 1993 gains on
disposition aggregated $219.4 million versus $8.1 million in 1992. Other
nonoperating income totalled $55,340,000, up from $36,374,000 in 1992, primarily
reflecting other marketable securities gains and the placement of Time Warner
proceeds in money market instruments.
BHC's effective income tax rate rose to 38% in 1993 from 24% in 1992,
primarily due to a reduction in the proportion of not fully taxable dividend
income included in pretax income.
OPTION AGREEMENT
dated as of July 19, 1994
between
BHC NETWORK PARTNER, INC.
and
PCI NETWORK PARTNER INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
THE NETWORK. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Network Name . . . . . . . . . . . . . . . . . . . . 11
2.3 Form of Organization . . . . . . . . . . . . . . . . 11
ARTICLE 3
MANAGEMENT OF THE NETWORK. . . . . . . . . . . . . . . . . . . 12
3.1 The Operating Committee. . . . . . . . . . . . . . . 12
3.2 Appointment and Removal of Agents. . . . . . . . . . 12
3.3 Meetings of the Operating Committee. . . . . . . . . 12
3.4 Affiliate Board of Governors . . . . . . . . . . . . 13
ARTICLE 4
FINANCIAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Fiscal Year. . . . . . . . . . . . . . . . . . . . . 13
4.2 Budget; Funding. . . . . . . . . . . . . . . . . . . 13
4.3 Information; Books and Records . . . . . . . . . . . 13
4.4 Accountants. . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 5
DEVELOPMENT AND OTHER OBLIGATIONS. . . . . . . . . . . . . . . 14
5.1 Initial Station Clearances . . . . . . . . . . . . . 14
5.2 Services . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Provisions Relating to Launch Date . . . . . . . . . 16
ARTICLE 6
PARAMOUNT STATIONS; BHC STATIONS . . . . . . . . . . . . . . . 18
6.1 Paramount Stations . . . . . . . . . . . . . . . . . 18
6.2 BHC Stations . . . . . . . . . . . . . . . . . . . . 19
6.3 Maintenance of Existing Affiliations . . . . . . . . 19
6.4 Additional Affiliation Matters . . . . . . . . . . . 19
6.5 Sale of Party Affiliated Station . . . . . . . . . . 20
ARTICLE 7
PROGRAMMING. . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 STV. . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 STV Syndication. . . . . . . . . . . . . . . . . . . 22
7.3 Other Network Programs Licensed from Paramount . . . 23
7.4 Related Party Programming. . . . . . . . . . . . . . 25
7.5 Programming Produced by the Partners . . . . . . . . 26
ARTICLE 8
COVENANT NOT TO COMPETE. . . . . . . . . . . . . . . . . . . . 26
8.1 Covenant Not to Compete. . . . . . . . . . . . . . . 26
8.2 Restrictions on Permitted Networks . . . . . . . . . 27
8.3 Activities Outside Scope of Agreement. . . . . . . . 27
8.4 Acquisition or Development of a Competing Network. . 27
8.5 Notice . . . . . . . . . . . . . . . . . . . . . . . 31
8.6 Survival . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 9
OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Option . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Option Price . . . . . . . . . . . . . . . . . . . . 31
9.3 Manner of Exercise . . . . . . . . . . . . . . . . . 32
9.4 Third Party Investment . . . . . . . . . . . . . . . 38
ARTICLE 10
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 43
10.1 Due Incorporation . . . . . . . . . . . . . . . . . 43
10.2 Authority To Execute and Perform Agreement. . . . . 43
10.3 No Consents . . . . . . . . . . . . . . . . . . . . 44
10.4 No Conflicts. . . . . . . . . . . . . . . . . . . . 44
10.5 Litigation. . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 11
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 45
11.1 Breach of Representation, Warranty or Covenant. . . 45
11.2 Network Operations; Unauthorized Actions. . . . . . 45
11.3 Procedures for Indemnification. . . . . . . . . . . 45
11.4 Survival. . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 12
CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . 46
12.1 General . . . . . . . . . . . . . . . . . . . . . . 46
12.2 Third Party Investor . . . . . . . . . . . . . 47
ARTICLE 13
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.1 Termination . . . . . . . . . . . . . . . . . . . . 48
13.2 Survival. . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 14
GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.1 Notices . . . . . . . . . . . . . . . . . . . . . . 49
14.2 Status of Operating Committee . . . . . . . . . . . 50
14.3 Further Assurances. . . . . . . . . . . . . . . . . 50
14.4 Specific Enforcement. . . . . . . . . . . . . . . . 50
14.5 Entire Agreement. . . . . . . . . . . . . . . . . . 50
14.6 Inconsistent Terms. . . . . . . . . . . . . . . . . 50
14.7 Computation of Time . . . . . . . . . . . . . . . . 51
14.8 Amendment; Waiver . . . . . . . . . . . . . . . . . 51
14.9 Headings. . . . . . . . . . . . . . . . . . . . . . 51
14.10 Expenses . . . . . . . . . . . . . . . . . . . . . 51
14.11 Counterparts . . . . . . . . . . . . . . . . . . . 51
14.12 References . . . . . . . . . . . . . . . . . . . . 51
14.13 Governing Law. . . . . . . . . . . . . . . . . . . 52
EXHIBITS:
A - Form of Advertising Sales Agent Agreement
B - Form of Affiliation Agreement for Primary Stations
C - Form of Affiliation Agreement for Secondary Stations
D - Form of BHC Guaranty
E - Form of Interim Agreement
F - Form of Joint Venture Agreement
G - Form of Paramount Guaranty
H - Form of PPC Guaranty
I - Form of Services Agreement
J - Form of STV License Agreement
K-1 - Form of Trademark Agreement
K-2 - Form of United Trademark Agreement
K-3 - Form of Nameco Trademark Agreement
L - List of Operating Committee Members
M - List of Paramount Stations
N - List of BHC Stations
O - Form of PCI Note (together with Summary of Terms of
Letter of Credit)
P - Representations of BHC
Q - Representations of PCI
R - Matters to be Covered by Opinion of Counsel to BHC/NP
S - Matters to be Covered by Opinion of Counsel to PCI/NP
SCHEDULE I - Affiliate Sign-Up Costs and Development Costs
SCHEDULE II - Conditions to Affiliation Agreements
SCHEDULE III - Terms of Junior Interest
SCHEDULE IV - Description of Certain Agreements<PAGE>
<PAGE>
OPTION AGREEMENT
This Option Agreement, dated and effective as of July 19,
1994, is between BHC Network Partner, Inc. ("BHC/NP"), a wholly-
owned direct subsidiary of BHC Communications, Inc. ("BHC"), and
PCI Network Partner Inc. ("PCI/NP"), a wholly-owned indirect
subsidiary of Paramount Communications Inc. ("Paramount") (BHC/NP
and PCI/NP are sometimes referred to individually as a "Party" and
collectively as the "Parties").
ARTICLE 1
DEFINITIONS
"Acceptable Station" shall mean, at any time, a Party
Station (whether now owned or hereafter acquired) if, at such time,
no other Party Station which serves substantially the same
designated market areas is an Affiliate or is in the process of
becoming an Affiliate pursuant to Section 6.4.1.
"Advertising Sales Agent Agreement" shall mean the
agreement between BHC/NP and Premier Advertiser Sales, Inc., which
agreement is in the form of Exhibit A.
"Affiliate" shall mean a broadcast television station or
other television exhibitor that has entered into an Affiliation
Agreement with BHC/NP, the Network Entity or Holdingco.
"Affiliated Person" with respect to any Person shall mean
any other Person which, directly or indirectly, is Controlled by,
is in Control of or is under common Control with that Person;
provided, that except as used in Sections 5.1.3, 5.3.1 and 9.3.2
and in Article 11, "Affiliated Person" shall not include any
individual or trust or any closely held company that is not
Controlled by any Person required to register any of its equity
securities under the Securities Exchange Act of 1934.
"Affiliation Agreement" shall mean an agreement relating
to the broadcast of Network programming entered into between
BHC/NP, Holdingco or the Network Entity (either as an original
party or as an assignee of a Party or an Affiliated Person of a
Party) and a broadcast television station or other television
exhibitor pursuant to which the Network Entity grants a limited
license to telecast certain television programming during
designated time periods, which agreement shall be in substantially
the form of either Exhibit B (Primary Stations) or Exhibit C
(Secondary Stations) unless otherwise agreed to by the Operating
Committee.
"Agreement" shall mean this Option Agreement as amended
from time to time in accordance with the terms hereof.
"BHC Guaranty" shall mean the agreement and guaranty
executed by BHC in favor of PCI/NP and its Parent, among other
things, guaranteeing all of the obligations of BHC/NP and any BHC
Holder under this Agreement and the Constituent Documents, which
guaranty is in the form of Exhibit D.
"BHC Holders" shall mean BHC and/or any Affiliated Person
of BHC which is a Permitted Transferee that holds any Equity
Interests or any portion of a BHC Loan on the Effective Date.
"BHC Loans" shall have the meaning ascribed to such term
in Section 4.2.
"BHC Station" shall mean a broadcast television station
owned or Controlled by BHC or one or more of its Affiliated
Persons.
"Board" shall mean the Board of Directors of BHC/NP.
"Budget" shall mean the capital and operating budget of
the Network Entity for any Budget Period.
"Budget Period" shall mean the period from the date
hereof through December 31, 1995 and each fiscal year of the
Network Entity thereafter.
"CEO" shall mean the Chief Executive Officer of the
Network.
"Competing Network" shall mean any entity that (a) is the
WB Television Network or any network that has, as a broadcast
affiliate, a station currently Controlled by the Tribune Company or
an Affiliated Person of the Tribune Company and/or (b) meets each
of the following criteria: (i) delivers multiple video programming
in the United States and primarily in pattern; (ii) reaches at
least 60% of the Television Households; (iii) is supported
primarily by advertising revenues; and (iv) has a broadcast
component to its delivery system that includes broadcast affiliates
other than Permitted Affiliates. For the purposes of clause (iv)
of the preceding sentence, "broadcast" shall not include Non-
Standard Television. "Competing Network" shall not include any of
the following unless, in each case, each of the provisions set
forth in clauses (a) or (b) above is met: (A) any international
network programming service; (B) any regional programming service;
or (C) any cable delivery (basic, pay or pay-per-view) or any other
delivery by means of Non-Standard Television.
"Constituent Documents" shall mean the Certificate of
Incorporation, By-laws, Joint Venture Agreement, other partnership
agreement, shareholder agreement (or other similar agreement) or
other constituent documents of the Network Entity.
"Continuation Notice" shall have the meaning ascribed to
such term in Section 5.3.2.
"Control" shall mean, as to any Person, the power to
direct or cause the direction of the management or operation of
such Person, whether through ownership of the voting power of such
Person, by contract or otherwise.
"Covered Parties" shall have the meaning ascribed to such
term in Section 8.1.
"Damages" shall have the meaning ascribed to such term in
Section 11.1.
"Development Costs" shall mean all direct out-of-pocket
costs and other costs (including, without limitation, travel
expenses and filing fees) incurred or accrued by a Party or an
Affiliated Person of a Party, its directors, officers, employees or
agents in connection with the development and promotion of the
Network or which are otherwise solely related to the activities of
the Network, in any case not exceeding such amount as the Operating
Committee shall approve. "Development Costs" shall include
Affiliate Sign-Up Costs but shall not include (a) attorneys' fees
and other costs relating to the negotiation and execution of the
Relevant Agreements or (b) any corporate overhead or employee or
personnel costs incurred or accrued by a Party or its Affiliated
Persons. As used herein, "Affiliate Sign-Up Costs" shall mean all
costs (whether or not requiring expenditures by a Party or its
Affiliated Persons), incurred or accrued by such Party or their
respective Affiliated Persons in connection with the solicitation
of Affiliates (other than Party Affiliated Stations) and the
execution of Affiliation Agreements (other than with Party
Affiliated Stations). The Parties hereby acknowledge and agree
that the amount specified as such for each Party on Schedule I are
the Development Costs incurred or accrued as of the date hereof by
such Party or its Affiliated Persons other than Affiliate Sign-Up
Costs, the amount of which will be determined in accordance with
Section 5.1.4.
"Effective Date" shall have the meaning ascribed to such
term in Section 9.3.1.
"Equity Interests" shall mean (a) any capital stock or
partnership interest or any securities representing any other
equity interest in the Network Entity, or (b) any securities
convertible into or exchangeable for any capital stock or
partnership interest in the Network Entity or any other rights,
warrants or options to acquire any of the foregoing securities or
interests.
"Exercise Notice" shall have the meaning ascribed to such
term in Section 9.3.1.
"Existing Network" shall mean the network operations of
any of ABC, NBC, CBS or Fox Broadcasting.
"FCC" shall mean the Federal Communications Commission.
"Genre" shall mean any of the following categories of
episodes: (a) a one-half hour situation comedy on film; (b) a one-
half hour situation comedy on tape; (c) a one hour drama; (d) a one
hour action/adventure; (e) a one-half hour reality program; or (e)
a one hour reality program.
"General Entertainment" shall mean varied programming
with a broad-based appeal which could include a mix of comedy,
drama, news, sports and other forms of programming.
"Holdingco" shall have the meaning ascribed to such term
in Section 5.1.2.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, 15 U.S.C. $18a et. seq., as amended, and
the rules promulgated thereunder by the Federal Trade Commission,
16 C.F.R. $803.1 et. seq.
"Indemnifying Party" shall have the meaning ascribed to
such term in Section 11.3.
"Indemnitee" shall have the meaning ascribed to such term
in Section 11.1.
"Initial Distribution Amount" shall mean an amount equal
to (a) one-half of the Investment Amount minus (b) the greater of
$25 million and 12.5% of the Investment Amount, provided, that if
such amount is less than or equal to zero, the Initial Distribution
Amount shall be zero.
"Interim Agreements" shall mean, collectively, the
agreements between PDI, as agent for PPC, and each of the BHC
Stations which are Affiliates relating to the licensing of repeat
episodes of STV, which agreements are in the form of Exhibit E.
"Investment Amount" shall have the meaning ascribed to
such term in Section 9.2 except that the reference to "Effective
Date" shall be deemed to be, for purposes of Section 5.3.5, a
reference to the "90th Day", and, for purposes of Sec-
tion 9.4.3(a)(ii), a reference to the closing time for the first
Public Offering.
"Investment Notice" shall have the meaning ascribed to
such term in Section 9.4.2.
"Joint Venture Agreement" shall mean an agreement between
each BHC Holder, PCI/NP and any Permitted Transferee of PCI/NP with
respect to the Partnership in the form of Exhibit F.
"Junior Interest" shall have the meaning ascribed to such
term in Section 5.3.4(e).
"Launch Date" shall mean the date of the first broadcast
by the Network to the Affiliates of regularly scheduled
programming, provided, that such broadcast occurs on or before
February 15, 1995.
"Loan Rate" shall mean the "prime rate" as reported from
time to time in the Wall Street Journal.
"Material Affiliation Breach" shall mean the failure
(other than a failure arising from force majeure) of a Party
Affiliated Station to (a) accept the Network feed as provided by
the Network Entity without any changes or (b) exhibit such feed
intact during the designated time periods; provided, however, it
shall not constitute a Material Affiliation Breach if such failure
(i) is inadvertent on the part of the Party Affiliated Station,
(ii) constitutes an Authorized Preemption (as such term is defined
in such Affiliation Agreement) or (iii) constitutes an Unauthorized
Preemption (as such term is defined in such Affiliation Agreement)
and such Party Affiliated Station has not received notice from the
Network Entity that it has made more than two other Unauthorized
Preemptions during the preceding twelve-month period. For the
purposes of this definition, a failure shall not be deemed to be
inadvertent if such breach evidences a pattern of activity.
"Minimum Percentage" shall mean (a) 25% if the Exercise
Notice is given on or before January 15, 1996, and (b) 33-1/3% if
the Exercise Notice is given thereafter.
"Nameco" shall have the meaning ascribed to such term in
Section 2.2.
"Nameco Trademark Agreement" shall mean the trade name
and service mark agreement between Nameco and BHC/NP relating to
the use by the Network of the name "United Paramount Television
Network", and certain other trade names, trademarks and service
marks, which agreement is in the form of Exhibit K-3.
"Network" shall have the meaning ascribed to such term in
Section 2.1.
"Network Assets and Liabilities" shall mean all of the
tangible and intangible assets of the Network Entity (including any
predecessor entity) relating to or used in connection with the by
the FCC, conduct of the business of the Network or, in the case of
assets of the type specified in clauses (d), (e), (f), (h) and (i),
below, arising out of the conduct of the business of the Network,
as they shall exist on the Effective date, including, without
limitation, the following:
(a) all buildings, fixtures and real property;
(b) all machinery and equipment, vehicles, furniture and
all other tangible property;
(c) all inventory, including, without limitation, all
work in process, finished products and supplies;
(d) cash, money market investments and prepaid expenses;
(e) all right, title and interest of the Network Entity
(and any predecessor entity) in and to all programming and
projects in development, contracts (including, without
limitation, the Affiliation Agreements) and commitments to
which the Network Entity or any predecessor entity is a party;
(f) all licenses, permits, franchises, consents or
authorizations of any regulatory body and applications
therefor;
(g) all rights to the use of United States and foreign
registered and unregistered trademarks, patents, trade names,
service marks, copyrights and the like, and all applications
therefor and rights of renewal, modification or extension
thereof, which are owned by, or registered in the name of or
licensed to the Network Entity or any predecessor entity;
(h) all accounting information and other records
pertaining to the operations of the Network Entity and all
media in which all or any of the information, knowledge, data
or records may be related or stored, all personnel records,
credit information, advertising, promotional and sales
materials, information relating to Affiliates, all software,
including programs relating to any of the information listed
herein or any similar information;
(i) all accounts receivable of the Network Entity; and
(j) all other rights, properties and assets relating to
or used in connection with the conduct of the business of the
Network;
and all debts, liabilities, obligations and commitments of any kind
or nature of the Network Entity (including any predecessor entity),
whether accrued, absolute or contingent, whether in existence on
the Effective Date or arising thereafter, relating to or incurred
in connection with or arising out of the conduct of the business of
the Network, including, without limitation, any obligations of
BHC/NP under Section 11.2(a). "Network Assets and Liabilities"
shall not include (i) any assets that either did (or do) not relate
to, or were (or are) not used in connection with, or did (or do)
not arise out of, the conduct of the business of the Network or
(ii) any liabilities that either did (or do) not relate to, or were
(or are) not incurred in connection with, or did (or do) not arise
out of, the conduct of the business of the Network.
"Network Entity" shall mean BHC/NP or such other
corporation, general or limited partnership, joint venture or
limited liability company formed for the purposes of, and that is
engaged in, carrying on the business of the Network and holds the
Network Assets and Liabilities, in each case either directly or
through one or more entities wholly-owned by the Network Entity.
"Nielsen" means A.C. Nielsen Company.
"90th Day" shall have the meaning ascribed to such term
in Section 5.3.5.
"Non-Compete Term" shall have the meaning ascribed to
such term in Section 8.1.1.
"Non-Standard Television" shall include, without
limitation, VBI, additional transmissions through the active video
of an NTSC signal, advanced television distribution service -- HDTV
(other than simulcasting of the Network, or original broadcasting
of the Network if required by the FCC), DTH, TVRO, MMDS, MLDS, MDS,
cable (wire, wireless or fiber optic), MATV, SMATV, VDT (video dial
tone), 18 ghz, 28 ghz (i.e., Cellular Vision), DBS (FSS, BSS or Ka
Band), IVDS, POFS and scrambled UHF and VHF.
"0+0s" shall have the meaning ascribed to such term in
Section 8.4.1(b).
"Operating Committee" shall have the meaning ascribed to
such term in Section 3.1.
"Option" shall have the meaning ascribed to such term in
Section 9.1.
"Option Percentage" shall have the meaning ascribed to
such term in Section 9.1.
"Option Period" shall mean the period from the date
hereof to and including January 15, 1997.
"Paramount Guaranty" shall mean the agreement and
guaranty executed by Paramount in favor of BHC/NP and its Parent,
among other things, guaranteeing certain non-financial obligations
of PCI/NP and its Permitted Transferees under this Agreement and
the Constituent Documents, which guaranty is in the form of Exhibit
G.
"Paramount Station" shall mean a broadcast television
station owned or Controlled by Paramount or one or more of its
Affiliated Persons.
"Parent" shall mean Paramount, in the case of PCI/NP, and
BHC, in the case of BHC/NP.
"Partnership" shall mean the general partnership that may
be formed by BHC/NP and PCI/NP (and their Permitted Transferees) in
accordance with the terms of the Joint Venture Agreement under the
provisions of the Uniform Partnership Act of the State of Delaware
as contemplated by Section 9.3.2.
"Party Affiliated Stations" shall mean, collectively, all
Party Stations which are Affiliates.
"Party Station" shall mean any Paramount Station or any
BHC Station.
"PCI/NP Notes" shall have the meaning ascribed to such
term in Section 9.3.8.
"PDI" shall mean Paramount (PDI) Distribution, Inc., a
Delaware corporation.
"Permitted Affiliate" of any network shall mean any
broadcast affiliate that (a) serves a DMA which is served by an
Affiliate of the Network or (b) together with all other broadcast
affiliates of such network which serve DMAs other than DMAs served
by Affiliates of the Network, serves 5% or less of the DMAs;
provided, that "Permitted Affiliate" shall not include a broadcast
affiliate (i) with more than a 2.0 sign-on to sign-off Nielsen
rating (based upon the most current ratings book at the time of
affiliation) or (ii) which became an affiliate of such network
within the four-year period, if any, following such affiliate's
sign-up as an Affiliate of the Network. For the purposes of this
definition, "broadcast" shall not include Non-Standard Television
and "DMA" shall mean designated market area in the United States,
including its territories and possessions (other than Puerto Rico).
"Permitted Network" shall mean network activity by one or
more Covered Parties that is not a Competing Network.
"Permitted Transferee" shall mean, with respect to BHC/NP
and PCI/NP, BHC and Paramount, respectively, and any Person in
which BHC or Paramount, respectively, owns, directly or indirectly,
not less than 51% of the voting interest and not less than 33-1/3%
of the economic interest.
"Person" shall mean any individual, corporation,
partnership, firm, group, joint venture, association or similar
entity.
"PPC" shall mean Paramount Pictures Corporation, a
Delaware corporation.
"PPC Guaranty" shall mean the agreement and guaranty
executed by PPC in favor of BHC/NP and its Parent, among other
things, guaranteeing all of the obligations of PCI/NP and any
Permitted Transferee of PCI/NP under this Agreement and the
Constituent Documents, which guaranty is in the form of Exhibit H.
"Programmer" shall have the meaning ascribed to such term
in Section 7.3.3.
"Public Offering" shall mean a sale of Equity Interests
pursuant to a firm commitment underwriting (registered under the
Securities Act of 1933, as amended) by a nationally recognized
investment banking firm that agrees to use its best efforts to
effect a broad distribution of the Equity Interests purchased by it
in such underwriting.
"Relevant Agreements" shall mean, collectively, this
Agreement, the Affiliation Agreements with the Party Affiliated
Stations, the BHC Guaranty, the PPC Guaranty, the Paramount
Guaranty, the Trademark Agreement, the United Trademark Agreement,
the Nameco Trademark Agreement, the Interim Agreements, the STV
License Agreement, the Joint Venture Agreement, the Services
Agreement, the Advertising Sales Agent Agreement, the partnership
agreement between BHC/NP and PCI/NP with respect to Holdingco and
the partnership agreement between BHC/NP and PCI/NP with respect to
Nameco.
"Relevant Person" shall have the meaning ascribed to such
term in Section 10.1.
"Report" shall have the meaning ascribed to such term in
Section 9.3.1.
"Restricted Entity" shall have the meaning ascribed to
such term in Section 8.1.2.
"Services Agreement" shall mean the services agreement
between Paramount and BHC/NP relating to services to be provided by
Paramount, which agreement is in the form of Exhibit I.
"STV" shall mean a program, based on the Star Trek genre
and currently anticipated to be entitled "Star Trek: Voyager", to
be produced by PPC and licensed to BHC/NP, as the Network Entity,
pursuant to the STV License Agreement.
"STV License Agreement" shall mean the license agreement
between PPC and BHC/NP, as the Network Entity, relating to the
licensing of STV, which agreement is in the form of Exhibit J.
"Television Households" at any time shall mean the total
number of television households in the United States as most
recently reported by A.C. Nielsen Co. on a designated market area
basis.
"Termination Event" shall have the meaning ascribed to
such term in Section 5.3.1.
"Termination Notice" shall have the meaning ascribed to
such term in Section 5.3.2.
"Third Party Investor" shall have the meaning ascribed to
such term in Section 9.4.2.
"Trademark Agreement" shall mean the trade name and
service mark agreement among Paramount, Nameco and BHC/NP, as the
Network Entity, relating to the use and sublicensing by Nameco of
the Paramount name, trademarks and service marks, which agreement
is in the form of Exhibit K-1.
"United Trademark Agreement" shall mean the trade name
and service mark agreement among BHC, BHC/NP, Nameco and BHC/NP, as
the Network Entity, relating to the use and sublicensing by Nameco
of the United name, trademarks and service marks, which agreement
is in the form of Exhibit K-2.
ARTICLE 2
THE NETWORK
2.1 Purpose. The purpose of BHC/NP is, and the purpose
of the Network Entity and the Partnership (if formed) shall be, to
develop, launch, operate and exploit a "Fifth Network", i.e., a
multi-daypart, national (United States (including its territories
and possessions other than Puerto Rico) as opposed to regional)
General Entertainment network program service targeted primarily
for the broadcast television market, engaging in activities similar
to the network operations of any Existing Network, and such other
activities as may be related to the operation thereof (the
"Network"). Such purpose:
(a) would not permit and does not include (i) any
activities outside the United States (including its territories and
possessions other than Puerto Rico) or in furtherance of activities
outside the United States (including its territories and
possessions other than Puerto Rico), other than as described in
(b), (ii) distributing the Network primarily through cable systems
(whether through a superstation or otherwise) even on a temporary
basis (other than to the extent necessary to distribute the Network
during an event of force majeure), (iii) development or ownership
of any cable channel or cable programming service (including,
without limitation, basic, pay or pay-per-view) or any other
network or programming service which is delivered primarily by
means of Non-Standard Television, (iv) owning domestic or foreign
television stations or engaging in any first run syndication
business or (v) the syndication of programming other than as
described in (b); and
(b) would permit and does include the ownership,
production, worldwide syndication and distribution (including,
without limitation, on basic cable, pay or pay-per-view) of
programming produced and/or acquired by the Network, in each case
for exhibition on the Network.
2.2 Network Name. During the Option Period, the name of
the Network shall be "United Paramount Television Network" or such
other name as the Parties shall mutually agree. The Network Entity
can change the name of the Network at any time after the Option
Period to any other name chosen by the Network Entity, in its sole
discretion, that does not include the word "Paramount", any other
mark licensed from Paramount or any mark confusingly similar
thereto. Pursuant to the terms of the Trademark Agreement,
Paramount shall license to a general partnership to be formed and
owned 50% by BHC/NP and 50% by PCI/NP ("Nameco") the right to use
and sublicense the name "Paramount" and shall negotiate in good
faith to license other specified trade names, marks, emblems and
logos that are the property of Paramount. BHC or its Affiliated
Persons and BHC/NP shall license to Nameco, pursuant to the terms
of the United Trademark Agreement, the right to use and sublicense
the name "United" and shall negotiate in good faith to license
other specified trade names, marks, emblems and logos that are the
property of BHC or its Affiliated Persons. Nameco shall license to
the Network Entity the right to use the name "United Paramount
Television Network" and other specified trade names, marks, emblems
and logos pursuant to the terms of the Nameco Trademark Agreement.
The parties to the Trademark Agreement, the United Trademark
Agreement and the Nameco Trademark Agreement shall be bound by
their respective terms for the period specified therein. The name
"United Paramount Television Network" or other names used by the
Network Entity that incorporate both the "United" and "Paramount"
names shall be owned by Nameco and, in connection therewith, Nameco
may pursue the registration of such combination name or mark in the
United States Patent and Trademark Office.
2.3 Form of Organization. BHC/NP may, in its sole
discretion, determine to conduct the business of the Network itself
or through any other Network Entity. In any such event, subject to
the provisions of Section 9.4, BHC/NP shall control the management
of the business and affairs of the Network. All of the Network
Assets and Liabilities shall be owned by the Network Entity.
ARTICLE 3
MANAGEMENT OF THE NETWORK
3.1 The Operating Committee. Subject to the authority
of the Board, BHC/NP shall manage and control the day-to-day
business and affairs of the Network through an operating committee
(the "Operating Committee") which shall consist of not less than
two members. BHC/NP may change the size of the Operating Committee
at any time. PCI/NP shall have the right to designate a number of
agents of PCI/NP to serve as members of the Operating Committee
equal to the number of agents of BHC/NP serving on the Operating
Committee. Subject to the authority of the Board, the Operating
Committee shall be responsible for the establishment of policy and
operating procedures respecting the business and affairs of the
Network, shall develop a set of standards and practices applicable
to the Network and shall consider, among other matters, the
following:
(a) Authorization of (i) the Budget for each Budget
Period and any revisions to such Budget and (ii) any additional
major expenditures by the Network which are not contemplated in the
Budget for the relevant Budget Period;
(b) Selection and terms of employment of the CEO, the
Chief Financial Officer and the Head of Programming, and any other
executive to whom such officers report, and entering into any
executive employment agreement or otherwise establishing the terms
of executive compensation;
(c) Acquisition or disposition by the Network of assets
other than in the ordinary course of business;
(d) Material amendments to any Affiliation Agreement or
the execution and delivery of any Affiliation Agreement which
materially deviates from Exhibit B, in the case of a Primary
Station, or Exhibit C, in the case of a Secondary Station;
(e) Significant programming decisions, including
licensing and scheduling; and
(f) Termination of the operations of the Network.
3.2 Appointment and Removal of Agents. The Operating
Committee shall initially consist of the persons set forth on
Exhibit L, as the respective agents of BHC/NP and PCI/NP as
indicated thereon. Any Party may at any time, by written notice to
the other Party, remove its agent or agents who are members of the
Operating Committee, with or without cause, and substitute another
agent or agents to serve in their stead.
3.3 Meetings of the Operating Committee. The Operating
Committee shall meet at least monthly, and at such other times as
it may decide. Either BHC/NP or the CEO may call a meeting of the
Operating Committee at any time by giving not less than five
business days' prior notice to the members of the Operating
Committee which, in the case of the PCI/NP agents, shall be given
to PCI/NP in accordance with Section 14.1 (unless PCI/NP shall
designate another address for such notice pursuant to this Section
3.3). No notice shall be required for any regularly scheduled
meeting. The Operating Committee will establish its operating
procedures from time to time. In the event of any deadlock at the
Operating Committee on any matter, such matter shall be referred to
the Board (or any agent designated by the Board) for final
decision.
3.4 Affiliate Board of Governors. During the Non-
Compete Term, PCI/NP shall cause any member representing a
Paramount Station on the Affiliate Board of Governors to cast their
vote with the members representing the BHC Stations with respect to
any increase in the number of hours of Network programs.
ARTICLE 4
FINANCIAL MATTERS
4.1 Fiscal Year. The fiscal year of the Network Entity
shall be the 12-month period ending on December 31 of each year.
4.2 Budget; Funding. The Budgets for the period from
June 15, 1994 through December 31, 1995 and for calendar year 1996
shall incorporate minimum expenditures by the Network Entity of
$75 million and $75 million, respectively. BHC/NP shall make funds
available to the Network Entity at such times and in such amounts
as are required by the Budget, provided, that (a) BHC/NP shall not
be required to invest more than $150 million in the Network Entity
in the aggregate in the period from June 15, 1994 through
December 31, 1996 and (b) BHC/NP shall have no further obligation
pursuant to this Section 4.2 if BHC/NP has elected to terminate the
operations of the Network and has given notice to PCI/NP in
accordance with Section 13.1(c). Any investment by BHC/NP in the
Network Entity may be in the form of the allocation of capital,
capital contributions or loans, in BHC/NP's sole discretion, and
any loans (collectively, the "BHC Loans") shall be on such terms
and conditions as BHC/NP and the Network Entity shall agree from
time to time, provided, that the interest rate with respect to each
BHC Loan shall not exceed the Loan Rate.
4.3 Information; Books and Records.
4.3.1 From and after the Launch Date, BHC/NP shall
cause to be prepared and delivered to PCI/NP: (a) as soon as
available and in any event within 15 days after the end of each
calendar month and calendar quarter, unaudited monthly or
quarterly, as the case may be, balance sheets, statements of income
and cash flows of the Network Entity, all in reasonable detail and
certified by the Network Entity's Chief Financial Officer as having
been prepared in accordance with generally accepted accounting
principles; (b) as soon as available, and in any event within 75
days after the end of each fiscal year, audited annual balance
sheets, statements of income and cash flows of the Network Entity,
all in reasonable detail and certified by the Network Entity's
independent public accountants; and (iii) such other information
with respect to the financial condition, business and affairs of
the Network Entity as PCI/NP may from time to time reasonably
request. In the case of all financial statements provided pursuant
to clauses (a) and (b) above, (i) the date for delivery shall be
extended if timely information is not received from Paramount or
any of its Affiliated Persons pursuant to the Services Agreement
and the Advertising Sales Agent Agreement and (ii) such statements
shall set forth comparisons to the Budget and the comparable period
of the preceding fiscal year.
4.3.2 BHC/NP shall, and shall cause the Network
Entity to, maintain proper books and records in accordance with
generally accepted accounting principles. PCI/NP shall have the
unqualified right itself or through its agents, at its expense
(other than reasonable photocopying and similar expenses) and
during reasonable business hours, to discuss the Network Entity's
business and affairs, finances and accounts with officers and
employees of the Network Entity and with its independent
accountants, and to inspect the Network Entity's books and records,
and, subject to the provisions of Article 12, to make copies
thereof for its permanent retention.
4.4 Accountants. The independent public accountants of
the Network Entity shall be a nationally recognized accounting firm
chosen, from time to time, by the Board, in its sole discretion.
Initially, the independent public accountants of BHC shall serve as
the Network Entity's independent public accountants.
ARTICLE 5
DEVELOPMENT AND OTHER OBLIGATIONS
5.1 Initial Station Clearances.
5.1.1 Subject to the authority of the Operating
Committee, Paramount, BHC and/or their Affiliated Persons,
officers, employees and agents shall provide all initial station
clearance activities, including, without limitation, negotiation of
Affiliation Agreements with television stations and television
exhibitors. Paramount shall provide such services pursuant to, and
in accordance with the terms of, the Services Agreement.
5.1.2 Simultaneously with the execution of this
Agreement, PPC is assigning each Affiliation Agreement to United
Paramount Television Network Partnership, a newly formed joint
venture of BHC/NP and PCI/NP in which each Party owns a 50% general
partnership interest ("Holdingco") and Holdingco is assuming the
obligations of PPC thereunder. PCI/NP represents that there are no
conditions to the obligations of the Affiliates under the
Affiliation Agreements as in effect on the date hereof, and the
Network Entity has no obligations to the Affiliates thereunder,
which, in each case, are not set forth in such Affiliation
Agreements or do not arise from the matters set forth in Schedule
II. After the execution of this Agreement, all Affiliation
Agreements will be entered into in the name of Holdingco or, after
the assignment and assumption contemplated by the next sentence, in
the name of BHC/NP, and shall contain a provision that they may be
assigned to the Network Entity (if other than BHC/NP). BHC/NP
shall have the absolute right to cause Holdingco to assign the
Affiliation Agreements to the Network Entity at any time, and
concurrently therewith the Network Entity shall assume the
obligations of Holdingco with respect thereto.
5.1.3 (a) BHC/NP shall endeavor, promptly upon
assignment and assumption of the Affiliation Agreements to the
Network Entity, to have PPC released from any obligations of the
Network under the Affiliation Agreements (and set forth therein or
arising from the matters set forth in Schedule II) to which it was
originally a party (other than any obligation to which it may
become subject as a result of the exercise by PCI/NP of the
Option). BHC/NP shall defend, indemnify and hold harmless PPC
and/or its Affiliated Persons, officers, employees and agents from
and against any and all Damages incurred by any of them by reason
of any acts, omissions or alleged acts or omissions undertaken or
omitted by Holdingco, BHC/NP or any Network Entity in connection
with the Affiliation Agreements or arising out of any matter
identified in Schedule II.
(b) PCI/NP covenants that PCI/NP and its Affiliated
Persons shall perform any obligations they have incurred (other
than obligations of the Network under the Affiliation Agreements
and set forth therein or arising from the matters set forth in
Schedule II (which schedule identifies any written materials known
to PCI/NP and its Affiliated Persons that describe any such
obligations)) in connection with the negotiation or execution of
the Affiliation Agreements. PCI/NP shall defend, indemnify and
hold harmless BHC/NP and/or its Affiliated Persons, officers,
employees and agents from and against any and all Damages incurred
by any of them by reason of any breach or alleged breach of the
preceding sentence or the representation contained in the second
sentence of Section 5.1.2.
5.1.4 The Parties agree to negotiate in good faith
the amount attributable to the Affiliate Sign-Up Costs as of the
date hereof, and to agree on such amount within 90 days after the
Launch Date. From the date hereof, PCI/NP and its Affiliated
Persons shall not incur any Affiliate Sign-Up Costs without the
prior consent of BHC/NP and the agreement of the Parties as to the
amount attributable thereto. The agreement of the Parties pursuant
to this Section 5.1.4 shall be reflected in a supplement to
Schedule I executed by the Parties.
5.2 Services. Simultaneously with the execution of this
Agreement, BHC/NP, PPC and PDI are executing the Services Agreement
and BHC/NP and PPC are executing the Advertising Sales Agent
Agreement. The Parties agree and acknowledge that Premier
Advertiser Sales, Inc. will act as the exclusive advertising sales
agent for the Parties and the Network Entity with respect to STV.
5.3 Provisions Relating to Launch Date.
5.3.1 Simultaneously with the execution of this
Agreement, Holdingco is giving notice to the Affiliates of a Launch
Date. BHC/NP shall have the right, prior to the earlier to occur
of (a) such announced Launch Date and (b) the date a Continuation
Notice is given by PCI/NP pursuant to Section 5.3.2(b), and upon
not less than five days' prior notice to PCI/NP, to terminate the
operations of the Network or give notice to the Affiliates of
termination of the Affiliation Agreements (either, a "Termination
Event"). BHC/NP agrees that, if it causes a Termination Event
without the consent of PCI/NP, then BHC/NP will (a) reimburse
PCI/NP for 100% of all Affiliate Sign-up Costs incurred by PCI/NP
or any of its Affiliated Persons with respect to a third party
which is not an Affiliated Person and 100% of all other Development
Costs paid by PCI/NP or any of its Affiliated Persons, and (b)
defend, indemnify and hold harmless PCI/NP and its Affiliated
Persons, officers, employees and agents from and against any and
all Damages incurred by any of them in respect of the Affiliation
Agreements (but specifically excluding any conditions to the
obligations of the Affiliates not set forth therein (other than
obligations which might arise out of the statements and/or
understandings set forth in Schedule II), and specifically
excluding any obligations of the Network Entity to PCI/NP or any
Affiliated Person of PCI/NP).
5.3.2 If no Termination Event has occurred, then:
(a) on or before November 15, 1994, BHC/NP shall
give written notice to PCI/NP setting forth BHC/NP's non-binding
good faith indication of whether it believes it might give a
Termination Notice as contemplated by clause (c) below;
(b) on or before January 3, 1995 (or, if later, the
Monday preceding the Launch Date), PCI/NP shall give written notice
to BHC/NP stating either that, if the determination were its to
make, (i) PCI/NP would not continue the operations of the Network
(a "Termination Notice") or (ii) PCI/NP would continue the
operations of the Network (a "Continuation Notice"); and
(c) after PCI/NP has given notice pursuant to
Section 5.3.2(b) (or, if no such notice is given, after January 3,
1995 (or, if later, the Monday preceding the Launch Date)), and on
or before February 15, 1995 (or, if later, the thirtieth day
following the Launch Date if the Launch Date has occurred prior to
February 15, 1995), BHC/NP shall give written notice to PCI/NP
stating either that (i) BHC/NP has elected not to continue the
operations of the Network (a "Termination Notice"), or (ii) BHC/NP
has elected to continue the operations of the Network (a
"Continuation Notice").
A failure to give a notice pursuant to paragraph (b) or
(c) shall be deemed to constitute a Continuation Notice.
5.3.3 If BHC/NP gives a Continuation Notice, then
this Agreement shall remain in full force and effect.
5.3.4 If PCI/NP and BHC/NP each give a Termination
Notice, then:
(a) BHC/NP shall, within five business days' of the
date it gives its Termination Notice, give notice to each Affiliate
of termination of the Affiliation Agreements in accordance with
their terms; and
(b) BHC/NP and PCI/NP shall each pay 50% of all
Development Costs paid by either of them to a third party which is
not an Affiliated Person and, except as specifically provided in
the next sentence, shall each be liable for 50% of the obligations,
if any, of the Network Entity to the Affiliates under the
Affiliation Agreements (but specifically excluding any conditions
to the obligations of the Affiliates not set forth therein (other
than obligations which might arise out of the statements and/or
understandings set forth in Schedule II), but in any event
specifically including Affiliate Sign-up Costs). Within 60 days of
the termination of this Agreement, each Party shall provide to the
other a detailed accounting of all such costs paid or incurred by
such Party, and within 30 days thereafter the appropriate Party
shall make the necessary payment to reimburse that Party whose
costs have exceeded 50% of the total so that each Party shall have
paid or incurred 50% of the total.
5.3.5 If PCI/NP gives a Continuation Notice and
BHC/NP gives a Termination Notice, then the Parties shall effect
the following:
(a) Effective on the date of BHC/NP's Termination
Notice, PCI/NP shall have the right to appoint the Board and shall
have control over the operations of the Network;
(b) BHC/NP will continue to fund the operations of
the Network's ordinary course of business, in accordance with its
Budget in existence prior to the date of BHC/NP's Termination
Notice, for the period through the 90th day from the date of such
Termination Notice (the "90th Day");
(c) On the 90th Day, PCI/NP shall pay to BHC/NP an
amount equal to 50% of the Investment Amount through the 90th Day;
(d) In addition, BHC/NP will continue to fund 50%
of the costs incurred pursuant to any programming commitment made
by BHC/NP without the consent of the PCI/NP members of the
Operating Committee to the extent that the Network is obligated to
purchase programming for first-run exhibition in periods subsequent
to the first broadcast season; and
(e) PCI/NP shall grant to BHC/NP an option to
acquire an interest in the Network Entity equal to PCI/NP's
interest in the Network Entity, and on the terms and conditions of
the Option as set forth in this Agreement (including obligations of
BHC/NP as if it were PCI/NP (but excluding programming and similar
rights and obligations)) and the Parties shall execute the relevant
agreements to evidence such option and obligations, provided, that
the balance of the Investment Amount not paid to BHC/NP pursuant to
Section 5.3.5(d) plus any amount funded by BHC/NP pursuant to
Section 5.3.5(c) shall be applied to reduce BHC/NP's option
exercise price and, if BHC/NP does not exercise its option, shall
become a subordinated non-voting interest in the Network Entity
which has the terms set forth in Schedule III (the "Junior
Interest").
ARTICLE 6
PARAMOUNT STATIONS; BHC STATIONS
6.1 Paramount Stations. (a) PCI/NP hereby represents
and warrants that each Paramount Station existing as of the date of
this Agreement is listed on Exhibit M and that the current Existing
Network affiliation, if any, of each Paramount Station is correctly
indicated thereon. PCI/NP hereby agrees that each Paramount
Station which is not currently affiliated with an Existing Network
shall execute an Affiliation Agreement simultaneously with the
execution of this Agreement.
(b) If PCI/NP or any Affiliated Person of PCI/NP
acquires a broadcast television station after the date of this
Agreement which, on the date of such acquisition, is an Acceptable
Station and is not affiliated with an Existing Network, PCI/NP or
such Affiliated Person, as the case may be, shall execute an
Affiliation Agreement (subject to Section 6.4.4, in the form of
Exhibit B) if, and when, no Affiliate serves substantially the same
designated market areas as are served by such station (and no
Acceptable Station is in the process of becoming an Affiliate
pursuant to Section 6.4).
(c) Subject to the provisions of Section 6.5,
PCI/NP further agrees that it shall cause each Paramount Station
which is an Affiliate to remain an Affiliate for the Option Term,
plus any additional period of time as may be required by Section
6.4.3 or the respective Affiliation Agreement.
6.2 BHC Stations. (a) BHC/NP hereby represents and
warrants that each BHC Station existing as of the date of this
Agreement is listed on Exhibit N and that the current Existing
Network affiliation, if any, of each BHC Station is correctly
indicated thereon. BHC/NP hereby agrees that each BHC Station
which is not currently affiliated with an Existing Network shall
execute an Affiliation Agreement simultaneously with the execution
of this Agreement.
(b) If BHC/NP or any Affiliated Person of BHC/NP
acquires a broadcast television station after the date of this
Agreement which, on the date of such acquisition, is an Acceptable
Station and is not affiliated with an Existing Network, BHC/NP or
such Affiliated Person, as the case may be, shall execute an
Affiliation Agreement (subject to Section 6.4.4, in the form of
Exhibit B) if, and when, no Affiliate serves substantially the same
designated market areas as are served by such station (and no
Acceptable Station is in the process of becoming an Affiliate
pursuant to Section 6.4).
(c) Subject to the provisions of Section 6.5,
BHC/NP further agrees that it shall cause each BHC Station which is
an Affiliate to remain an Affiliate for the Option Term and for any
extended term required of the Paramount Stations in accordance with
Section 6.4.3 or the respective Affiliation Agreement.
6.3 Maintenance of Existing Affiliations. Each Party or
its Affiliated Persons may maintain its current Existing Network
affiliations and may renew or change an Existing Network
affiliation to another Existing Network affiliation, until such
time as it, in its sole discretion, chooses to end such affiliation
with an Existing Network. Nothing in this Section 6.3 shall
preclude a Party or its Affiliated Persons from maintaining
secondary Existing Network affiliations or changing to other
secondary Existing Network affiliations, provided, that any such
secondary affiliation with respect to a Party Affiliate shall not
interfere with such Party Affiliate's ability to broadcast the
Network programming.
6.4 Additional Affiliation Matters.
6.4.1 If (a) a television station which is not
affiliated with an Existing Network becomes a Paramount Station or
a BHC Station and such television station is an Acceptable Station
at such time or (b) an Acceptable Station ceases its affiliation
with an Existing Network then, with respect to clause (a) upon such
acquisition, and with respect to clause (b) upon the election of
PCI/NP in the case of a Paramount Station and upon the election of
BHC/NP in the case of a BHC Station, to have such station become an
Affiliate, BHC/NP and the applicable Party shall, as soon as
feasible, (i) cause a notice of non-renewal to be delivered to the
Affiliate, if any, serving substantially the same designated market
areas as such Acceptable Station and (ii) cause such Acceptable
Station to become an Affiliate.
6.4.2 BHC/NP hereby agrees that during the Non-
Compete Term it shall not, and it shall cause the Network Entity
not to, terminate any Affiliation Agreement of a Party Affiliated
Station or give notice of non-renewal other than on account of a
Material Affiliation Breach of such Affiliation Agreement. This
Section 6.4.2 shall not restrict BHC/NP or the Network Entity from
taking any other action to enforce the rights of the Network Entity
in respect of such Affiliation Agreement.
6.4.3 If PCI/NP does not exercise the Option with
an Effective Date on or before January 15, 1997, then, without any
action of either Party, if (a) the Affiliation Agreements of all of
the BHC Stations are extended or renewed on the terms set forth in
Exhibit B for any period beyond the initial three-year term and
(b) at the date of such extension or renewal, the Network Entity
has effective Affiliation Agreements with broadcast television
stations serving designated market areas which, in the aggregate,
include approximately 60% of the Television Households and (c) the
Network is scheduled to broadcast at least six hours of prime time
programming in the fourth broadcast year after the Launch Date,
then the Affiliation Agreement of each Paramount Station shall be
deemed to be extended automatically (for so long as the Network
continues to regularly schedule at least six hours of prime time
programming) for an additional period coterminous with the term of
the BHC Station Agreements, but in no event for a period beyond the
sixth anniversary of the Launch Date. The Network Entity will give
PCI/NP prompt notice of any such extension, but in no event later
than 120 days prior to the last day of the initial term of such
Affiliation Agreements.
6.4.4 The Affiliation Agreement for any station
acquired by PCI/NP or any Affiliated Person of PCI/NP after the
date of this Agreement, as contemplated by Section 6.1, and for any
extension pursuant to this Section 6.4, shall be on terms no less
favorable to the Paramount Stations than those contained in the
Affiliation Agreement of any Affiliate other than BHC or any Third
Party Investor or any of their respective Affiliated Persons.
6.5 Sale of Party Affiliated Station. Except as
provided in Section 6.6 with respect to Deferred Stations, if, at
any time during the Option Period, either Paramount or BHC or any
of their respective Affiliated Persons sells or transfers one of
its Party Affiliated Stations, it shall require, as a condition of
sale, that the new owner assume the Affiliation Agreement for the
longer of the remainder of the term of such Affiliation Agreement
(including, with respect to BHC Stations and Paramount Stations,
any extension pursuant to Section 6.4.3, whether or not such
extension occurs after the date of sale) or one year from the date
of sale, but in any case in no event beyond the sixth anniversary
of the Launch Date.
6.6 Deferred Stations.
6.6.1 The Parties acknowledge that the Paramount
Stations WKBD-TV, Detroit (the "Detroit Station") and WTXF-TV,
Philadelphia (the "Philadelphia Station" and, together with the
Detroit Station, the "Deferred Stations") have not executed
Affiliation Agreements. Within 30 days of the date this Agreement
is executed, PCI/NP shall cause each Deferred Station (whether or
not such Station is previously sold) to either:
(a) execute and deliver to Holdingco an
Affiliation Agreement in the form of Exhibit B, together with the
appropriate rider in the form of Schedule IV(A) (as to the Detroit
Station) or Schedule IV (B) (as to the Philadelphia Station),
which Affiliation Agreement shall be promptly accepted and
executed on behalf of Holdingco by BHC/NP, or
(b) execute and deliver to Holdingco an
Affiliation Agreement in the form of Exhibit C, together with the
appropriate Rider in the form of Schedule V (A) (as to the Detroit
Station) or Schedule V (B) (as to the Philadelphia Station), which
Affiliation Agreement may be accepted, in BHC/NP's sole
discretion, at any time up to and including January 9, 1995, by
written notice to PCI/NP of such acceptance and the execution of
such Affiliation Agreement on behalf of Holdingco by BHC/NP. Such
Affiliation Agreement shall be for a term through the third
anniversary of the later to occur of (i) the Launch Date and
(ii) the closing date of the sale of the Deferred Station by
PCI/NP or its Affiliated Persons, provided that the Network Entity
shall have the right to terminate the Affiliation Agreement upon
180 days' notice and, if a Deferred Station is sold after
January 9, 1995 and prior to May 31, 1995, then the Network Entity
shall have the right to terminate the Affiliation Agreement
effective May 31, 1995, and provided that in no event shall such
Affiliation Agreement extend beyond the term of the Affiliation
Agreements of the other Paramount Stations.
6.6.2 If either Deferred Station elects the option
referred to in Section 6.6.1(b) and BHC/NP gives written notice
to PCI/NP on or before January 9, 1995 that the Network Entity is
prepared to enter into an Affiliation Agreement substantially in
the form of Exhibit B with another station that serves
substantially the same designated market area as is served by such
Deferred Station, then PCI/NP shall cause PDI, as agent for PPC,
within five business days after BHC/NP's notice, to either (x)
enter into a "back-end" license agreement for STV with such
proposed Affiliate on the best terms offered by such proposed
Affiliate or (y) waive in writing the right to have such Affiliate
enter into a "back-end" license agreement for STV, in which event
PCI/NP shall cause the Deferred Station to enter into a "back-end"
license agreement for STV, provided, that if the offer by the
proposed Affiliate is at least $23,000 per episode and $17,000 per
episode, respectively, for Philadelphia and Detroit, then PDI, as
agent for PPC, shall be required to accept such offer and enter
into a "back-end" license agreement for STV with such proposed
Affiliate.
6.6.3 If either Deferred Station becomes an Affiliate
pursuant to Section 6.6.1(b), PCI/NP shall consult regularly with
BHC/NP with respect to any plans of PCI/NP or its Affiliated
Persons with respect to a sale of such Station. Within ten
business days after a written notice to BHC/NP from PCI/NP that
it is likely that a Deferred Station will be sold, but in any
event until January 9, 1995, the Network Entity shall have the
right to acquire a "back-end" license agreement for STV for the
designated market area served by the Deferred Station to be sold.
The license agreement (each, a "Back-end Agreement") shall be on
substantially the terms set forth in the Interim Agreements for
the BHC Stations, provided, that the license fee shall be $23,000
per episode and $17,000 per episode, respectively, for
Philadelphia and Detroit. A Back-end Agreement shall be
assignable by the Network Entity to an Affiliate that enters into
an Affiliation Agreement substantially in the form of Exhibit B.
If BHC/NP does not assign a Back-end License Agreement to an
Affiliate before January 1, 1998, PCI/NP and its Affiliated
Persons shall have the right, and shall use their best efforts,
to license the "back-end" for STV in the relevant designated
market area, any loss on such license shall be for the account of
the Network Entity and any gain on such license shall be 50% for
the account of PCI/NP and 50% for the account of the Network
Entity.
6.6.4 The provisions of Section 6.5 shall not apply to
a Deferred Station that is subject to an Affiliation Agreement in
the form of Exhibit C.
ARTICLE 7
PROGRAMMING
7.1 STV. Simultaneously with the execution of this
Agreement, BHC/NP and PPC are executing the STV License Agreement.
7.2 STV Syndication. Simultaneously with the execution
of this Agreement, the BHC Stations are executing Interim
Agreements with PDI, as agent for PPC, as licensor.
7.3 Other Network Programs Licensed from Paramount.
7.3.1 (a) For so long as first run episodes of
STV are licensed in prime time to BHC/NP or the Network Entity,
Paramount (or its designated Affiliated Persons) shall have the
right, but not the obligation, to provide one additional hour of
first run prime time programming to the Network Entity for initial
exploitation on the Network, on terms and conditions that are on
an arm's-length basis and are consistent with those contained in
third party license agreements entered into by the Network Entity
or any Existing Network for similar product. This right will
continue only so long as first run episodes of STV are licensed
in prime time to the Network Entity and such right will expire on
the first anniversary of the Launch Date if STV has not achieved
the Minimum Performance Criteria. The Minimum Performance
Criteria shall mean a 1995 Average Nielsen Rating for STV which
is at least 110% of the 1994 Average Nielsen Rating. For purposes
of this Section 7.3.1(a):
The "1994 Average Nielsen Rating" shall mean the number
of total television households watching the program
broadcast by each Base Affiliate in the February 1994
and May 1994 NSI "sweeps" in the first run, prime time
period in which STV is broadcast in 1995 (e.g., Monday
8:00 p.m. to 9:00 p.m. in the February and May 1994 NSI
"sweeps" if STV is broadcast in 1995 in the Monday 8:00
p.m. to 9:00 p.m. time slot) divided by the number of
total television households in all the marketplaces of
each Base Affiliate in the February and May 1994 NSI
"sweeps", if STV was broadcast in that marketplace in
the corresponding 1995 "sweeps".
The "1995 Average Nielsen Rating" for STV shall mean
the number of total television households watching the
first run, prime time broadcast of STV in the February
1995 and May 1995 NSI "sweeps" divided by the number of
total television households in all the marketplaces of
each Base Affiliate where STV was broadcast in the
February 1995 and May 1995 NSI "sweeps".
For purposes of the definitions of 1994 Average Nielsen
Rating and 1995 Average Nielsen Rating, (i) for each
Base Affiliate which is not a primary Affiliate, the
time period used shall be the time period with the
higher "HUT" level of the two time periods in which
such Base Affiliate broadcasts STV in 1995, and (ii)
there shall be excluded from the calculation for each
Base Affiliate any time period in which it pre-empts
its regular broadcast for purposes of sports
broadcasting or otherwise.
A "Base Affiliate" shall mean any Affiliate at the
Launch Date for which February 1994 and May 1994
Nielsen ratings are available, and for which the
Nielsen ratings did not change during the period from
February 1, 1994 through May 31, 1995 from diary-based
to meter-based.
Paramount shall work with the CEO to develop such programming, but
Paramount shall make the final decision (subject to the Network's
standards and practices) as to the selection of programming to be
licensed to the Network Entity pursuant to this Section 7.3.1.
The first one hour of first run prime time programming licensed
by the Network Entity from Paramount or its Affiliated Persons in
addition to STV shall satisfy the Network Entity's obligations
under this Section 7.3.1.
(b) An "additional hour" of programming shall
mean, in any year, episodes representing an aggregate of 26 hours
of first run prime time programming, consisting of 26 one-hour
episodes or 52 one-half hour episodes or a combination thereof;
provided, that an order by the Network for an aggregate of 22 to
26 episodes of a single series (either initially or upon exercise
of an option) shall be treated as, in the case of a one-hour
series, 26 hours of programming and, in the case of a half-hour
series, 13 hours of programming.
7.3.2 With respect to programming licensed by the
Network Entity pursuant to this Section 7.3, the CEO shall have
the authority to make all programming decisions, subject only to
confirmation by BHC/NP or the Network Entity that the terms and
other conditions of any such transaction are on an arm's-length
basis and are consistent with those contained in third party
license agreements entered into by the Network Entity or any
Existing Network for similar product. Upon not less than 90 days'
prior written notice to Paramount, the CEO shall have the right
to cancel any such programming, after giving good faith
consideration to the opinions of Paramount, in which event
Paramount shall have the right, but not the obligation, to provide
additional programming for the equivalent time represented by the
cancelled series in accordance with the provisions of this Section
7.3.
7.3.3 (a) Subject to Section 7.3.3(c), if the
Network Entity grants to any third party programmer that is not
Paramount or an Affiliated Person of Paramount (each, together
with its Affiliated Persons, a "Programmer") the right to provide
prime time programming to the Network Entity, with the Programmer
retaining the right to make the final decision (subject to the
Network's standards and practices) as to the selection of
programming to be licensed to the Network Entity, then the Joint
Venture Agreement (or the Constituent Documents) will contain a
provision granting Paramount the right, but not the obligation,
to provide additional first run prime time programming for that
amount of time, if any, by which the Programmer's programming
right exceeds the greater of (i) (x) the time, if any, Paramount
has the right to provide pursuant to Section 7.3.1 (or the
comparable provision in the Constituent Documents) plus (y) the
STV time plus (z) one hour and (ii) 25% of the then total Network
prime time programming. By way of example only, if the Programmer
has the right to program four hours per week and the then total
Network prime time programming is ten hours per week, and:
(A) first run episodes of STV are licensed
in prime time to the Network, then Paramount shall have the right
to program, in addition to STV, a total of two hours per week,
inclusive of the additional hour per week, if any, pursuant to
Section 7.3.1; or
(B) STV is not licensed to the Network, then
Paramount shall have the right to program a total of one and one-
half hours per week.
(b) Any additional programming right of Paramount
pursuant to this Section 7.3.3 shall be exercisable by it as set
forth in Sections 7.3.1 and 7.3.2 in connection with the
additional hour referred to therein.
(c) The provisions of this Section 7.3.3 shall not
apply if the Option is not exercised with an Effective Date on or
before January 15, 1997, and shall not apply in any event if the
Programmer is a Third Party Investor which has an Equity Interest
in excess of 25% or an Affiliated Person of such a Third Party
Investor and the Option Percentage is less than the Minimum
Percentage.
(d) BHC/NP shall not, and shall cause the Network
Entity not to, take any action which would preclude the exercise
of Paramount's rights described in this Section 7.3.3, provided,
that the Network Entity may postpone its obligation to license
such programming until the earlier of (i) availability of Network
broadcast time in light of then existing programming commitments
and (ii) 90 days from the date of notice from Paramount of
exercise of such rights.
7.4 Related Party Programming. Notwithstanding any
other provision concerning related party transactions, and without
limiting the provisions of Section 7.3, the Constituent Documents
will provide that, so long as PCI/NP or BHC/NP, as the case may
be, holds an Equity Interest not less than the Minimum Percentage,
the CEO shall have the authority to make all programming decisions
for the Network Entity with respect to programming licensed or to
be licensed from such Party and/or its Affiliated Persons, up to
the greater of two hours or 20% of the Network's prime time
schedule, without the approval of the Board of Directors, the
Operating Committee or similar governing body; provided, that the
programming order is for no more than 13 episodes, in the case of
an initial order, or that number of episodes that is the industry
standard, in the case of a renewal order; and provided, further,
that the programming order is for no more than the average per
episode license fee of all programs of a similar Genre which have
been purchased from Persons other than such Party or its
Affiliated Persons, as expressed in dollars per hour of program
material for the United States broadcast rights (as against
foreign rights, syndication rights, etc.).
7.5 Programming Produced by the Partners. Nothing
herein shall be deemed to obligate Paramount or BHC (or any of
their respective Affiliated Persons) to offer programming other
than STV (pursuant to the STV License Agreement) to the Network
Entity and both Parties shall be free, in their sole discretion,
to acquire, produce and distribute programming in any manner as
they shall determine.
ARTICLE 8
COVENANT NOT TO COMPETE
8.1 Covenant Not to Compete. For the Non-Compete Term,
neither BHC nor Paramount nor any of their respective Affiliated
Persons or successors (the "Covered Parties") may (a) own any
interest, financial or otherwise, in, or (b) Control any Competing
Network. The Parties agree and acknowledge that, subject to
Section 8.3, the provisions of this Article 8 are intended to bind
Persons who become Covered Persons after the date hereof.
Notwithstanding the foregoing, nothing in this Article 8 shall
restrict any Covered Party's ability to:
(i) Maintain its Party Stations' affiliations or
prevent any Party Station, other than a Party Affiliated Station,
to at any time identify itself as part of a network other than the
Network as more specifically set forth in Article 6;
(ii) Comply with its obligations under any
applicable laws or regulations, including without limitation, the
rules, regulations and published policies of the Federal
Communications Commission; and
(iii) Own up to a 15% interest in any corporation
traded on any stock exchange that is, or holds an interest in, any
Competing Network, provided, that such stock is acquired in the
open market.
The term "Non-Compete Term" shall mean: (x) as to
BHC and any of its Affiliated Persons, the Option Period and (y)
as to Paramount and any of its Affiliated Persons, the period from
the date hereof through January 15, 1999, provided, that if the
Option is exercised, the Non-Compete Term shall mean, as to all
Covered Parties, the period from the date hereof through the
fourth anniversary of the Effective Date.
8.2 Restrictions on Permitted Networks. The Parties
hereby acknowledge and agree that (a) during the Non-Compete Term,
a Permitted Network shall not solicit or accept committed time
periods on Affiliates or (b) during the longer of the Non-Compete
Term and the term of the Trademark Agreement, they shall not
authorize a Competing Network or a Permitted Network to use the
Paramount name (x) as part of the name of such Competing Network
or Permitted Network, (y) to identify Competing Network or
Permitted Network activities or (z) to otherwise trade upon the
identity created by the Network by using, to name or otherwise
identify Competing Network or Permitted Network activities, a name
that is so similar, in each case in this clause (b), in a manner
as to cause confusion in the marketplace as to the identity of
network activities of such Competing Network or Permitted Network.
8.3 Activities Outside Scope of Agreement. The Parties
hereby acknowledge and agree that Sections 8.1 and 8.2 are not
intended to, and do not, restrict any Covered Party in connection
with (a) its licensing of programming to, and/or production of
programming for, Competing Networks or other entities (including,
without limitation, first run production, first run licensing
and/or syndication activities) or its current business activities
or (b) any (digital or analogue) data broadcasting service or
transport or Non-Standard Television transmitted in whole or in
part by television stations, individually, or a network of
television stations (whether or not a Competing Network),
irrespective of the content category (textual, video, audio or
other) and the revenue source (subscription or advertiser
supported), which data broadcasting service, transport or Non-
Standard Television is ancillary or supplemental to the primary
service for which the television stations were licensed by the
FCC.
8.4 Acquisition or Development of a Competing Network.
Notwithstanding any provision to the contrary in Sections 8.1 or
8.2, in the event any Covered Party desires to acquire or develop
an interest in a Competing Network during the Non-Compete Term and
such opportunity is not otherwise permitted under this Article 8,
the acquisition or development will be allowed if the full
interest of such Covered Party (i.e., financial or otherwise and
having the same rights, powers and privileges) with respect to
such opportunity is offered to the Network Entity, as follows:
8.4.1 The offering Covered Party (the "Offeror")
shall give written notice (the "Acquisition Notice") to the other
Party (the "Offeree") of the proposed acquisition or development
of an interest in a Competing Network (the "Acquisition") not less
than 45 days prior to the proposed closing date. The Acquisition
Notice shall include a description of the material terms of the
Acquisition, including the material provisions of the constituent
documents if the Acquisition will be made in, or together with,
a third party. The Parties intend in good faith that the Offeror
will take the following actions before giving an Acquisition
Notice:
(a) When a Covered Party is considering any
Acquisition, it will, subject to customary confidentiality
agreements between the Parties, consult with the other Party to
the extent reasonable and practicable so that both Parties have
information reasonably necessary to consider the legal structure
of any Acquisition, any legal impediments to the Acquisition of
the potential offeree and material terms of the potential
Acquisition. It is the intention of the Parties that any
Acquisition be structured in a manner to minimize or eliminate
either Party's legal restrictions in making the Acquisition.
(b) The Parties agree and acknowledge that "owned
and operated" broadcast television stations ("0+0s") may be an
integral part of the existing Competing Networks. Accordingly,
the Offeror will use its best efforts to structure the Acquisition
to permit direct ownership of the Competing Network together with
any 0+0s to be acquired or, if the 0+0s may not be acquired
directly, to preserve the full economic equivalent of such
ownership for the Network Entity and its partners. In this
endeavor, the Parties intend to take full advantage of the broad
range of structures available for an Acquisition, such as options,
non-voting interests, limited partnership interests, trusts, LMAs,
and otherwise to explore each alternative that could reasonably
enable the Parties to carry out their intent as expressed in this
paragraph (b).
(c) The Parties agree and acknowledge that an
Acquisition could encompass other assets or business activities
which another partner of the Network Entity might be prohibited
from acquiring by contract or other legal restriction. In that
event, the Parties will use all reasonable efforts to structure
the Acquisition so that the "prohibited" assets are segregated and
the Network Entity or its partners, as the case may be, are
disadvantaged as minimally as fair and practicable.
(d) If the good faith efforts of the Parties do
not result in a satisfactory structure to effect the Acquisition
as originally contemplated, the Offeror will seek to restructure
the Acquisition to enable the Network Entity or its partners, as
the case may be, to obtain substantially similar economic benefits
and risks to the Acquisition as originally contemplated.
(e) If the good faith efforts of the Parties do
not result in a satisfactory structure after a reasonable period
of time in light of the existing facts and circumstances, then the
Offeror shall be free to give the Acquisition Notice, and to
consummate the Acquisition, regardless of whether the Offeree
remains unable to make the acquisition, and neither the Network
Entity nor the Offeree shall have any further rights or
obligations with respect to the Acquisition except as specifically
set forth in this Section 8.4.
8.4.2 Except as described in the next sentence,
the Offeree shall have the right, by written notice ("Offeree
Notice") to the Offeror given within 45 days of the date the
Acquisition Notice is duly given, to cause the Acquisition to be
made in the Network Entity or, if such transaction has closed, to
be transferred to the Network Entity, in either case for the price
at the Offeror's cost (plus interest from the date of the
Acquisition at the Loan Rate), provided, that if there is a legal
restriction on such Acquisition in the Network Entity, then the
Acquisition shall be made by the Parties directly, pro rata to
their Equity Interests in the Network Entity. If the Acquisition
is not made in the Network Entity and is not made in, or together
with, a third party, it shall be made in a corporate or
partnership joint venture (at the election of the Offeror) with
constituent documents that contain terms, including governance
provisions, which are the same as those contained in the Joint
Venture Agreement, with only such appropriate modifications as may
be necessary to reflect any different structure. The effective
date of the Acquisition by the Offeree shall be the date specified
as such in the Offeree Notice, which shall not be earlier than the
later of the date of the Acquisition and five business days after
the date of the Acquisition Notice and not later than the earlier
to occur of (a) the 60th day after the date such Offeree Notice
is given, (b) if the HSR Act is applicable to the Acquisition
(directly or because of an Exercise Notice, as contemplated by
Section 8.4.3), the fifth day after the waiting period under the
HSR Act has expired or terminated or (c) the receipt of any
required FCC approval. If there is any delay because of the HSR
Act in the effective date relating to the Offeree's filings
pursuant to the HSR Act, then the Offeror may close the
Acquisition itself, provided, that it makes reasonable arrangement
for the subsequent transfer of the interest in the Competing
Network on the effective date of such approval but in no event
more than 120 days after the date of the request, if any, for
additional information or documentary material from the Offeree.
If there is any delay because of required FCC approval for the
Offeree in the effective date beyond the time the Offeror has the
requisite approval to complete the Acquisition, then the Offeror
may close the Acquisition itself, provided, that it makes
reasonable arrangement for the subsequent transfer of the interest
in the Competing Network on the effective date of such subsequent
approval for the Offeree, which arrangement shall be available for
so long as the Offeree is diligently pursuing FCC approval, but
in no event more than one year after the date of the closing of
such Acquisition.
8.4.3 (a) The Paramount Covered Parties may not
acquire or develop any interest in a Competing Network or give an
Offeree Notice, unless PCI/NP has given an Exercise Notice and the
Effective Date has occurred before PCI/NP acquires an interest in
the Acquisition. If PCI/NP gives an Exercise Notice as
contemplated by this Section 8.4.3 and withdraws it as permitted
by Section 9.3.1(b) or 9.3.1(d), then any notice given by PCI/NP
pursuant to Section 8.4.2 shall be deemed to be void ab initio.
(b) If the Option Period has expired without
PCI/NP exercising the Option, and PCI/NP wants to make an
Acquisition (provided that such Acquisition shall only be with
respect to a Competing Network which PCI/NP, together with any
Offerees, would, after consummation of the Acquisition, have the
ability to Control (with Control, for such purposes, meaning a
50.1% voting interest)) prior to acquiring an interest in the
Network Entity, then upon receipt of an Acquisition Notice from
PCI/NP, BHC/NP shall have the right, at its election, by written
notice to PCI/NP made within 30 days of receipt of the notice from
PCI/NP, to either, simultaneously with the consummation of such
Acquisition:
(w) require PCI/NP to acquire an Equity Interest
in the Network Entity on the terms set forth in the Option
Agreement as if the Option had not expired thereunder and the
Option Period had continued to that date, and give an Offeree
Notice with respect to such Acquisition,
(x) give an Offeree Notice without requiring
PCI/NP to acquire an interest in the Network Entity, in which case
BHC/NP or the Network Entity shall have the right to acquire the
portion of the Competing Network, at BHC/NP's option, equal to
either (A) 50% or (B) one minus one-half the percentage interest
in the Network Entity held by BHC/NP and its Permitted Transferees
on the date the Acquisition Notice is given,
(y) require PCI/NP to pay the Network Entity $100
million and not give an Offeree Notice with respect to such
Acquisition, or
(z) require PCI/NP to acquire an Equity Interest
in the Network Entity on the terms set forth in the Option
Agreement as if the Option had not expired thereunder and not give
an Offeree Notice with respect to such Acquisition.
8.4.4 If the offer is not accepted pursuant to
Section 8.4.2., the Covered Party shall be free to pursue such
opportunity without any other party.
8.4.5 The provisions of this Section 8.4 shall not
apply to the WB Television Network during the Option Period.
8.5 Notice. Each Party agrees to provide prompt notice
to the other Party of any action taken in reliance on Section
8.1(ii) if such action would otherwise constitute a breach of
Article 8; provided, that the Parties agree and acknowledge that
any inadvertent failure to provide notice in accordance with this
Section shall not constitute a breach of this Agreement.
8.6 Survival. During the Non-Compete Term, the
covenants contained in this Article 8 (other than the provisions
of Section 8.4, which shall terminate) shall survive the Option
Period and, other than the provisions of Section 8.4, shall
survive the withdrawal of any partner from the Network Entity
pursuant to Section 14.2 of the Joint Venture Agreement (or any
similar provision in the Constituent Documents), provided, that
the covenants contained in this Article 8 shall terminate as to
the Covered Parties if the Network ceases to be continued by the
Network Entity or any successor to the business of the Network.
Notwithstanding any provision to the contrary in this Section 8.6,
neither the continuing partner of the Network Entity nor any of
its Affiliated Persons or successors shall be subject to this
Article 8. For the purposes of the preceding sentence, the
Network shall be deemed to be continuing if, and only for so long
as, the Network provides at least (a) four hours of first-run
prime-time programming to Affiliates in each year until the end
of calendar year 1996 and (b) six hours of first-run prime-time
programming to Affiliates in each year thereafter.
ARTICLE 9
OPTION
9.1 Option. Subject to the provisions of
Section 9.4.3(a)(ii), PCI/NP shall have the right (the "Option")
during the Option Period to acquire Equity Interests such that,
after giving effect to such acquisition, PCI/NP will own Equity
Interests equal to, and of the same class (and series, if
applicable), and having all of the same rights, powers and
privileges as, the Equity Interests held by the BHC Holders at the
time of closing on the Effective Date (the "Option Percentage"),
other than any non-voting Equity Interests of BHC/NP to be
redeemed for an amount not greater than the Initial Distribution
Amount as provided in Section 9.3.5(b).
9.2 Option Price. The purchase price for the Equity
Interests acquired by PCI/NP upon exercise of the Option shall be
payable as set forth in Section 9.3.3, 9.3.5, 9.3.6 or 9.3.8, as
the case may be. The "Investment Amount" shall be equal to:
(a)(i) any cash contributed to the Network Entity
(or any predecessor) by BHC or any Affiliated Person of BHC
through the Effective Date in the form of a capital contribution
(whether such amount was initially contributed as cash or property
(at its original cost basis) or subsequently upon contribution of
any indebtedness represented by a BHC Loan) minus (ii) (A) the
amount of any cash or property (at its original cost basis)
distributed (whether by way of dividend, distribution of earnings,
return of capital or otherwise) by the Network Entity to BHC or
any Affiliated Person of BHC prior to the Effective Date, plus (B)
the amount of any cash contributed to the Network Entity (or any
predecessor) by BHC or any Affiliated Person of BHC for assets
that are not Network Assets and Liabilities, or expenditures which
do not relate to Network Assets and Liabilities, plus
(b) interest from the date of each such
contribution (or, in the case of a BHC Loan, the date of the
contribution of such BHC Loan) (other than contributions described
in clause (a)(ii)(B), above) to the Effective Date (or, if
earlier, the date of distribution) at the Loan Rate.
, i Manner of Exercise.
9.3.1 (a) PCI/NP may exercise the Option, in whole
but not in part, by delivering notice of exercise to BHC/NP (the
"Exercise Notice") on or before December 15, 1996, provided, that
if the Network Entity will be a corporation, then BHC/NP shall
give PCI/NP written notice on or before November 1, 1996 to such
effect and the Exercise Notice must be delivered to BHC/NP on or
before November 15, 1996. Such notice shall specify the effective
date of the exercise (the "Effective Date"), which shall not be
earlier than 30 days from the date the Exercise Notice is given
and, subject to the next sentence, not later than the earlier to
occur of (i) January 15, 1997 and (ii) the 60th day after the date
the Exercise Notice is given. If the HSR Act is applicable to the
purchase and sale of the Equity Interests by PCI/NP, then the
Effective Date shall be extended automatically, if required, to
the second business day after the date the waiting period under
the HSR Act shall have expired or been terminated, but in no
event later than the earlier to occur of (x) March 15, 1997 and
(y) the 90th day after the request, if any, for additional
information or documentary material relating to the filing of
PCI/NP or BHC/NP pursuant to the HSR Act, provided, that if PCI/NP
has previously withdrawn an Exercise Notice as permitted by
Section 9.3.1(b), then such extension of the Effective Date shall
be to a date which is in no event later than the earlier to occur
of (A) February 15, 1997 and (B) the 60th day after the request,
if any, for additional information or documentary material
relating to the second filing of PCI/NP or BHC/NP pursuant to the
HSR Act. Any such exercise shall be irrevocable upon delivery of
such Exercise Notice, unless withdrawn as permitted by Section
9.3.1(b), 9.3.1(d) or 9.4.2.
(b) Within five days after the delivery of the
Exercise Notice, if required, PCI/NP shall cause to be filed a
Notification and Report Form with respect to the purchase and sale
of Equity Interests pursuant to PCI/NP's exercise of the Option,
in accordance with the HSR Act, and PCI/NP and BHC/NP shall each
thereafter promptly make all filings or supply all information
requested by the Federal Trade Commission or the Antitrust
Division of the U.S. Department of Justice in connection with such
filing. PCI/NP and BHC/NP shall each furnish to the other such
necessary information and reasonable assistance as the other Party
may reasonably request in connection with the preparation of
filings or submissions under the HSR Act. PCI/NP and BHC/NP shall
each use their best efforts (including the filing by PCI/NP of a
request for early termination) to obtain the approval of the
Federal Trade Commission and the Antitrust Division of the U.S.
Department of Justice to the purchase of the Equity Interests by
PCI/NP or expiration or termination, on or prior to the date
referred to in the third sentence of Section 9.3.1(a), of the
waiting period under the HSR Act without the commencement of
litigation. If the HSR Act is applicable, PCI/NP has complied
with the provisions of this Section 9.3.1(b) and the waiting
period under the HSR Act has not expired or terminated on or prior
to the date referred to in the third sentence of Section 9.3.1(a),
then on that date PCI/NP shall have the right to withdraw its
Exercise Notice by written notice to BHC/NP, in which event
neither Party shall have any further obligation to the other on
account of, or relating to, the Exercise Notice.
(c) Not later than five business days prior to the
Effective Date, BHC/NP shall give notice to PCI/NP of BHC/NP's
good faith estimate of the Investment Amount and the outstanding
balance of the BHC Loans as of the Effective Date. The payments
on the Effective Date required by PCI/NP pursuant to this
Section 9.3 shall be determined by the estimated amounts set forth
in BHC/NP's notice. BHC/NP shall cause the Network Entity's
independent public accountants, as soon as practicable but in no
event more than 30 days after the Effective Date, to calculate the
Investment Amount and the outstanding balance of the BHC Loans on
the Effective Date, and to submit to BHC/NP and PCI/NP a report
(the "Report") stating that such accountants have reviewed the
relevant provisions of this Agreement and the books and records
of the Network Entity, and, based thereon, have determined the
Investment Amount and the outstanding balance of the BHC Loans on
the Effective Date to be the amounts set forth in the Report. The
determination of the accountants, as set forth in the Report,
shall be final, binding and conclusive on all parties. The amount
payable by PCI/NP shall be automatically adjusted to conform to
the Report and, within five business days of the delivery of the
Report, the BHC Holders and/or the Partnership, on the one hand,
or PCI/NP, on the other, as the case may be, shall pay to the
other, in immediately available funds, the difference between the
amount actually paid by PCI/NP on the Effective Date and the
amount payable (determined in accordance with the Report),
together with interest on such difference at the Loan Rate from
the Effective Date to the date of payment. If PCI/NP elected to
defer payment in accordance with Section 9.3.8, then the deferred
amount and/or the principal balance of the PCI/NP Notes, as the
case may be, shall be adjusted appropriately. Promptly following
the issuance of such Report, PCI/NP and the respective payee of
the PCI/NP Notes shall execute and attach the allonge to such
Notes to reflect such adjustment.
(d) Not later than ten days prior to the Effective
Date, BHC/NP shall give PCI/NP copies of the Constituent Documents
and written notice to PCI/NP setting forth any exception to the
representations and warranties set forth on Exhibit P that will
be contained in the certificate to be delivered by BHC/NP pursuant
to Section 9.3.9, and any item that will be listed on any schedule
to such certificate. At any time within five days after receipt
of such notice, PCI/NP shall have the right to withdraw its
Exercise Notice by written notice to BHC/NP, in which event
neither Party shall have any further obligation to the other on
account of, or relating to, the Exercise Notice.
9.3.2 Subject to the provisions of Section 9.4,
on or prior to the Effective Date:
(a) (i) BHC/NP shall form the Partnership and
transfer (free and clear of any liens other than liens securing
or relating to obligations of the Network) to the Partnership all
of the Network Assets and Liabilities (or, if the Network is
already in a partnership, take all action necessary to transfer
from the partnership any assets and liabilities that are not
Network Assets and Liabilities) and (ii) the Parties shall execute
the Joint Venture Agreement, to be effective on the Effective
Date; or
(b) (i) BHC/NP shall ensure that the Network
Entity has all of the Network Assets and Liabilities (free and
clear of any liens other than liens securing or relating to
obligations of the Network), and only the Network Assets and
Liabilities, and (ii) BHC/NP shall cause the Network Entity to
adopt Constituent Documents to contain terms, including, without
limitation, governance provisions and all other rights of the
parties, which are the same as those contained in the Joint
Venture Agreement, with only such appropriate modifications as may
be necessary to reflect any different structure of the Network
Entity. In the event there is no Third Party Investor in the
Network Entity, the structure chosen by BHC/NP for the Network
Entity (if other than the Partnership) will not be such that
PCI/NP will be treated after the Effective Date for federal income
tax purposes in any way that is less favorable than the treatment
after the Effective Date for tax purposes of BHC/NP (assuming that
each had an equal ability to utilize any tax benefits and to pay
any taxes arising as a result of the ownership of the Equity
Interests in the Network Entity).
In either case, the Network Entity shall expressly assume all of
the liabilities included in the Network Assets and Liabilities,
and shall agree to defend, indemnify and hold harmless BHC/NP and
any other predecessor entity and their Affiliated Persons,
officers, employees and agents from and against any and all
Damages incurred by any of them by reason of any such liability.
BHC/NP shall agree to defend, indemnify and hold harmless the
Network Entity, its partners or shareholders, and their respective
officers, employees and agents from and against any and all
Damages incurred by any of them by reason of any liability assumed
by the Network Entity that is not a Network Asset and Liability.
9.3.3 Subject to the provisions of Sections 9.3.6
and 9.3.8, on the Effective Date:
(a) PCI/NP shall, in satisfaction of the payment
of the purchase price for the Option, contribute to the capital
of the Network Entity (i) immediately available funds in an amount
equal to (A) the Investment Amount minus (B) 60% of PCI/NP's
Development Costs not previously paid or reimbursed by BHC/NP,
plus interest from the date such costs are incurred to the
Effective Date at the Loan Rate, and (ii) PCI/NP's Development
Costs, and
(b) the Network Entity shall issue to PCI/NP
Equity Interests equal to the Equity Interests of the BHC Holders.
9.3.4 If the Network Entity is a partnership,
there shall be established for each Party on the books of the
partnership, as of the Effective Date, a capital account. The
amount of each capital contribution of cash or the fair market
value of each capital contribution of other property of a Party
to the partnership pursuant to this Section 9.3 shall be credited
to the capital account of such Party on the Effective Date. The
fair market value of BHC/NP's capital contribution shall be deemed
to be the Investment Amount. The fair market value of the
Development Costs contributed to the partnership by PCI/NP shall
be deemed to be 60% of the actual amount thereof incurred by
PCI/NP in accordance with this Agreement and not previously paid
or reimbursed by BHC/NP, plus interest from the date such costs
are incurred to the Effective Date at the Loan Rate.
9.3.5 (a) Upon the exercise of the Option and at
the election of BHC/NP, PCI/NP, in satisfaction of the payment of
the purchase price for the Option, shall either (i) contribute the
amount set forth in Section 9.3.3 and BHC/NP and PCI/NP each shall
be entitled, subsequent to such issuance of Equity Interests to
PCI/NP, to receive a dividend, distribution or redemption in an
amount equal to the Initial Distribution Amount; or (ii) provided
that the Investment Amount is greater than $50 million, in lieu
of the amount set forth in Section 9.3.3, contribute (x) an amount
equal to (A) one-half of the Investment Amount, plus (B) the
greater of $25 million and 12.5% of the Investment Amount, minus
(C) 60% of PCI/NP's Development Costs not previously paid or
reimbursed by BHC/NP, plus interest from the date such costs are
incurred to the Effective Date at the Loan Rate, and (y) PCI/NP's
Development Costs, and BHC/NP shall be entitled, subsequent to
such issuance of Equity Interests to PCI/NP, to receive a
dividend, distribution or redemption in an amount equal to the
Initial Distribution Amount; or (iii) purchase a portion of
BHC/NP's Equity Interest in the Network Entity pursuant to Section
9.3.6; provided, that if PCI/NP has made a deferral election
pursuant to Section 9.3.8, the withdrawal of the Initial
Distribution Amount pursuant to clause (i) or (ii) above shall be
made subsequent to the day that PCI/NP makes its payment under the
capital contribution agreement.
(b) In the event that PCI/NP contributes the
amount set forth in Section 9.3.5(a)(i), pending distribution of
the Initial Distribution Amount to each of PCI/NP and BHC/NP, the
Network Entity shall prudently invest such amounts and PCI/NP
shall receive (and if the Network Entity is a partnership shall
also be allocated income equal to) a return on the amount it is
entitled to receive pursuant to such provision (i) at the "prime
rate" as reported form time to time in the Wall Street Journal for
the first 60 days following such contribution, (ii) at 10% per
annum for the next 30 days thereafter, (iii) at 12% per annum for
the next 30 days thereafter, and (iv) at 15% per annum thereafter
until PCI/NP receives such distribution. If PCI/NP has made a
deferral election pursuant to Section 9.3.8, such return shall not
begin until the day prior to the day that PCI/NP makes its payment
under the Capital Contribution Agreement.
(c) In the event that PCI/NP contributes the
amount set forth in Section 9.3.5(a)(ii), BHC/NP shall receive
(and if the Network Entity is a partnership shall also be
allocated income, gain, loss, deduction and credit equal to) all
earnings and shall bear all losses from the investment of the
amounts BHC/NP is entitled to receive. BHC/NP shall be entitled
to direct the investment of all such amounts.
9.3.6 Not later than five business days prior to
the Effective Date, BHC/NP may give notice to PCI/NP that BHC/NP
elects to have PCI/NP purchase one-half of the BHC Holders' Equity
Interests rather than have PCI/NP acquire newly issued Equity
Interests pursuant to Section 9.3.3. If BHC/NP so elects, then
on the Effective Date the BHC Holders shall sell to PCI/NP, and
PCI/NP shall purchase from the BHC Holders, one-half of the Equity
Interests (by class (and series, if applicable) and having the
same rights, powers and privileges as, the Equity Interests) held
by each BHC Holder, for an aggregate purchase price payable in
immediately available funds (or PCI/NP Notes, in accordance with
Section 9.3.8), equal to (a) one-half of the Investment Amount,
minus (b) 30% of PCI/NP's Development Costs not previously paid
or reimbursed by BHC/NP, plus interest from the date such costs
are incurred to the Effective Date at the Loan Rate. In such
event:
(i) BHC/NP's notice shall identify each BHC
Holder and the portion of the purchase price payable to each,
(ii) The provisions of Sections 9.3.3 and
9.3.5 and the second and third sentences of Section 9.3.4 shall
be of no force or effect, and
(iii) Simultaneously with such sale and
purchase, the BHC Holders and PCI/NP shall each contribute to the
capital of the Network Entity an amount equal to the greater of
(A) $25 million and (B) 12.5% of the Investment Amount.
9.3.7 On the Effective Date, the BHC Holders shall
sell to PCI/NP, and PCI/NP shall purchase from the BHC Holders,
one-half of the BHC Loans outstanding on the Effective Date. The
purchase price for such BHC Loans, which shall be payable in
immediately available funds (or PCI/NP Notes, in accordance with
Section 9.3.8), shall be equal to the principal amount of the BHC
Loans purchased plus accrued and unpaid interest to the Effective
Date. Any such purchase shall be a condition to, and shall be
effected simultaneously with, PCI/NP's purchase of Equity
Interests.
9.3.8 PCI/NP may elect to defer payment, until
January 15, 1997, of the purchase price of the Equity Interests
(to the Network Entity or BHC Holders, as the case may be) and for
any BHC Loans. In such event, on the Effective Date PCI/NP shall
deliver to the Network Entity and to the BHC Holders, as
appropriate, a capital contribution agreement and/or a promissory
note or notes (the "PCI/NP Notes"), as the case may be, in the
form of Exhibit O and in the amount of the cash that is otherwise
payable on the Effective Date to the Network Entity or the BHC
Holders, as the case may be. PCI/NP's obligations under the
capital contribution agreement and on the PCI/NP Notes shall be
supported by a letter of credit having the terms set forth in
Exhibit O, and each shall have the benefit of the PPC Guaranty.
9.3.9 At the Effective Date, BHC/NP and PCI/NP
shall make to the other, as of the Effective Date, the
representations and warranties set forth in Exhibits P and Q,
respectively, and shall deliver legal opinions in substantially
the form of Exhibits R and S, respectively. The representations
and warranties shall be set forth in a certificate executed by an
executive officer of BHC/NP or PCI/NP, as the case may be. BHC/NP
and PCI/NP shall have the benefit of the PPC Guaranty and the BHC
Guaranty, respectively, and the provisions of Article 11 with
respect to any breach of any such representation or warranty.
9.3.10 PCI/NP shall not have the right to transfer
the Option to any Person other than a Permitted Transferee.
9.3.11 If PCI/NP gives the Exercise Notice, then
for the period until the Effective Date specified in the Exercise
Notice BHC/NP shall not, and shall cause the Network Entity not
to (or enter into a binding agreement to), issue any debt
securities or Equity Interests, other than BHC Loans, but prior
to the Effective Date neither BHC/NP nor the Network Entity shall
otherwise be restricted in any way. From the date of the Exercise
Notice to the Effective Date, BHC/NP shall give notice to PCI/NP
of any material action taken by the Network Entity other than in
the ordinary course of its business. At any time after such
notice and prior to the Effective Date, PCI/NP shall have the
right to withdraw the Exercise Notice by written notice to BHC/NP.
The only effect of any failure by BHC/NP to give a notice in
accordance with the second preceding sentence shall be the right
of PCI/NP to withdraw the Exercise Notice prior to the Effective
Date by written notice to BHC/NP. In the event of withdrawal of
an Exercise Notice pursuant to this Section 9.4.2, neither Party
shall have any further obligation to the other on account of, or
relating to, such Exercise Notice.
9.4 Third Party Investment.
9.4.1 Subject to the provisions of this Sec-
tion 9.4, nothing in this Agreement shall preclude BHC/NP or any
Permitted Transferee from transferring all or any part of its
interest in BHC/NP or the Network Entity to a Permitted
Transferee, provided that the transferee agrees to be bound by the
terms of this Agreement applicable to BHC/NP and BHC/NP is not
released from its obligations under this Agreement and BHC is not
released from its obligations under the BHC Guaranty.
9.4.2 BHC/NP shall not, and shall cause the
Network Entity not to, (or enter into a binding agreement to), (a)
issue, sell or otherwise transfer any debt securities (other than
a BHC Loan) of the Network Entity or (b) reduce the Option
Percentage by redeeming Equity Interests of the BHC Holders or
issue, sell or otherwise transfer any Equity Interests to any
Person (a "Third Party Investor", which may include an underwriter
that intends to acquire the securities for distribution to the
public, but may not include an Affiliated Person of BHC/NP) other
than a Permitted Transferee, unless BHC/NP has given PCI/NP not
less than 30 days' written notice (the "Investment Notice") of the
proposed securities issuance or redemption. In addition, BHC/NP
shall not give an Investment Notice prior to the Launch Date
unless (i) the Equity Interest to be acquired by the Third Party
Investor (together with all other Equity Interests acquired or to
be acquired by Third Party Investors prior to the Launch Date) is
not more than one-third of the total Equity Interests, on a fully
diluted basis, (ii) the economic terms of the Third Party
Investor's investment is no more favorable to it than the terms
of BHC/NP's and PCI/NP's investment in the Network Entity if it
exercised the Option and (iii) BHC/NP has consulted with PCI/NP
with respect to such proposed investment prior to the date of the
Investment Notice. Any such Investment Notice given prior to the
Launch Date shall constitute a Continuation Notice by BHC/NP
pursuant to Section 5.3.2(c), and thereafter PCI/NP shall have no
obligation to give a notice pursuant to Section 5.3.2(b). The
Investment Notice shall include the following:
(a) the identity of the Third Party Investor;
(b) the nature of the Network Entity (if other
than BHC/NP) in which the Third Party Investor will acquire an
interest, the debt securities or Equity Interests to be issued and
the purchase price therefor;
(c) any programming commitments to be made by the
Network Entity to the Third Party Investor or any Affiliated
Person of the Third Party Investor;
(d) any material provisions of the Constituent
Documents relating to governance or Budget approval that vary from
the provisions contained in the Joint Venture Agreement;
(e) Any material provisions of the Constituent
Documents with respect to Budget deadlocks and cash contributions
or loans by the investors (including the maximum amount of such
contributions); and
(f) Any other material provision of the
Constituent Documents that vary from the Joint Venture Agreement.
In the event PCI/NP fails to exercise the Option (either by
permitting the 30-day period to expire without giving the Exercise
Notice or by delivering a written notice to BHC/NP of PCI/NP's
decision not to exercise the Option), then (i) BHC/NP and the
Network Entity shall, for a period of 60 days (or 90 days in the
event of a public offering) thereafter, have the right to effect
the proposed securities issuance or redemption referred to in the
Investment Notice upon terms and conditions no more favorable to
such Third Party Investor than those specified in the Investment
Notice and (ii) PCI/NP shall not be permitted to give the Exercise
Notice during such 60- or 90-day period. In the event that the
proposed securities issuance or redemption is not effected within
the specified 60- or 90-day period, an Investment Notice pursuant
to this Section 9.4.2 shall thereafter be required for any such
securities issuance or redemption. After the giving of any
Exercise Notice, BHC/NP shall not give any further Investment
Notice prior to the Effective Date set forth (or determined in
accordance with), such Exercise Notice. No further Investment
Notice shall be required prior to the exercise by a Third Party
Investor (or any permitted assignee) of any option, warrant or
other right to acquire debt securities of the Network Entity or
Equity Interests, provided, that such option, warrant or other
right is described in the Investment Notice.
9.4.3 (a)(i) Subject to the provisions of Sec-
tion 9.4.3(a)(ii), any investment by a Third Party Investor, as
contemplated by Section 9.4.2, shall be structured so that, if
PCI/NP thereafter exercises the Option, then the Option shall be
exercisable for Equity Interests, payable as set forth in Section
9.3.3, 9.3.5, 9.3.6 or 9.3.8, such that, after giving effect to
such acquisition, PCI/NP would own Equity Interests equal to, and
of the same class (and series, if applicable) and having the same
rights, powers and privileges as, the Equity Interests held by the
BHC Holders on the Effective Date, provided, that the rights and
obligations attributable to the Equity Interests acquired by
PCI/NP upon exercise of the Option shall be consistent with the
provisions of paragraph (b) of this Section 9.4.3.
(ii) If there is a Public Offering prior to
PCI/NP's exercise of the Option, then, notwithstanding any
provision to the contrary in this Article 9, the Option shall be
exercisable for Equity Interests equal to, and of the same class
(and series, if applicable) and having the same rights, powers and
privileges as, the Equity Interests held by the BHC Holders at the
closing time of, and after giving effect to, the first Public
Offering and for a price equal to the Investment Amount through
such closing time.
(b) The Constituent Documents of the Network
Entity shall include the provisions of Section 2.1, Article 6 (as
to the BHC Stations, the Paramount Stations and the provisions of
Section 6.6.3), Sections 7.3 and 7.4 and Article 8, and the
Constituent Documents shall further provide that, so long as (i)
PCI/NP and its Affiliated Persons own not less than the Minimum
Percentage of the Equity Interests or, in the case of clause (B)
only, not less than 15% of the Equity Interests, and (ii) no sale
to a Third Party Investor involved a Public Offering, the
following actions by the Network Entity shall require the consent
of PCI/NP:
(A) Subject to any provisions for Budget
deadlock set forth in the Joint Venture Agreement or the
Constituent Documents, authorization of (A) the Budget for each
Budget Period and any revisions to such Budget, and (B) any
additional expenditures by the Network Entity which are not
contemplated in the Budget for the relevant Budget Period;
(B) Entering into any business or activity
not within the scope of Section 2.1;
(C) Selection and terms of employment of the
CEO and entering into any executive employment agreement or
otherwise establishing the terms of the CEO's compensation;
(D) Acquisition or disposition by the Network
Entity of assets other than in the ordinary course of business,
including by merger or consolidation;
(E) Admission of new investors to the Network
Entity and all material terms relating thereto, including, without
limitation, the percentage interest of such new investors and the
consideration to be paid therefor by such new investors;
(F) Issuance of any debt securities (other
than BHC Loans and loans with similar provisions from the Third
Party Investor) or Equity Interests by the Network Entity, whether
in a public offering or otherwise;
(G) If the Network Entity is a partnership,
entering into any agreement for borrowed money that does not limit
the lender's recourse solely to the assets of the Network Entity;
(H) Cash contributions or loans by any of the
investors to the Network Entity other than those specifically
contemplated by the Joint Venture Agreement or the Constituent
Documents;
(I) Material amendments to any Affiliation
Agreement or the execution and delivery of any Affiliation
Agreement which materially deviates from Exhibit B, in the case
of a Primary Station, or Exhibit C, in the case of a Secondary
Station; and
(J) Material amendments of the Joint Venture
Agreement or the Constituent Documents.
Notwithstanding the foregoing, the Constituent
Documents shall provide (as to PCI/NP) and may provide (as to
BHC/NP) that, if the actions referred to in clauses (A) through
(J) do not require the consent of PCI/NP, then the provisions of
Section 6.1(b), 6.2(b) and 6.4.1 shall be of no further force or
effect.
9.4.4 (a) If the Option Percentage is less than
the Minimum Percentage or, in the case of clause (ii)(B) only, if
the Option Percentage is less than 15%, then:
(i) notwithstanding any contrary provision of the
Joint Venture Agreement, the Constituent Documents shall provide
that the Non-Compete Term as to Paramount and its Affiliated
Persons shall terminate on January 15, 1999 and, subject to the
Option Percentage being less than 15% and complying with Section
9.4.4(ii)(B), the provisions of Section 2.1 (or its equivalent
provision) can thereafter be amended or modified without the
consent of PCI/NP (or its Permitted Transferees); and
(ii) any agreement with a Third Party Investor
(and the Constituent Documents relating to the Network Entity)
will provide that, from and after the date PCI/NP exercises the
Option, such agreement (and the Constituent Documents) may not be
amended as they apply to PCI/NP without PCI/NP's consent if such
amendment would:
(A) change the provisions of Article 8 (or the
equivalent provisions in the Constituent Documents);
(B) change the provisions of Section 2.1 (or the
equivalent provision in the Constituent Documents) in such a
manner as would cause PCI/NP's investment in the Network to
violate any law applicable to PCI/NP or its Affiliated Persons,
or would cause PCI/NP or any of its Affiliated Persons to be in
material breach of any material contract applicable to such Person
on the date of this Agreement, described on Schedule IV (to be
delivered by PCI/NP to BHC/NP within 45 days of the date of this
Agreement) and continuing to be applicable on the date of such
change, provided, that an extract of the provision of such
contract is delivered to the Network Entity, together with a
notice of PCI/NP identifying the potential breach, within five
business days of the Network Entity's notice to PCI/NP of any
proposed change;
(C) permit the Network Entity to incur
indebtedness which is recourse to PCI/NP or any of its Affiliated
Persons;
(D) otherwise increase the obligations of PCI/NP
or its Affiliated Persons;
(E) diminish the rights of PCI/NP as set forth in
Section 7.3 of this Agreement or of the type set forth in Article
13, 14, 15 or 19 of the Joint Venture Agreement; or
(F) amend this provision.
(b) Nothing in this Section 9.4.4(a) shall restrict the
Network Entity from increasing the capital contribution
obligations of PCI/NP, provided, that the consequences of the
failure to make any such increased capital contribution are no
more adverse to PCI/NP than either a pro rata dilution of its
interest in the Network Entity and/or loans and the acquisition
of preferred partnership or capital stock interests by one or more
of the remaining investors on commercially reasonable terms.
(c) The Constituent Documents may provide that, if BHC/NP
or any of its Affiliated Persons engage in any activity outside
of the Network Entity that is precluded from being included in the
provisions of Section 2.1 (or the equivalent provision in the
Constituent Documents) by the provisions of clause (ii) of Section
9.4.4(a), then, if the Option Percentage is less than 15%,
transactions between the Network Entity, on the one hand, and
BHC/NP or any of its Affiliated Persons, on the other hand, and
relating to a precluded activity shall not require the prior
approval of PCI/NP (or its Permitted Transferees), provided, that
such transaction is on an arm's-length basis or is on terms not
more favorable to BHC/NP and its Affiliated Persons than terms
applicable to PCI/NP or its Affiliated Persons in the contracts
referred to in clause (ii) or similar contracts to which any of
them is a party.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party
as of the date hereof as follows:
10.1 Due Incorporation. Such Party and each Affiliated
Person of such Party which is a party to any Relevant Agreement
(such Party and each such Person, a "Relevant Person") is duly
incorporated or otherwise duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation or organization and has the power and lawful
authority to own its assets and properties and to carry on its
business as now conducted. Each Relevant Person is duly licensed
or qualified to do business and is in good standing in each
jurisdiction in which it is required to be so licensed or
qualified, except where the failure to be licensed or qualified
would not, individually or in the aggregate, have a material
adverse effect on its financial condition or its ability to
perform its obligations hereunder.
10.2 Authority To Execute and Perform Agreement. Each
Relevant Person has the full right, power, authority and approval
required to enter into, execute and deliver this Agreement and/or
each Relevant Agreement, as the case may be, to which it is a
party and to perform fully such Relevant Person's obligations
hereunder and/or thereunder. This Agreement and each Relevant
Agreement to which such Relevant Person is a party have been duly
executed and delivered by such Relevant Person and, assuming the
due execution and delivery by the other parties hereto or thereto,
constitute the valid and binding obligations of such Relevant
Person, enforceable in accordance with their respective terms,
except as such enforceability may be affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles and an implied covenant
of good faith and fair dealing.
10.3 No Consents. No approval or consent of any
foreign, federal, state, county, local or other governmental or
regulatory body or of any other Person is required in connection
with the execution and delivery by such Relevant Person of this
Agreement and each Relevant Agreement to which it is a party and
the consummation and performance by such Relevant Person of the
transactions contemplated hereby and thereby.
10.4 No Conflicts. The execution and delivery of this
Agreement and each Relevant Agreement to which such Relevant
Person is a party, the consummation of the transactions
contemplated hereunder and thereunder and the performance by such
Relevant Person of this Agreement and each such Relevant Agreement
in accordance with their respective terms and conditions will not
conflict with or result in the breach or violation of any of the
terms or conditions of, or constitute (or with notice or lapse of
time or both would constitute) a default under, (a) the
Certificate of Incorporation, By-laws or other constituent
documents of such Relevant Person; (b) any instrument, contract
or other agreement to which such Relevant Person is a party or by
or to which it or its assets or properties are bound or subject;
or (c) any statute or any regulation, order, judgment or decree
of any court or governmental or regulatory body.
10.5 Litigation. (a) There are no actions, suits,
proceedings or investigations pending or, to the knowledge of such
Relevant Person or its Affiliated Persons, threatened against or
affecting such Relevant Person or its Affiliated Persons or their
respective properties, assets or businesses in any court or before
or by any governmental department, board, agency or
instrumentality or arbitrator which could, if adversely determined
(or, in the case of an investigation could lead to any action,
suit or proceeding, which if adversely determined could)
reasonably be expected to materially impair such Relevant Person's
ability to perform its obligations under this Agreement and each
Relevant Agreement to which such Relevant Person is a party or to
have a material adverse effect on its financial position; and (b)
such Relevant Person or its Affiliated Persons have not received
any currently effective notice of any default, and such Relevant
Person or its Affiliated Persons are not in default, under any
applicable order, writ, injunction, decree, permit, determination
or award of any court, any governmental department, board, agency
or instrumentality or arbitrator which could reasonably be
expected to materially impair such Relevant Person's ability to
perform its obligations under this Agreement and/or each Relevant
Agreement to which it is a party.
ARTICLE 11
INDEMNIFICATION
11.1 Breach of Representation, Warranty or Covenant.
Each Party shall and hereby agrees to defend, indemnify and hold
harmless the other Party, the Affiliated Persons of the other
Party, and each of their respective officers, directors, employees
and agents (each, together with any other indemnitee under this
Agreement, an "Indemnitee") against and in respect of any loss,
debt, liability, damage, obligation, claim, demand, judgment or
settlement of any nature or kind, known or unknown, liquidated or
unliquidated, including all reasonable costs and expenses as
incurred (legal, accounting or otherwise) (collectively,
"Damages") arising out of, resulting from or based upon any breach
of any representation, warranty or covenant made by such Party in
this Agreement or in any other Relevant Agreement.
11.2 Network Operations; Unauthorized Actions.
(a) Subject to the provisions of paragraph (b) of this
Section 11.2, BHC/NP shall and hereby agrees to defend, indemnify
and hold harmless PCI/NP, its Affiliated Persons and each of their
respective officers, directors, employees and agents, against and
in respect of any and all Damages that may be asserted against
such Indemnitees arising out of, or relating to, the operations
of the Network, other than any such Damages resulting from a
breach by PCI/NP of any representation, warranty or covenant made
by it in this Agreement or in any other Relevant Agreement. The
obligations of BHC/NP under this Section 11.2(a) shall be assigned
to and assumed by the Network Entity on the Effective Date.
(b) Each Party shall and hereby agrees to defend,
indemnify and hold harmless each Indemnitee against and in respect
of any and all Damages that may be asserted against such
Indemnitee arising out of or relating to unauthorized actions that
such Party or any Affiliated Person of such Party has purported
to take on behalf of the other Party or the Network, or both.
11.3 Procedures for Indemnification. Whenever a claim
shall arise for indemnification under this Agreement, the relevant
Indemnitees, as appropriate, shall promptly notify the party or
parties from whom indemnification is sought for such claim (the
"Indemnifying Party") and request the Indemnifying Party to defend
the same. Failure to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of any liability which the
Indemnifying Party might have, except to the extent that such
failure materially prejudices the Indemnifying Party's ability to
defend such claim. The Indemnifying Party shall have the right
to defend against such liability or assertion in which event the
Indemnifying Party shall give written notice to the relevant
Indemnitees of acceptance of the defense of such claim and the
identity of counsel selected by the Indemnifying Party. Except
as set forth below, such notice to the relevant Indemnitees shall
give the Indemnifying Party full authority to defend, adjust,
compromise or settle such action, suit, proceeding or demand with
respect to which such notice shall have been given as the
Indemnifying Party shall elect. The Indemnifying Party shall
consult with the relevant Indemnitees prior to any such compromise
or settlement, and the relevant Indemnitees shall have the right
to refuse such compromise or settlement and, at the refusing
party's or parties' cost, to take over such defense, provided that
in such event the Indemnifying Party shall not be responsible for,
nor shall it be obligated to indemnify the relevant Indemnitees
against, any cost or liability in excess of such compromise or
settlement. With respect to any defense accepted by the
Indemnifying Party, the relevant Indemnitees shall be entitled to
participate with the Indemnifying Party in such defense and also
shall be entitled to employ separate counsel for such defense at
its expense. In the event the Indemnifying Party does not accept
the defense of any indemnified claim as provided above, the
relevant Indemnitees shall have the right to employ counsel for
such defense at the expense of the Indemnifying Party. Each Party
agrees to cooperate and, in the case of BHC/NP, to cause the
Network Entity to cooperate, with the other Party in the defense
of any such action and the relevant records of each Party shall
be available to the other Party with respect to any such defense.
11.4 Survival. The indemnity contained in this
Article 11 shall survive the Option Period and any termination of
the Network or this Agreement.
ARTICLE 12
CONFIDENTIALITY
12.1 General. Each Party shall, and shall require its
employees and agents and the employees and agents of its
Affiliated Persons to, keep confidential the information furnished
by the other in the course of negotiating the transactions
contemplated in this Agreement and the other agreements referred
to herein, other than such information as is public knowledge
without disclosure by such Party or its employees or its agents,
or except as otherwise required by law. Furthermore, neither
Party shall disclose information not theretofore publicly
disclosed regarding the business of the Network, the terms of this
Agreement or the terms of the transactions contemplated by this
Agreement or the other agreements referred to herein without the
concurrence of the other Party, except as otherwise required by
law or as permitted by Section 12.2. If any such disclosure is
required by law, the disclosing Party shall promptly notify the
other Party of the time, nature and extent of such disclosure.
The obligations set forth in this Article 12 shall survive the
Option Period or the termination of the Network or this Agreement.
12.2 Third Party Investor. BHC/NP and its Affiliated
Persons may disclose to any Third Party Investor, and any
potential Third Party Investor, any information regarding the
business of the Network, the terms of this Agreement and the terms
of the transactions contemplated by this Agreement, provided, that
such Person first agrees in writing to be bound by the provisions
of Section 12.1 as if such Person were a Party.
<PAGE>
ARTICLE 13
TERMINATION
13.1 Termination. (a) Either Party shall have the
right, by notice to the other Party, to terminate this Agreement
at any time after February 15, 1995 if the Launch Date has not
occurred by such date.
(b) If BHC/NP determines to terminate the operations
of the Network other than in connection with a Termination Event,
BHC/NP shall have the right, by not less than 120 days' notice to
PCI/NP (including not less than 30 days' notice prior to any
notice by the Network Entity of cancellation pursuant to the
Affiliation Agreements), to terminate this Agreement effective on
the date of termination of the Network operations.
(c) This Agreement shall terminate without further
action of the Parties on the earlier to occur of (i) a Termination
Event, (ii) the termination of the Network, (iii) the Effective
Date, (iv) January 16, 1997 (or February 15, 1997 or March 15,
1997, if the Effective Date is extended as permitted by Section
9.3.1(a)) and (v) if the provisions of Section 5.3.5 are
applicable, the date on or after the 90th Day that the agreements
contemplated in Section 5.3.5 are effective.
13.2 Survival. In the event of termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith
become void and of no force or effect, without any liability on
the part of any Party or its Affiliated Persons or their
respective officers, directors, employees or agents, except for:
(a) The provisions of Sections 3.4, 6.1(c), 6.2(c),
6.4.2, 6.6.3, 7.3.1 and 7.3.2, which shall continue in full force
and effect only if this Agreement is terminated in accordance with
Section 13.1(c)(iv);
(b) The provisions of Article 8, which shall continue
in full force and effect only if this Agreement is terminated in
accordance with Section 13.1(c)(iv);
(c) Article 9, which shall continue in full force and
effect only if this Agreement is terminated in accordance with
Section 13.1(c)(iii); and
(d) Article 5 (other than Sections 5.1.1, 5.1.2 and
5.2) and Articles 11 (other than, if this Agreement is terminated
pursuant to Section 13.1(c)(iii), Section 11.2(a) which shall be
assigned to and assumed by the Network Entity on the Effective
Date), 12 and 14, which shall continue in full force and effect.
Nothing in this Section 13.2 shall relieve any Party of liability
for any breach of this Agreement. Termination of this Agreement
shall have no effect on any Relevant Document except as
specifically set forth therein.
ARTICLE 14
GENERAL
14.1 Notices. Any notices, requests, demands or other
communications to be given by a Party hereunder shall be in
writing and shall be deemed to have been duly given when delivered
personally or by facsimile transmission, in either case with
receipt acknowledged, or five days after being sent by registered
or certified mail, return receipt requested, postage prepaid,
addressed (until another address is supplied by notice duly given
hereunder) as follows:
If given to PCI/NP:
PCI Network Partner Inc.
c/o Paramount Pictures Corporation
5555 Melrose Avenue
Los Angeles, California 90038
Attention: Bruce Pottash
Telephone: (213) 956-8801
Facsimile: (213) 956-8613
with a copy to:
Viacom Inc.
1515 Broadway
New York, New York 10036
Attention: Philippe P. Dauman
Telephone: 212-258-6160
Facsimile: 212-258-6134
If given to BHC/NP:
BHC Network Partner, Inc.
c/o United Television, Inc.
8501 Wilshire Boulevard
Suite 340
Beverly Hills, California 90211
Attention: Evan C Thompson
Telephone: 310-854-0426
Facsimile: 310-659-8121
with a copy to:
Brian C. Kelly, Esq.
General Counsel
BHC Communications, Inc.
767 Fifth Avenue
New York, New York 10153
Telephone: 212-421-0200
Facsimile: 212-759-7653
14.2 Status of Operating Committee. The Parties
acknowledge that the Operating Committee is advisory only, and
neither BHC/NP nor the Network Entity shall have any obligation
or liability to PCI/NP for any failure to comply with the
provisions of Article 3. The failure of BHC/NP to give notice to
PCI/NP or to consult with the Operating Committee with respect to
any matter shall not affect the validity of any actions taken by
BHC/NP or the Network Entity.
14.3 Further Assurances. Each party to this Agreement
agrees to execute, acknowledge, deliver, file and record such
further certificates, amendments, instruments, agreements and
documents and to do all such other acts and things, as may be
required by law or as, in the opinion of the Parties, may be
necessary or advisable to carry out the intent and purposes of
this Agreement. Each Party agrees that it will act diligently and
in good faith to carry out its respective obligations under this
Agreement.
14.4 Specific Enforcement. The parties hereto
recognize and agree that, in the event that any of the provisions
of this Agreement are not performed in accordance with their
specific terms or otherwise are breached, immediate irreparable
injury would be caused for which there is no adequate remedy at
law. It is accordingly agreed that in the event of a failure by
a party to perform its obligations under this Agreement, the non-
breaching party shall be entitled to specific performance through
injunctive relief to prevent breaches of the provisions of this
Agreement and to enforce specifically the provisions of this
Agreement in any action instituted in any court having subject
matter jurisdiction, in addition to any other remedy to which such
party may be entitled, at law or in equity.
14.5 Entire Agreement. This Agreement constitutes the
entire agreement between the parties and supersedes any prior
agreement or understanding between the parties with respect to the
subject matter hereof.
14.6 Inconsistent Terms. The Parties hereby agree
that, in the event that any provision of an Affiliation Agreement
with a Party Affiliated Station is inconsistent with any express
provision of this Agreement relating to Party Affiliated Stations,
the provisions of this Agreement shall control.
14.7 Computation of Time. In computing any period of
time under this Agreement, the day of the act or event from which
the designated period of time begins to run shall not be included.
The last day of the period so computed shall be included, unless
it is not a business day in the place where the relevant act or
event has occurred, in which case the period shall run until the
end of the next succeeding business day in such place.
14.8 Amendment; Waiver. This Agreement may not be
amended nor may any rights hereunder be waived except by an
instrument in writing signed by the parties hereto.
14.9 Headings. Article headings are inserted for
convenience and reference purposes only, and are not and shall not
be deemed to be a part of this Agreement or affect any meaning or
interpretation hereof.
14.10 Expenses. Each Party shall pay all of its own
legal and accounting fees and other expenses incurred in
connection with the negotiation, preparation and execution of the
Relevant Agreements.
14.11 Counterparts. This Agreement may be executed in
one or more counterpart copies, each of which shall be considered
an original, but together shall constitute one agreement.
14.12 References. All references in this Agreement to
Articles, Sections and Exhibits are references to Articles,
Sections and Exhibits of this Agreement.
<PAGE>
14.13 Governing Law. This Agreement and all matters
collateral hereto shall be governed by and construed in accordance
with the laws of the State of New York except as and to the extent
such laws are superseded by the federal laws of the United States,
including the rules, regulations and published policies of the
Federal Communications Commission.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
PCI NETWORK PARTNER INC.
By: ____________________________
Name:
Title:
BHC NETWORK PARTNER, INC.
By: ____________________________
Name:
Title:
